No 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2004
COMMISSION FILE NUMBER 33-11194
CENTURY PACIFIC HOUSING FUND-I
| A CALIFORNIA LIMITED PARTNERSHIP | I.R.S. EMPLOYER IDENTIFICATION NO. |
| 95-3938971 | |
| 1 E. Stow Road, | |
| Marlton, NJ 08053 | |
REGISTRANT’S TELEPHONE NUMBER:
(856)
596-3008
Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the Commission by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes No
No market exists for the limited partnership interests of the registrant, and therefore, no aggregate market value can be determined.
Documents Incorporated by Reference
Registrant’s Prospectus dated April 15, 1987, as amended (the Prospectus) and the Registrant’s Supplement No. 3 dated December 21, 1988 to Prospectus dated April 15, 1987 (Supplement No. 3) but only to the extent expressly incorporated by reference in Parts I through IV hereof. Capitalized terms, which are not defined herein, have the same meaning as in the Prospectus.
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PART I
Century Pacific Housing Fund-I (the Partnership) was formed on October 6, 1986 as a limited partnership under the laws of the State of California to invest in multi-family housing developments. The Partnership’s business is to invest primarily in other limited partnerships (Operating Partnerships) that are organized for the purpose of either constructing or acquiring and operating existing affordable multi-family rental apartments that are eligible for the Low-Income Housing Tax Credit, or to a lesser extent, the Rehabilitation Tax Credit, both enacted by the Tax Reform Act of 1986 (sometimes referred to as Credits or Tax Credits). The Partnership invested in 21 properties (the properties), 13 of which are still owned at March 31, 2004. Each of the properties qualifies for the Low-Income Housing Tax Credit, and one property, a historic structure, qualifies for the Rehabilitation Tax Credit. All of these properties receive one or more forms of assistance from federal, state or local governments. A summary of the Partnership’s objectives and a summary of the Tax Credits are provided in the Prospectus under “Investment Objectives and Policies” and “Federal Income Tax Aspects” on pages 45 and 79, respectively, and are incorporated herein by reference.
In order to stimulate private investment in low and moderate income housing of the types in which the Partnership has invested, the federal government has provided investors with significant ownership incentives intended to reduce the risks and provide investors/owners with certain tax benefits, limited cash distributions and the possibility of long-term capital gains. The ownership incentives include interest subsidies, rent subsidies, mortgage insurance and other measures. However, significant risks remain inherent in this type of housing. Long-term investments in real estate limit the ability of the Partnership to vary its portfolio in response to changing economic, financial and investment conditions, and such investments are subject to changes in economic circumstances and housing patterns, rising operating costs and vacancies, rent controls and collection difficulties, costs and availability of energy, as well as other factors which normally affect real estate values. In addition, these properties usually are rent restricted and are subject to government agency programs which may or may not require prior consent to transfer ownership.
The Partnership acquired the properties by investing as the limited partner in Operating Partnerships which own the properties. As a limited partner, the Partnership’s liability for obligations of the Operating Partnerships is limited to its investment. The Partnership made capital contributions to the Operating Partnerships in amounts sufficient to pay the Operating Partnerships’ expenses and to reimburse the general partners for their costs incurred in forming the Operating Partnerships, if any, and acquiring the properties. For each acquisition, this typically included a cash down payment (in one or more installments), acceptance of the property’s mortgage indebtedness, and execution of a Purchase Money Note in favor of the seller of the property. For a summary of the acquisition financing activities for each property, see the financial information contained under Item 2.
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The Partnership’s primary objective is to provide Low-Income Housing Tax Credits to limited partners generally over a 10-year period. Each of the Partnership’s Operating Partnerships has been allocated by the relevant state tax credit agency an amount of the Low-Income Housing Tax Credit for 10 years from the date the property is placed-in-service. The required holding period of the properties is 15 years (the Compliance Period). The properties must satisfy rent restrictions, tenant income limitations and other requirements (the Low-Income Housing Tax Credit Requirements) in order to maintain eligibility for recognition of the Low-Income Housing Tax Credit at all times during the Compliance Period. Once an Operating Partnership has become eligible for the Low-Income Housing Tax Credit, it may lose such eligibility and suffer an event of recapture of previously taken tax credits if its property fails to remain in compliance with the Low-Income Housing Tax Credit Requirements. During 2004, none of the Operating Partnerships have suffered an event of recapture of the Low-Income Housing Tax Credits. 2002 was the final year of credits.
Eleven of the Operating Partnerships receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 (“Section 8”). The subsidy agreements expire at various times during and after the 15-year compliance period of the Operating Partnerships. The United States Department of Housing and Urban Development (“HUD”) has issued a notice implementing provisions to renew expiring Section 8 contracts as requested by an owner, for an additional one year term at current rent levels. As of November 30, 2004, one of the Operating Partnerships’ Section 8 contract is due to expire during 2004. Eight of the Operating Partnerships’ Section 8 contracts are due to expire in 2005. At the present time, the Partnership cannot reasonably predict legislative initiatives and government budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income and debt structure of any or all Operating Partnerships receiving such subsidy or similar subsidies.
Employees
The Partnership does not employ any persons. Alternatively, the Partnership reimburses an affiliate for overhead allocation consisting primarily of payroll costs.
As of March 31, 2004, the Partnership had acquired equity interests in the Operating Partnerships set forth in the table below. Each of the properties acquired by the Operating Partnerships receives benefits under government assistance programs. The table set forth below summarizes the properties acquired, and the purchase price, encumbrances and the government assistance programs benefiting each property. Further information concerning these Properties may be found in Supplement No. 3 to the Prospectus, pages 4 through 66, which information is incorporated herein by reference and is summarized below.
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| Property Name | Average | Initial Purchase | Initial Cash | Mortgage | Residual Note | Other Notes | Government | |||||||||||
| Location | Occupancy | Price | Down Payment | Assumed | Assistance Program | |||||||||||||
| Rental Units | Calendar | |||||||||||||||||
| Year 2003 | ||||||||||||||||||
| Century Pacific | 95 | % | $ | 5,700,000 | $ | 400,196 | $ | 1,809,086 | $ | 7,512,558 | $ | 264,703 | Section 236 | |||||
| Housing Partnership V- | ||||||||||||||||||
| (CPHP-V) - Jaycee Towers | ||||||||||||||||||
| Dayton, Ohio | ||||||||||||||||||
| 204 residential units | ||||||||||||||||||
| CPHP - XIII - Atlantis | 87 | % | 6,032,000 | 801,000 | 1,546,017 | 8,722,092 | 52,522 | Section 236 | ||||||||||
| Virginia Beach, VA | Section 8 | |||||||||||||||||
| 208 residential units | ||||||||||||||||||
| CPHP - XVI - | 99 | % | 1,235,400 | 129,564 | 363,188 | 1,347,682 | 96,726 | Section 236 | ||||||||||
| Rockwell Villa | Section 8 | |||||||||||||||||
| Oklahoma City, OK | ||||||||||||||||||
| 60 residential units | ||||||||||||||||||
| CPHP - XVII | 97 | % | 4,214,000 | 414,097 | 1,578,205 | 3,348,986 | 306,628 | Section 236 | ||||||||||
| London Square Village | Section 8 | |||||||||||||||||
| Oklahoma City, OK | ||||||||||||||||||
| 200 residential units | ||||||||||||||||||
| CPHP - XVIII | 78 | % | 6,727,500 | 409,094 | 2,498,162 | 8,173,757 | 543,059 | Section 236 | ||||||||||
| Ascension Towers | ||||||||||||||||||
| Memphis, TN | ||||||||||||||||||
| 197 residential units | ||||||||||||||||||
| Coleman Manor | 96 | % | 3,990,000 | (1) | 1,625,000 | 2,089,835 | - | 40,000 | 221(d)(3) | |||||||||
| Associates Limited | Section 8 | |||||||||||||||||
| Partnership | ||||||||||||||||||
| Baltimore, MD | ||||||||||||||||||
| 50 residential units | ||||||||||||||||||
| CPHP - XX | 94 | % | 2,200,000 | 191,000 | 685,735 | 3,050,854 | - | Section 236 | ||||||||||
| Holiday Heights | Section 8 | |||||||||||||||||
| Fort Worth, TX | ||||||||||||||||||
| 100 residential units | ||||||||||||||||||
| CPHP - XXII | 99 | % | 4,732,000 | 593,000 | 1,127,520 | 6,810,532 | 221,500 | (2) | Section 236 | |||||||||
| Harriet Tubman Terrace | Section 8 | |||||||||||||||||
| Berkeley, CA | ||||||||||||||||||
| 91 residential units | ||||||||||||||||||
| CPHP - I - Charter | 98 | % | 2,146,460 | 196,000 | 671,762 | 1,835,167 | - | Section 236 | ||||||||||
| House | ||||||||||||||||||
| Dothan, AL | ||||||||||||||||||
| 100 residential units | ||||||||||||||||||
| CPHP II - VOA - | 94 | % | 6,500,000 | 956,000 | 1,941,155 | 8,869,550 | 341,414 | Section 236 | ||||||||||
| Sunset Park | Section 8 | |||||||||||||||||
| Denver, CO | Flexible | |||||||||||||||||
| 242 residential units | Subsidy Loan | |||||||||||||||||
| CPHP - VII - Gulfway | 80 | % | 5,700,000 | 683,000 | 2,127,437 | 4,830,106 | 287,806 | Section 236 | ||||||||||
| Terrace | Section 8 | |||||||||||||||||
| New Orleans, LA | ||||||||||||||||||
| 206 residential units | ||||||||||||||||||
| CPHP -IX - Windridge | 92 | % | 3,500,000 | 382,000 | 3,011,622 | 916,040 | 61,100 | Section 221(d)(3) | ||||||||||
| Wichita, KS | Section 8 | |||||||||||||||||
| 136 residential units | Flexible | |||||||||||||||||
| Subsidy Loan | ||||||||||||||||||
| CPHP - X - Bergen Circle | 97 | % | 12,261,000 | 1,768,000 | 5,039,850 | 12,476,694 | 840,616 | Section 236 | ||||||||||
| Springfield, MA | Section 8 | |||||||||||||||||
| 201 residential units | ||||||||||||||||||
| $ | 64,938,360 | $ | 8,547,951 | $ | 24,489,574 | $ | 67,894,018 | $ | 3,056,074 | |||||||||
| (1) | This amount represents the development cost and not the purchase price. |
| (2) | This total includes a flex subsidy loan in the amount of $185,000 and the assumption of a prior residual note in the amount of $200,000. |
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As of the date of this report, there were no pending legal proceedings against the Partnership or any Operating Partnership in which it has invested.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no submissions of matters to a vote of security holders during the year ended March 31, 2004.
ITEM 5. MARKET FOR THE REGISTRANT’S PARTNERSHIP INTERESTS
There is presently no public market for the Units of limited partnership interests (the Units), and it is unlikely that any public market for the Units will develop. See the Prospectus under “Transferability of Interests” on pages 29 and 72 of the Prospectus, which information is incorporated herein by reference. The number of owners of Units as of December 22, 2004 was approximately 2,096, holding 22,315 units.
As of December 22, 2004 there were no cash distributions.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below, insofar as they relate to each of the three years ended March 31, 2004, and as of March 31, 2004 and 2003, are derived from, and are qualified by reference to, our audited financial statements included herein and should be read in conjunction with those financial statements and the notes thereto. The selected financial data as of March 31, 2002, 2001 and 2000 and for the years ended March 31, 2001 and 2000 are derived from audited financial statements not included herein. Results for past periods are not necessarily indicative of results that may be expected for future periods.
| YEAR ENDED MARCH 31, | |||||||||||||||
| OPERATIONS | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||
| Revenues | $ | — | $ | — | $ | 400 | $ | 800 | $ | 1,000 | |||||
| Operating | |||||||||||||||
| Expenses | (60,000 | ) | (65,623 | ) | (80,379 | ) | (69,421 | ) | (87,407 | ) | |||||
| Equity in Net | |||||||||||||||
| Losses of | |||||||||||||||
| Operating | |||||||||||||||
| Partnerships | — | — | — | (15,633 | ) | (122,245 | ) | ||||||||
| Net Loss | $ | (60,000 | ) | $ | (65,623 | ) | $ | (79,979 | ) | $ | (84,254 | ) | $ | (208,652 | ) |
| Net Loss per | |||||||||||||||
| Unit of | |||||||||||||||
| Limited | |||||||||||||||
| Partnership | |||||||||||||||
| Interest | $ | (2.69 | ) | (3 | ) | $ | (4 | ) | $ | (4 | ) | $ | (9 | ) | |
| MARCH 31, | |||||||||||||||
2004 |
2003 |
2002 |
2001 |
2000 |
|||||||||||
| FINANCIAL POSITION | |||||||||||||||
| Total | |||||||||||||||
| Assets | $ | 4,934 | $ | 4,934 | $ | 5,503 | $ | 9,619 | $ | 26,456 | |||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $8,517,000 in equity capital during calendar year 1987 and raised an additional $13,798,000 through April 15, 1988. In late December 1987, the Partnership invested in eight Operating Partnerships, which own eight multi-family properties located in various states representing $45,507,000 of property value. During 1988, the Partnership invested in an additional 13 properties located in eight states representing $52,953,900 of property value.
As of March 31, 2004, the Partnership’s portfolio consists of 13 properties. The properties are located in 12 states and contain 1,995 residential units. The average occupancy level for all properties during calendar year 2003 was approximately 93% and most properties generated sufficient revenue to cover operating costs, debt service, and the funding of reserves. For a summary of the combined financial status of the Operating Partnerships and the properties, see the financial information contained under Item 15.
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The government restricts rental rate increases. A substantial amount of the revenue generated by this property comes from rental subsidy payments made by federal or state housing agencies. These features, which are characteristic of all low-income housing properties, limit the pool of potential buyers for these real estate assets. As a limited partner of the Operating Partnership, the Partnership does not control property disposition decisions. At the present time, management is aware of intentions of the general partners to sell the investment properties in the near future.
The Partnership is currently experiencing a liquidity problem. Under the Partnership Agreement, the Partnership is entitled to receive distributions of surplus cash from the Operating Partnerships which is to provide the funds necessary for the Partnership to meet its operating costs. To date, the Operating Partnerships have not provided sufficient cash distributions to enable the Partnership to meet its current obligations. The Partnership has also incurred allocated losses from all of its Operating Partnerships to the extent of the Partnership’s cash contributions and has a negative working capital. As a result of the foregoing, the Partnership has been dependent upon its general partners and affiliates for continued financial support to meet its operating costs. Management maintains that the general partners and/or affiliates, though not required to do so, will continue to fund operations of the Partnership by continuing to fund operating costs and by deferring payment of allocated overhead expenses and repayment of operating cash advances. Allocated administrative expenses paid or accrued to affiliates and the General Partners represent reimbursement of the actual cost of goods and materials used for or by the Partnership, salaries, related payroll costs and other administrative items incurred or allocated, and direct expenses incurred in rendering legal, accounting/bookkeeping, computer, printing and public relations services. Items excluded from the overhead allocation include overhead expenses of the General Partners, including rent and salaries of employees not specifically performing the services described above. Unpaid allocated administrative expenses and partnership management fees, an annual amount up to .5% of invested assets, will accrue for payment in future operating years.
Management believes the possibility exists that one or several Operating Partnerships may require additional capital, in addition to that previously contributed by the Partnership, to sustain operations. In such case, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from the Operating Partnerships that would otherwise be available for distribution to partners), (ii) debt financing at the Operating Partnership level (which may not be available), or (iii) additional equity contributions from the general partner of the Operating Partnerships (which may not be available). There can be no assurance that any of these sources would be readily available to provide for possible additional capital requirements which may be necessary to sustain the operations of the Operating Partnerships. However, the Partnership is under no obligation to fund operating deficits of the Operating Partnerships in the form of additional contributions or loans.
Due to the uncertainty of the continuation of the Section 8 program, management has been forced to consider several options to prepare for the possible lack of subsidy income to the Operating Partnerships. The loss of subsidy income to the Operating Partnerships will make it more difficult for the Operating Partnerships to provide sufficient cash distributions to the Partnership. Management has identified the courses of action they will take as a result of the potential changes to the Section 8 program.
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The plan that the Operating Partnerships follow will depend on the federal government’s decision to implement the decentralization or elimination of HUD. HUD’s proposed Mark-to-Market approach would create an atmosphere where the Projects would have to compete for residents in the conventional market. The following alternatives are listed as plans of action that management plans to pursue in response the HUD’s actions:
| 1. | HUD may transfer project control to a local Housing Authority in the form of block grants. The Housing Authority would determine the market rents based on the area market. The projects will respond to the local Housing Authority and follow their procedures and guidelines. |
| 2. | The current tenants may receive a housing voucher administered by the local Housing Authority. The projects will accept vouchers and actively seek applicants who have vouchers. The projects will also accept non-voucher residents who will pay rent amounts not to exceed the maximum rents for persons at 60% of the median income level as in compliance with Section 42 of the Internal Revenue Code (IRC). |
| 3. | If no subsidies or vouchers are given to the projects or the tenants, all rents will be raised not to exceed the maximum rents for persons at 60% of the median income level and in compliance with Section 42 of the IRC. With rental rate increases, many of the current residents will be unable to pay the higher rents, thus forcing them to move from the projects and to seek housing elsewhere. An increase in the move out rate will cause a severe cash flow strain to the project. To compensate for the loss of income and increased vacancy turnover costs, the projects will require effective marketing, competitive rental rates and possible upgrading to units and/or common areas to attract qualified applicants and maintain a low vacancy rate. |
| 4. | HUD may restructure loans in order to minimize the monthly costs to the project and reduce the chances for default. Even with reduced or eliminated payments, the project will be forced to increase rents in order to operate. |
| 5. | The final option is to buy off the HUD insured loan making the complex free from HUD’s or the local Housing Authority’s regulations. |
Contractual Obligations
The Operating Partnerships’ contractual cash obligations and other commercial commitments at March 31, 2004 are summarized in the following table:
| LESS THAN | AFTER | ||||||||||||||
| TOTAL | 1 YEAR | 1-3 YEARS | 4-5 YEARS | 5 YEARS | |||||||||||
| Mortgage | |||||||||||||||
| payable | $ | 24,489,574 | $ | 1,254,052 | $ | 2,823,023 | $ | 3,266,150 | $ | 17,146,349 | |||||
The Partnership is organized as a limited partnership and is a “pass through” tax entity which does not, itself, pay federal income tax. However, the partners of the Partnership, who are subject to federal income tax, may be affected by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of 1989, the Omnibus Budget Reconciliation Act of 1990 and all subsequent tax acts (collectively the Tax Acts). The Partnership will consider the effect of certain aspects of the Tax Acts on the partners when making investment decisions. The Partnership does not anticipate that the Tax Acts will have a material adverse impact on the Partnership’s business operations, capital resources, plans or liquidity.
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Results of Operations
2004 Compared to 2003
For the fiscal year ended March 31, 2004, the Partnership recorded a net loss of approximately $60,000, as compared to a net loss of approximately $66,000 for the prior fiscal year. The decrease in net loss is the result of a decrease in the Partnership’s general and administrative expenses.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership’s equity method basis in these properties. All of the Partnership’s investments have an equity method basis of zero at March 31, 2004.
Combined rental revenue of the Operating Partnerships decreased by approximately $5,468,000 during the calendar year. The average occupancy level, in total, remained relatively constant in the Operating Partnerships. The combined total expenses decreased by approximately $6,900,000 in the current year primarily due to decreases in utilities, repairs and maintenance, depreciation and amortization, management fees and other operating expenses.
The majority of the properties owned by the Operating Partnerships are in a position of functional obsolescence and need substantial rehabilitation. The Operating Partnerships do not have the funds to address the growing deferred maintenance. Infusion of capital is necessary to keep the projects viable and maintain them as decent, safe and quality housing. Refinancing is not an option in view of the indebtedness on the properties surpassing their fair market value.
As a result of the above, in 2003, the Operating Partnerships sold the following property:
| BASIS | CANCEL- | |||||||||||||||||||
| OF | LATION | |||||||||||||||||||
| OPERATING | PROJECT | DATE | SELLING | ASSET | OF DEBT | |||||||||||||||
| PARTNERSHIP | NAME | LOCATION | SOLD | PRICE | SOLD | GAIN | INCOME | |||||||||||||
| Century | ||||||||||||||||||||
| Pacific | ||||||||||||||||||||
| Housing | ||||||||||||||||||||
| Partnership | Sunset | Newton | ||||||||||||||||||
| VIII | Townhouses | KS | 12/19/03 | $ | 728,008 | $ | 656,079 | $ | 71,929 | $ | 1,145,216 | |||||||||
This property was sold at fair market value, which was less than the existing debt on the property.
2003 Compared to 2002
For the fiscal year ended March 31, 2003, the Partnership recorded a net loss of approximately $66,000, as compared to a net loss of approximately $80,000 for the prior fiscal year. The decrease in net loss is the result of a decrease in the Partnership’s general and administrative expenses.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership’s equity method basis in these properties.
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All of the Partnership’s investments have an equity method basis of zero at March 31, 2003.
Combined rental revenue of the Operating Partnerships decreased by approximately $215,000 during the calendar year. The average occupancy level, in total, remained relatively constant in the Operating Partnerships. The combined total expenses decreased by approximately $2,700,000 in the current year primarily due to decreases in utilities, repairs and maintenance, depreciation and amortization, partially offset by increases in management fees and other operating expenses.
The majority of the properties owned by the Operating Partnerships are in a position of functional obsolescence and need substantial rehabilitation. The Operating Partnerships do not have the funds to address the growing deferred maintenance. Infusion of capital is necessary to keep the projects viable and maintain them as decent, safe and quality housing. Refinancing is not an option in view of the indebtedness on the properties surpassing their fair market value.
As a result of the above, in 2002, the Operating Partnerships sold the following seven properties:
| CANCEL- | ||||||||||||||||||||
| LATION | ||||||||||||||||||||
| OPERATING | PROJECT | DATE | SELLING | BASIS OF | OF DEBT | |||||||||||||||
| PARTNERSHIP | NAME | LOCATION | SOLD | PRICE | ASSET SOLD | GAIN | INCOME | |||||||||||||
| Century Pacific | ||||||||||||||||||||
| Housing | Highland | Topeka, | ||||||||||||||||||