UNITED STATES
SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
FORM 10-K
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
ASSISTED
HOUSING FUND L.P. I
(Exact name of registrant
as specified in its charter)
|
Washington |
|
91-1391150 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
|
|
|
|
|
1301 Fifth Avenue, Suite 1330 |
|
98101 |
|
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (206) 461-3128
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES o NO ý.
Documents Incorporated by Reference:
None
ASSISTED HOUSING FUND L.P. I
2003 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Item 1. Business
Assisted Housing Fund L.P. I (Investor Partnership) is a limited partnership formed on November 2, 1987 and organized under the laws of the State of Washington.
The Investor Partnership’s general partner is Murphey Favre Properties, Inc., (MFP), a wholly-owned subsidiary of Washington Mutual Bank (WMB), a wholly-owned subsidiary of Washington Mutual, Inc.
The Investor Partnership raised $3,511,000 from the sale of 703 units of limited partnership through a public offering completed on April 14, 1989. The Investor Partnership is solely engaged in the business of real estate investment. Accordingly, a presentation of information about industry segments is not applicable and would not be material to an understanding of the Investor Partnership’s business taken as a whole.
The Investor Partnership invested, as a Limited Partner, in 11 limited partnerships (Property Partnerships) which developed, own, and operate residential apartment complexes located in various locations across the country. Each apartment complex benefits from several forms of federal assistance programs and qualifies for low-income housing tax credits (Tax Credits) pursuant to Section 42 of the Internal Revenue Code (Code). There are 336 partners in the Investor Partnership.
The investment objectives of the Investor Partnership include the following:
• provide limited partners with tax benefits from investing in the Investor Partnership in the form of low-income housing tax credits under Section 42 of the Code,
• preserve and protect the Investor Partnership capital, and
• realize long-term capital appreciation in the value of the properties upon the sale or refinancing of the Property Partnerships properties.
During the next year the properties will have completed the 15-year compliance period, thus eliminating the opportunity for an occurrence of a tax credit recapture event which may occur when there is a failure to comply with the requirements of the Internal Revenue Service. As each property completes the compliance period, the Investor Partnership may explore opportunities to sell or refinance the properties within the guidelines allowed and permissions granted by the U.S. Department of Agriculture Rural Development Agency, through its Rural Housing Service (RHS), under its mortgage note agreements. The sale of any properties will be determined individually on a case-by-case basis, and MFP cannot assure you that it will sell any of the properties, or if MFP does sell any of the properties, that the Investor Partnership will realize any meaningful profit as a result of the sale.
1
The Property Partnerships own rental properties consisting of apartment projects occupied by low- and moderate-income tenants. Duration of leases for occupancy in the properties is generally 12 months.
The following table provides information regarding the Property Partnerships and their locations:
|
Property Partnership |
|
Location |
|
Date Interest Acquired |
|
Number of Apt. Units |
|
Fairview |
|
Plymouth, WI |
|
December 1, 1989 |
|
40 |
|
Ionia |
|
Ionia, MI |
|
December 1, 1989 |
|
24 |
|
Logan |
|
Logan, OH |
|
December 1, 1989 |
|
32 |
|
Rolling Brook |
|
Algonac, MI |
|
December 1, 1989 |
|
24 |
|
Wexford |
|
Onsted, MI |
|
December 1, 1989 |
|
24 |
|
Blue Heron |
|
Bainbridge Island, WA |
|
March 20, 1989 |
|
40 |
|
Glenwood |
|
Lake Stevens, WA |
|
June 1, 1988 |
|
46 |
|
Pacific Place |
|
South Bend, WA |
|
October 4, 1988 |
|
24 |
|
Cove |
|
Big Rapids, MI |
|
July 12, 1989 |
|
48 |
|
Washington |
|
Perry, MI |
|
July 12, 1989 |
|
24 |
|
Fayette |
|
Fayetteville, WV |
|
December 1, 1989 |
|
68 |
|
|
|
|
|
|
|
394 |
For information regarding placed in service dates, please see Schedule III.
All of the projects owned by the respective Property Partnerships were financed and constructed under Section 515 of the National Housing Act, as amended, and are administered by RHS. Under this RHS program, the Property Partnerships provide affordable housing to tenants subject to regulation by RHS as to rental charges and operating methods. Lower rental charges to tenants are recovered by the respective Property Partnerships through an interest reduction program which reduces the effective interest rate over the lives of the respective mortgages to 1 percent and a rental assistance program whereby RHS pays the respective Property Partnerships for a portion of qualified tenant rents.
Each Property Partnership has as its Developer General Partner (DGP), one or more individuals or an entity not affiliated with the Investor Partnership or MFP. In accordance with the Property Partnership agreements under which such entities are organized, the Investor Partnership depends on the DGPs for the management of each Property Partnership. See Management’s Discussion and Analysis of the Financial Condition and Results of Operations in Item 7 for additional information regarding the Property Partnerships. As of December 31, 2003, the Property Partnerships and their DGPs were as follows:
|
Property Partnership |
|
Developer General Partner |
|
|
|
|
|
|
|
|
|
1. |
Fairview
Apartments Company Limited |
|
Rural Housing Corporation |
|
|
|
|
|
|
|
|
2. |
Ionia
Limited Dividend Housing |
|
Rural Housing Corporation |
|
|
|
|
|
|
|
|
3. |
Logan
Apartments Company Limited |
|
Rural
Housing Corporation |
|
|
|
|
|
|
|
|
4. |
Rolling
Brook II Limited Dividend |
|
Rural Housing Corporation |
|
2
|
Property Partnership |
|
Developer General Partner |
|
|
|
|
|
|
|
|
|
5. |
Wexford
Manor Limited Dividend |
|
Rural Housing Corporation |
|
|
|
|
|
|
|
|
6. |
Blue Heron
Apartment Associates |
|
Dujardin Development Co. |
|
|
|
|
|
|
|
|
7. |
Glenwood
Apartment Associates Limited |
|
Dujardin Development Co. |
|
|
|
|
|
|
|
|
8. |
Pacific
Place Apartment Associates |
|
Dujardin Development Co. |
|
|
|
|
|
|
|
|
9. |
Cove Limited
Dividend Housing |
|
Kenneth & Lowell Werth |
|
|
|
|
|
|
|
|
10. |
Washington
Street Limited Dividend |
|
Kenneth & Lowell Werth |
|
|
|
|
|
|
|
|
11. |
Fayette
Hills Limited Partnership |
|
LeRoy
Eslinger and |
|
A wholly-owned subsidiary of MFP, Murphey Favre Housing Managers, Inc. (MFHM), is a special limited partner of each Property Partnership and has certain approval rights over the actions of the DGPs of the Property Partnerships.
Regulatory Compliance and Liquidity
Each of the Property Partnerships has received an allocation of Tax Credits. In general, the Tax Credit runs for ten years from the date the property is placed in service. The required holding period (Compliance Period) of the properties is 15 years. During these 15 years, the properties must satisfy rent restrictions, tenant income limitations and other requirements, as promulgated by the Internal Revenue Service, in order to maintain eligibility for the Tax Credits at all times during the Compliance Period. Once a Property Partnership has become eligible for Tax Credits, it may lose such eligibility and suffer an event of recapture if its property fails to remain in compliance with the requirements. To date, none of the Property Partnerships has suffered an event of recapture of Tax Credits. In addition, each of the properties must comply with the regulations of RHS to meet certain obligations of the mortgage notes held by RHS with respect to each of the properties.
In 2003, reserve account deposits of Fairview, Logan, Rolling Brook and Wexford fell short of the amounts required by RHS. In addition, Logan was $10,150 in arrears for property taxes due in 2002 and $20,359 in arrears for property taxes due in 2003, which are violations of RHS regulations. Cove had overdue property taxes amounting to $1,138 at December 31, 2002 but was current at December 31, 2003. Those Property Partnerships were in violation of RHS requirements and mortgage loan covenants during the year. As a result of violations of RHS regulations in 2000 and 2001, RHS issued a Letter of Acceleration on the mortgage note on the Logan property on August 29, 2001. However, RHS suspended further proceedings on October 11, 2001, based on preliminary agreements reached with the Logan DGPs and the Logan property management agent.
During 2003, RHS did not take action against any of the Property Partnerships that were not in compliance with its regulations. While RHS has not pursued any further action against Logan or initiated any action against Cove with respect to its property taxes, we cannot assure you that RHS will not take action against the Property
3
Partnerships which are not in compliance with applicable regulations. This could result in acceleration of a Property Partnership’s mortgage note and ultimately in foreclosure on its property. The foreclosure on any of the properties might result in the complete loss of that Property Partnership’s investment and might lead to a tax recapture event with respect to that property, which would have a material adverse effect on the financial condition of the Investor Partnership.
Each of the Property Partnerships tries to maintain compliance with all of the applicable regulations and each of those Property Partnerships that are not in compliance are taking steps to remedy their respective situations. However, we cannot provide assurance that all of the Property Partnerships will remain in compliance with all applicable regulations. Accordingly, we cannot assure you that RHS will not foreclose against any of the properties or that a tax recapture event with respect to any of the properties will not occur.
Item 2. Properties
The Investor Partnership owns limited partnership interests in the 11 Property Partnerships which own and operate properties, all of which benefit from some form of federal assistance program and which qualify for the Tax Credits added to the Code by the Tax Reform Act of 1986.
Each Property Partnership has received an allocation of federal low-income housing tax credits under Section 42 of the Internal Revenue Code, administered by the respective state allocating agency. Under this program, housing provided by each Property Partnership is subject to additional monitoring of tenant eligibility by the respective state allocating agency.
The individual Property Partnerships have loan agreements with and mortgage notes held by RHS. All mortgage notes have a maturity of 50 years and bear stated interest rates between 8.75% and 10.75% and have an effective interest rate of approximately 1% resulting from participating in the RHS interest reduction program. The mortgage notes are secured by the real estate, rents and any profits of the Property Partnerships.
For additional information regarding the properties of the Property Partnerships, please see Item 1. Business—Property Partnerships.
Item 3. Legal Proceedings
In 2001 and 2000, Arthur H. Winer (Winer), a DGP of Logan, did not comply with RHS regulations in handling project cash. This non-compliance was reported to appropriate authorities in 2001. Winer made multiple unauthorized withdrawals of project cash totaling $9,000 and $15,079, for personal business. Further, project bank accounts, were also pledged. As of December 31, 2003 and 2002, pledged funds totaled $ 61,146 and $ 60,131, respectively. As a result, RHS issued a Letter of Acceleration on the mortgage note on the Logan property on August 29, 2001. The mortgage note balance totaled $984,306 at December 31, 2003. RHS suspended further proceedings on October 11, 2001, based on preliminary agreements reached with Logan’s other DGPs and the Logan property management agent.
On February 19, 2002, Winer filed a Chapter 7 Petition in Bankruptcy in the U.S. Bankruptcy Court for the Southern District of West Virginia, in Charleston, WV, triggering the “automatic stay” under the Bankruptcy Code, which precluded all actions to collect Winer debts, absent approval of the Bankruptcy Court, including the unauthorized withdrawals of project cash and pledging of project bank accounts mentioned above. Among these debts are funds from Logan totaling approximately $84,000 (the Logan Debts), comprised of operating and reserve account funds of approximately $60,000, tenant security deposit funds of approximately $9,000, and other funds of approximately $15,000 that Winer used for personal business. MFP, general partner of the Investor Partnership, through outside bankruptcy counsel, and on behalf of Logan, filed a creditor’s claim against and also filed a Complaint to Determine Dischargeability of Debt and for Judgment to protect the claim for Logan debt from being dischargeable and to obtain a judgment against Winer for the amount of the creditor’s claim. Winer filed an Answer to the Complaint contesting its assertions. The U.S. Trustee filed a Motion to Sell Personal Property Free and Clear of All Liens and Encumbrances and to Allow Expenses (Trustee’s Motion) seeking, in part, to sell Winer’s partnership interest in Logan, free of all liens and encumbrances, to Buckeye Community Hope Foundation, an Ohio non-profit corporation (Buckeye). The Investor Partnership initially prepared and filed an
4
Objection to the Trustee’s Motion, but as result of further research and discussions, it withdrew its Objection. A hearing on the Trustee’s Motion was scheduled for May 16, 2003, but was continued to August 15, 2003.
On September 23, 2003 (to be effective no earlier than October 3, 2003), the U.S. Bankruptcy Court (S.D. WV) signed an Order Granting Trustee’s Motion To Sell [Etc.] Winer’s interest in Logan to Buckeye. Upon completion of the sale (anticipated during the second quarter of 2004), Buckeye will become a DGP in Logan and it will restore and replenish assets misappropriated by Winer.
The Investor Partnership also filed a Motion for Summary Judgment (SJ Motion) against Winer, which was later modified, asking the Court to decide the question of the non-dischargeability of Winer’s debt to MFP based on the pleadings and evidence currently before it. No response to the Motion was received from the Petitioner. The matter is pending awaiting the completion of the sale of Winer's interest in Logan to Buckeye.
The Investor Partnership also sent a demand letter to Thomas Runquist (Runquist) and Rural Housing Corporation (RHC), the other DGPs of Logan, requiring that Runquist and RHC, who are jointly liable for the actions of Winer, reimburse Logan for its damages and costs sustained as a result of Winer’s improper actions. A written response to the demand letter was received from counsel for Runquist and RHC, acknowledging the demand but declining to reimburse Logan for Winer’s improper actions. The Investor Partnership will reply to the Runquist/RHC response letter after completion of the sale of Winer's interests in Logan to Buckeye and Buckeye's replenishment of the assets of Logan taken by Winer.
We believe the claims by AHF and MFP are meritorious and that the cash balances of Logan will be restored as a result of these claims. However, litigation and legal disputes are inherently uncertain. We cannot guarantee that AHF or MFP will prevail in their efforts, if the cash balances of the Logan property will be restored or if any cash will be recovered. Any cash shortfalls at Logan that will require replenishment by the Investor Partnership will have an adverse effect on its financial position. However, we cannot assure you that we will be successful in these efforts, which could have an adverse effect on the Logan Property Partnership and, as a result, the Investor Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
None
5
Item 5. Market for the Registrant’s Common Equity and Related Securityholder Matters
The Registrant’s securities consist of 703 units of Limited Partnership Interest (Units), originally valued at $5,000 per unit. There is no market for the Units, and it is not anticipated that any public market is likely to develop in the future. The Units may only be sold, assigned, exchanged or otherwise transferred upon compliance with the terms of the Limited Partnership Agreement. As of the date of filing of this report, the Partnership has 335 limited partners and one general partner.
The Partnership has not made any distributions to holders of the Units in 2001, 2002 and 2003 and does not anticipate making any significant distributions in the future.
Item 6. Selected Financial Data
The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Consolidated Financial Statements and Notes thereto and other financial information included elsewhere in this report.
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
|||||
|
|
|
12/31/03 | ||||||||||||||