Attached files
Exhibit 99.1
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
HARBOR POINTE, L.P.
DECEMBER 31, 2012
HARBOR POINTE, L.P.
TABLE OF CONTENTS
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PAGE
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INDEPENDENT AUDITOR'S REPORT
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3
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FINANCIAL STATEMENTS:
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BALANCE SHEET
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4
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STATEMENT OF OPERATIONS
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5
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STATEMENT OF CHANGES IN PARTNERS' CAPITAL
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6
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STATEMENT OF CASH FLOWS
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7
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NOTES TO FINANCIAL STATEMENTS
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8
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ACCOMPANYING INFORMATION:
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INDEPENDENT AUDITOR'S REPORT ON INFORMATION
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ACCOMPANYING THE BASIC FINANCIAL STATEMENTS
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SUPPLEMENTAL INFORMATION
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PAILET, MEUNIER and LeBLANC, L.L.P.
Certified Public Accountants
Management Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Harbor Pointe, L.P.
We have audited the accompanying balance sheet of Harbor Pointe, L.P., as of December 31, 2012 and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harbor Pointe, L.P. as of December 31, 2012 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Metairie, Louisiana
March 6, 2013
| Member of: |  |
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• PCAOB - Public Company Accounting Oversight Board |
AICPA: Center for Public Company Audit Firms (SEC) • Governmental Audit Quality Center • Private Companies Practice Section (PCPS)
3421 N. Causeway Blvd., Suite 701 • Metairie, LA 70002 • Telephone (504) 837-0770 • Fax (504) 837-7102
201 St. Charles Ave., Suite 2500 • New Orleans, LA 70170 • Telephone (504) 599-5905 • Fax (504) 837-7102
www.pmlcpa.com
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HARBOR POINTE, L.P.
BALANCE SHEET
DECEMBER 31, 2012
| ASSETS | ||||
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Property and Equipment, at cost
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Land
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$ | 293,689 | ||
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Land improvements
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533,292 | |||
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Building
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3,259,695 | |||
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Equipment
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226,975 | |||
| 4,313,651 | ||||
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Accumulated depreciation
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(1,314,682 | ) | ||
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Property and Equipment, Net
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2,998,969 | |||
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Other Assets
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Cash, operating
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38,194 | |||
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Tax and insurance escrow
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23,713 | |||
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Accounts receivable
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306 | |||
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Tenant security deposits
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10,727 | |||
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Prepaid expenses
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857 | |||
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Required reserves
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262,225 | |||
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Monitoring fee, net of accumulated amortization
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9,827 | |||
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Total Other Assets
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345,849 | |||
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Total Assets
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$ | 3,344,818 | ||
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LIABILITIES AND PARTNERS' CAPITAL
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Current Liabilities
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Accounts payable and accrued expenses
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$ | 2,859 | ||
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Accrued real estate taxes
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6,140 | |||
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Prepaid rents
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1,831 | |||
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Current portion mortgage payable
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13,033 | |||
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Tenant security deposits
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10,727 | |||
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Total Current Liabilities
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34,590 | |||
| Other Liabilities | ||||
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State Home mortgage, net of current portion
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2,005,299 | |||
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Total Liabilities
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2,039,889 | |||
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Partners' Equity
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1,304,929 | |||
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Total Liabilities and Partners' Equity
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$ | 3,344,818 | ||
See auditors' report and accompanying notes to the financial statements
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HARBOR POINTE, L.P.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
| Income from Rental Operations | ||||
| Gross rent potential | $ | 261,160 | ||
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Vacancies and rental concessions
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(13,111 | ) | ||
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Other rental income
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1,525 | |||
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Total Rental Operating Income
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249,574 | |||
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Operating Expenses
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Management fees
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22,680 | |||
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Repairs and maintenance
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40,071 | |||
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Salaries
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38,742 | |||
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Utilities
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18,446 | |||
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Real estate taxes
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41,185 | |||
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Insurance
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11,354 | |||
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Administrative
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22,856 | |||
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Total Operating Expenses
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195,334 | |||
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Net Rental Operating Income
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54,240 | |||
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Other Income (Expenses)
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Interest income
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87 | |||
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Depreciation and amortization
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(141,577 | ) | ||
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Asset management fee
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(2,000 | ) | ||
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Interest
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(19,745 | ) | ||
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Total Other Income (Expenses)
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(163,235 | ) | ||
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Net Loss
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$ | (108,995 | ) | |
See auditors' report and accompanying notes to the financial statements
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HARBOR POINTE, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
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General
Partner
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Limited
Partners
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Total
Partners'
Capital
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Balance - January 1, 2012
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$ | (3,407 | ) | $ | 1,420,115 | $ | 1,416,708 | |||||
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Net Loss
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(11 | ) | (108,984 | ) | (108,995 | ) | ||||||
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Distributions to Members
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(2,088 | ) | (696 | ) | (2,784 | ) | ||||||
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Balance - December 31, 2012
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$ | (5,506 | ) | $ | 1,310,435 | $ | 1,304,929 | |||||
See auditors' report and accompanying notes to the financial statements
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HARBOR POINTE, L.P.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2012
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Cash flows from operating activities:
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Net Loss
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$ | (108,995 | ) | |
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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141,577 | |||
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(Increase) decrease in accounts receivable
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(286 | ) | ||
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(Increase) decrease in prepaid expenses
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(85 | ) | ||
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Increase (decrease) in accounts payable and accrued expenses
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116 | |||
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Increase (decrease) in security deposits payable
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725 | |||
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Increase (decrease) in prepaid rent
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(169 | ) | ||
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Total adjustments
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141,878 | |||
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Net cash provided (used) by operating activities
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32,883 | |||
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Cash flows from investing activities:
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| Investment in rental property | (555 | ) | ||
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(Deposit) withdrawal tax and insurance escrow
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(4,792 | ) | ||
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(Deposit) withdrawal required reserve
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5,225 | |||
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(Deposit) withdrawal security deposit account
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(725 | ) | ||
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Net cash provided (used) by investing activities
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(847 | ) | ||
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Cash flows from financing activities:
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Principal payments on State Home loan
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(12,914 | ) | ||
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Distributions
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(2,784 | ) | ||
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Net cash provided (used) by financing activities
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(15,698 | ) | ||
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Net increase (decrease) in cash and equivalents
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16,338 | |||
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Cash and equivalents, beginning of year
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21,856 | |||
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Cash and equivalents, end of year
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$ | 38,194 | ||
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Supplemental disclosures of cash flow information:
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Cash paid during the year for:
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| Interest Expense | $ | 19,745 | ||
See auditors' report and accompanying notes to the financial statements
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE A - NATURE OF OPERATIONS
Harbor Pointe, L.P. (the "Partnership") was formed in 2001 under the laws of the State of Georgia for the purpose of constructing and operating a 56-unit apartment community, known as Harbor Pointe, and located in Tifton, Georgia.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been followed in the preparation of the financial statements:
Basis of Accounting
The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.
Cash and Cash Equivalents
The Statement of Cash Flows considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. These amounts are available for current operations and development and exclude amounts restricted for repayment of tenant security deposits and restricted reserves.
Concentration of Credit Risk
The Partnership maintains its cash in financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). Deposit accounts, at times, may exceed federally insured limits. Interest bearing deposits are insured by the FDIC up to $250,000 per bank, while non-interest bearing deposits are fully insured. The Partnership has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Tenant Rent Receivables
Management considers tenant rent receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. Uncollectible rent receivables are charged to operations upon management's determination that collection of the receivable is unlikely.
Tenants' Security Deposits
Tenants' security deposits are held in a separate bank account in the name of the project. As of December 31, 2012, this account was funded in an amount equal to the security deposit liability.
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations using the straight-line method over their estimated service lives of 40 years for buildings, 5 to 10 years for equipment, and 15 years for land improvements. Depreciation expense for the year ended December 31, 2012 was $139,817. As of December 31, 2012, accumulated depreciation was $1,314,682.
Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income.
Impairment of Long-Lived Assets
In accordance with Accounting Standards Codification 360-10-05-4, Accounting for the Impairment or Disposal of Long-Lived Assets, the partnership reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount for the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the year ended December 31, 2012.
Intangible Assets
Compliance monitoring fees have been recorded at cost. Amortization has been provided for using the straight-line method over 15 years.
Rental Income
Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and tenants of the property are operating leases.
Income Taxes
No income tax provision has been included in the financial statements since profit or loss of the Partnership is required to be reported by the respective partners on their income tax returns. On January 1, 2009, the Partnership applied the guidance on accounting for uncertain tax provisions in FASB ASC 740, Income Taxes. The Partnership is no longer subject to income tax examinations for calendar years prior to 2009.
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Accounting Standards Codification
The Financial Accounting Standards Board ("FASB ASC") became the sole authoritative source of generally accepted accounting principles in the United States of America for periods ending after September 15, 2009. The FASB ASC incorporates all authoritative literature previously issued by a standard setter. Adoption of the FASB ASC has no effect on the Partnership's financial position, results from operations, partners' equity, or cash flows. References to the authoritative accounting literature in the notes to the financial statements are to the FASB ASC.
NOTE C - REQUIRED RESERVES
In accordance with the provisions of the mortgage agreement, certain reserves are required to be established to be used for property replacement, budgeted expense items and loan payments as follows:
| Excess operating reserve | $ | 46,583 | ||
| Replacement reserve | 105,773 | |||
| Operating deficit reserve | 99,650 | |||
| Excess cash flow reserve | 10,219 | |||
| Total | $ | 262,225 |
amortization of $16,573. aggregated amortization expense
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NOTE D - INTANGIBLE ASSETS
Compliance monitoring fees at December 31, 2012 were net of accumulated Amortization expense for the same year ended was $1,760. Estimated
for each of the next five years is:
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2013
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$ | 1,760 | ||
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2014
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1,760 | |||
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2015
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1,760 | |||
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2016
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1,760 | |||
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2017
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1,760 | |||
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE E - MORTGAGE PAYABLE
The Partnership has a mortgage note with the Georgia Department of Community Affairs (State Home Bank) in the original amount of $2,141,000 secured by a deed of trust on the rental property. The mortgage bears an interest rate of 1% per annum with monthly installments of $3,121 for 300 months, maturing December 1, 2024. The remaining principal balance at December 31, 2012, amounted to $2,018,332.
Aggregate annual maturities for the mortgage payable over each of the next five years are as follows:
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December 31,
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2013
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$ | 13,033 | ||
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2014
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13,163 | ||||
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2015
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7,229 | ||||
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2016
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7,301 | ||||
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2017
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7,375 | ||||
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and Thereafter
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1,970,231 | ||||
| $ | 2,018,332 | ||||
NOTE F - MANAGEMENT FEES
The Partnership is managed by Boyd Management, Inc., pursuant to an agreement effective December 2004 and renewed in October 2011. During the year ended December 31, 2012, Boyd Management, Inc. earned management fees of $22,680, and management fees payable amounted to $420 at December 31, 2012.
The rental property's on-site employees are employed by Boyd Management, Inc. Total payroll and benefit costs reimbursed to the management company for the year ended December 31, 2012 totaled $41,469.
NOTE G - RELATED PARTY TRANSACTIONS Asset Management Fee
The Partnership shall pay to the limited partner an asset management fee equal to $1,000. The fee shall be paid annually; provided however, that if in any year operating income is insufficient to pay the full $1,000, the unpaid portion thereof shall accrue and be payable on a cumulative basis in the first year in which there is sufficient net operating income. The Partnership incurred fees of $1,454 for these services for the year ended December 31, 2012. As of December 31, 2012, $0 remains payable.
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE G - RELATED PARTY TRANSACTIONS (CONTINUED) Incentive Management Fee
The Partnership shall pay to the general partner an incentive management fee equal to $500. The fee shall be paid annually; provided however, that if in any year operating income is insufficient to pay the full $500, the unpaid portion shall not accrue for payment in subsequent years. The Partnership incurred fees of $500 for these services for the year ended December 31, 2012.
Tax Credit Compliance Fee
The Partnership shall pay to the general partner a tax credit compliance fee equal to $500. The fee shall be paid annually; provided however, that if in any year operating income is insufficient to pay the full $500, the unpaid portion shall not accrue for payment in subsequent years. The Partnership incurred fees of $500 for these services for the year ended December 31, 2012.
NOTE H - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS
Operating profits and losses are allocated 99.99% to the limited partners and .01% to the general partner. Tax credits are to be allocated 99.99% to the limited partners and .01% to the general partner. Profit or loss and cash distributions from sales of property will be allocated as formulated in the partnership agreement.
NOTE I - COMMITMENTS AND CONTINGENCIES
As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed.
Compliance with these regulations must be maintained in each of the fifteen consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.
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HARBOR POINTE, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE J - ADVERTISING
The Company expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2012 amounted to $2,342.
NOTE K - SUBSEQUENT EVENTS
FASB ASC 855, Subsequent Events, addresses events which occur after the balance sheet date but before the issuance of financial statements. An entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that existed after the balance sheet date. Additionally, Topic 855 requires disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. Management evaluated the activity of Harbor Pointe, L.P. through March 6, 2013, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.
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