ITEM 1. BUSINESS
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). 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, there remains significant risks 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.
ITEM 2. PROPERTIES
As of March 31, 2002, 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, original indebtedness assumed and the government assistance programs benefitting 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.
(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.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As of June 21, 2002, there were no pending legal proceedings against the Partnership or any Operating Partnership in which it has invested.
ITEM 4.
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, 2002.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS
There is at 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 May 31, 2002 was approximately 2,121, holding 22,315 units.
As of June 21, 2002, there were no cash distributions.
ITEM 6.
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, 2002, and as of March 31, 2002 and 2001, are derived from, and are qualified by reference to, our audited financial statements included herein and should be read in conjunction with those consolidated financial statements and the notes thereto. The selected financial data as of March 31, 2000, 1999 and 1998 and for the years ended March 31, 1999 and 1998 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.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
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, 2002, the Partnership's portfolio consists of 21 properties. The properties are located in 13 states and contain 3,267 residential units. The average occupancy level for all properties during calendar year 2001 was approximately 92% 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 14.
Liquidity and Capital Resources
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.
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.
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, 2002 are summarized in the following table:
Tax Reform Act of 1986, Omnibus Budget Reconciliation Act of 1987, Technical and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget Reconciliation Act of 1990 and all subsequent tax acts.
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.
Results of Operations
2002 Compared to 2001
For the fiscal year ended March 31, 2002, the Partnership recorded a net loss of approximately $80,000, as compared to a net loss of approximately $84,000 for the prior fiscal year. The decrease in net loss is the result of a decrease in the Partnership's equity in net losses of the Operating Partnerships, partially offset by an increase 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, 2002.
In the aggregate, combined rental revenue of the Operating Partnerships increased by approximately $69,000 during the current calendar year. The average occupancy level, in total, remained relatively constant in the Operating Partnerships. The combined total expenses increased by approximately $1,400,000 in the current year primarily due to an increase in utilities, other operating expenses, and interest expense, partially offset by a decrease in repairs and maintenance.
2001 Compared to 2000
For the fiscal year ended March 31, 2001, the Partnership recorded a net loss of approximately $84,000, as compared to a net loss of approximately $209,000 for the prior fiscal year. The decrease in net loss is a result of a decrease in the Partnership's equity in net losses of the Operation Partnerships and by 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 had an equity method basis of zero at March 31, 2001. The Partnership's recorded share of the Operating Partnerships' losses in the year ended March 31, 2001 consisted of losses of approximately $16,000 from the Coleman Manor Associates Limited Partnership. In the prior fiscal year, losses of approximately $122,000 from the operations of Coleman Manor Associates Limited Partnership were recorded.
In the aggregate, combined rental revenue of the Operating Partnerships decreased by approximately $81,000 in 2001. The average occupancy level decreased in twelve out of the twenty-one Operating Partnerships. The combined total expenses increased by approximately $802,000 in the current year primarily due to an increase in utilities, repairs and maintenance, and interest expense.
Inflation
Inflation is not expected to have a material adverse impact on the Partnership's operations during its period of ownership of the Properties.
Other
The Partnership's operations are not subject to any significant seasonal fluctuations. The Partnership believes it is in compliance with environmental regulations and does not anticipate material effects of continued compliance.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the report of the independent auditors thereon are incorporated by reference from the Registrants Financial Statements on the pages indicated in ITEM 14.
ITEM 9.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no officers or directors. Management of the Partnership is vested in Irwin Jay Deutch and Century Pacific Capital Corporation (CPCC) (the general partners). The general partners will involve themselves in the day-to-day affairs of the Partnership as required to protect the limited partners' investment and advance the Partnership's tax investment objectives. Mr. Deutch, the managing general partner, has the overall responsibility for the preparation and transmittal of periodic reports to the limited partners, preparation and filing of the Partnership's tax returns with the IRS and the appropriate state tax authorities, and the preparation and filing of reports to HUD and other government agencies.
Following is biographical information on Mr. Deutch and the Executive Officers of CPCC:
IRWIN JAY DEUTCH
Irwin Jay Deutch, age 61, is Chairman of the Board, President, and Chief Executive Officer of Century Pacific Realty Corporation (CPRC), a general partner of the Operating Partnerships that own the Properties in which CPHF-I has invested, and its Affiliates. Mr. Deutch has been involved with low-income housing investments since 1968. He is the individual general partner in 62 private limited partnerships and two public limited partnerships investing in 209 properties, including 196 multifamily properties with 33,700 apartment units, 10 commercial projects, and 3 hotel properties. Fifty-eight of the 62 private limited partnerships have invested in affordable housing. In his capacity as general partner and officer of CPRC, he oversees the management of these partnerships and assumes overall responsibility for the development, direction, and operation of all affiliated CPRC companies. Mr. Deutch is recognized as an expert in the field of affordable housing and frequently addresses professional groups on topics of real estate investment, syndication, tax law, and the Low-Income Housing Tax Credit program.
Mr. Deutch received a B.B.A. with distinction from the University of Michigan School of Business Administration in 1962 and a Juris Doctor degree with honors from the University of Michigan Law School in 1965. He is a member of the Order of the Coif. Mr. Deutch served in the Honors Program in the Office of the Chief Counsel of the Internal Revenue Service from 1965 to 1967, where he was assigned to the Interpretative Division in Washington, D.C. He attended Georgetown Law Center and received his Master of Laws degree in taxation in 1967. Mr. Deutch is a member of the State Bars of Michigan and California, as well as the American, Federal, Los Angeles, and Beverly Hills Bar Associations.
KEY OFFICERS OF CPCC AND AFFILIATES
ESSIE SAFAIE, age 52, is Chief Financial Officer and Chief Operating Officer of CPRC. Prior to joining CPRC in 1988, from 1985-88, he was Vice President and Chief Financial Officer of Sunrise Investments, Inc., a real estate syndication firm with $450 million of real estate under management. During this period, Mr. Safaie was also President of an affiliated property management firm, S&L Property Management, Inc., with over 12,000 residential units and 800,000 square feet of commercial office space under direct management. From 1982 to 1985, Mr. Safaie was assistant controller of Standard Management Company, builders and managers of luxury hotels, commercial offices and residential units. From 1980-1982, he served as financial officer of Diamond "M" Drilling Company. Mr. Safaie received a BA degree in Business Administration from California State University with a major in accounting.
CHARLES L. SCHWENNESEN, Age 56, is Executive Vice President for CPEC and is responsible for real estate acquisition and real estate financing activities. Prior to joining CPEC in 1987, he analyzed investment opportunities and was Vice President of a municipal bond underwriter. From 1977 to 1984, Mr. Schwennesen was a manager with the accounting firm of Price Waterhouse. Mr. Schwennesen is a Certified Public Accountant, holds a Juris Doctor degree, Class Rank - Top 20%, from Loyola Marymount University School of Law (May 1999), a Masters Degree in Business Administration from the UCLA Graduate School of Management (June 1976) and a B.A. degree, with honors, in mathematics from UCLA (June 1974), and is a registered NASD Principal. Mr. Schwennesen is a candidate for admission to the State Bar of California.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. However, in connection with the operations of the Partnership and the Operating Partnerships, the general partners and their affiliates will or may receive certain fees, compensation, income and other payments which are described in the Prospectus under "Compensation, Fees and Reimbursements" on page 17, the terms of which are incorporated herein by reference.
During the fiscal years ended March 31, 2002, 2001, and 2000, CPCC, a general partner of the Partnership, and CPRC, a general partner of the Operating Partnerships, earned $529,329, $526,524, and $522,326, respectively, in compensation from the Operating Partnerships and $60,000 was accrued for each fiscal year for the reimbursement for overhead allocation from Century Pacific Equity Corporation (CPEC). During fiscal year 2002, the general partners received no payments from the Operating Partnerships.
ITEM 12.
ITEM 12. PARTNERSHIP INTEREST OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No partner in the Partnership owns more than 5% of the total number of partnership interests outstanding. Irwin J. Deutch, the managing general partner, holds a one-half percent general partnership interest and C.P. Westwood Associates holds a one percent limited partnership interest.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Irwin J. Deutch is the managing general partner of the Partnership, and CPCC is also a general partner. Irwin J. Deutch is the sole Director and President of CPCC, and the stock of CPCC is solely owned by the Deutch Family Trust. Mr. Deutch is also the President, sole Director and the Deutch Family Trust is the sole stockholder of Century Pacific Realty Corporation (CPRC), the general partner of the Operating Partnerships that own the properties in which the Partnership has invested. The general partners were allocated their proportionate share of the Partnership's tax losses and allocated tax credits. CPCC and CPRC accrued certain fees for their services in managing and advising the Partnership and its business. Century Pacific Equity Corporation (CPEC), an affiliate, provides all the services and materials necessary for the operation of the Partnership and is reimbursed for actual costs. These transactions are more particularly set forth in the financial statements found under ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(3) Exhibits
Not applicable
(b) Reports on Form 8-K
Not applicable
(c) Exhibits
Not applicable
(d) Financial Statement Schedule
Financial Statements of Coleman Manor for the Year Ended December 31,
INDEPENDENT AUDITORS' REPORT
Partners Century Pacific Housing Fund - I
We have audited the accompanying balance sheet of Century Pacific Housing Fund - I as of March 31, 2002 and 2001, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended March 31, 2002. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Fund - I as of March 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Notes 2, 3, 4 and 5 to the financial statements, the Partnership has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 14 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
St. Louis, Missouri June 21, 2002
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- BALANCE SHEET
- -------------------------------------------------------------------------------- See the accompanying report letter and notes to financial statements.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------- See the accompanying report letter and notes to financial statements.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- STATEMENT OF PARTNERS' EQUITY (DEFICIT) FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
- -------------------------------------------------------------------------------- See the accompanying report letter and notes to financial statements.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------- See the accompanying report letter and notes to financial statements.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS MARCH 31, 2002, 2001 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its financial records on the tax basis. Memorandum entries, while not recorded in the records of the Partnership, have been made in order to prepare the financial statements in accordance with accounting principles generally accepted in the United States of America.
On August 7, 1991, management of the Partnership changed from a calendar year end to a fiscal year end of March 31 for financial reporting purposes. Accordingly, the Partnership's quarterly periods end June 30, September 30 and December 31. The Operating Partnerships, for financial reporting purposes, have a calendar year. The Partnership, as well as the Operating Partnerships, have a calendar year for income tax purposes.
ESTIMATES AND ASSUMPTIONS
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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
INVESTMENTS IN OPERATING PARTNERSHIPS
The Partnership uses the equity method to account for its investment in the Operating Partnerships in which it has invested (Note 5). Under the equity method of accounting, the investment is carried at cost and adjusted for the Partnership's share of the Operating Partnerships' results of operations and by cash distributions received. Equity in the loss of each Operating Partnership allocated to the Partnership is not recognized to the extent that the investment balance would become negative. Costs paid by the Partnership for organization of the Operating Partnership as well as direct costs of acquiring properties, including acquisition fees and reimbursable acquisition expenses paid to the general partner, have been capitalized as investments in Operating Partnerships.
INCOME TAXES
No provision has been made for income taxes in the accompanying financial statements since such taxes and/or the recapture of the Low-Income Housing Tax Credit benefits received, if any, are the liability of the individual partners. The Partnership uses the accrual method of accounting for tax purposes.
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net loss per unit of limited partnership interest is calculated based upon the weighted average number of units of limited partnership interest (units) outstanding.
2. OPERATIONS
Century Pacific Housing Fund-I, a California limited partnership, (the Partnership), was formed on October 6, 1986 for the purpose of raising capital by offering and selling limited partnership interests and then acquiring limited partnership interests in 21 limited partnerships (the Operating Partnerships), which acquired and operate 21 multi-family residential apartment properties (the properties).
The general partners of the Partnership are Century Pacific Capital Corporation, a California corporation (CPCC), and Irwin Jay Deutch, an individual (collectively, the general partners). The general partners and affiliates of the general partners (the general partners and affiliates) have interests in the Partnership and receive compensation from the Partnership and the Operating Partnerships (Note 4).
The Properties qualify for the Low-Income Housing Tax Credit established by Section 42 of the Tax Reform Act of 1986 (the Low-Income Housing Tax Credit) and one property qualifies for Historic Rehabilitation Tax Credits (collectively the Tax Credits). These properties are leveraged low-income multi-family residential complexes and receive one or more forms of assistance from federal, state or local government agencies (the Government Agencies).
In July 1987, the Partnership began raising capital from sales of limited partnership interests, at $1,000 per unit, to limited partners. The Partnership authorized the issuance of a maximum of 50,000 partnership units of which 22,315 were subscribed and issued. The limited partnership interest offering closed in April 1988.
The Partnership has acquired limited partnership interests ranging from 97% to 99% in the Operating Partnerships, which have invested in rental property.
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
3. REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Partnership as a going concern. The Partnership's Operating Partnerships have not achieved the operating results required to provide the Partnership with sufficient cash distributions to fund the Partnership's administrative costs. Additionally, as of March 31, 2002, the Partnership has incurred allocated losses from all of its Operating Partnerships to the extent of the Partnership's cash contributions. As a result of the foregoing, the Partnership is dependent upon the general partners and affiliates for continued financial support.
The auditors' reports on eight of the Operating Partnerships' financial statements contained an explanatory paragraph relating to a going concern issue, of which seven concerned the expiration of the Housing Assistance Payment Contract and one concerned recurring losses of the project. These Operating Partnerships have Housing Assistance Payment Contracts with the U.S. Department of Housing and Urban Development (HUD) that are due to expire during 2002. Management has requested one year extensions for these Operating Partnerships; however, as of June 21, 2002, these extensions have not been granted.
Management maintains that the general partners and affiliates, though not required to do so, will continue to fund operations by deferring payment to related parties of allocated overhead expenses, and by funding any Partnership operating costs. Unpaid allocated overhead expenses will accrue and become payable when the Operating Partnerships generate sufficient cash distributions to the Partnership to cover such expenses. The financial statements do no include any adjustments that might result from the outcome of this uncertainty.
4. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES OF THE GENERAL PARTNERS
The general partners of the Partnership are CPCC and Irwin Jay Deutch. The original limited partner of the Partnership is Westwood Associates which partners are Irwin Jay Deutch and key employees of CPCC. Century Pacific Placement Corporation (CPPC), an affiliate of the general partners, served as the broker-dealer-manager for sales of the limited partnership interests in the Partnership. Century Pacific Realty Corporation (CPRC), an affiliate of CPCC, is a general partner in each of the Operating Partnerships.
The general partners have an aggregate one percent interest in the Partnership, as does the original limited partner. CPRC has a one percent interest in each of the Operating Partnerships, except for one Operating Partnership in which it has a one-half percent interest.
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
The general partners and affiliates receive compensation and reimbursement of expenses from the Partnership, as set forth in the limited partnership agreement, for their services in managing the Partnership and its business. The general partners and affiliates also receive compensation and reimbursement of expenses from the Operating Partnerships. This compensation and reimbursement includes services provided to the Partnership during its offering stage, acquisition stage, operational stage, and termination of refinancing stage.
The general partners and affiliates earned the following fees for services provided to the Partnership and were entitled to reimbursement for costs incurred by the general partners and affiliates on behalf of the Partnership and the Operating Partnerships for the years ended March 31, 2002, 2001 and 2000 as follows:
At March 31, 2002 and 2001, payable to related parties totaling $1,080,533 and $1,006,337, respectively, consists of fees and certain general and administrative costs accrued as a non-interest bearing payable by the Partnership to the general partners and affiliates. Such fees and allocated costs have been deferred until the Partnership has sufficient cash to pay them.
Receivable from related parties of $4,934 at March 31, 2002 and 2001 represents cash advances to several of the Operating Partnerships.
At March 31, 2002 and 2001, CPRC was owed $62,455 for non-interest bearing, demand cash advances to the Partnership.
The general partners may advance funds to the Partnership to fund operating deficits, but are not obligated to do so. Such advances shall be evidenced by a promissory note of a term no more than 12 months in length and at a rate of interest no lower than the prime rate. All such loans shall be repaid prior to any distributions of net cash flow. At March 31, 2002 and 2001, the Partnership had no outstanding advances due to the general partners.
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
5. INVESTMENTS IN OPERATING PARTNERSHIPS
At March 31, 2002 and 2001, the Partnership owned limited partnership interests in 21 Operating Partnerships, each of which has invested in a multi-family rental property.
Investments in Operating Partnerships consist of the following:
A summarized combined balance sheet as of December 31, 2001 and 2000 and statement of operations for the three years ended December 31, 2001 of the aforementioned Operating Partnerships follows:
COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
COMBINED STATEMENT OF OPERATIONS
6. COMMITMENTS AND CONTINGENCIES
The rents of the Operating Partnerships, all of which receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8") are subject to specific laws, regulations, and agreements with federal and state agencies. 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 Section 8 contracts expiring during HUD's fiscal year 2002, where requested by an owner, for an additional one year term at current rent levels. As of June 21, 2002, eight of the Operating Partnerships' Section 8 contracts are due to expire during 2002. The Operating Partnerships have not yet received HUD's approval of their extension requests. At the present time, the Partnership cannot reasonably predict legislative initiatives and governmental 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.
- -------------------------------------------------------------------------------- See the accompanying report letter.
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
CASH
The carrying amount approximates fair value because of the short maturity of those instruments.
RELATED PARTY RECEIVABLES
The carrying amount approximates fair value because of the short-term nature of the receivables.
ADVANCE FROM AFFILIATE
The carrying amount approximates fair value because of the short-term nature of the advance.
PAYABLE TO RELATED PARTIES
The carrying amount approximates fair value because the terms of the payable are similar to currently available terms and conditions for similar instruments.
- -------------------------------------------------------------------------------- See the accompanying report letter.
Schedule III
CENTURY PACIFIC HOUSING FUND-I - --------------------------------------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
See notes to schedule
CENTURY PACIFIC HOUSING FUND-I - --------------------------------------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
See notes to schedule
CENTURY PACIFIC HOUSING FUND-1 - --------------------------------------------------------------------------------
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
NOTE 1 - DESCRIPTION OF PROPERTIES
The Properties held by the Operating Partnerships in which the Partnership has invested are housing projects, primarily for families and elderly or handicapped individuals of low and moderate income.
NOTE 2 - SCHEDULE OF ENCUMBRANCES
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS - CONTINUED DECEMBER 31, 2001
NOTE 3 - RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
Schedule IV
CENTURY PACIFIC HOUSING FUND-1 MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
Schedule IV
See notes to schedule
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
Schedule IV
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
Schedule IV
See notes to schedule
CENTURY PACIFIC HOUSING FUND-1 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2001
NOTE 1 - DESCRIPTION
Each Operating Partnership has invested in a Property. The Operating Partnerships assumed mortgage loan obligations from the sellers of the properties, and with the exception of two mortgages, all mortgage loan obligations are insured by the United States Department of Housing and Urban Development. All mortgages are secured by the land and buildings of the properties.
In addition, the Operating Partnerships issued residual notes to the sellers of the properties as partial consideration. The notes bear interest at the minimum long-term federal rate as announced from time-to-time pursuant to Section 1274 of the Internal Revenue Code, provided that such rate shall not be less than 7% nor greater than 15%. The notes are secured by the land and buildings of the properties. The notes are repayable out of future cash available for distribution and unpaid principal and interest are due at maturity.
NOTE 2 - RECONCILIATION OF MORTGAGES AND RESIDUAL NOTES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTURY PACIFIC HOUSING FUND - I
By: Irwin Jay Deutch, as Managing General Partner
Date: July 15, 2002 /s/ IRWIN JAY DEUTCH -----------------------------------------
and
Century Pacific Capital I Corporation, as Corporate General Partner and as Attorney-in-Fact for all Investor Limited Partners
Date: July 15, 2002 /s/ IRWIN JAY DEUTCH ------------------------------------- By: Irwin Jay Deutch, President
S2100-020 INDEPENDENT AUDITORS' REPORT
To The Partners Coleman Manor Associates Limited Partnership
We have audited the accompanying balance sheet of Coleman Manor Associates Limited Partnership, Project No. 052-35464, a limited partnership, as of December 31, 1999 and the related statements of profit and loss, partners' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Coleman Manor Associates Limited Partnership as of December 31, 1999 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
January 27, 2000
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - -------------------------------------------------------------------------------- BALANCE SHEET PAGE 1 OF 2 DECEMBER 31, 1999
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 2
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - -------------------------------------------------------------------------------- BALANCE SHEET PAGE 2 OF 2 DECEMBER 31, 1999
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 3
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - -------------------------------------------------------------------------------- STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED DECEMBER 31, 1999
Page 1 of 2
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 4
Page 2 of 2
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 5
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - ------------------------------------------------------------------------------ SCHEDULE OF SUB-ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------ See the accompanying notes to financial statements. Page 6a
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - ------------------------------------------------------------------------------ STATEMENT OF PARTNERS' EQUITY (DEFICIT) FOR THE YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------ See the accompanying notes to financial statements. Page 7
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS PAGE 1 OF 2 FOR THE YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 8
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS PAGE 2 OF 2 FOR THE YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------- See the accompanying notes to financial statements. Page 9
COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP 052-35464 - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (S3100-010)
The Partnership is organized as a limited partnership formed under the laws of the State of Maryland on May 16, 1988 to acquire an interest in .723 acres of land in Baltimore City, Maryland, and to construct and operate thereon an apartment complex of 50 units under Section 221(d)(3) of the National Housing Act. Such projects are regulated by the U.S. Department of Housing and Urban Development (HUD) as to rent charges and operating methods. The regulatory agreements limit annual distributions of net operating receipts to "surplus cash" available at the end of each year. There was no "surplus cash" as of December 31, 1999.
The following significant accounting policies have been followed in the preparation of the financial statements:
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
The Partnership provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 1999 as none was deemed necessary by management.
Depreciation is provided using primarily the straight-line method over the estimated useful lives of the assets ranging from seven to twenty-seven years.
The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
Deferred loan costs consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan.
The low income credit application fee and the low income credit compliance fee are being amortized over 15 years, the term of the credit compliance period.
Income or loss of the Partnership is allocated 2% to the general partners and 98% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.
2. MORTGAGES PAYABLE (S3100-050)
Permanent financing of the project has been provided by three mortgages. The related notes are nonrecourse and are secured by the Partnership's real estate.
The first mortgage is insured by the Federal Housing Administration (FHA) and collateralized by a deed of trust on the rental property. The mortgage bears interest at a rate of 10% and is payable in monthly installments of $12,545 (including principal and interest) through July 2029.
Under agreements with the mortgage lender and FHA, the Partnership is required to make monthly escrow deposits for taxes, insurance and replacement of project assets, and is subject to restrictions as to operating policies, rental charges, operating expenditures and distributions to partners.
The liability of the Partnership under the mortgage note is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender.
SUBORDINATED MORTGAGE PAYABLE
The second mortgage, a variable interest loan through Community Development Administration (CDA) of Maryland, is serviced by Bogman, Inc. The note matures on July 1, 2029 and is payable as follows:
1. Beginning August 1, 1990, fifteen annual payments of $8,500 are due, which includes interest at 1% annum.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
2. Beginning August 1, 2005, annual payments are due including interest at 10%, in an amount sufficient to amortize the principal balance over the remaining term of the loan.
SUBORDINATED PURCHASE MONEY MORTGAGE PAYABLE
This mortgage is with the Mayor and City Council of Baltimore and is non-interest bearing. The full balance is due on September 1, 2029.
The scheduled maturities of the mortgages payable at December 31, 1999 are as follows: (S3100-x1x)
3. COMMITMENTS (S3100-X3X) (S3100-240)
The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the project, prohibits the sale of the Project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.
4. RELATED PARTY TRANSACTIONS (S3100-200)
ASSET AND SUPERVISORY MANAGEMENT FEE (S3100-200)
The Project has a management agreement with Century Pacific Realty Corporation (CPRC), the supervising general partner, which requires a fee of $19,800 annually. The first portion of the fee ($3,000) is to be paid out of operations. The second portion ($5,000) is to be paid out of surplus cash (as defined by HUD). The remaining balance and any unpaid portions of the above may be paid out of capital transactions. As of December 31, 1999, $186,454 of this fee remains unpaid.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
INCENTIVE MANAGEMENT FEE (S3100-200)
The Project has an incentive management agreement with the managing general partner. The fee is to be equal to 60% of surplus cash (as defined by HUD) net of the second portion ($5,000) of the asset and supervisory management fee. There were no fees charged nor payments made related to this fee in 1999.
S3100-210 COMPANY NAME Century Pacific Realty Corporation S3100-220 AMOUNT RECEIVED $3,000
S3100-210 COMPANY NAME Mt. Washington Management Group, Inc. S3100-220 AMOUNT RECEIVED $27,461
MANAGEMENT FEE (S3100-230)
Mt. Washington Management Group, Inc., an affiliate of the general partners, is the exclusive agent for the management of the property. The current management agreement provides for a management fee equal to 6.14% of gross collections. Total management fees incurred during 1999 were $21,943. In addition, Mt. Washington Management Group, Inc. collects an accounting and bookkeeping fee which amounted to $4,925 in 1999. At December 31, 1999, $1,839 of these amounts are due and payable.
5. LOW-INCOME HOUSING TAX CREDITS (S3100-240)
The Partnership expects to generate an aggregate of $2,545,410 of low-income housing tax credits. Generally, such credits are expected to become available for use by its partners pro rata over a ten-year period beginning in 1989. In order to qualify for these credits, the Property must comply with various federal and state requirements. These requirements, include, but are not limited to, renting to low-income tenants at rental rates, which do not exceed specified percentages of area median gross income for the first 15 years of operation.
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