Item 1. Business
Oxford Residential Properties I Limited Partnership (the "Partnership" or the "Registrant") was formed on January 19, 1984, under the Maryland Revised Uniform Limited Partnership Act to acquire, own and operate residential properties. The General Partners of the Partnership are Oxford Residential Properties I Corporation and Oxford Fund I Limited Partnership. Oxford Residential Properties I Corporation serves as the managing general partner (the "Managing General Partner") and Oxford Fund I Limited Partnership serves as the Associated General Partner. The Partnership sold $25,714,000 of Assignee Units in a public offering that concluded on October 18, 1985. The net offering proceeds were used to acquire residential properties. Effective September 20, 2000, Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust, acquired a 100% ownership interest in the Managing General Partner’s sole shareholder. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2027, unless terminated prior to such date.
On April 24, 2008, the Partnership Agreement was amended to merge Oxford Residential Properties I Limited Partnership into Oxford Residential Properties I Limited Partnership, a Delaware limited partnership, with the Delaware limited partnership as the surviving entity. The Partnership Agreement was also amended to allow for the establishment of a series of limited partnership units.
The Partnership is engaged in the business of operating and holding real estate properties for investment. In 1984, during its acquisition phase, the Partnership acquired four existing apartment properties. The Partnership continues to own and operate one investment property.
The Partnership has no employees. Management and administrative services are performed by the Managing General Partner and by agents retained by the Managing General Partner. An affiliate of the Managing General Partner has been providing such property management services.
A further description of the Partnership’s business is included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in “Item 7” of this Form 10-K.
Item 2.
Item 2. Property
The following table sets forth the Partnership's investment in property:
Date of
Property
Purchase
Type of Ownership
Use
Fairlane East Apartments
12/23/85
Fee ownership, subject to
Apartment
Dearborn, Michigan
first mortgage
units
On September 30, 2008, the Partnership sold Raven Hill Apartments to a third party for a gross sale price of $23,000,000. The net proceeds realized by the Partnership were approximately $22,337,000 after payment of closing costs and a credit to the purchaser for deferred maintenance at the property. The Partnership used approximately $14,225,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership recorded a gain of approximately $13,766,000. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $242,000 due to the write off of unamortized loan costs and a prepayment penalty.
Schedule of Property
Set forth below for the Partnership's property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation, and Federal tax basis.
See "Note A - Organization and Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's capitalization and depreciation policies.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loan encumbering the Partnership's property.
Principal
Principal
Balance At
Stated
Balance
December 31,
Interest
Period
Maturity
Due At
Property
Rate
Amortized
Date
Maturity (3)
(in thousands)
(in thousands)
Fairlane East
Apartments
$10,200
(1)
(2)
10/01/10
$10,200
(1) Adjustable rate based on the one-month LIBOR rate plus 0.78%. The rate at December 31, 2009 was 1.02%.
(2) Interest only payments.
(3) See “Note B - Mortgage Note Payable” to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” for information with respect to the Partnership’s ability to prepay this loan and other specific details about the loan.
On June 20, 2008, the Partnership refinanced the mortgage encumbering Fairlane East Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $9,442,000, with a new mortgage loan in the principal amount of $10,200,000. The new loan was refinanced under a secured real estate credit facility (“Secured Credit Facility”) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010. AIMCO Properties, L.P. has the option to extend the Secured Credit Facility by two one-year extensions if no event of default exists.The new mortgage requires monthly payments of interest only beginning on August 1, 2008, through the October 1, 2010 maturity date, at which date the entire principal balance of $10,200,000 is due. The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (1.02% per annum at December 31, 2009) and resets monthly. The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the Managing General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty. As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee certain non-recourse carveout obligations and liabilities of the Partnership with respect to the new mortgage financing. Total capitalized loan costs associated with the new mortgage were approximately $93,000. Loan costs associated with the previous mortgage were fully amortized.
Schedule of Rental Rate and Occupancy
Average annual rental rate and occupancy for 2009 and 2008 for the property was as follows:
The real estate industry is highly competitive. The Partnership’s property is subject to competition from other residential apartment complexes in the area. The Managing General Partner believes that the property is adequately insured. The property is an apartment complex which leases units for terms of one year or less. No tenant leases 10% or more of the available rental space. The property is in good physical condition, subject to normal depreciation and deterioration as is typical for an asset of this type and age.
Schedule of Real Estate Tax and Rate
Real estate taxes and rate in 2009 for the property were as follows:
Billing
Rate
(in thousands)
Fairlane East Apartments
$ 449
5.85%
Capital Improvements
During the year ended December 31, 2009, the Partnership completed approximately $308,000 of capital improvements at Fairlane East Apartments, consisting primarily of kitchen and bath upgrades, air conditioning, appliance, floor covering and roof replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.
Item 3.
Item 3. Legal Proceedings
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the partnership paid approximately $13,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
The Partnership originally issued 25,714 Assignee Units (the “Units”) and through December 31, 2009, had redeemed a total of 2,156 Assignee Units, ranging in price from $332 to $600 per Unit. As of December 31, 2009, there were 643 holders of record owning an aggregate of 23,558 Units outstanding. Affiliates of the Managing General Partner owned 14,153.50 Units in the Partnership representing 60.08% of the outstanding Units at December 31, 2009. There is currently no established public market in which the Units are traded, and it is not anticipated that a public market will develop.
The Partnership distributed the following amounts during the years ended December 31, 2009 and 2008 (in thousands, except per unit data):
Year Ended
Per Assignee
Year Ended
Per Assignee
December 31,
Unit
December 31,
Unit
Operations
$ 1,675
$ 63.38
$ --
$ --
Sale(1)
2,252
95.59
5,829
247.43
Refinance (2)
1.78
1,175
49.88
$ 3,969
$160.75
$ 7,004
$297.31
(1) Proceeds from the September 2008 sale of Raven Hill Apartments.
(2) Proceeds from the June 2008 refinancing of the mortgage encumbering Raven Hill
Apartments.
Future cash distributions will depend on the levels of net cash generated from operations, the timing of the debt maturity, refinancing and/or property sale. The Partnership’s cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit any distributions to its partners in 2010 or subsequent periods. See “Item 2. Property - Capital Improvements” for information relating to anticipated capital expenditures at the property.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 14,153.50 Units in the Partnership representing 60.08% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 60.08% of the outstanding Units, AIMCO is in a position to control all such voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report.
The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.
Results of Operations
The Partnership’s net income for the years ended December 31, 2009 and 2008 was approximately $126,000 and $13,684,000, respectively. The consolidated statement of operations included in “Item 8.
Item 8. Financial Statements and Supplementary Data
OXFORDRESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
LIST OF FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2009 and 2008
Consolidated Statements of Operations - Years ended December 31, 2009 and 2008
Consolidated Statements of Changes in Partners' (Deficiency) Capital - Years ended December 31, 2009 and
Consolidated Statements of Cash Flows - Years ended December 31, 2009 and 2008
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
The Partners
OxfordResidential Properties I Limited Partnership
We have audited the accompanying consolidated balance sheets of Oxford Residential Properties I Limited Partnership as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in partners’ (deficiency) capital, and cash flows for each of the two years in the period ended December 31, 2009. 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 the standards of the Public Company 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. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits 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, and 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 consolidated financial position of Oxford Residential Properties I Limited Partnership at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
/s/Ernst & Young LLP
Greenville, South Carolina
March 29, 2010
OXFORDRESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
See Accompanying Notes to Consolidated Financial Statements
OXFORDRESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
See Accompanying Notes to Consolidated Financial Statements
OXFORDRESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(in thousands)
Assignor
Assignee
Assignee
General
Limited
Unit
Units
Partners
Partner
Holders
Total
Partners' (deficiency)
capital at
December 31,
23,558
$(2,149)
$
$ (3,650)
$ (5,798)
Distributions to
Assignee Unit Holders
--
--
--
(7,004)
(7,004)
Net income for the year
ended December 31,
--
--
13,571
13,684
Partners' (deficiency)
capital at
December 31,
23,558
(2,036)
2,917
Distributions to Partners
--
(182)
--
(3,787)
(3,969)
Net income for the year
ended December 31,
--
--
Partners' (deficiency)
capital at
December 31,
23,558
$(2,215)
$
$ (747)
$ (2,961)
See Accompanying Notes to Consolidated Financial Statements
At December 31, 2007, accounts payable included approximately $660,000 of property improvements and replacements, which are included in property improvements and replacements for the year ended December 31, 2008.
See Accompanying Notes to Consolidated Financial Statements
OXFORDRESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
Note A - Organization and Summary of Significant Accounting Policies
Organization: Oxford Residential Properties I Limited Partnership (the "Partnership" or "Registrant") was formed on January 19, 1984, to acquire, own and operate residential properties. The General Partners of the Partnership are Oxford Residential Properties I Corporation and Oxford Fund I Limited Partnership. Oxford Residential Properties I Corporation serves as the managing general partner (the "Managing General Partner") and Oxford Fund I Limited Partnership serves as the Associated General Partner. The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2027 unless terminated prior to such date. The Partnership operates one apartment property located in Michigan.
On April 24, 2008, the Partnership Agreement was amended to merge Oxford Residential Properties I Limited Partnership into Oxford Residential Properties I Limited Partnership, a Delaware limited partnership, with the Delaware limited partnership as the surviving entity. The Partnership Agreement was also amended to allow for the establishment of a series of limited partnership units.
Basis of Presentation: The accompanying consolidated statement of operations for the year ended December 31, 2008 reflects the operations of Raven Hill Apartments as income from discontinued operations due to its sale on September 30, 2008 (see Note G).
The following table presents summarized results of operations related to the Partnership’s discontinued operations for the year ended December 31, 2008 (in thousands):
Year Ended December 31,
Revenues
$2,367
Expenses
(2,627)
Loss on early extinguishment of debt
(242)
Casualty gain
Income from discontinued operations
$ 469
Certain reclassifications have been made to the 2008 balances to conform to the 2009 presentation.
Subsequent Events: The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.
Recent Accounting Pronouncement: In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162, or SFAS No. 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Upon the effective date of SFAS No. 168, the FASB Accounting Standards Codification, or the FASB ASC, became the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB ASC superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered non-SEC accounting literature not included in Note A - Basis of Presentation he FASB ASC is now non-authoritative. Subsequent to the effective date of SFAS No. 168, the FASB will issue Accounting Standards Updates that serve to update the FASB ASC.
Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $144,000 and $2,986,000 at December 31, 2009 and 2008, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.
Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment property and related personal property. For Federal income tax purposes, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal property additions over 5 years.
Deferred Costs: Loan costs of approximately $93,000 and $104,000 at December 31, 2009 and 2008, less accumulated amortization of approximately $60,000 and $20,000, respectively, are included in other assets on the accompanying consolidated balance sheets. The loan costs are amortized over the term of the related loan agreement. The total amortization expense for the years ended December 31, 2009 and 2008 was approximately $40,000 and $349,000 and is included in interest expense and income from discontinued operations. Amortization expense is expected to be approximately $33,000 for 2010.
Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases. Amortization of these costs is included in operating expenses and income from discontinued operations.
Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease. Deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.
Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.
Partners' (Deficiency) Capital: The Limited Partnership Agreement ("Agreement") provides that income and losses from operations for both financial and tax reporting purposes shall be allocated 98% to the Assignee Unit Holders and 2% to the General Partners. The Agreement provides that gain from the sale of investment properties is allocated to the partners in the same proportion and to the same extent as the partners received distributions of sale proceeds. To the extent that the gain exceeds the distribution, the excess shall be allocated 98% to the Assignee Unit holders and 2% to the General Partner. For financial reporting purposes, the net income per assignee unit (“Assignee Unit") has been calculated by dividing the portion of the Partnership's net income allocable to Assignee Unit Holders (98%) by the weighted average of Assignee Units outstanding. In all computations of earnings per Assignee Unit, the weighted average of Assignee Units outstanding during the period constitutes the basis for the net income amounts per Assignee Unit on the consolidated statements of operations.
Cash flow, as defined in the Partnership Agreement, will be disbursed within 60 days after June 30 and December 31, 90% to the Assignee Unit Holders and 10% to the General Partners and the Assignor Limited Partner. The Assignee Unit Holders are entitled to a noncumulative, preferred 6% return. To the extent that these preferences are not achieved from current operations, 40% of the property management fees and the Managing General Partners’ and the Assignor Limited Partner’s 10% share in cash flow will be deferred. Deferred property management fees are to be paid without interest in the next year in which excess cash flow is available after distribution to the Assignee Unit Holders of their preferred 6% return or out of sale or refinancing proceeds, after certain return of capital contributions are met.
Investment Property: Investment property consists of one apartment complex and is stated at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level. The Partnership did not capitalize any costs related to interest, property taxes or operating costs during the years ended December 31, 2009 and 2008. Capitalized costs are depreciated over the useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.
If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. No adjustments for impairment of value were necessary for the years ending December 31, 2009 and 2008.
Segment Reporting: FASB ASC Topic 280-10, “Segment Reporting”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. FASB ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in FASB ASC Topic 280-10, the Partnership has only one reportable segment.
Advertising: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $78,000 and $131,000 for the years ended December 31, 2009 and 2008, respectively, are included in operating expense and income from discontinued operations.
Fair Value of Financial Instruments: FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments approximates their fair value due to the short-term maturity of these instruments, which includes the mortgage encumbering Fairlane East Apartments.
Note B - Mortgage Note Payable
The principal terms of the mortgage note payable are as follows:
(1) Adjustable rate based on the one-month LIBOR rate plus 0.78%. The rate at December 31, 2009 was 1.02%.
On June 20, 2008, the Partnership refinanced the mortgage encumbering Fairlane East Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $9,442,000, with a new mortgage loan in the principal amount of $10,200,000. The new loan was refinanced under a secured real estate credit facility (“Secured Credit Facility”) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010. AIMCO Properties, L.P. has the option to extend the Secured Credit Facility by two one-year extensions if no event of default exists.The new mortgage requires monthly payments of interest only beginning on August 1, 2008, through the October 1, 2010 maturity date, at which date the entire principal balance of $10,200,000 is due. The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (1.02% per annum at December 31, 2009) and resets monthly. The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the Managing General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty. As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee certain non-recourse carveout obligations and liabilities of the Partnership with respect to the new mortgage financing. Total capitalized loan costs associated with the new mortgage were approximately $93,000. Loan costs associated with the previous mortgage were fully amortized. The Managing General Partner will either exercise its extension option or attempt to refinance such indebtedness and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure.
On June 30, 2008, the Partnership refinanced the mortgage debt encumbering Raven Hill Apartments. The refinancing resulted in the replacement of the existing mortgage debt, which at the time of refinancing had a principal balance outstanding of approximately $10,043,000, with a new mortgage loan in the principal amount of $14,225,000. The new mortgage loan bore interest at 5.75% per annum and required monthly payments of interest only of approximately $68,000 beginning on August 1, 2008 through June 30, 2010. From July 1, 2010 through the maturity date of July 1, 2015, the new mortgage loan required monthly payments of principal and interest with the interest rate being equal to the prime rate in effect 90 days prior to July 1, 2010 plus 2.50%, with a minimum interest rate of 5.75% and a maximum interest rate of 16.00%. The interest rate was to reset annually. The new mortgage loan required a balloon payment at maturity. Total capitalized loan costs associated with the new mortgage were approximately $237,000. The unamortized balance of these loan costs was written off and the new mortgage loan was paid off in conjunction with the sale of Raven Hill Apartments on September 30, 2008. Loan costs associated with the previous mortgage were fully amortized.
The mortgage note payable is non-recourse and is secured by pledge of the apartment property and by pledge of revenues from the property. The property may not be sold subject to existing indebtedness.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for property management services and for reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. However, 40% of this fee is subordinated until certain operating distribution preference levels to the Assignee Unit Holders are achieved or the Partnership distributes proceeds from a sale or refinancing. During the year ended December 31, 2009, the operating distribution preference level was met. Total property management fees of approximately $152,000 and $268,000 for the years ended December 31, 2009 and 2008, respectively, were charged to expense and are included in operating expense and income from discontinued operations. Property management fees of approximately $61,000 and $107,000 for the years ended December 31, 2009 and 2008, respectively, were deferred. During the years ended December 31, 2009 and 2008, the Partnership paid approximately $66,000 and $511,000, respectively, of deferred management fees from operations and proceeds from the sale of Raven Hill Apartments. The cumulative deferred management fees as of December 31, 2008 totaled approximately $10,000, and are included in other liabilities. At December 31, 2009, approximately $5,000 of property management fees were owed and are included in other liabilities.
An affiliate of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $52,000 and $117,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the Managing General Partner of approximately $21,000 and $19,000, respectively.
AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $497,000 during the year ended December 31, 2008 to fund mortgage application fees and operations at both investment properties. There were no such advances during the year ended December 31, 2009. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the advances made to the Partnership ranged from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the Managing General Partner review the market rate adjustment quarterly. Interest expense was approximately $124,000 for the year ended December 31, 2008. During the year ended December 31, 2008, the Partnership repaid approximately $3,542,000 of advances and accrued interest from proceeds from the refinancing of the mortgages encumbering both investment properties. There were no outstanding advances due at December 31, 2009 or 2008. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheets, please see its reports filed with the Securities and Exchange Commission.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $45,000 and $102,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 14,153.50 Assignee units (the "Units") in the Partnership representing 60.08% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 60.08% of the outstanding Units, AIMCO is in a position to control all such voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.
Note D - Investment Property and Accumulated Depreciation
Reconciliation of "Investment Property and Accumulated Depreciation":
The aggregate cost of the real estate for Federal income tax purposes at December 31, 2009 and 2008 is approximately $20,358,000 and $20,058,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2009 and 2008 is approximately $17,265,000 and $16,742,000, respectively.
Note E - Income Taxes
The Partnership is classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable income (loss)(in thousands, except per unit data):
Net income as reported
$ 126
$13,684
Add (deduct):
Depreciation differences
Prepaid rent
(15)
Casualty gain
--
Gain on sale
--
7,783
Other
(32)
(51)
Federal taxable income
$
$ 21,857
Federal taxable income per Assignee
unit
$ 22.96
$ 914.10
The tax basis of the Partnership's assets and liabilities is approximately $2,361,000 and $1,741,000 more than the assets and liabilities as reported in the consolidated financial statements at December 31, 2009 and 2008, respectively.
Note F - Casualty Event
During June 2007, Raven Hill Apartments incurred damages as a result of a fire. Total building damages were approximately $2,132,000, total clean up costs were approximately $807,000 and total lost rents were approximately $71,000. Total insurance proceeds received were approximately $2,908,000, which included reimbursement of approximately $2,132,000 for building damages and $776,000 for clean up costs. The Partnership recognized a total casualty gain of approximately $2,414,000, of which approximately $1,443,000 was recognized in the year ended December 31, 2007. The Partnership recognized a casualty gain of approximately $971,000 for the year ended December 31, 2008, which is included in income from discontinued operations. In addition, the Partnership received approximately $71,000 during the year ended December 31, 2008 to cover lost rents, which was included in revenues in 2007.
In May 2009, Fairlane East Apartments sustained damages of approximately $47,000 as a result of a fire. Subsequent to December 31, 2009, the Partnership received insurance proceeds of approximately $37,000 to cover the damaged assets. The Partnership does not expect to record a loss from this event.
Note G - Sale of Discontinued Operations
On September 30, 2008, the Partnership sold Raven Hill Apartments to a third party for a gross sale price of $23,000,000. The net proceeds realized by the Partnership were approximately $22,337,000 after payment of closing costs and a credit to the purchaser for deferred maintenance at the property. The Partnership used approximately $14,225,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership recorded a gain of approximately $13,766,000, which is included in gain from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $242,000 due to the write off of unamortized loan costs and a prepayment penalty, which is included in income from discontinued operations for the year ended December 31, 2008.
Note H - Contingencies
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the partnership paid approximately $13,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Managing General Partner have implemented policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s consolidated financial condition or results of operations.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T). Controls and Procedures
(a) Disclosure Controls and Procedures
The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;
· provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and
· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2009. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on their assessment, the Partnership’s management concluded that, as of December 31, 2009, the Partnership’s internal control over financial reporting is effective.
This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.
(b) Changes in Internal Control Over Financial Reporting.
There has been no change in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The Registrant has no directors or officers. The Managing General Partner is Oxford Residential Properties I Corporation. The names and ages of, as well as the position and offices held by, the present director and officers of the Managing General Partner are set forth below. There are no family relationships between or among any directors or officers.
Name
Age
Position
Steven D. Cordes
Director and Senior Vice President
John Bezzant
Director and Senior Vice President
Timothy J. Beaudin
President and Chief Operating Officer
Ernest M. Freedman
Executive Vice President and Chief Financial Officer
Lisa R. Cohn
Executive Vice President, General Counsel and Secretary
Paul Beldin
Senior Vice President and Chief Accounting Officer
Stephen B. Waters
Senior Director of Partnership Accounting
Steven D. Cordes was appointed as a Director of the Managing General Partner effective March 2, 2009. Mr. Cordes has been a Senior Vice President of the Managing General Partner and AIMCO since May 2007. Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity. Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership. Mr. Cordes brings particular expertise to the Board in the areas of asset management, finance and accounting.
John Bezzant was appointed as a Director of the Managing General Partner effective December 16, 2009. Mr. Bezzant has been a Senior Vice President of the Managing General Partner and AIMCO since joining AIMCO in June 2006. Prior to joining AIMCO, from 2005 to June 2006, Mr. Bezzant was a First Vice President at Prologis, a Denver, Colorado-based real estate investment trust, and from 1986 to 2005, Mr. Bezzant served as Vice President, Asset Management at Catellus Development Corporation, a San Francisco, California-based real estate investment trust. Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.
Timothy J. Beaudin was appointed President and Chief Operating Officer of AIMCO and the Managing General Partner in February 2009. He joined AIMCO and the Managing General Partner as Executive Vice President and Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer of the Managing General Partner and AIMCO in October 2008. Mr. Beaudin oversees conventional and affordable property operations, transactions, asset management, and redevelopment and construction services for AIMCO and the Managing General Partner. Prior to joining AIMCO and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.
Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of the Managing General Partner and AIMCO in November 2009. Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas. Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts.
Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Managing General Partner and AIMCO in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO. Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel. Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.
Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the Managing General Partner since that time. Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.
Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the Managing General Partner in June 2009. Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the Managing General Partner. Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the Managing General Partner and AIMCO in April 2004. Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.
The Registrant is not aware of the involvement in any legal proceedings with respect to the directors and executive officers listed in this Item 10.
One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.
The board of directors of the Managing General Partner does not have a separate audit committee. As such, the board of directors of the Managing General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an "audit committee financial expert".
The directors and officers of the Managing General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.
Item 11.
Item 11. Executive Compensation
None of the directors and officers of the Managing General Partner received any remuneration from the Partnership during the year ended December 31, 2009.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners
Except as noted below, no person or entity was known by the Partnership to own of record or beneficially more than 5% of the Assignee Units (the “Units”) of the Partnership as of December 31, 2009.
Entity
Number of Units
Percentage
AIMCO/Bethesda Holdings
(an affiliate of AIMCO)
1,028.0
4.36%
AIMCO Properties, L.P.
(an affiliate of AIMCO)
8,128.5
34.51%
ORP Acquisition Partners, L.P.
(an affiliate of AIMCO)
4,997.0
21.21%
AIMCO/Bethesda Holdings and ORP Acquisition Partners, L.P. are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29601.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237.
(b) Beneficial Owners of Management
No director or officer of the Managing General Partner owns any Units of the Partnership of record or beneficially.
Item 13.
Item 13. Certain Relationships and Related Transactions and Director Independence
The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for property management services and for reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. However, 40% of this fee is subordinated until certain operating distribution preference levels to the Assignee Unit Holders are achieved or the Partnership distributes proceeds from a sale or refinancing. During the year ended December 31, 2009, the operating distribution preference level was met. Total property management fees of approximately $152,000 and $268,000 for the years ended December 31, 2009 and 2008, respectively, were charged to expense and are included in operating expense and income from discontinued operations on the consolidated statements of operations included in “Item 8. Financial Statements and Supplementary Data”. Property management fees of approximately $61,000 and $107,000 for the years ended December 31, 2009 and 2008, respectively, were deferred. During the years ended December 31, 2009 and 2008, the Partnership paid approximately $66,000 and $511,000, respectively, of deferred management fees from operations and proceeds from the sale of Raven Hill Apartments. The cumulative deferred management fees as of December 31, 2008 totaled approximately $10,000, and are included in other liabilities on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”. At December 31, 2009, approximately $5,000 of property management fees were owed and are included in other liabilities on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”.
An affiliate of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $52,000 and $117,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the Managing General Partner of approximately $21,000 and $19,000, respectively.
AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $497,000 during the year ended December 31, 2008 to fund mortgage application fees and operations at both investment properties. There were no such advances during the year ended December 31, 2009. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the advances made to the Partnership ranged from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the Managing General Partner review the market rate adjustment quarterly. Interest expense was approximately $124,000 for the year ended December 31, 2008. During the year ended December 31, 2008, the Partnership repaid approximately $3,542,000 of advances and accrued interest from proceeds from the refinancing of the mortgages encumbering both investment properties. There were no outstanding advances due at December 31, 2009 or 2008. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheets, please see its reports filed with the Securities and Exchange Commission.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $45,000 and $102,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 14,153.50 Assignee Units in the Partnership representing 60.08% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 60.08% of the outstanding Units, AIMCO is in a position to control all such voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.
Neither of the Managing General Partner’s directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the Managing General Partner.
Item 14.
Item 14. Principal Accounting Fees and Services
The Managing General Partner has reappointed Ernst & Young LLP as independent auditors to audit the consolidated financial statements of the Partnership for 2010. The aggregate fees billed for services rendered by Ernst & Young LLP for 2009 and 2008 are described below.
Audit Fees. Fees for audit services totaled approximately $39,000 and $54,000 for 2009 and 2008, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.
Tax Fees. Fees for tax services totaled approximately $8,000 and $22,000 for 2009 and 2008, respectively.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a) The following consolidated financial statements of the Registrant are included in Item 8:
Consolidated Balance Sheets at December 31, 2009 and 2008.
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008.
Consolidated Statements of Changes in Partners' (Deficiency) Capital for the years ended December 31, 2009 and 2008.
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008.
Notes to Consolidated Financial Statements.
Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
(b) Exhibits:
See Exhibit index.
The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OxfordResidential Properties I Limited Partnership
By: Oxford Residential Properties I Corporation
Managing General Partner
By: /s/Steven D. Cordes
Steven D. Cordes
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Senior Director of Partnership Accounting
Date: March 29,
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/John Bezzant
Director and Senior
Date: March 29, 2010
John Bezzant
Vice President
/s/Steven D. Cordes
Director and Senior
Date: March 29, 2010
Steven D. Cordes
Vice President
/s/Stephen B. Waters
Senior Director of
Date: March 29, 2010
Stephen B. Waters
Partnership Accounting
OXFORD RESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
EXHIBIT INDEX
Exhibit Description of Exhibit
3.1 Amended and Restated Agreement and Certificate of Limited Partnership (incorporated by reference to Exhibit A of the Prospectus of the Partnership, dated May 24, 1985).
4.1 Amended and Restated Agreement and Certificate of Limited Partnership (incorporated by reference from Exhibit A of the Prospectus of the Partnership, dated May 24, 1985).
4.2 Second Amendment to the Amended and Restricted Agreement and Certificate of Limited Partnership, incorporated by reference to the Partnership’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008.
10.12 Future Advance Mortgage, dated June 20, 2008, between ORP One, LLC, a Maryland limited liability company, and Transamerica Occidental Life Insurance Company, an Iowa corporation (incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 20, 2008).
10.13 Secured Promissory Note, dated June 20, 2008, between ORP One, LLC, a Maryland limited liability company, and Transamerica Occidental Life Insurance Company, an Iowa corporation (incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 20, 2008).
10.14 Carveout Guarantee and Indemnity Agreement, dated June 20, 2008, between AIMCO Properties, L.P., a Delaware limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation (incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 20, 2008).
10.17 Purchase and Sale Contract between ORP Three, L.L.C., a Maryland limited liability company, and Nighthawk Properties, LLC, a Minnesota limited liability company, and Osprey Properties Limited Partnership, LLLP, a Minnesota limited liability limited partnership, dated August 12, 2008 (incorporated by reference to the Partnership’s Current Report on Form 8-K dated August 12, 2008).
10.18 First Amendment to Purchase and Sale Contract between ORP Three, L.L.C., a Maryland limited liability company, and Nighthawk Properties, LLC, a Minnesota limited liability company, and Osprey Properties Limited Partnership, LLLP, a Minnesota limited liability limited partnership, dated August 14, 2008 (incorporated by reference to the Partnership’s Current Report on Form 8-K dated August 12, 2008).
10.19 Second Amendment to Purchase and Sale Contract between ORP Three, L.L.C., a Maryland limited liability company, and Nighthawk Properties, LLC, a Minnesota limited liability company, and Osprey Properties Limited Partnership, LLLP, a Minnesota limited liability limited partnership, dated August 20, 2008 (incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 30, 2008).
10.20 Third Amendment to Purchase and Sale Contract between ORP Three, L.L.C., a Maryland limited liability company, and Nighthawk Properties, LLC, a Minnesota limited liability company, and Osprey Properties Limited Partnership, LLLP, a Minnesota limited liability limited partnership, dated August 22, 2008 (incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 30, 2008).
10.21 Fourth Amendment to Purchase and Sale Contract between ORP Three, L.L.C., a Maryland limited liability company, and Nighthawk Properties, LLC, a Minnesota limited liability company, and Osprey Properties Limited Partnership, LLLP, a Minnesota limited liability limited partnership, dated September 22, 2008 (incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 30, 2008).
31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.