ITEM 1. BUSINESS
Housing Programs Limited ("HPL" or the "Partnership") is a limited partnership which was formed under the laws of the State of California on May 15, 1984. On September 12, 1984, the Partnership offered 3,000 units consisting of 6,184 Limited Partnership Interests and warrants to purchase a maximum of 6,184 Additional Limited Partnership Interests through a public offering. The Partnership shall be dissolved only upon the expiration of 50 complete calendar years (December 31, 2034) from the date of the formation of the Partnership or upon the occurrence of various other events as described in the terms of the Partnership agreement. The principal business of the Partnership is to invest in other limited partnerships which own or lease and operate Federal, state and local government-assisted housing projects.
The general partners of the Partnership are National Partnership Investments Corp. ("NAPICO" or the "Corporate General Partner"), Housing Programs Corporation II and National Partnership Investment Associates (collectively, the “General Partners”). NAPICO and Housing Programs Corporation II are subsidiaries of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust. The business of the Partnership is conducted primarily by NAPICO. The General Partners have a one percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments.
On January 31, 2012, an affiliate of the Corporate General Partner entered into a management agreement with a third party management services company for the management of a portfolio of approximately 147 properties with 10,184 units held by entities, including the Partnership, in which Aimco and its affiliates have minority limited and general partner interests. On January 31, 2012, an affiliate of the Corporate General Partner also entered into an option agreement with the management services company pursuant to which it granted the company the exclusive option, for a period ending on December 27, 2013, to purchase the minority interests in the portfolio held by Aimco and its affiliates. Aimco expects the sale of such interests to be completed later this year, pending the satisfaction of certain closing conditions.
The Partnership holds a limited partnership interest in one local limited partnership (the "Local Limited Partnership") as of December 31, 2011. The Partnership surrendered its interest in one Local Limited Partnership in 2001, the properties in three Local Limited Partnerships were sold in 2003, one Local Limited Partnership sold its investment property in 2006, the Partnership assigned its remaining limited partnership interest in one Local Limited Partnership during 2007, and one Local Limited Partnership sold its investment property in December 2011. The remaining Local Limited Partnership owns a residential low income rental project consisting of a total of 330 apartment units. The Partnership sold its limited partnership interest in the remaining local limited partnership on January 31, 2012. The mortgage loans of this project are payable to a governmental agency.
The Partnership became the limited partner in the remaining Local Limited Partnership pursuant to an arm’s-length negotiation with the Local Limited Partnership’s general partner who is the original project developer. As a limited partner, the Partnership’s liability for obligations of the Local Limited Partnership is limited to its investment. The general partner of the Local Limited Partnership retains responsibility for maintaining, operating and managing the project. Under certain circumstances of default, the Partnership has the right to replace the general partner of the Local Limited Partnership, but otherwise does not have control of sale, refinancing, etc.
The Partnership has no employees. Management and administrative services are performed by the Corporate General Partner and by agents retained by the Corporate General Partner.
A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2.
ITEM 2. PROPERTY
During 2011, the project in which the Partnership had invested was substantially rented. The following is a schedule of the status, as of December 31, 2011, of the remaining project owned by the Local Limited Partnership in which the Partnership has invested.
SCHEDULE OF PROJECT OWNED BY LOCAL LIMITED PARTNERSHIP
IN WHICH HOUSING PROGRAMS LIMITED HAS AN INVESTMENT
DECEMBER 31, 2011
Units
Authorized
Percentage of
Percentage of
For Rental
Total Units
Total Units
No. of
Assistance Under
Occupied
Occupied
Name and Location
Units
Section 8 (A)
Evergreen
Oshtemo, MI
95%
98%
(A) Section 8 of Title II of the Housing and Community Development Act of 1974.
The Partnership has a 99.0% ownership interest in Oshtemo Limited Dividend Housing Association, which was held for sale at December 31, 2011 as a result of the Partnership selling its limited partnership interest in the Local Limited Partnership on January 31, 2012.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Corporate General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the Corporate General Partner, the claims will not result in any material liability to the Partnership.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The limited partnership interests are not traded on a public exchange, and it is not anticipated that any public market will develop for the purchase and sale of any limited partnership interest; therefore an investor may be unable to sell or otherwise dispose of his or her interest in the Partnership. Limited partnership interests may be transferred only if certain requirements are satisfied. At December 31, 2011, there were 2,438 registered holders, owning an aggregate of 12,050 limited partnership interests in the Partnership. The Partnership has invested in certain government assisted projects under programs which in many instances restrict the cash return available to project owners. The Partnership was not designed to provide cash distributions to investors in circumstances other than refinancings or dispositions of its investments in Local Limited Partnerships. During the year ended December 31, 2011, the Partnership deemed a distribution of approximately $71,000 ($5.88 per limited partnership interest), which consisted of nonresident withholding taxes previously paid by the Partnership on behalf of the limited partners. No distributions were made during the year ended December 31, 2010.
In addition to its indirect ownership of the general partnership interest in the Partnership, Aimco and its affiliates owned 580.5 limited partnership units (the "Units"), or 1,161.0 limited partnership interests, in the Partnership representing 9.63% of the outstanding Units at December 31, 2011. A Unit consists of two limited partnership interests. 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 that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General Partner also owes fiduciary duties to Aimco as its sole stockholder. As a result, the duties of the Corporate General Partner, as corporate general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to Aimco as its sole stockholder.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
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 financial statements and other items contained elsewhere in this report.
The Corporate General Partner monitors developments in the area of legal and regulatory compliance.
Liquidity and Capital Resources
The property in which the Partnership has invested, through its investment in the Local Limited Partnership, receives one or more forms of assistance from the Federal Government. As a result, the Local Limited Partnership’s ability to transfer funds to the Partnership in the form of cash distributions, loans or advances is generally restricted by those government assistance programs.
The Partnership's primary source of funds consists of distributions from Local Limited Partnerships in which the Partnership has invested. It is not expected that the remaining Local Limited Partnership in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership's limited partners in any material amount. As a result of the sale of the Partnership’s sole remaining investment in January 2012, the Partnership determined that it would not have sufficient cash to distribute to its partners. Accordingly, during the year ended December 31, 2011, the Partnership deemed a distribution of approximately $71,000 to the limited partners (approximately $5.88 per limited partnership interest), which consisted of Indiana and Michigan nonresident withholding taxes previously paid by the Partnership on behalf of nonresident limited partners.
At both December 31, 2011 and 2010, the Partnership had cash and cash equivalents of approximately $1,000.
Distributions received from Local Limited Partnerships are recognized as a reduction of the investment balance until the investment balance has been reduced to zero. Subsequent distributions received are recognized as income. During the year ended December 31, 2011, the Partnership received an operating distribution of approximately $15,000 from one Local Limited Partnership in which the Partnership’s investment balance has been reduced to zero, which was recognized as income. No operating distributions were received from the Local Limited Partnerships during the year ended December 31, 2010.
During the year ended December 31, 2010, the Partnership advanced approximately $1,000 to one Local Limited Partnership, Jenny Lind Hall II, L.P., to fund a tax payment. While not obligated to make advances to either of the Local Limited Partnerships, the Partnership made this advance in order to protect its economic investment in the Local Limited Partnership. This amount is included in advance to Local Limited Partnership recognized as expense for the year ended December 31, 2010, as the investment balance in the Local Limited Partnership had been reduced to zero. During the year ended December 31, 2011, the Partnership received repayment of advances of approximately $2,000 from this Local Limited Partnership. This repayment is recognized as recovery of advances made to Local Limited Partnership previously recognized as expense.
Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the Corporate General Partner, advanced the Partnership approximately $24,000 and $41,000 during the years ended December 31, 2011 and 2010, respectively, to fund partnership operating expenses. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2011). Interest expense was approximately $5,000 and $3,000 for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the total advances and accrued interest due to AIMCO Properties, L.P. was approximately $117,000 and $88,000, respectively, and are included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”. 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. Subsequent to December 31, 2011, the Partnership repaid approximately $118,000 of advances and accrued interest with proceeds from the sale of its limited partnership interest in Oshtemo Limited Dividend Housing Association as discussed below.
On December 21, 2011, Jenny Lind Hall II, L.P. sold its investment property to a third party for a gross sale price of $2,250,000. After payment of closing costs and repayment of the notes payable encumbering the property, the Partnership did not receive any proceeds from the sale. The Partnership had no investment balance remaining in this Local Limited Partnership as of December 31, 2011 or 2010.
Results of Operations
At December 31, 2011, the Partnership has an investment in one Local Limited Partnership, which owns a housing project that is substantially rented. The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions of the Local Limited Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. Thus the individual investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. However, since the Partnership is not legally liable for the obligations of the Local Limited Partnership, or is not otherwise committed to provide additional support, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. Subsequent distributions received are recognized as income in the statements of operations. For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. There was no recognition of equity in loss from the Local Limited Partnership for the year ended December 31, 2011 and 2010, as the Partnership’s investment balance in the Local Limited Partnership had been reduced to zero prior to January 1, 2010.
The Partnership receives distributions from the Local Limited Partnerships in which it has invested. During the year ended December 31, 2011, the Partnership received an operating distribution of approximately $15,000 from one Local Limited Partnership in which the Partnership’s investment balance has been reduced to zero, which was recognized as income. There were no distributions received during the year ended December 31, 2010.
Subsequent to December 31, 2011, the Partnership assigned its limited partnership interest in Oshtemo Limited Dividend Housing Association to a third party for $350,000. The Partnership had no remaining investment balance in the Local Limited Partnership at December 31, 2011 and 2010. Oshtemo Limited Dividend Housing Association was the Partnership’s sole remaining investment. The Partnership anticipates liquidating by December 31, 2012.
An annual management fee is payable to the general partners of the Partnership and is calculated at 0.5 percent of the original remaining invested assets of the Local Limited Partnerships at the beginning of each year. The management fee is paid to the general partners for their continuing management of Partnership affairs. Management fees were approximately $93,000 for each of the years ended December 31, 2011 and 2010.
Operating expenses, other than management fees and interest expense, consist of legal and accounting fees for services rendered to the Partnership and general and administrative expenses. Legal and accounting fees were approximately $57,000 and $39,000 for the years ended December 31, 2011 and 2010, respectively. The increase in legal and accounting fees is primarily due to an increase in professional expenses associated with the administration of the Partnership. General and administrative expenses were approximately $20,000 and $18,000 for the years ended December 31, 2011 and 2010, respectively.
The Partnership, as a Limited Partner in the Local Limited Partnership in which it has invested, is subject to the risks incident to the management and ownership of improved real estate. The Partnership investment is also subject to adverse general economic conditions, and, accordingly, the status of the national economy, including substantial unemployment, concurrent inflation and changing legislation, could increase vacancy levels, rental payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the project.
Off-Balance Sheet Arrangements
The Partnership owns a limited partnership interest in an unconsolidated Local Limited Partnership, in which the Partnership’s ownership percentage is 99%. However, based on the provisions of the relevant partnership agreement, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Limited Partnership that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 - Organization and Summary of Significant Accounting Policies” of the financial statements in “Item 8. Financial Statements and Supplementary Data”). There are no lines of credit, side agreements or any other derivative financial instruments between the Local Limited Partnership and the Partnership. Accordingly the Partnership’s maximum risk of loss related to the unconsolidated Local Limited Partnership is limited to the recorded investments in and receivables from the Local Limited Partnership. See “Note 2 - Investments in and Advances to Local Limited Partnerships” of the financial statements in “Item 8. Financial Statements and Supplementary Data” for additional information about the Partnership’s investment in the unconsolidated Local Limited Partnership.
Variable Interest Entities
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
At December 31, 2011 and 2010, the Partnership holds variable interests in one and two VIEs, respectively, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Limited Partnerships, that the general partner of each of the Local Limited Partnerships is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors:
· the general partners conduct and manage the business of the Local Limited Partnerships;
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnerships’ underlying real estate properties;
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnerships;
· the general partners are obligated to fund any recourse obligations of the Local Limited Partnerships;
· the general partners are authorized to borrow funds on behalf of the Local Limited Partnerships; and
· the Partnership, as a limited partner in each of the Local Limited Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnerships that most significantly impact such entities’ economic performance.
The one VIE at December 31, 2011 consists of a Local Limited Partnership that is directly engaged in the ownership and management of one apartment property with a total of 330 units. The Partnership is involved with this VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with this unconsolidated VIE is limited to the Partnership’s recorded investment in and receivables from this VIE, which were zero at both December 31, 2011 and 2010. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.
Critical Accounting Policies and Estimates
A summary of the Partnership’s significant accounting policies is included in "Note 1 -Organization and Summary of Significant Accounting Policies" which is included in the financial statements in "Item 8. Financial Statements and Supplementary Data". The Corporate General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.
Method of Accounting for Investments in Local Limited Partnerships
The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnership, that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnership based upon its ownership percentage of 99%. Distributions of surplus cash from operations from the Local Limited Partnership are restricted by the Local Limited Partnership’s Regulatory Agreement with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Limited Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnership’s partnership agreement. This agreement usually limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership.
The individual investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. See “Note 1 - Organization and Summary of Significant Accounting Policies” to the financial statements included in “Item 8. Financial Statements and Supplementary Data” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Limited Partnership and is not otherwise committed to provide additional support to the Local Limited Partnership. Therefore, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance has been reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the statements of operations included in “Item 8. Financial Statements and Supplementary Data”.
For those investments where the Partnership has determined that the carrying value of its investment approximates the estimated fair value of the investment, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HOUSING PROGRAMS LIMITED
LIST OF FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm.
Balance Sheets - December 31, 2011 and 2010.
Statements of Operations - Years ended December 31, 2011 and 2010.
Statements of Changes in Partners' Deficit - Years ended December 31, 2011 and 2010.
Statements of Cash Flows - Years ended December 31, 2011 and 2010.
Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm
The Partners
Housing Programs Limited
We have audited the accompanying balance sheets of Housing Programs Limited as of December 31, 2011 and 2010, and the related statements of operations, changes in partners' deficit and cash flows for each of the two years in the period ended December 31, 2011. 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 financial position of Housing Programs Limited as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
/s/Ernst & Young LLP
Greenville, South Carolina
March 29, 2012
HOUSING PROGRAMS LIMITED
BALANCE SHEETS
(in thousands)
See Accompanying Notes to Financial Statements
HOUSING PROGRAMS LIMITED
STATEMENTS OF OPERATIONS
(in thousands, except per interest data)
See Accompanying Notes to Financial Statements
HOUSING PROGRAMS LIMITED
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands)
General
Limited
Partners
Partners
Total
Partners’ deficit,
December 31, 2009
$(256)
$ (255)
$ (511)
Net loss for the year ended
December 31, 2010
(2)
(152)
(154)
Partners’ deficit, December 31, 2010
(258)
(407)
(665)
Distribution to limited partners
--
(71)
(71)
Net loss for the year ended
December 31, 2011
(2)
(156)
(158)
Partners’ deficit, December 31, 2011
$(260)
$ (634)
$ (894)
See Accompanying Notes to Financial Statements
HOUSING PROGRAMS LIMITED
STATEMENTS OF CASH FLOWS
(in thousands)
See Accompanying Notes to Financial Statements
HOUSING PROGRAMS LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Housing Programs Limited (the “Partnership”) was organized under the California Uniform Limited Partnership Act on May 15, 1984. The Partnership was formed to invest primarily in other limited partnerships which own or lease and operate federal, state or local government-assisted housing projects. The general partners of the Partnership are National Partnership Investments Corp. ("NAPICO" or the "Corporate General Partner"), Housing Programs Corporation II and National Partnership Investment Associates (collectively, the "General Partners"). NAPICO and Housing Programs Corporation II are subsidiaries of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust.
On January 31, 2012, an affiliate of the Corporate General Partner entered into a management agreement with a third party management services company for the management of a portfolio of approximately 147 properties with 10,184 units held by entities, including the Partnership, in which Aimco and its affiliates have minority limited and general partner interests. On January 31, 2012, an affiliate of the Corporate General Partner also entered into an option agreement with the management services company pursuant to which it granted the company the exclusive option, for a period ending on December 27, 2013, to purchase the minority interests in the portfolio held by Aimco and its affiliates. Aimco expects the sale of such interests to be completed later this year, pending the satisfaction of certain closing conditions.
The General Partners have a one percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments.
The Partnership shall be dissolved only upon the expiration of 50 complete calendar years (December 31, 2034) from the date of the formation of the Partnership or upon the occurrence of various other events as described in the terms of the Partnership agreement.
Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the general partners will be entitled to a liquidation fee as stipulated in the Partnership agreement. The limited partners will have a priority return equal to their invested capital attributable to the project(s) or project interest(s) sold and shall receive from the sale of the project(s) or project interest(s) an amount sufficient to pay state and federal income taxes, if any, calculated at the maximum rate then in effect. The general partners' liquidation fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions. No such fees were accrued or paid during the years ended December 31, 2011 and 2010.
Subsequent Events
The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of 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 financial statements and accompanying notes. Actual results could differ from those estimates.
Method of Accounting for Investment in Local Limited Partnership
The investment in local limited partnership (the “Local Limited Partnership”) is accounted for using the equity method.
Abandoned Units
During the years ended December 31, 2011 and 2010, the number of Limited Partnership Interests decreased by 20 and 14 interests, respectively, due to limited partners abandoning their interests. At December 31, 2011 and 2010, the Partnership had outstanding 12,050 and 12,070 limited partnership interests, respectively. In abandoning his or her Limited Partnership Interest(s), a limited partner relinquishes all right, title, and interest in the Partnership as of the date of abandonment.
Net Loss and Distribution Per Limited Partnership Interest
Net loss and distribution per limited partnership interest was computed by dividing the limited partners' share of net loss and distributions by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 12,070 and 12,084 for the years ended December 31, 2011 and 2010, respectively.
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. The entire cash balances at December 31, 2011 and 2010 are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.
Impairment of Long-Lived Assets
The Partnership reviews its investments in long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. No impairment losses were recognized during the years ended December 31, 2011 and 2010.
Segment Reporting
Financial Accounting Standards Board Accounting Standards Codification (“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. ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in ASC Topic 280-10 the Partnership has only one reportable segment.
Fair Value of Financial Instruments
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. At December 31, 2011, the Partnership believes that the carrying amount of other assets and liabilities that require such disclosure approximated their fair value due to the short-term maturity of these instruments.
Variable Interest Entities
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the rights to receive benefits that could potentially be significant to the VIE.
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
At December 31, 2011 and 2010, the Partnership holds variable interests in one and two VIEs, respectively, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Limited Partnerships, that the general partner of each of the Local Limited Partnerships is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors:
· the general partners conduct and manage the business of the Local Limited Partnerships;
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnerships’ underlying real estate properties;
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnerships;
· the general partners are obligated to fund any recourse obligations of the Local Limited Partnerships;
· the general partners are authorized to borrow funds on behalf of the Local Limited Partnerships; and
· the Partnership, as a limited partner in each of the Local Limited Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnerships that most significantly impact such entities’ economic performance.
The one VIE at December 31, 2011 consists of a Local Limited Partnership that is directly engaged in the ownership and management of one apartment property with a total of 330 units. The Partnership is involved with this VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with this unconsolidated VIE is limited to the Partnership’s recorded investment in and receivables from this VIE, which were zero at both December 31, 2011 and 2010. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.
NOTE 2 - INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS
As of December 31, 2011 and 2010, the Partnership holds limited partnership interests in one and two Local Limited Partnerships, respectively. The remaining Local Limited Partnership at December 31, 2011 owns a residential low income rental project consisting of 330 apartment units. The mortgage loans of this project are payable to a governmental agency.
The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnership, that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnership based upon its ownership percentage of 99%. Distributions of surplus cash from operations from the Local Limited Partnership are restricted by the Local Limited Partnership’s Regulatory Agreement with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to 12%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Limited Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnership’s partnership agreement. This agreement usually limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership.
The individual investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. See “Note 1 - Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Limited Partnership and is not otherwise committed to provide additional support to the Local Limited Partnership. Therefore, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance has been reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. During the year ended December 31, 2011, the Partnership received an operating distribution of approximately $15,000 from one Local Limited Partnership in which the Partnership’s investment balance has been reduced to zero, which was recognized as income. There were no distributions received during the year ended December 31, 2010.
For those investments where the Partnership has determined that the carrying value of its investment approximates the estimated fair value of the investment, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.
The Partnership has no carrying value in the investment in the Local Limited Partnership as of December 31, 2011 and 2010.
During the year ended December 31, 2010, the Partnership advanced approximately $1,000 to one Local Limited Partnership, Jenny Lind Hall II, L.P., to fund a tax payment. While not obligated to make advances to either of the Local Limited Partnerships, the Partnership made this advance in order to protect its economic investment in the Local Limited Partnership. This amount is included in advance to Local Limited Partnership recognized as expense for the year ended December 31, 2010, as the investment balance in the Local Limited Partnership had been reduced to zero. During the year ended December 31, 2011, the Partnership received repayment of advances of approximately $2,000 from this Local Limited Partnership. This repayment is recognized as recovery of advances made to Local Limited Partnership previously recognized as expense.
On December 21, 2011, Jenny Lind Hall II, L.P., sold its investment property to a third party for a gross sale price of $2,250,000. After payment of closing costs and repayment of the notes payable encumbering the property, the Partnership did not receive any proceeds from the sale. The Partnership had no investment balance remaining in this Local Limited Partnership as of December 31, 2011 or 2010.
Oshtemo Limited Dividend Housing Association was held for sale at December 31, 2011 as a result of the Partnership selling its limited partnership interest in the Local Limited Partnership on January 31, 2012. The Partnership assigned its limited partnership interest in Oshtemo Limited Dividend Housing Association to a third party for $350,000. The Partnership had no remaining investment balance in the Local Limited Partnership at December 31, 2011 and 2010. Oshtemo Limited Dividend Housing Association was the Partnership’s sole remaining investment. The Partnership anticipates liquidating by December 31, 2012.
NOTE 3 - TRANSACTIONS WITH AFFILIATED PARTIES
Under the terms of the Restated Certificate and Agreement of the Limited Partnership, the Partnership is obligated to pay to the general partners an annual asset management fee equal to 0.5% of the Partnership’s original remaining invested assets of the Local Limited Partnerships at the beginning of the year. Invested assets is defined as the costs of acquiring project interests including the proportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective Local Limited Partnerships. For each of the years ended December 31, 2011 and 2010, this fee was approximately $93,000. At December 31, 2011 and 2010, approximately $694,000 and $601,000, respectively, of such fees were unpaid and are included in accrued fees due to affiliates on the accompanying balance sheets. Subsequent to December 31, 2011, the Partnership paid approximately $157,000 of such fees to the general partners.
Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the Corporate General Partner, advanced the Partnership approximately $24,000 and $41,000 during the years ended December 31, 2011 and 2010, respectively, to fund partnership operating expenses. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2011). Interest expense was approximately $5,000 and $3,000 for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the total advances and accrued interest due to AIMCO Properties, L.P. was approximately $117,000 and $88,000, respectively, and are included in due to affiliates. 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. Subsequent to December 31, 2011, the Partnership repaid approximately $118,000 of advances and accrued interest with proceeds from the sale of its limited partnership interest in Oshtemo Limited Dividend Housing Association.
As of December 31, 2011 and 2010, the accrued fees due to the Corporate General Partner exceeded the Partnership’s cash. The Partnership Agreement provides that the fees and advances due to the Corporate General Partner may only be paid from the Partnership’s available cash. As the balance of the accrued fees exceeds the amount of proceeds received from the January 2012 sale of the Partnership’s last remaining investment, the Partnership will be unable to repay the entire balance of accrued fees due to the Corporate General Partner.
An affiliate of NAPICO was the property manager for one of the Local Limited Partnerships. During the years ended December 31, 2011 and 2010, affiliates of the Corporate General Partner were paid approximately $26,000 and $25,000, respectively, for providing property management services.
In addition to its indirect ownership of the general partnership interest in the Partnership, Aimco and its affiliates owned 580.5 limited partnership units (the "Units") or 1,161.0 limited partnership interests in the Partnership representing 9.63% of the outstanding Units at December 31, 2011. A Unit consists of two limited partnership interests. 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 that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General partner also owes fiduciary duties to Aimco as its sole stockholder. As a result, the duties of the Corporate General Partner, as corporate general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to Aimco as its sole stockholder.
NOTE 4 - INCOME TAXES
The Partnership is not taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable loss and are allowed the benefits to be derived from off-setting their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Limited Partnership as discussed below. The tax loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.
A reconciliation follows:
The following is a reconciliation between the Partnership’s reported amounts and the Federal tax basis of net assets and liabilities:
NOTE 5 - DISTRIBUTION
As a result of the sale of the Partnership’s sole remaining investment in January 2012, the Partnership determined that it would not have sufficient cash to distribute to its partners. Accordingly, during the year ended December 31, 2011, the Partnership deemed a distribution of approximately $71,000 to the limited partners (approximately $5.88 per limited partnership interest), which consisted of Indiana and Michigan nonresident withholding taxes previously paid by the Partnership on behalf of nonresident limited partners.
NOTE 6 - CONTINGENCIES
The Corporate General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the Corporate General Partner, the claims will not result in any material liability to the Partnership.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. 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 Corporate 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 Corporate 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 Corporate 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 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 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 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, 2011. 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, 2011, 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 attestation by the Partnership’s registered public accounting firm pursuant to 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 defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2011 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
Housing Programs Limited(the “Partnership” or the “Registrant”) has no directors or officers. The general partner responsible for conducting the business of the Partnership is National Partnership Investments Corp, a California Corporation (“NAPICO” or the “Corporate General Partner”).
The names and ages of, as well as the positions and offices held by, the present directors and officers of NAPICO are set forth below: The Corporate General Partner manages and controls substantially all of the Partnership’s affairs and has general responsibility and ultimate authority in all matters affecting its business. There are no family relationships between or among any directors or officers.
Name
Age
Position
John Bezzant
Director and Executive Vice President
Ernest M. Freedman
Director, 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
John Bezzant was appointed as a Director of the Corporate General Partner effective December 16, 2009. Mr. Bezzant was appointed Executive Vice President of the Corporate General Partner and Aimco in January 2011 and prior to that time was a Senior Vice President of the Corporate General Partner and Aimco since joining Aimco in June 2006. Effective February 7, 2012, Mr. Bezzant will serve as the equivalent of the chief executive officer of the Partnership. Prior to joining Aimco, Mr. Bezzant spent over 20 years with Prologis, Inc. and Catellus Development Corporation in a variety of executive positions, including those with responsibility for transactions, fund management, asset management, leasing and operations. Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.
Ernest M. Freedman was appointed Director, Executive Vice President and Chief Financial Officer of the Corporate 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. Mr. Freedman brings particular expertise to the Board in the areas of finance and accounting.
Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Corporate 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 Corporate 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 Corporate General Partner in June 2009. Mr. Waters has responsibility for partnership accounting with Aimco and serves as the equivalent of the principal financial officer of the Partnership. Mr. Waters joined Aimco as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the Corporate 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 Corporate General Partner does not have a separate audit committee. As such, the board of directors of the Corporate General Partner fulfills the functions of an audit committee. The board of directors has determined that John Bezzant meets the requirement of an "audit committee financial expert".
The directors and officers of the Corporate 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 Corporate General Partner received any remuneration from the Partnership during the year ended December 31, 2011.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners
The General Partners own all of the outstanding general partnership interests of Housing Programs Limited. Except as noted below, no person is known to own beneficially in excess of 5% of the outstanding limited partnership interests.
Entity
Number of Interests
Percentage
AIMCO Properties, L.P.
1,161
9.63%
AIMCO Properties, L.P. is ultimately controlled by Aimco. Its business address is 4582 S. Ulster Parkway, Suite 1100, Denver, Colorado 80237.
(b) None of the officers or directors of the Corporate General Partner own directly or beneficially any limited partnership interests in the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Under the terms of the Restated Certificate and Agreement of the Limited Partnership, the Partnership is obligated to pay to the general partners an annual asset management fee equal to 0.5% of the Partnership’s original remaining invested assets of the Local Limited Partnerships at the beginning of the year. Invested assets is defined as the costs of acquiring project interests including the proportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective Local Limited Partnerships. For each of the years ended December 31, 2011 and 2010, this fee was approximately $93,000. At December 31, 2011 and 2010, approximately $694,000 and $601,000, respectively, of such fees were unpaid and are included in accrued fees due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”. Subsequent to December 31, 2011, the Partnership paid approximately $157,000 of such fees to the general partners.
Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the Corporate General Partner, advanced the Partnership approximately $24,000 and $41,000 during the years ended December 31, 2011 and 2010, respectively, to fund partnership operating expenses. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2011). Interest expense was approximately $5,000 and $3,000 for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the total advances and accrued interest due to AIMCO Properties, L.P. was approximately $117,000 and $88,000, respectively, and are included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”. 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. Subsequent to December 31, 2011, the Partnership repaid approximately $118,000 of advances and accrued interest with proceeds from the sale of its limited partnership interest in Oshtemo Limited Dividend Housing Association.
As of December 31, 2011 and 2010, the accrued fees due to the Corporate General Partner exceeded the Partnership’s cash. The Partnership Agreement provides that the fees and advances due to the Corporate General Partner may only be paid from the Partnership’s available cash. As the balance of the accrued fees exceeds the amount of proceeds received from the January 2012 sale of the Partnership’s last remaining investment, the Partnership will be unable to repay the entire balance of accrued fees due to the Corporate General Partner.
An affiliate of NAPICO was the property manager for one of the Local Limited Partnerships. During the years ended December 31, 2011 and 2010, affiliates of the Corporate General Partner were paid approximately $26,000 and $25,000, respectively, for providing property management services.
In addition to its indirect ownership of the general partnership interest in the Partnership, Aimco and its affiliates owned 580.5 limited partnership units (the "Units") or 1,161.0 limited partnership interests in the Partnership representing 9.63% of the outstanding Units at December 31, 2011. A Unit consists of two limited partnership interests. 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 that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General partner also owes fiduciary duties to Aimco as its sole stockholder. As a result, the duties of the Corporate General Partner, as corporate general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to Aimco as its sole stockholder.
Neither of the Corporate 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 Corporate General Partner.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Corporate General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2012. The aggregate fees billed for services rendered by Ernst & Young LLP for 2011 and 2010 are described below.
Audit Fees. Fees for audit services totaled approximately $25,000 and $26,000 for 2011 and 2010, 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 $7,000 for 2011 and 2010, respectively.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following financial statements are included in Item 8:
Balance Sheets - December 31, 2011 and 2010
Statements of Operations - Years ended December 31, 2011 and 2010
Statements of Changes in Partners' Deficit - Years ended December 31, 2011 and 2010
Statements of Cash Flows - Years ended December 31, 2011 and 2010
Notes to 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.
HOUSING PROGRAMS LIMITED
(a California Limited Partnership)
By: National Partnership Investments Corp.
Corporate General Partner
By: /s/John Bezzant
John Bezzant
Executive Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Senior Director of Partnership
Accounting
Date: March 29, 2012
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 Executive
Date: March 29, 2012
John Bezzant
Vice President
/s/Ernest M. Freedman
Director and Executive
Date: March 29, 2012
Ernest M. Freedman
Vice President
/s/Stephen B. Waters
Senior Director of
Date: March 29, 2012
Stephen B. Waters
Partnership Accounting
HOUSING PROGRAMS LIMITED
EXHIBIT INDEX
Exhibit Description of Exhibit
3.1 Amendment, dated February 2, 2006, to Restated Certificate and Agreement of Limited Partnership incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 2, 2006 and filed February 2, 2006.
3.2 Amendment, dated February 2, 2006, to Restated Certificate and Agreement of Limited Partnership incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 2, 2006 and filed February 2, 2006.
10.2 Assignment and Assumption Agreement by and between Housing Programs Limited, a California limited partnership, Gleason E. Amboy, Joel I. Ferguson, Sol L. Steadman and AMG-MGT, LLC, a Michigan limited liability company, dated June 28, 2011 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated June 28, 2011).
10.3 First Amendment to Assignment and Assumption Agreement by and between Housing Programs Limited, a California limited partnership, Gleason E. Amboy, Joel I. Ferguson, Sol L. Steadman and AMG-MGT, LLC, a Michigan limited liability company, dated December 28, 2011 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 31, 2012).
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 equivalent of 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.
101 XBRL (Extensible Business Reporting Language). The following materials from Housing Programs Limited’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, formatted in XBRL: (i) balance sheets, (ii) statements of operations, (iii) statements of changes in partners’ deficit, (iv) statements of cash flows, and (v) notes to financial statements (1).
(1) As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.