10-Q 1 real10q601.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2001 Commission file number 33-18756 ASSISTED HOUSING FUND L.P. I (Exact name of registrant as specified in its charter) Washington 91-1391150 (State of organization) (IRS Employer Identification No.) 1191 Second Avenue, Suite 904, Seattle, WA 98101 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (206) 461-4782 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The Exhibit Index appears at page 14. There are 15 pages. Part I. Financial Information Item 1. Financial Statements ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES BALANCE SHEETS

Continued on page 2A See notes to financial statements 2

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See notes to Financial Statements 4 Unaudited ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended June 30, 2001 1. General The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with financial statements and notes thereto included with the Partnership's Form 10-K for the year ended December 31, 2000. In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year. Assisted Housing Fund L.P. I (the Partnership) is a limited partnership which was organized November 2, 1987 under the laws of the state of Washington to acquire limited partnership interests in other partnerships (the Property Partnerships), each of which has been organized to develop or purchase a low- or moderate-income apartment complex. The Partnership's general partner is Murphey Favre Properties, Inc. (MFP), a wholly-owned subsidiary of WM Financial, Inc., which is a wholly-owned subsidiary of Washington Mutual Bank (WMB). The Partnership completed its public offering of limited partnership interests and commenced operations on April 14, 1989. Prior to that date, the Partnership's activities consisted solely of purchasing limited partnership interests in Property Partnerships which were in the development process. As of December 31, 2000, limited partners held the 703 units of limited partnership interests outstanding. The Partnership has invested as a limited partner in eleven Property Partnerships. The developer of each apartment complex serves as the general partner (DGP) of the respective Property Partnership. Additionally, a wholly-owned subsidiary of MFP, Murphey Favre Housing Managers (MFHM), is a special limited partner in each Property Partnership. MFHM has the right to oversee the management of each Property Partnership and has certain approval rights over the actions of each DGP. The Partnership Agreement for each Property Partnership sets forth the allocations of profits, losses and distributions of net cash flow from operations or from sale or refinancing of the rental property. The properties owned by the Property Partnerships were financed and constructed under Section 515 of the National Housing Act, as amended (administered by Farmer's Home Administration, now known as Rural Housing Services (RHS)). Under this program, the Property Partnerships provide housing to low- and moderate-income families. Lower rental charges to tenants are recovered by the Property Partnerships through an interest reduction program which reduces the effective interest rate over the lives of the mortgages to 1 percent and a rental assistance program whereby RHS pays the Property Partnerships for a portion of qualified tenant rents. Construction of the rental properties began in June, 1988 and all were completed by January 31, 1991. Rental operations began in April, 1989. Unaudited 2. Summary of Significant Accounting Policies a. The Partnership's financial statements are reported on a consolidated basis with the Property Partnerships in which it has invested because the Partnership (as a limited partner) holds approximately 99% profit and loss interests and approximately 55% of the equity interests in each Property Partnership and because of the aforementioned rights of MFHM to restrict the authority of each DGP. The consolidated financial statements, include the financial statements of the Partnership and eleven Property Partnerships: Fairview Apartments Company Limited Partnership (Fairview); Ionia Limited Dividend Housing Association Limited Partnership (Ionia); Logan Apartments Company Limited Partnership (Logan); Rolling Brook II Limited Dividend Housing Association Limited Partnership (Rolling Brook); Wexford Manor Limited Dividend Housing Association Limited Partnership (Wexford); Blue Heron Apartment Associates Limited Partnership (Blue Heron); Glenwood Apartment Associates Limited Partnership (Glenwood); Pacific Place Apartment Associates Limited Partnership (Pacific Place); Cove Limited Dividend Housing Association Limited Partnership (Cove); Washington Street Limited Dividend Housing Association Limited Partnership (Washington); and, Fayette Hills Limited Partnership (Fayette). All material interpartnership transactions and balances have been eliminated. The minority partners' interests in the losses of the Property Partnerships, which aggregate $55,327 and $52,753 as of June 30, 2001 and December 31, 2000, respectively, are included in other income. b. The accrual method of accounting is used for both financial statement and income tax purposes. c. Rental property and equipment is stated at cost including interest of $387,000, capitalized during construction. The partnership agreements for the Property Partnerships require the DGP's to fund cost overruns on the development of the rental properties. As of June 30, 2001 and December 31, 2000, $589,462 of such cost overruns have been recorded as capital contributions from DGP's and have been included in the cost basis of the rental property. All depreciation related thereto has been specially allocated to the respective DGP's. d. Depreciation is computed for financial statement purposes using the straight-line method over the estimated useful lives of the related assets as follows: Building shell and components.................... 27.5 years Land improvements.................................. 15 years Appliances......................................... 10 years Carpets and draperies.............................. 10 years Depreciation is computed for income tax purposes using the modified-accelerated-cost-recovery-system (MACRS). Unaudited e. No income tax provision has been included in the financial statements since income or loss of a Partnership is required to be reported by the respective partners on their income tax returns. f. For purposes of the statement of cash flows, all investment instruments purchased with a maturity of three months or less are considered to be cash equivalents. g. The unaudited interim financial statements include all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. These adjustments are all of a normal recurring nature. 3. Transactions with Affiliates In connection with the offering of units of limited partnership interest, the acquisition and development of rental property and the management of both the rental property and the Partnership, the Partnership and Property Partnerships have paid or accrued the following amounts to certain affiliates: Quarter Ended Year Ended June 30, 2001 Dec 31, 2000 Murphey Favre Properties, Inc. Reimbursements, at cost $ 1,875 $ 7,500 Developer general partners and affiliates Property management fees 34,834 137,289 The Partnership maintains deposits in certain of WMB's interest-bearing accounts which aggregated $18,360 and $13,148 at June 30, 2001 and December 31, 2000, respectively. Interest earned on such deposits totaled $101 and $504 during the quarter ended June 30, 2001 and year ended December 31, 2000, respectively. Terms of the RHS Loan Agreements require each DGP to provide interest-free advances of stipulated amounts as initial operating capital to the Property Partnerships. Due to affiliates includes $152,107 and $152,107 of such advances at June 30, 2001 and December 31, 2000, respectively, which will be repaid in two to five years upon approval of RHS, or from the proceeds of future sales of the respective Properties. The balance includes DGP advances of $35,468 for land improvements and $14,209 to fund operating deficits. The remaining balance due to affiliates includes program management fees and reimbursements payable to MFP. Under the terms of management services agreements, affiliates of the DGP's provide management services for the rental properties and receive compensation for such services in amounts approximating 8% of gross rental revenue. Unaudited 4. Cash in Reserve Accounts The Loan Agreements between the Property Partnerships and RHS require the Property Partnerships to deposit into separate reserve accounts (savings accounts) $126,889 annually until the reserve accounts reach $1,268,211. With the prior approval of RHS, these funds can be used for: (1) loan debt service, if operating funds cannot meet these obligations: (2) repairs and replacements caused by catastrophe or long-range depreciation; (3) improvements or extensions to the buildings; and, (4) any other reason RHS determines will promote or be beneficial to the purpose of the loans. 5. Mortgage Notes Payable The mortgage notes are payable to RHS in monthly installments stated in the table below. In accordance with provisions of Interest Credit Agreements, RHS provides monthly interest credits which reduce the interest rates stated in the mortgage notes to effective rates of 1 percent over the lives of the mortgages. Amortization of principal is based on the stated rates of 8.75% to 10.75% under RHS's Predetermined Amortization Schedule System (PASS). Substantially all of the rental property and equipment is pledged as collateral on the mortgages. No partner is personally liable on the mortgage notes. Amendments enacted in 1979 and 1987 to Section 515 of the National Housing Act contain restrictive provisions for prepayment of Section 515 loans. In summary, RHS may refuse offers to prepay the mortgage notes and require that the projects be used for the purpose of housing those eligible, as provided in Section 515, for a period of 20 years. The loan balances, net monthly payments, and due dates for each Property Partnership are as follows: Net Monthly Loan Balance Payment June 30, 2000 Due Date Fairview $ 2,744 $ 1,268,905 April, 2040 Ionia 1,532 709,912 October, 2040 Logan 2,142 991,748 March, 2041 Rolling Brook 1,614 744,587 June, 2040 Wexford 1,567 722,828 April, 2040 Blue Heron 3,173 1,463,768 June, 2040 Glenwood 3,111 1,433,253 May, 2039 Pacific Place 1,632 754,827 June, 2039 Cove 3,092 1,425,827 April, 2040 Washington 1,545 711,873 May, 2040 Fayette 4,398 2,042,555 December, 2039 Total $26,550 $12,270,083 Unaudited Principal Payments on the mortgage notes for the next 5 years are as follows: Year Amounts 2001 18,057 2002 38,422 2003 42,029 2004 46,303 2005 50,294 2006 and later years 12,074,978 $12,270,083 6. Limited Distributions to Partner Limited distributions payable from funds provided by rental operations of the Property Partnerships are limited by the Loan Agreements to eight percent per year of the Property Partnerships' initial equity, as determined by the RHS. Current RHS regulations limit the distribution payments in any year to a maximum of the annual distribution for the current year and the prior year. Distribution payments are also subject to approval by RHS. Prerequisites to limited distributions being paid by each Property Partnership are: (a) funding of the reserve account must be current and (b) the mortgage note must be current. 7. Contingency The Partnership has ceased accrual of the annual partnership administration fee, payable in part to the general partner. Management has determined that the source of payment, a future sale or refinance of one or more of the Property Partnerships, may not be sufficient to pay fees accrued in excess of the $544,540 payable at December 31, 1996. Management has elected to treat fees for years subsequent to 1996 as a contingent liability. At June 30, 2001 and December 31, 2000 the contingent liability for partnership administration fees totaled $335,327 and $298,068, respectively. The DGP of Logan did not comply with RHS regulations regarding the handling of project cash during 2000. These instances of non-compliance were reported to the appropriate authorities during the first quarter of 2001. In addition, during the first quarter 2001, the DGP made unauthorized withdrawals of project cash totaling $20,511. Also, project bank accounts have been pledged in violation of RHS regulations. MFP and the other general partners of Logan are considering proceedings to remove and replace the DGP. 8. Guarantees Each of the DGP's has made a guarantee to the respective Property Partnership that they will compensate the Partnership in the event the actual low-income housing tax credit is less than 85% to 90% of the available credit. Through June 30, 2001, no payments have been made under the guarantee agreements. Unaudited Item 2. Management's Discussion and Analysis Assisted Housing Fund L.P. I (the Partnership) is a limited partnership organized under the laws of the state of Washington. The Partnership has invested as a limited partner in eleven other limited partnerships (Property Partnerships) which develop, own, and operate residential apartment complexes which benefit from some form of federal assistance programs and which qualify for low-income housing credits (Tax Credits) pursuant to the Internal Revenue Code by the Tax Reform Act of 1986. The Partnership's general partner is Murphey Favre Properties, Inc., (MFP), a wholly-owned subsidiary of WM Financial, Inc. which is a wholly-owned subsidiary of Washington Mutual Bank (WMB). The Partnership completed its public offering of units of limited partnership on April 14, 1989 with proceeds totaling $3,511,000 through the sale of 703 units. There are 334 limited partners and one General Partner in the Partnership. Each Property Partnership has, as its general partner, one or more individuals or an entity not affiliated with the Partnership or MFP. In accordance with the Partnership Agreements under which such entities are organized, the Partnership depends on the DGP's for the management of each Property Partnership. During the quarter, management's emphasis was on the continued operation of eleven properties placed in service. At June 30, 2001, four properties were 100% occupied, six properties were between 90% and 98% occupied, and one property was 83% occupied. The DGP of Logan did not comply with RHS regulations regarding the handling of project cash during 2000. These instances of non-compliance were reported to the appropriate authorities during the first quarter of 2001. In addition, during the first quarter 2001, the DGP made unauthorized withdrawals of project cash totaling $20,511. Also, project bank accounts have been pledged in violation of RHS regulations. MFP and the other general partners of Logan are considering proceedings to remove and replace the DGP. Results of Operations On a consolidated basis, net income before depreciation and amortization for the second quarter 2001 was $14,670 compared with net income before depreciation and amortization in the second quarter of 2000 of $40,624. Rental revenues for the second quarter of 2001 were down 1.3% from the second quarter 2000 while the second quarter 2001 expenses including depreciation were down 0.1% from the second quarter 2000. Unaudited Liquidity and Capital Resources The Partnership completed its public offering of units of limited partnership on April 14, 1989, with proceeds totaling $3,511,000 from 339 limited partners. The Partnership invested $2,542,000 of offering proceeds in eleven Property Partnerships. Offering proceeds equal to $175,750 were reserved by the Partnership to fund its operating expenses. As of June 30, 2001, the cash reserves of the Partnership totaled $18,360. It is expected that the Partnership will draw on the reserves in future quarters to fund accounting and other operating expenses of the Partnership. Nominal cash distributions from the Property Partnerships will supplement the cash reserves. It is expected that all cash distributions received from the Property Partnerships will be used to defray the operating expenses of the Partnership and thus it is not likely any distribution will be made to the limited partners. The Partnership is not required to fund additional amounts to the Property Partnerships based on each Property Partnership agreement. Additionally, each Property Partnership is operated as an individual project, and without any contractual arrangements of any kind between the Property Partnerships. In the second quarter 2001, five properties generated deficit cash flow and six generated positive cash flow. The deficits were funded by cash reserves of the Property Partnerships. Included in cash deposits on the consolidated balance sheets were $18,360 and $13,148, held as deposits by the Partnership in Washington Mutual Bank accounts as of June 30, 2001 and December 31, 2000, respectively. Washington Mutual Bank is affiliated with MFP, the general partner of the Partnership. There are no additional acquisitions nor any dispositions planned. PART II. OTHER INFORMATION Except for the disclosures set forth below, all items under Part II are inapplicable or have a negative response and are therefore omitted. Item 6. Exhibits and Reports on Form 10-Q a.) Listing of Exhibits. Exhibit Incorporated by No. Reference From 3 Certificate of Exhibit C to Form S-11 Limited Partnership Registration Statement No. 91.1391150 10 Material Contracts Exhibit 10 to Form 10-K filed for year ended December 31, 1989 13 Annual Report to Exhibit 13 to Form 10-K Security Holders filed for year ended December 31, 2000 Pursuant to the requirements 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. Dated this 15th day of August, 2001. Assisted Housing Fund L.P. I By: Murphey Favre Properties, Inc. Its Managing General Partner Herbert F. Fox, Vice President /s/ Herbert F. Fox, Vice President and Principal Financial Officer

ASSISTED HOUSING FUND LP I 10-Q