-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PbOLjxSDRxrPmJKoD0SZOK85Om0FVlwFlXkXrYbCuUjeeDtLhOnrA0yb9kzsQQGc AGHvGwNN9GfqhwxtEP3r8g== 0001047469-97-001971.txt : 19971030 0001047469-97-001971.hdr.sgml : 19971030 ACCESSION NUMBER: 0001047469-97-001971 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19971029 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NHP INC CENTRAL INDEX KEY: 0000946358 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 521445137 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-26572 FILM NUMBER: 97702655 BUSINESS ADDRESS: STREET 1: 8065 LEESBURG PIKE STREET 2: STE 400 CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 2023476247 MAIL ADDRESS: STREET 1: 1225 EYE ST NW CITY: WASHINGTON STATE: DC ZIP: 20005 10-K/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment No. 2 /x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-26572 NHP INCORPORATED (Exact name of registrant as specified in its charter) Delaware 52-1445137 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 8065 Leesburg Pike, Suite 400, Vienna, Virginia 22182-2738 Address of principal executive offices Zip Code Registrant's telephone number, including area code (703) 394-2400 Securities registered pursuant to Section 12(b) of the Act: None Title of Each Class Name of Each Exchange on which Registered Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. /X/ The aggregate market value of the voting stock held by nonaffiliates of the registrant was $131,665,608 at March 7, 1996, calculated in accordance with the Securities and Exchange Commission rules as to beneficial ownership. 12,652,439 shares of the registrant's common stock were outstanding at March 7, 1996. DOCUMENTS INCORPORATED BY REFERENCE: None Item 8. NHP INCORPORATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (RESTATED) INDEX Page NHP Incorporated Report of Independent Public Accountants ................................ F-1 Index of 1994 Auditors' Reports ......................................... F-2 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 (as restated for 1996 and 1995) .................... F-12 Consolidated Balance Sheets as of December 31, 1996 and 1995 (both as restated) ............................................................. F-13 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 (as restated for 1996 and 1995)..................... F-14 Consolidated Statements of Shareholders' Equity (Deficit) for the Years Ended December 31, 1996, 1995 and 1994 (as restated for 1996 and 1995).. F-16 Notes to Consolidated Financial Statements................................ F-17 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of NHP Incorporated: We have audited the accompanying consolidated balance sheets of NHP Incorporated (formerly NHP, Inc.), a Delaware corporation, and subsidiaries (the "Company") as of December 31, 1996 and 1995, (both as restated--See Note 2 and Note 5) and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996 (as restated for 1996 and 1995--See Note 2 and Note 5). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the 1994 financial statements of certain real estate partnerships whose operating results are included in "income (loss) from discontinued real estate operations, net of income taxes," in the accompanying 1994 consolidated financial statements. The net losses of these real estate partnerships ($1,706,000) represent 10% of 1994 net income. The financial statements of these real estate partnerships were audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts (including the 1994 gross revenues disclosed in Note 2) included in the consolidated financial statements for these real estate partnerships, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NHP Incorporated and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Washington, D.C., April 23, 1997 (except with respect to the matters discussed in Note 5 and "Discontinued Real Estate Operations" in Note 2 as to which the dates are October 3, 1997 and October 21, 1997, respectively) F-1 INDEX OF 1994 AUDITORS' REPORTS * Anders, Minkler & Diehl, LLP Caroline Associates I Columbus Square Associates I Columbus Square Associates II Pershing Waterman Phase I PW III Associates PW IV Associates PW V Associates PW VI Associates Savoy Court Associates Wigar, Ltd. Arthur Andersen LLP NHP Incorporated * Dauby O'Connor & Zaleski, LLC Brookview Apartments Company Limited Clover Ridge East Limited Partnership Colony Apartments Company Limited East Hampton Limited Partnership Edgewood II Associates Fairburn & Gordon Associates, Phase I Fairburn & Gordon Associates, Phase II Laing Village Oakland City/West End Associates, Ltd. Orangeburg Manor Parkways Associates Pleasant Valley Apartments, Ltd. Sandy Springs Associates, Ltd. The Oak Park Partnership The Rogers Park Partnership Tiffany Rehab Associates Village Green Apartments Company Limited Vineville Towers Associates, Ltd. Westgate Apartments * Deloitte & Touche LLP 107-145 West 135th Street Associates Algonquin Tower Limited Partnership All Hallows Associates Allentown Towne House Limited Partnership Anglers Manor Associates Antioch Apartments, Ltd. Arvada House Audobon Park Associates Baldwin Oaks Elderly, Ltd. Baldwin Towers Associates Basswood Manor Limited Partnership Bayview Hunters Point Apartments Bensalem Gardens Associates Berkley Limited Partnership Bloomsburg Elderly Associates Boynton Beach Limited Partnership Briarwood Apartments - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-2 INDEX OF 1994 AUDITORS' REPORTS Brightwood Manor Associates Brinton Manor No. 1 Associates Brinton Towers Associates Brookside Apartments Associates Buena Vista Apartments, Ltd. Cabell Associates of Lakeview California Square Limited Partnership California Square II Limited Partnership Campbell Heights Associates Canterbury Gardens Associates Capital Park Limited Partnership Caroline Arms Limited Partnership Center Square Associates Central Village Associates Chapel NDP Cheek Road Limited Partnership Cheyenne Village Apartments, Ltd. Clay Courts Associates College Heights College Park Apartments College Park Associates Community Developers of High Point Congress Park Associates II Copperwood Limited Copperwood II Limited Cottonwood Apartments Cumberland Court Associates Cypress Gardens, Limited Darby Townhouses Associates Darbytown Development Associates Delcar-S, Ltd. Delcar-T, Ltd. DIP Limited Partnership DIP Limited Partnership - II DIP Limited Partnership - III Discovery Limited Partnership Doral Gardens Associates Duquesne Associates No. 1 Eastman Associates Edmond Estates Limited Partnership Elden Limited Partnership Elm Creek Limited Partnership Esbro Limited Partnership Fairmeadows Limited Partnership Fairmont #1 Limited Partnership Fairmont #2 Limited Partnership Fairview Homes Associates Fairwood Associates Federal Square Village - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-3 INDEX OF 1994 AUDITORS' REPORTS Field Associates Forest Green Limited Partnership Forest Park Elderly Associates Forrester Gardens, Ltd. Fort Carson Associates Foxwood Manor Associates Franklin Chapel Hill Associates Franklin Eagle Rock Associates Franklin Northwoods Associates Franklin Park Limited Partnership Franklin Pheasant Ridge Associates Franklin Ridgewood Associates Franklin Woods Associates Friendset Housing Company Frio Housing, Ltd. G. W. Carver Limited Galion Limited Partnership Garfield Hill Associates Gateway Village Associates Gladys Hampton Houses Associates Golden Apartments I Golden Apartments II Grandview Apartments Greater Mount Calvary Terrace, Ltd. Greater Richmond Community Development Corp. I and Associates Greater Richmond Community Development Corp. II and Associates Green Mountain Manor Limited Partnership Griffith Limited Partnership Gulfway Limited Partnership H.R.H. Properties, Ltd. Hamilton Gardens, Ltd. Hamilton Heights Associates Harold House Limited Partnership Hatillo Housing Associates Hickory Ridge Associates, Ltd. Hillcrest Green Apartments, Ltd. Hillside Village Associates Hilltop Apartments Associates Hilltop Limited Partnership Hopkins Renaissance Associates Hudson Terrace Associates Hurbell II Limited Partnership Indian Valley I Limited Partnership Indian Valley II Limited Partnership Indian Valley III Limited Partnership Ingram Square Apartments, Ltd. Jamestown Village Associates Jersey Park Associates JFK Associates Johnston Square Associates - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-4 INDEX OF 1994 AUDITORS' REPORTS JVL Limited JVL 16 Associates JVL 18 Associates JVL 19 Associates Kennedy Homes Limited Partnership Kenneth Arms Apartments Key Parkway West Associates Kimberly Associates Limited Partnership Knollcrest Apartments La Salle Apartments La Vista Associates Lafayette Manor Associates Lafayette Towne Elderly, Ltd. Lafayette Towne Family, Ltd. Lake Forest Apartments Langenheim Associates Las Americas Housing Associates Lassen Associates Laurel Gardens Lewisburg Associates Lewisburg Elderly Associates Leyden Limited Partnership Lincmar Associates Lincoln Park Associates Lock Haven Elderly Associates Lock Haven Gardens Associates Loring Towers Apartments Limited Partnership M & P Development Company Madison Hill Limited Partnership Manzanita Arms Apartments Maple Hill Associates Maple Park East Limited Partnership Maple Park West Limited Partnership Mayfair Manor Limited Partnership Meadowood Apartments - Phase I (Meadowood Associates) Meadowood Apartments - Phase II (Meadowood Associates) Meadowood Associates III, Ltd. Meadows Apartments Limited Partnership Meadows East Apartments Limited Partnership Menlo Limited Partnership Merced Commons I Merced Commons II Mill Street Associates Miramar Housing Associates Montblanc Garden Apartments Associates Montblanc Housing Associates Morrisania Towers Housing Company Moss Gardens Ltd. Murphy Blair Associates III New Lake Village Apartments - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-5 INDEX OF 1994 AUDITORS' REPORTS New West 111th Street Housing Company New West 111th Street Two Associates Newton Hill Limited Partnership Northgate Village Limited Partnership Northlake Terrace Associates Northwest Terrace Associates Oakland Village Townhouse Associates Ocala Place, Ltd. Olde Rivertowne Venture One Lytle Place One West Conway Associates Orange Village Associates Overbrook Park, Ltd. Palm House Limited Partnership Park Avenue West I Limited Partnership Park Avenue West II Limited Partnership Park Creek Limited Partnership Pavillion Associates Place One Limited Partnership Portland Plaza Partnership Portner Place Associates Post Street Associates Pride Gardens Limited Partnership Pueblo Apartments Associates, Ltd. Rancho Arms Apartments Retirement Manor Associates RI-15 Limited Partnership Richlieu Associates River Front Apartments Limited Partnership River Woods Associates Riverview II Associates Rockwell Limited Partnership Rolling Meadows Of Ada, Ltd. Royal Towers Limited Partnership Ruffin Road Associates Rutherford Park Townhouses Associates San Jose Limited Partnership San Juan Apartments San Juan Del Centro Limited Partnership Sencit Towne House Limited Partnership Sherman Terrace Associates Shoreview Apartments Site 10 Community Alliance Associates Sleepy Hollow Apartments SNI Development Company Southmont Apartments Southridge Apartments Limited Partnership Southward Limited Partnership Spring Meadow Limited Partnership Springfield Limited Partnership - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-6 INDEX OF 1994 AUDITORS' REPORTS Spruce Limited Partnership Stafford Apartments Stock Island Limited Partnership Storey Manor Associates Strawbridge Square Associates Limited Partnership Summersong Townhouses Limited Partnership Sunrise Associates Sunset Plaza Apartments Susquehanna View Limited Partnership Timberlake Apartments Limited Partnership Timuquana Park Associates Tinker Creek Limited Partnership Town North Treeslope Apartments Associates Trinity Apartments Trinity Hills Village Apartments Trinity Towers - 14th Street Associates, Ltd. Tumast Associates United Handicap Federation Apartment Associates United House Associates United Housing Partners - Carbondale, Ltd. United Redevelopment Associates University Plaza Associates Vantage 78 Verdes Del Oriente Villa De Guadalupe Associates Village Circle Apartments, Ltd. Village Green Limited Partnership Village Park II Vistas De San Juan Associates Waico Apartments Associates Waico Phase II Associates Walden Oaks Associates Walmsley Terrace Associates Walnut Hills Associates, Ltd. Wash-West Properties Washington Manor Limited Partnership Waterman Limited Partnership Waters Towers Associates West Oak Village Limited Partnership Whitefield Place, Ltd. Woodmark Limited Partnership Yadkin Associates * Edwards Leap & Sauer Buffalo Village Associates Genessee Gardens Associates Ida Tower - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-7 INDEX OF 1994 AUDITORS' REPORTS * George A. Hieronymus & Company, LLC Athen Arms Associates Colonial Terrace I Associates Colonial Terrace II Associates * Goldenberg Rosenthal Friedlander, LLP Baisley Park Associates Brunswick Village Limited Partnership Churchview Gardens Limited Partnership Harris Gardens Limited Partnership Hawksworth Limited Partnership Hollows Associates Kimberton Apartments Associates Washington Northgate Limited Partnership Washington Westgate Limited Partnership Windsor Apartments Associates * Hansen, Hunter & Kibbee, P.C. Haines Associates Limited Partnership King-Bell Associates Monmouth Associates Limited Partnership Pendleton Riverside Apartments, Oreg., Ltd. Penn Hall Associates Limited Partnership Rodeo Drive Limited Partnership South Mountain Terrace, Ltd. Woodland Apartments, Oreg., Ltd. * J.H. Cohn, LLP Marlboro Greens Limited Partnership * J.A. Plumer & Co., P.A. 630 East Lincoln Avenue Associates Aspen Stratford Apartments Company B Aspen Stratford Apartments Company C Benjamin Banneker Plaza Associates Brightwood Limited Partnership Cambridge Heights Apartments, Ltd. Carter Associates Limited Partnership Cherry Estates Christopher Court Housing Company Concord House Associates Duke Manor Associates Elderly Housing Associates Ltd. Partnership Forest Apartments Associates Gate Manor Apartments, Ltd. Greenfield Apartments Limited Partnership Greenfield North Apartments Limited Partnership Haili Associates Houston Aristocrat Apartments, Ltd. Kapuna Associates - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-8 INDEX OF 1994 AUDITORS' REPORTS Kinloch Urban East Housing Koolau Housing Associates Lakeview Arms Associates Lee-Hy Manor Associates Limited Partnership Locust Park Associates Loring Towers Associates Mahoning Associates Milliken Apartments Company Monument Street Limited Partnership Neighborhoods of the Universities Lock Street Apartments Company Oak Hollow South Associates Orchard Mews Associates Oxford Place Associates Pittsfield Neighborhood Associates Prince Street Towers Limited Partnership Sencit-Lebanon Company St. Nicholas Associates Tamarac Pines, Ltd. Tamarac Pines II, Ltd. Taunton Green Associates Taunton II Associates Tompkins Terrace Associates Waipahu Associates Washington Chinatown Associates Woodcrest Apartments, Ltd. Worchester Episcopal Housing Company * Marks Shron & Company, LLP Two Bridges Associates * Reznick Fedder & Silverman Beautiful Village Associates Redevelopment Company Branchwood Towers Limited Partnership Citrus Park Associates, Ltd. Community Circle II Limited Copperstone Limited Partnership Diakonia Associates Limited Partnership Easton Terrace I Associates Easton Terrace II Associates Eastridge Apartments Emory Grove Associates Limited Partnership First Alexandria Associates Flatbush NSA Associates Franklin Square School Associates Gates Mill I Limited Partnership Grosvenor House Associates Limited Partnership Harris Park Limited Partnership Hollybush Gardens I Hollybush Gardens II Intown West Associates Limited Partnership - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-9 INDEX OF 1994 AUDITORS' REPORTS Lake Avenue Associates Lake Crossing Limited Partnership Lakehaven Associates One Lakehaven Associates Two Linden Court Associates Loudoun House Limited Partnership Monaco Arms Associates I Monaco Arms Associates II Muske Limited Partnership Natick Associates Oakcrest Terrace Apartments Oakwood Limited Partnership Parkview Associates Queenstown Apartments Limited Partnership Rancho Townhouse Associates Ruscombe Gardens Limited Partnership Sencit-Jacksonville Company LTD Sheffield Associates Snap IV Limited Partnership Tara Bridge Limited Partnership Twin Towers Associates Tyee Associates Limited Partnership Urbanization Maria Lopez Housing Company Westminster Associates Wollaston Manor Associates Woodside Village Limited Partnership * Russell Thompson Butler & Houston Chesterfield Housing Associates Community Developers Of Princeville Crosland Housing Associates Eastcourt Village Partners Eustis Apartments, Ltd. Grove Park Villas, Ltd. Hemingway Housing Associates Highlands Village II Housing Assistance of Mt. Dora, Ltd. Housing Assistance of Orange City, Ltd. Housing Assistance of Sebring, Ltd. Housing Assistance of Vero Beach, Ltd. Hurbell I Limited Partnership Hurbell IV Limited Partnership Lakeview Villas, Ltd. Mccoll Housing Associates Miami Elderly Associates Orange City Villas II, Ltd. Parkview Apartments, Ltd. Parkview Arms Associates I Parkview Arms Associates II Registry Square, Ltd. - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-10 INDEX OF 1994 AUDITORS' REPORTS South Hiawassee Village, Ltd. St. George Villas The Meadows Apartments Townview Towers I Partnership, Ltd. Twin Gables Associates United Housing Partners Cuthbert, Ltd. United Housing Partners Elmwood, Ltd. United Housing Partners Morristown, Ltd. United Housing Partners Welch, Ltd. VOA-Nicollet Towers Associates Woodside Villas of Arcadia, Ltd. - -------------------- * Incorporated by reference from Exhibit 99 to the Registration Statement on Form S-1 (File No. 33-93110) of NHP Incorporated. F-11 NHP INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, --------------------------------------- (Restated) (Restated) 1996 1995 1994 ---- ---- ---- Revenue, substantially all from related parties Property management services $ 54,632 $ 48,336 $ 40,953 On-site personnel, general and administrative cost reimbursement 127,266 117,249 98,158 Administrative and reporting fees 4,593 4,148 3,680 Other 8,488 4,941 4,505 --------- --------- --------- Total revenue 194,979 174,674 147,296 Expenses Salaries and benefits On-site employees 124,138 113,100 93,560 Off-site employees 26,641 22,371 19,099 Other general and administrative 14,074 11,899 10,968 Costs charged to the Real Estate Companies 3,128 4,149 4,598 Amortization of purchased management contracts 4,562 3,076 2,043 Other depreciation and amortization 1,759 727 481 Non-recurring expenses -- 45 1,806 --------- --------- --------- Total expenses 174,302 155,367 132,555 --------- --------- --------- Operating income 20,677 19,307 14,741 Interest income 747 292 121 Interest expense (3,982) (5,788) (5,857) --------- --------- --------- Income from continuing operations before income taxes and extraordinary item 17,442 13,811 9,005 Income tax (provision) benefit (6,977) 17,802 -- --------- --------- --------- Income from continuing operations before extraordinary item 10,465 31,613 9,005 Income (loss) from discontinued operations, net of income tax (provision) benefit of ($1,144), $2,515 and $0 in 1996, 1995 and 1994, respectively 1,155 (3,771) 7,490 --------- --------- --------- Income before extraordinary item 11,620 27,842 16,495 Extraordinary item, net of income taxes - (see Note 16) -- (400) -- --------- --------- --------- Net income $ 11,620 $ 27,442 $ 16,495 --------- --------- --------- --------- --------- --------- Net income (loss) per common share: Continuing operations before extraordinary item $ .82 $ 3.27 $ 1.11 Discontinued operations .09 (.38) .93 Extraordinary item -- (.04) -- --------- --------- --------- Net income $ .91 $ 2.85 $ 2.04 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated statements. F-12 NHP INCORPORATED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
December 31, ---------------------------- (Restated) (Restated) ASSETS 1996 1995 ---- ---- Cash and cash equivalents $ 4,779 $ 5,996 Receivables, net, substantially all from related parties 15,270 12,809 On-site cost reimbursement receivable, substantially all from related parties 3,816 2,747 Current portion of net deferred tax asset 6,357 5,916 Other current assets 1,355 277 -------- --------- Total current assets 31,577 27,745 Purchased management contracts, net 43,718 34,568 Net assets of discontinued operations 23,400 -- Goodwill, net 5,887 -- Property, equipment and capitalized software, net 10,415 3,523 Investment in real estate held for sale 84,871 -- Other assets 10,832 4,483 Net deferred tax asset 7,441 14,451 -------- --------- Total Assets $218,141 $ 84,770 -------- --------- -------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current portion of long-term debt, including amounts payable to related parties of $143 and $356 in 1996 and 1995, respectively $ 720 $ 412 Accounts payable 3,947 4,063 Accrued expenses, including amounts associated with related parties of $4,090 and $4,365 in 1996 and 1995, respectively 11,452 10,001 Accrued on-site salaries and benefits 3,816 2,747 Deferred revenues and other 3,400 2,232 -------- --------- Total current liabilities 23,335 19,455 Long-term debt, including amounts payable to related parties of $0 and $139 in 1996 and 1995, respectively 62,607 23,278 Real estate related debt 71,152 -- Other long-term liabilities 5,034 2,883 -------- --------- Total liabilities 162,128 45,616 Commitments and contingencies (Note 14) Shareholders' equity Common stock, $0.01 par value, 25,000,000 shares authorized; 12,586,629 and 12,264,675 shares issued and outstanding in 1996 and 1995, respectively 126 123 Additional paid-in capital 133,337 128,101 Accumulated deficit (77,450) (89,070) -------- --------- Total shareholders' equity 56,013 39,154 -------- --------- Total Liabilities and Shareholders' Equity $218,141 $ 84,770 -------- --------- -------- ---------
The accompanying notes are an integral part of these consolidated statements. F-13 NHP INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year Ended December 31, ---------------------------------------- (Restated) (Restated) 1996 1995 1994 ---- ---- ---- Cash Flows From Operating Activities: Net income $ 11,620 $ 27,442 $ 16,495 Extraordinary item, net of income taxes -- 400 -- Discontinued operations, net of income taxes (1,155) 3,771 (7,490) --------- --------- -------- Income before extraordinary item and discontinued operations 10,465 31,613 9,005 Depreciation and amortization 6,321 3,803 2,524 Income taxes 5,997 (18,744) -- Increase in receivables, substantially all from related parties (3,529) (5,893) (2,389) (Increase) decrease in other assets (1,646) (1,477) 160 Increase (decrease) in accounts payable and accrued expenses 3,057 (293) 886 Increase in deferred revenues and other liabilities 1,124 515 76 Other 176 176 1,630 --------- --------- -------- Net cash provided by continuing operations 21,965 9,700 11,892 Net cash used in discontinued operations (164) (8,554) (217) --------- --------- -------- Net cash provided by operating activities 21,801 1,146 11,675 --------- --------- -------- Cash Flows From Investing Activities: Purchase of businesses (19,763) -- -- Investment in real estate held for sale, net of debt assumed (13,719) -- -- Purchase of management contracts (8,798) (13,809) (2,059) Purchase of long-term notes receivable (8,374) -- -- Purchase of fixed assets (6,161) (2,217) (2,484) --------- --------- -------- Net cash used in investing activities (56,815) (16,026) (4,543) --------- --------- -------- Cash Flows From Financing Activities: Additional borrowings 53,000 33,207 133 Repayments of debt (19,471) (61,466) (6,000) Borrowings from related parties -- 1,119 3,903 Repayments of notes payable to related parties (352) (10,369) (332) Repurchases of common stock from related parties -- (375) (808) Proceeds from issuance of common stock, net -- 51,987 -- Proceeds from option exercises 1,211 -- -- Proceeds from sale of stock to related parties -- -- 343 Payment of financing, offering and disposition costs (591) (5,317) (1,515) --------- --------- -------- Net cash provided by (used in) financing activities 33,797 8,786 (4,276) --------- --------- -------- (Decrease) increase in cash and cash equivalents (1,217) (6,094) 2,856 Cash and cash equivalents, beginning of period 5,996 12,090 9,234 --------- --------- -------- Cash and cash equivalents, end of period $ 4,779 $ 5,996 $ 12,090 --------- --------- -------- --------- --------- --------
The accompanying notes are an integral part of these consolidated statements. F-14 NHP INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (IN THOUSANDS)
Year Ended December 31, ------------------------------------------ (Restated) 1996 1995 1994 ---- ---- ---- Supplemental Disclosures of Cash Flow Information: Cash interest payments $ 4,448 $ 6,537 $ 4,607 Cash income tax payments $ 2,380 $ 942 $ 49 Non-cash items: Notes payable given as consideration for acquisitions $ 6,293 $ -- $ -- Stock issued in acquisition of NHP Financial Services, Ltd. $ 3,780 $ -- $ -- Acquisition of leasehold improvements and other fixed assets through lease incentives $ 2,217 $ -- $ -- Reduction in notes payable to related parties in consideration for the sale of the Real Estate Companies $ -- $ 9,129 $ -- Assumption of Real Estate related debt for Great Atlantic portfolio $ 71,152 $ -- $ --
The accompanying notes are an integral part of these consolidated statements. F-15 NHP INCORPORATED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (RESTATED) (IN THOUSANDS EXCEPT SHARE AMOUNTS)
Common Stock Additional ------------------------ Paid-In Accumulated Treasury Shares Par Value Capital Deficit Stock Total --------- --------- ------- ----------- -------- ----- Balance, January 1, 1994 8,030,925 $ 80 $ 69,343 $ (133,007) $ -- $(63,584) Sale of common stock 32,500 -- 343 -- -- 343 Repurchase of common stock -- -- -- -- (808) (808) Retirement of treasury stock (76,500) -- (808) -- 808 -- Net income -- -- -- 16,495 -- 16,495 ---------- ---- --------- ---------- ------ --------- Balance, December 31, 1994 7,986,925 80 68,878 (116,512) -- (47,554) Stock option compensation -- -- 583 -- -- 583 Repurchase of common stock -- -- -- -- (375) (375) Retirement of treasury stock (31,250) -- (375) -- 375 -- Issuance of common stock in public offering, net 4,300,000 43 48,198 -- -- 48,241 Issuance of common stock to Directors 9,000 -- 127 -- -- 127 Sale of Real Estate Companies (Note 1) (Restated) -- -- 10,690 -- -- 10,690 Net income (Restated) -- -- -- 27,442 -- 27,442 ---------- ---- --------- ---------- ------ --------- Balance, December 31, 1995 12,264,675 123 128,101 (89,070) -- 39,154 Stock issued in acquisition 210,000 2 3,778 -- -- 3,780 Exercise of stock options 111,954 1 1,497 -- (39) 1,459 Retirement of treasury stock -- -- (39) -- 39 -- Net income -- -- -- 11,620 -- 11,620 ---------- ---- --------- ---------- ------ --------- Balance, December 31, 1996 12,586,629 $126 $ 133,337 $ (77,450) $ - $ 56,013 ---------- ---- --------- ---------- ------ --------- ---------- ---- --------- ---------- ------ ---------
The accompanying notes are an integral part of these consolidated statements. F-16 NHP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) NATURE OF BUSINESS AND ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of NHP Incorporated and its wholly-owned subsidiaries (the "Company"). On August 18, 1995, the Company sold those of its subsidiaries which held all of the Company's direct and indirect interests in property-owning partnerships, along with its captive insurance subsidiary and certain other related assets (collectively referred to as the "Real Estate Companies") to the two controlling shareholders of the Company, Demeter Holdings Corporation ("Demeter") and Capricorn Investors, L.P. ("Capricorn"), and J. Roderick Heller, III, the Chairman, President and Chief Executive Officer of the Company ("Mr. Heller"). The consolidated financial statements include the accounts of the Real Estate Companies through August 18, 1995, presented as discontinued operations in accordance with generally accepted accounting principles ("GAAP"). The Company continues to provide services to the Real Estate Companies and, therefore, intercompany revenues and expenses between the Company and the Real Estate Companies have not been eliminated from the Company's revenues and expenses in the consolidated financial statements for the periods prior to August 18, 1995. All other material intercompany accounts and transactions have been eliminated in consolidation. As of April 1, 1996, NHP Incorporated closed the acquisition of all of the outstanding capital stock of WMF Holdings, Ltd., which was subsequently renamed NHP Financial Services, Ltd., for consideration of approximately $21 million in the form of $16.8 million in cash and 210,000 shares of the Company's common stock. NHP Financial Services, Ltd. is the owner of Washington Mortgage Financial Group, Ltd. ("Washington Mortgage Financial") of Fairfax County, Virginia, one of the nation's leading multifamily mortgage originators and servicers (collectively, "NHP Financial Services"). Included in Washington Mortgage Financial is WMF/Huntoon, Paige Associates Limited ("WMF/Huntoon, Paige"), a leading FHA mortgage originator and servicer located in Edison, New Jersey. On April 19, 1997, the Company's Board of Directors approved a plan to spin-off NHP Financial Services (the Company's former Financial Services business segment) to the Company's current shareholders. Accordingly, the accompanying financial statements have been restated to reflect NHP Financial Services as discontinued operations in accordance with GAAP. Previously reported revenue related to the Financial Services business segment of $24.8 million is now included in net income from discontinued operations. For further discussion, see Note 2. NATURE OF BUSINESS The Company's continuing operations provide a broad array of real estate services nationwide including property management and asset management as well as related services including equity investments, purchasing, risk management and home health care. The Company provides a full range of property management and related services to owners of multifamily rental housing properties, primarily properties owned by partnerships in which the Real Estate Companies have an ownership interest. The properties served by the Company are located in urban, suburban and rural areas throughout various regions of the United States other than the Northwest region. This reduces the impact of local economic cycles on the overall operations of the Company. The Company provides services to both "conventional" (market rate) and "affordable" properties. Affordable properties receive some form of Federal and/or state assistance and are generally restricted to low or moderate income tenants. Approximately 64% of the properties and 44% of the units managed by the Company as of December 31, 1996 are affordable properties and units. A substantial portion of the affordable properties were built or acquired by the owners with the assistance of programs administered by the United States Department of Housing and Urban Development ("HUD") that provide mortgage insurance, favorable financing terms, or rental assistance payments to the F-17 owners. As a condition to the receipt of assistance under these and other HUD programs, the properties must comply with various HUD requirements including limiting rents on these properties to amounts approved by HUD. For the past several years, various proposals have been advanced by HUD, the Congress and others proposing the restructuring of Section 8 of the United States Housing Act of 1937 ("Section 8"). These proposals generally seek to lower subsidized rents to market levels and to lower required debt service costs as needed to ensure financial viability at the reduced rents, but vary greatly as to how that result is to be achieved. Some proposals include a phase-out of project-based subsidies on a property-by-property basis upon expiration of a property's Housing Assistance Payments Contract ("HAP Contract"), with a conversion to a tenant-based subsidy. Under a tenant-based system, rent vouchers would be issued to qualified tenants who then could elect to reside at a property of their choice, provided the tenant has the financial ability to pay the difference between the selected property's monthly rent and the value of the voucher, which would be established based on HUD's regulated fair market rent for that geographic area. Congress has not yet accepted any of these restructuring proposals and instead has elected to renew expiring Section 8 HAP Contracts for one year terms, generally at existing rents. While the Company does not believe that the proposed changes would result in a significant number of tenants relocating from properties managed by the Company, there can be no assurance that the proposed changes would not significantly affect the Company's management portfolio. Furthermore, there can be no assurance that changes in federal subsidies will not be more restrictive than those currently proposed or that other changes in policy will not occur. Any such changes could have an adverse effect on the Company's property management revenues. DEPENDENCE ON THE REAL ESTATE COMPANIES FOR PROPERTY SERVICES REVENUES The Company is, and will continue to be, substantially dependent on revenue from services provided to properties controlled by the Real Estate Companies. Approximately 67% of the Company's property management revenue in 1996 was derived from fees for services provided to properties controlled by the Real Estate Companies. Pursuant to the agreements with the Real Estate Companies discussed in Note 13, the Real Estate Companies are required for a period of at least 25 years, subject to certain conditions, to cause the Company to be selected to provide services to each of the properties the Real Estate Companies control and properties they may control in the future. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PROPERTY SERVICES - REVENUE AND EXPENSES The Company recognizes property management, Buyers Access-Registered Trademark-, tax credit investment and insurance advisory fee revenues as services are rendered and the revenue is earned. Administrative and reporting fees are earned for providing administrative services to certain partnerships in which the Real Estate Companies have ownership interest. These fees are payable only to the extent distributable cash flow of the partnerships, as defined, is available. The Company accrues these fees as services are rendered and establishes a reserve equal to the amount of accrued fees that are not assured of being paid. Prepayments received on service contracts are deferred and recognized as revenue when the related services are performed. Revenues from Preferred Home Health are recognized as services are performed. Property management services revenue includes direct management fees, central accounting fees, computer fees and asset management fees as well as various other fees earned in conjunction with the management of properties. Buyers Access-Registered Trademark- revenue, tax credit investment revenue, revenues from Preferred Home Health and insurance advisory fee revenue are included in other revenue on the Consolidated Statement of Operations. Personnel hired to provide operating and management services to the individual properties which the Company manages are employees of the Company ("On-site Employees"). All payroll costs, including payroll taxes and benefits, relating to On-site Employees are reimbursable to the Company by the individual properties. These costs, F-18 which totaled $124.1, $113.1, and $93.6 million for the years ended December 31, 1996, 1995 and 1994, respectively, have been reflected as operating expenses, and the related reimbursements have been included in operating revenue as part of on-site personnel, general and administrative cost reimbursements. The Company accrues as a liability amounts charged to the individual properties for On-site Employee benefits (health insurance and 401(k) Plan employer contributions) which have not yet been paid to third party providers of services. All other employees of the Company are classified as "Off-site Employees." The Company also provides asset management, finance, accounting and tax services to the Real Estate Companies on a cost reimbursable basis. The costs charged back to the Real Estate Companies have been reflected as operating expenses and the related reimbursements have been included in operating revenue as part of on-site personnel, general and administrative cost reimbursements in the accompanying consolidated financial statements and amounted to $3.1, $4.1 and $4.6 million for the years ended December 31, 1996, 1995 and 1994, respectively. INCOME TAXES The benefit (provision) for income taxes includes Federal and state income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities. The net deferred tax asset relates primarily to net operating loss carryforwards ("NOLs") recognized by the Company subsequent to the sale of the Real Estate Companies. For further discussion see Note 9. NET INCOME PER SHARE Net income per share is computed using the weighted average number of common shares and equivalents outstanding during each period. Common share equivalents are attributable primarily to outstanding stock options. The weighted average shares and equivalents used in the per share calculations were 12,729,636, 9,644,745, and 8,094,733 for the years ended December 31, 1996, 1995 and 1994, respectively. As there is not a material difference (less than 3%) between net income per share and fully-diluted net income per share, only net income per share is presented. In February 1995, the Company's Board of Directors declared a 25 for 1 split of the Company's common stock. All share and per share amounts have been restated to reflect the stock split. On August 18, 1995, the Company completed an initial public offering ("IPO") of 4.3 million shares of common stock and received net proceeds of approximately $52.0 million. The net proceeds were used in their entirety to repay certain of the Company's outstanding debt (see Note 8). CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with initial maturities of 90 days or less to be cash equivalents. RECEIVABLES Receivables, which are substantially all from related parties, are stated net of an allowance for doubtful accounts of $2.5 and $1.6 million at December 31, 1996 and 1995, respectively. PURCHASED MANAGEMENT CONTRACTS The cost of acquiring the rights to manage multifamily real estate properties is capitalized and amortized over the shorter of 15 years or the estimated life of the management contracts which include projected renewals. Purchased management contracts are being amortized over terms ranging from 1 to 15 years. The Company periodically reevaluates its assumptions regarding projected renewals for the purpose of determining the need to adjust the estimated life of management contracts. Purchased management contracts are stated net of accumulated amortization of $11.9 and $8.4 million at December 31, 1996 and 1995, respectively. F-19 GOODWILL Goodwill represents the excess of the cost of acquired businesses over the fair value of their tangible and identified intangible assets. Goodwill was recorded in conjunction with the Goldberg acquisition described in Note 4. Goodwill is being amortized on a straight-line basis over 10 years. The Company reviews the carrying value of goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is stated net of accumulated amortization of $0.3 million at December 31, 1996. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE Property and equipment is carried at cost, net of accumulated depreciation, and includes all major renewals and betterments. Maintenance, repairs and minor replacements are expensed as incurred. Depreciation expense is computed on the straight-line basis over the estimated useful lives of the related assets, or the lesser of useful life or lease term for leasehold improvements. The lives used for calculating depreciation vary from 5 to 7 years. Computer software purchased from or developed by outside vendors is capitalized and is carried at cost net of accumulated amortization. Amortization expense is computed on a straight-line basis over the shorter of the estimated useful life of the software or five years. OTHER ASSETS Other assets includes notes receivable, deferred acquisition costs, deferred financing costs and other non-current assets. NOTES RECEIVABLE - In conjunction with the 1996 Goldberg Acquisition discussed in Note 4, the Company purchased two notes receivable. The two notes bear interest at 9% and 9.75% and are due from the project limited partnerships of two Florida rental retirement communities to the extent the properties have net cash flow available for payment. The 9% note was recorded at its face value of $5.1 million, which approximates fair value. The 9.75% note has a face value of $7.4 million and was recorded at its estimated fair value of $3.3 million, net of a discount of $4.1 million. The discount is being amortized into interest income over 15 years using a method that approximates the effective interest method. The net balance as of December 31, 1996, on these notes receivable, including approximately $0.5 million of which is considered current and is included in other current assets on the Consolidated Balance Sheet, was $8.4 million. The Company recognized $0.4 million of interest income on these notes in 1996. DEFERRED FINANCING COSTS - Certain costs of obtaining the financing arrangements described in Note 8 have been deferred and are being amortized to interest expense over the remaining term of the related debt. In 1995, the Company recorded as an extraordinary item the write off of deferred financing costs related to the Company's previous credit facility (see Note 16). Deferred financing costs, net of accumulated amortization, were $0.4 and $0.6 million as of December 31, 1996 and 1995, respectively. DEFERRED ACQUISITION COSTS - Certain costs related to the investigation, pursuit and negotiation of potential acquisitions are deferred until the acquisition is consummated or until the Company determines that it will no longer pursue a particular acquisition. Deferred costs associated with a completed acquisition are considered part of the acquisition price and are allocated, along with the costs incurred at closing, to the asset or assets acquired. Costs associated with potential acquisitions that are determined to no longer be viable are expensed in the period of the determination. Deferred acquisition costs were $0.7 and $2.6 million at December 31, 1996 and 1995, respectively. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year presentation. F-20 NEW ACCOUNTING STANDARD The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," on January 1, 1996. These statements did not have an effect on the Company's financial position or results of operations. See Note 11 for further discussion of SFAS No. 123. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share," which will change the reporting of earnings per share effective in the fourth quarter of 1997. Basic earnings per share will not include stock options as common stock equivalents and will be higher than previously reported primary earnings per share. Diluted earnings per share will equal previously reported primary earnings per share under the Company's current capital structure. (2) DISCONTINUED OPERATIONS NHP FINANCIAL SERVICES On April 19, 1997, the Company's Board of Directors approved a plan to distribute shares of NHP Financial Services (formerly the Company's Financial Services business segment) to the Company's existing shareholders pursuant to the terms of a Rights Agreement approved by the Board of Directors on that date. Pursuant to the Rights Agreement, the Company will issue to its stockholders rights to receive a distribution of one-third of a share of NHP Financial Services for each right at the earlier of the time of the AIMCO merger discussed in Note 3, or on December 1, 1997, if the AIMCO merger has not occurred by that date. NHP Financial Services is also expected to issue shares constituting approximately 11.5% of its common equity in a private transaction on or shortly after the distribution to the Company's stockholders. The Company has received a commitment, subject to certain conditions, to purchase 546,498 shares of NHP Financial Services for an aggregate purchase price of $5 million on or shortly after the distribution, which is equivalent to $9.15 per share. The distribution is conditioned on the consent of lenders under the Company's credit agreement. As a result of the distribution, each holder of shares of the Company's common stock at the time of the AIMCO merger will receive shares in NHP Financial Services in addition to the merger consideration described in Note 3. The Company anticipates that the rights will be distributed approximately May 9 to stockholders of record of the Company on May 2, 1997. Following the distribution of shares of NHP Financial Services, NHP Incorporated and NHP Financial Services will operate independently and neither will have any stock ownership in the other. In conjunction with the distribution of shares of NHP Financial Services, NHP Incorporated and NHP Financial Services will enter into a separation agreement that will govern their ongoing relationship. The separation agreement will provide, in part, for NHP Financial Services to assume all liabilities relating to the business and operations of NHP Financial Services prior to distribution (except for the costs of the distribution) and to indemnify NHP Incorporated for such liabilities and all expenses and costs and losses related thereto, all on terms reasonably acceptable to AIMCO. In addition, the separation agreement will also provide for the settlement, at or prior to the distribution of shares, of any intercompany amounts owed by NHP Financial Services to NHP Incorporated through retention by NHP Financial Services of Excess Free Cash flow, as defined by the AIMCO merger agreement, generated by NHP Incorporated during 1997, through the date of the AIMCO merger, and/or repayment of the remaining amounts by NHP Financial Services. The intercompany balance due from NHP Financial Services to NHP Incorporated, of approximately $9 million as of April 1997, relates primarily to advances to NHP Financial Services related to the Proctor and Askew acquisitions, which are discussed further in Notes 4 and 17, respectively, and intercompany cash tax allocations. The operating results of NHP Financial Services for the nine-month period since acquisition are summarized below (in thousands): April 1 - December 31, 1996 ---------------------- Gross Revenue $24,848 ------- ------- Income before taxes $ 2,299 Provision for income taxes (1,144) ------- Net income $ 1,155 ------- ------- Net income per share $ .09 ------- ------- The assets and liabilities of NHP Financial Services as of December 31, 1996, are summarized below (in thousands): 1996 ------- Current assets $51,060 Noncurrent assets 34,304 ------- Total assets $85,364 ------- ------- Current liabilities $52,254 Noncurrent liabilities 9,710 ------- Total liabilities 61,964 ------- Net assets of discontinued operations $23,400 ------- ------- DISCONTINUED REAL ESTATE OPERATIONS On June 14, 1994, the Company's Board of Directors approved a plan (the "Plan") to dispose of the Company's real estate operations immediately prior to an IPO of the Company's common stock. On August 18, 1995, the Company completed its IPO and sold the Real Estate Companies. In consideration for the sale of the Real Estate Companies, Demeter, Capricorn and Mr. Heller canceled $9.1 million of indebtedness owed to them by the Company. The 1995 financial statements of a partnership accounted for by The Real Estate Companies using the equity method have been restated to expense in 1995 the cost of acquiring the management contracts related to certain multifamily properties. The acquisition cost was originally capitalized by the partnership and amortized over a 70-month period. The Company's 1995 financial statements have been restated to reflect the Company's share of the partnership's restated loss. The effect of the restatement was to increase the loss from discontinued operations, net of income taxes of $1.2 million, by $1.8 million in the accompanying 1995 consolidated statement of operations. The restatement also had the effect of increasing the net liabilities of the Real Estate Companies as of the date of the sale which resulted in the Company receiving an additional net gain on sale of $1.8 million. The net liabilities of the Real Estate Companies as of the date of the sale were $6.4 million (restated) and transaction costs related to the sale, including taxes of $2.3 million, were $4.8 million, which resulted in the Company recording a net gain on the sale of the Real Estate Companies of $10.7 million (restated). The gain was recorded as a direct adjustment to additional paid-in capital. The Real Estate Companies' operations consist primarily of the ownership of general and limited partnership interests (generally 1% to 5%) in approximately 700 affordable and conventional multifamily housing properties located in 38 states, the District of Columbia and Puerto Rico. The Real Estate Companies also own majority interests in several real estate partnerships (primarily multifamily housing properties), interests in joint ventures (primarily land and single family housing developments) and a "captive" insurance company which are consolidated with the accounts of the Real Estate Companies for financial reporting purposes. In addition to managing the majority of the properties for which the Real Estate Companies act as general partner, the Company provides asset management, finance, accounting and tax services to the Real Estate Companies on a cost-reimbursable basis. For further discussion of transactions with the Real Estate Companies, see Note 13. F-21 The operating results of the discontinued real estate operations are summarized below (in thousands): Year Ended December 31, ---------------------------------- (Restated) 1996 1995 1994 ---- ---- ---- Gross revenues -- $23,874 $35,121 Net income (loss) before extraordinary item, net of minority interest and net of an income tax benefit of $2,515 for 1995 and $0 for 1994 -- $(3,771) $ 7,490 The net income (loss) before extraordinary item includes $1.0 and $12.0 million for the years ended December 31, 1995 and 1994, respectively, of gains resulting from sales and foreclosures of properties owned by real estate partnerships for which the Real Estate Companies act as general partner. (3) CHANGE IN CONTROL AND MERGER AGREEMENT On April 21, 1997, the Company announced that it had entered into a definitive Merger Agreement pursuant to which the Company will be acquired by Apartment Investment and Management Company ("AIMCO"), a real estate investment trust whose shares are traded on the New York Stock Exchange (AIV-NYSE). Upon completion of the merger, each of the Company's stockholders will receive for each share of Company common stock, at the stockholder's election, either (i) a combination of .37383 shares of AIMCO common stock and $10.00 cash per share of Company common stock, or (ii) .74766 shares of AIMCO common stock. The merger is conditioned on the approval of the Company's stockholders and AIMCO stockholders, the completion of the transactions between AIMCO and the majority stockholders of the Company described below, and customary state and federal regulatory and other approvals. AIMCO has separately entered into a Stock Purchase Agreement with Demeter and Capricorn, who together hold a majority of the outstanding shares of the Company's common stock. Pursuant to the Stock Purchase Agreement, AIMCO will acquire all of the Company's common stock currently held by Demeter and Capricorn. AIMCO will pay Demeter $20 in cash per share for 50% of the Company shares held directly and indirectly by Demeter. For the remainder of Demeter's shares and Capricorn's shares, AIMCO will pay .74766 shares of AIMCO common stock per share of Company common stock. The closing under the Stock Purchase Agreement is expected to occur in May 1997. Upon completion of AIMCO's purchase of shares held by Demeter and Capricorn, AIMCO will hold a majority of the issued and outstanding shares of the Company's common stock. The merger will, however, require approval by two-thirds vote of all shares of Company common stock held by persons other than AIMCO. Stockholder meetings to approve the merger are expected to be held in late summer. The Company has also been informed that AIMCO is negotiating a definitive agreement with Demeter and Capricorn to acquire interests in certain real estate properties owned or controlled by the Real Estate Companies, which are controlled by Demeter and Capricorn, most of which properties are managed by the Company pursuant to a long-term property management contract. Both the Company's and AIMCO's obligations to complete the merger are conditioned on signing the definitive agreement relating to the sale of real estate interests and the management agreement remaining in effect. As consideration for AIMCO's executing the Merger Agreement, the Company has waived, effective May 3, 1997, its right of first refusal to purchase the real estate being sold to AIMCO, subject to the condition that a definitive real estate agreement be signed by AIMCO and Demeter by May 31 on terms substantially in accordance with those described to the Company's Board of Directors. (4) ACQUISITIONS AND NEW BUSINESS CONTINUING OPERATIONS GOLDBERG ACQUISITION As of July 12, 1996, the Company, directly and through subsidiaries, acquired the long-term management rights and certain notes receivable from two Florida rental retirement communities as well as all of the outstanding stock of Preferred Home Health, Inc. (the "Goldberg Acquisition"). In addition, the Real Estate Companies acquired certain other notes receivable from one of the properties and subsequently acquired all of the issued and outstanding stock of the corporate general partners of the limited partnership owners of the two properties. The Company and the Real Estate Companies acquired these assets from affiliates of the Stephen A. Goldberg Company of Washington, D.C. and certain other individuals. The cost of the Company's portion of the acquisition, including transaction costs, was approximately $16.3 million in cash and $4.0 million in long-term notes. The purchase price was funded through additional borrowings under the Company's revolving credit facility. The transaction was accounted for under the purchase method of accounting. All assets acquired were recorded at their estimated fair value. The excess of the purchase price over the fair value of the net assets acquired was approximately $6.2 million and has been recorded as goodwill. Preferred Home Health, Inc. is a provider of home health care services to residents of multifamily rental retirement communities. F-22 GUILFORD The Real Estate Companies completed the Guilford Acquisition in January 1996, by which the Real Estate Companies acquired the general partnership interests and certain limited partnership interests in partnerships that own 14 properties containing 2,995 units. In conjunction with this acquisition by the Real Estate Companies, the Company paid the Real Estate Companies $2.6 million ($1.5 million of which was paid in December 1995) to enter into property management contracts with each property for a period of four to five years, commencing in December 1995. SOUTHPORT In December 1995, the Real Estate Companies entered into a binding agreement to acquire from Southport Financial Corporation the general partner interests in partnerships that own 14 properties containing 2,140 units. The Company began managing 12 of these properties containing 1,857 units in November 1995 and began managing the remaining two properties containing 283 units in early 1996. The Company acquired the right to manage all 14 of the Southport properties for $4.0 million, approximately $3.0 million of which will be paid in various quarterly installments through the year 2000. The Company manages the Southport properties pursuant to long-term contracts terminable only for cause, and will have a right of first refusal with respect to the sale of any of these properties or the Real Estate Companies' general partnership interests in partnerships owning these properties. RESCORP On October 31, 1995, the Company acquired from Rescorp Realty, Inc. and transferred to the Real Estate Companies the stock of entities owning the general partnership interests in 11 properties. The Company manages these properties pursuant to long-term contracts terminable only for cause, and has a right of first refusal with respect to the sale of any of these properties or the Real Estate Companies' general partnership interests in partnerships owning these properties. The Company also entered into short-term property management contracts with respect to four other properties, which are owned by unaffiliated owners. The 15 properties have an aggregate of 2,578 units. The Company paid Rescorp approximately $2.4 million in connection with the acquisition, and transferred the general partnership interests to the Real Estate Companies in exchange for the Real Estate Companies assuming the cost and responsibilities of the general partner. HALL In February 1995, the Company and the Real Estate Companies substantially completed the Hall Acquisition. In the Hall Acquisition, the Company and the Real Estate Companies acquired, for $12.5 million (of which $4.0 million was allocated to management rights), a 50% common equity interest in a joint venture which, in turn, owns an interest in a portfolio of 32 apartment properties containing 8,028 units and the associated property management rights. Each property is owned by a limited partnership, the managing general partner of which is an affiliate of the Real Estate Companies. As managing general partner, each of these affiliates has entered into a management contract with the Company having a term coinciding with the term of the current financing of the properties, or approximately 5.75 years. CONGRESS On December 31, 1994, the Company and the Real Estate Companies entered into a binding agreement to purchase for $6.7 million from Congress Realty Companies the general partner interests, property management rights and rights to certain receivables related to a 13-property portfolio containing 4,301 units. The acquisition was accounted for as a 1994 transaction using the purchase method of accounting. Substantially all of the purchase price was paid in January 1995. See also Note 17 for discussion of 1997 acquisitions. F-23 DISCONTINUED OPERATIONS NHP FINANCIAL SERVICES As previously discussed, as of April 1, 1996, NHP Incorporated acquired NHP Financial Services, for consideration of approximately $21 million in the form of $16.8 million in cash and 210,000 shares of the Company's common stock. The transaction has been accounted for under the purchase method of accounting. All assets acquired were recorded at their estimated fair value which resulted in recording an identifiable intangible asset of approximately $19.1 million related to acquired servicing rights. The excess of the purchase price over the fair value of the net assets acquired was approximately $5.0 million and has been recorded as goodwill. The goodwill is being amortized over seven years. The acquired servicing rights are being amortized over periods up to seven years. All purchase price allocations have been recorded by NHP Financial Services and are included in the net assets of discontinued operations on the Consolidated Balance Sheet. At closing, the 210,000 shares of the Company's common stock were placed in an escrow account as security for the satisfaction of claims by the Company under the stock purchase agreement against the former owner of NHP Financial Services (the "Seller"). Claims will be paid, subject in certain instances to a deductible, from the escrow by returning the number of shares to the Company equal to the value of the claim, as determined by the then current market value of the Company's common stock. 105,000 shares were released to the Seller on April 1, 1997. One-half of the shares remaining in the escrow will be released to the Seller on April 1, 1998, with the remaining shares to be released to the Seller on April 1, 1999. PROCTOR & ASSOCIATES As of December 31, 1996, Washington Mortgage Financial acquired Detroit-based Proctor & Associates ("Proctor"), the 37th largest commercial mortgage banking firm in the nation, according to June 30, 1996, data published by the Mortgage Banking Association, for $3.7 million. Included in the transaction is Proctor's $1.1 billion loan servicing portfolio of multifamily, retail, and office building mortgages, as well as the firm's fifteen active correspondent relationships with life insurance companies. Proctor originated nearly $180 million in commercial mortgage loans in 1996. The purchase has been accounted for under the purchase method of accounting by Washington Mortgage Financial. All assets acquired were recorded at their estimated fair value. The excess of the purchase price over the fair value of the net assets acquired was $3.1 million and has been recorded as goodwill by Washington Mortgage Financial and is included in net assets of discontinued operations on the Consolidated Balance Sheet. AMERICAN CAPITAL RESOURCE, INC. On May 13, 1996, WMF/Huntoon Paige, a subsidiary of Washington Mortgage Financial, completed the purchase of a portion of the loan production pipeline, as well as certain other assets, of American Capital Resource, Inc. ("ACR") for approximately $2.2 million plus potential future payments based on realization of the pipeline through August 1997. The acquisition has been accounted for under the purchase method of accounting. In addition, during 1996 WMF/Huntoon Paige also purchased the servicing rights to various loans from ACR for a total of $2.0 million. (5) INVESTMENT IN REAL ESTATE HELD FOR SALE TRANSACTION AND ACCOUNTING On May 16, 1996, the Company acquired 12 multifamily properties containing 2,905 apartment units, including the right to manage the units on a long-term basis, from affiliates of Great Atlantic Management, Inc. for a purchase price (including transaction costs) of approximately 86.8 million (the "Great Atlantic Acquisition"), in the form of approximately $71.2 million in third-party nonrecourse debt and $15.6 million in cash. The Company made this acquisition with the intention of selling the real estate ownership interests to third-party investors while retaining the management rights to the properties. Accordingly, the Company has reported on the Consolidated Balance Sheet its ownership interests in the Great Atlantic properties as an investment in real estate held for sale, which is reported at the lower of carrying value or fair value less estimated costs to sell. Previously, the investment in real estate was presented on the Consolidated Balance Sheet net of the associated debt, as discussed further below. The consolidated financial statements have been restated to separately report the real estate related debt as a liability. 1996 earnings from these properties since the date of acquisition, excluding depreciation, was $0.1 million. The recognition of the Company's pro rata share of these earnings increased the Company's investment. This increase was offset by the establishment of a valuation allowance to reduce the recorded investment to the lower of carrying value or fair value less estimated cost to sell which resulted in no net income being recognized related to these properties. DESCRIPTION OF REAL ESTATE RELATED DEBT The Company owns all of the limited and general partnership interests in the limited partnerships that in turn own the local partnerships (the partnerships that own and are responsible for the operations of the real estate). Eleven of the twelve local partnerships participate in joint financing, which was executed simultaneously with the acquisition. This financing consisted of three separate but related loans: (1) a senior mortgage loan; (2) a junior mortgage loan; and (3) a partnership loan, all of which are nonrecourse to the Company. The junior mortgage loan was paid in full on December 31, 1996. The remaining loans are discussed below. SENIOR MORTGAGE LOAN consists of eleven separate notes with an original face value totaling $55.3 million. The outstanding balance as of December 31, 1996, is $51.0 million. Interest is payable monthly at a rate of 8.53% per annum. There are no required principal payments until the loans mature on May 31, 2001. Principal may not be repaid prior to May 31, 1998, without the consent of the lender. THE PARTNERSHIP LOAN is evidenced by a single note, maturing June 3, 2001. The borrowers are the eleven limited partnerships which own the majority limited partner interests in the local partnerships, which in turn own the real estate. The note allocates the principal among the limited partnerships, but each is jointly and severally liable for the indebtedness. The partnership loan includes two tiers, totaling $15.9 million. The first tier partnership loan amount is $9.9 million. Interest at a rate of 8.53% per annum is payable monthly. There are no required principal payments until the loan matures. Principal may not be prepaid until May 31, 1998, and then only if the second tier of the partnership loan has been retired. The second tier partnership loan amount is $6.0 million. The interest rate is the amount that would give the lender a pre-tax rate of return of 16%. Interest is paid at a rate of 12.588%. The difference is recorded by the partnerships as a deferred payable. There are no required principal payments until May 31, 1998. Thereafter, monthly principal payments are required in an amount equal to the lesser of 35% of monthly cash flow or $41,666. Any shortfall is deferred. In subsequent months, if 35% of monthly cash flow is greater than $41,666, the excess is applied to reduce prior deferred amounts. Principal prepayments are permitted prior to May 31, 1998, by paying a prepayment premium of 3% of the amount prepaid. Concurrent with the closing of the loan, the local partnerships entered into a guaranty agreement making them jointly and severally liable for the senior mortgage notes payable. Under the terms of this contract, each of the senior note mortgagors unconditionally guarantee the full and prompt payment of all amounts due under the senior mortgage loans. Under a related contribution agreement, the guarantors have agreed to allow funds from the cash collateral account to be used to satisfy any shortfall of an affiliate partnership. A separate guaranty agreement was entered into by the limited partnerships related to the partnerhip loan, with similar terms. The liability of the local partnerships under the senior mortgage note and the guaranty, and the liability of the limited partnerships under the partnership note and guaranty, is limited to the underlying value of the real estate collateral plus amounts deposited with the lender. The partnerships are also required to make monthly escrow deposites with the lender. The twelfth property has a separate mortgage note payable with a remaining balance as of December 31, 1996, of $4.3 million. The mortgage note payable is secured by a deed of trust on the real estate. The note bears interest at a rate of 7.95%. Principal and interest payments are payable by the local partnership in equal monthly installments of $35,794 to June 2016. Principal amounts due on the mortgage payable are $0.1 million per year for the years 1997 through 2001 and $3.7 million thereafter. The liability of the local partnership under the mortgage note is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender. F-24 (6) PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE Property, equipment and capitalized software consist of the following (in thousands): December 31, --------------------- 1996 1995 ---- ---- Property and equipment $ 6,315 $ 3,393 Leasehold improvements 2,347 268 Capitalized software 4,112 1,642 ------- -------- 12,774 5,303 Less accumulated depreciation and amortization 2,359 1,780 ------- -------- $10,415 $ 3,523 ------- -------- ------- -------- (7) ACCRUED EXPENSES Accrued expenses consist of the following (in thousands): December 31, -------------------- 1996 1995 ------- ------- Accrued personnel and payroll costs $ 8,839 $ 7,990 Other 2,613 2,011 ------- ------- $11,452 $10,001 ------- ------- ------- ------- (8) LONG-TERM DEBT Long-term debt consists of the following (in thousands): December 31, ------------------------ 1996 1995 ------- ------- Lines of credit: $75 million Credit Facility $57,000 $23,000 Notes payable - Goldberg 4,000 -- Notes payable - Southport (net of unamortized discount of $364 and $42 in 1996 and 1995, respectively) 2,184 195 Note payable to Oxford 143 495 ------- ------- 63,327 23,690 Less current portion (720) (412) ------- ------- Long-term debt $62,607 $23,278 ------- ------- ------- ------- CREDIT FACILITY - CONTINUING OPERATIONS In August 1995, the Company entered into a $75.0 million, three-year unsecured revolving credit facility (the "Credit Facility") with a group of banks. At the end of two years, the Company may extend the Credit Facility (as a revolving facility) for a fourth year or may convert it at the end of the second year to a two-year term loan with equal quarterly installments based on a five year amortization schedule and the remaining balance (approximately 60%) due at the end of the two-year term. Availability under the Credit Facility is subject to the Company's compliance with F-25 various financial ratios, operating covenants and other customary conditions. The Credit Facility restricts the payment of dividends by the Company unless the Company's ratio of income from continuing operations before interest, income taxes, depreciation and amortization ("EBITDA") to interest expense is greater than 3 to 1. In 1996, interest on the Credit Facility was equal to 175 basis points over the London Interbank Offered Rate ("LIBOR") in effect from time to time. In 1996, the Credit Facility also required the payment of a commitment fee of 37.5 basis points per annum on the unused portion of the Credit Facility. During 1996, the Credit Facility required that any other borrowings be subordinated to the Credit Facility except up to $10 million of borrowings made in connection with the acquisition of assets that will result in additional management rights for the Company, Washington Mortgage Financial's Warehouse Line (described below), and any indebtedness of Washington Mortgage Financial incurred in the acquisition of mortgage loans or mortgage servicing rights. As of December 31, 1996, the Company had outstanding $6.2 million of additional unsubordinated borrowings from third parties. The Credit Facility limits the amount of loans or other advances by the Company to the Real Estate Companies to a total of $10 million. At December 31, 1996, $40 thousand was due directly from the Real Estate Companies. In February 1997, the terms of the Credit Facility were amended. See Note 17 for discussion of the changes in significant terms. At December 31, 1996, the Company classified all borrowings under the Credit Facility due within one year as long-term. The Company has both the intent and the ability, through the Credit Facility, to refinance these amounts on a long-term basis. LONG-TERM DEBT AND LINES OF CREDIT- DISCONTINUED OPERATIONS The following is a discussion of the long-term debt and lines of credit related to NHP Financial Services (formerly the Company's Financial Services business segment). Any amounts outstanding as of December 31, 1996, related to these items are included in the net assets of discontinued operations on the Consolidated Balance Sheet. During the third quarter of 1996, Washington Mortgage Financial renegotiated the terms of its existing warehouse line of credit (the "Warehouse Line"), which is used for the purpose of originating loans. The Warehouse Line was increased from $80 million to $150 million. The interest rate on the Warehouse Line was 1 to 1 1/2 percent during 1996 to the extent compensating balances are maintained or LIBOR plus 1 to 1 1/2 percent for amounts borrowed in excess of compensating balances. The Warehouse Line is secured by mortgage loans held for sale and is repaid upon sale of the mortgage loans. The Warehouse Line expires in August 1997, at which time the Company expects to extend it or replace it with a similar line of credit. As of December 31, 1996, Washington Mortgage Financial had drawn $39.9 million on the Warehouse Line. Washington Mortgage Financial has an additional warehouse agreement providing $15 million of revolving credit at 1 1/2 to 1 5/8 percent to the extent compensating balances are maintained and the prime rate for amounts borrowed in excess of compensating balances. As of December 31, 1996, Washington Mortgage Financial had no amounts outstanding under this line of credit. Interest is payable monthly. This warehouse line of credit is secured by mortgage loans held for sale and is paid upon sale of the mortgage loans. Washington Mortgage Financial has a separate line of credit which was used exclusively for acquisition of mortgage servicing rights (the "Servicing Acquisition Line"). The interest rate on the Servicing Acquisition Line in 1996 was 3 to 3 1/2 percent to the extent compensating balances are maintained or LIBOR plus 3 to 3 1/2 percent for amounts borrowed in excess of compensating balances. In October 1996, the Servicing Acquisition Line was converted to a term loan which is to be repaid in quarterly installments, based on a 10-year amortization schedule, with the remaining balance due in June 2001. The Servicing Acquisition Line is collateralized by servicing rights relating to loans with an approximate unpaid principal balance of $1.1 billion. The original commitment amount of the Servicing Acquisition Line was $10 million and as of December 31, 1996, Washington Mortgage Financial had drawn $6.2 million on this line. Because this line has been converted to a term loan, Washington Mortgage Financial cannot borrow any additional amounts under this line. Washington Mortgage Financial also has a revolving credit agreement providing $10 million of revolving credit to be used for servicing acquisitions or working capital advances (the "Working Capital Line"). Interest on the Working Capital Line is 3 1/2 percent to the extent compensating balances are maintained or LIBOR plus 3 1/2 F-26 percent for amounts borrowed in excess of compensating balances. The Working Capital Line is renewable annually through June 2001 and requires monthly interest payments. Any principal balance outstanding at June 2001 would be converted to a term loan due in quarterly installments through June 2006. The Working Capital Line is collateralized by the same assets as the Servicing Acquisition Line. As of December 31, 1996, Washington Mortgage Financial had no amounts outstanding under the Working Capital Line. Washington Mortgage Financial has an additional unsecured line of credit agreement available for working capital purposes providing for $0.5 million of revolving credit. The interest rate on this line of credit is the prime rate and all borrowings must be paid off annually with interest payments due monthly. At December 31, 1996, Washington Mortgage Financial had no amounts outstanding under this line of credit. NOTES PAYABLE - GOLDBERG As a portion of the consideration in the Goldberg Acquisition, the Company issued various notes payable totaling $4.0 million. The notes bear interest at 9.5% per annum and require quarterly interest payments with the principal due at maturity, July 12, 2006. NOTES PAYABLE - SOUTHPORT In conjunction with the Real Estate Companies' purchase from Southport Financial Corporation of the general partner interests in partnerships that own 14 properties containing 2,140 units, the Company completed its acquisition of the management rights for these properties. As consideration for the acquisition of the management rights, the Company issued various non-interest bearing notes in 1996 and 1995 with a total face value of $3.0 million which are due in various quarterly installments through the year 2000. These notes were recorded at $2.5 million, net of an unamortized discount of $0.5 million based on an imputed interest rate of 9.5%. REPAYMENTS OF DEBT Upon the completion of the IPO in August of 1995, the Company drew $20.0 million on the Credit Facility and used those funds together with the net proceeds of the IPO as follows: (i) $54.7 million was used to repay in full the Company's indebtedness under its previous credit facility, which was simultaneously terminated by the Company; (ii) $7.0 million was used to repay a note to a former institutional shareholder of the Company; and (iii) $5.5 million was used to repay indebtedness to Demeter, Capricorn, and Mr. Heller. The remaining proceeds were added to the Company's working capital. In consideration for the sale of the Real Estate Companies in August of 1995, Demeter, Capricorn and Mr. Heller canceled $9.1 million of indebtedness owed to them by the Company (for further discussion, see Notes 2 and 13). F-27 OTHER The following table provides more detail on interest rates (including commitment fees) and borrowings made under the Company's various credit agreements (dollar amounts in thousands): Year Ended December 31, -------------------------- 1996 1995 1994 ---- ---- ---- Continuing Operations: $75 million Credit Facility (a): Weighted average interest rate at period-end 7.61% 8.40% 6.42% Maximum month-end borrowings during the period $57,000 $58,466 $57,126 Average borrowings during the period $43,917 $41,457 $54,454 Weighted average interest rate, during the period 7.70% 9.03% 6.47% Discontinued Operations: $150 million Warehouse Line: Weighted average interest rate at period-end 1.00% -- -- Maximum month-end borrowings during the period $52,885 -- -- Average borrowings during the period $43,327 -- -- Weighted average interest rate, during the period 1.17% -- -- $10 million Servicing Acquisition Line: Weighted average interest rate at period-end 3.00% -- -- Maximum month-end borrowings during the period $ 9,960 -- -- Average borrowings during the period $ 8,884 -- -- Weighted average interest rate, during the period 3.17% -- -- $15 million Warehouse Line: Weighted average interest rate at period-end 1.50% -- -- Maximum month-end borrowings during the period $ 7,100 -- -- Average borrowings during the period $ 3,765 -- -- Weighted average interest rate, during the period 1.50% -- -- (a) Includes the Company's $75 million Credit Facility and/or any prior credit agreements in 1995 and 1994. Aggregate annual maturities of long-term debt for the Company's continuing operations as of December 31, 1996, are $0.7, $0.6, $57.7 and $0.3 million for the years 1997 through 2000, respectively. For the purposes of calculating aggregate maturities, the Credit Facility is assumed to be extended for a fourth year but the Company has not yet determined what option it will choose under the terms of the Credit Facility. Aggregate annual maturities of long-term debt for the Company's discontinued operations as of December 31, 1996, which excludes the Warehouse Line, are $1.0 million per year for the years 1997 through 2000 and $2.2 million for the year 2001. (9) INCOME TAXES The Company files a consolidated Federal income tax return, and in certain states, consolidated state income tax returns. As of December 31, 1994, the Company had net operating loss carryforwards (NOLs) of approximately $140 million which were attributable primarily to partnership losses related to the Real Estate Companies. In connection with the sale of the Real Estate Companies (discontinued operations), the Company utilized approximately $60 million of its NOLs, and the remaining NOLs were allocated between the Company and the Real Estate Companies. At December 31, 1996, the Company estimates that it has remaining approximately $55 million of gross unused NOLs for Federal tax purposes which expire in varying amounts between 2004 and 2008. Realization of the NOLs is dependent on generating sufficient taxable income prior to the expiration of the NOLs. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset related to the NOLs will be realized. Therefore, upon the sale of the Real Estate Companies in the third quarter of 1995, the Company reduced its valuation allowance as those entities historically generated operating losses, while continuing operations have historically generated operating income. F-28 The amount of deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. Furthermore, if the Internal Revenue Service were to determine that the consideration received by the Company in the sale of the Real Estate Companies was less than the fair market value of the assets transferred or that other valuations of assets made in connection with the sale were inaccurate, the amount of the net operating loss carryforwards available to the Company could be reduced, thus increasing the Company's future federal income tax liability. The ability of the Company to utilize NOLs may also be limited in the future if an "ownership change" within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, were deemed to occur. Such an ownership change may be deemed to occur, for example, if the Company engages in certain transactions involving the issuance of shares of common stock, including the issuance of a sufficient number of shares of common stock in connection with an acquisition or otherwise. If an ownership change were to occur, Section 382 would impose an annual limit on the ability of the Company to utilize NOLs. The amount of NOLs is, in any event, subject to uncertainty until such time as they are used to offset income as their validity is not reviewed by the Internal Revenue Service until such time as they are utilized. The sale of Company stock, discused in Note 3, by Demeter and Capricorn to AIMCO, if completed, would trigger the Section 382 limitations. The Company expects to recognize capital gain for federal income tax purposes as a result of the distribution of the rights combined with the later distribution of shares of NHP Financial Services, discussed in Note 2. The amount of gain recognized by the Company will be the excess of the fair market value of NHP Financial Services on the date of the distribution of the rights, over the Company's tax basis in NHP Financial Services. The Company expects to have regular federal NOLs available in sufficient amount to offset the gain under the regular federal income tax, but does not expect to have sufficient alternative minimum tax NOLs available to offset the gain under the alternative minimum tax. The following table summarizes the consolidated tax effect related to the Company's deferred tax assets and liabilities (in thousands): December 31, --------------- 1996 1995 ------- ------- Deferred tax assets: Net operating loss carryforwards $19,737 $26,904 Tax credit carryforwards 1,116 572 Vacation and incentives 470 32 Other temporary differences between book and tax 1,236 349 ------- ------- Total deferred tax assets 22,559 27,857 Valuation allowance for deferred tax assets (7,547) (5,020) ------- ------- Deferred tax assets 15,012 22,837 Deferred tax liabilities: Amortization of purchased management contracts 476 847 Management fees receivable 567 1,623 Other temporary differences between book and tax 171 -- ------- ------- Total deferred tax liabilities 1,214 2,470 ------- ------- Net deferred tax asset $13,798 $20,367 ------- ------- ------- ------- The Company did not record a tax provision during the first and second quarter of 1995, therefore, a year-to-date tax provision was recorded in the third quarter of 1995. A reconciliation of income tax expense computed at the statutory Federal and state rates to the provision (benefit) for income taxes included in the Consolidated Statements of Operations is as follows (in thousands):
Year Ended December 31, -------------------------------------- 1996 1995 1994 ------- -------- -------- Federal income tax provision at the Federal statutory rate - 35% in 1996 and 1995, 34% in 1994 $ 6,105 $ 4,834 $ 5,608 State income tax provision, net of Federal income tax benefit-5% 872 690 924 Change in net deferred tax asset (2,527) -- -- Change in valuation allowance 2,527 (23,326) (6,532) -------- -------- -------- Provision (benefit) for income taxes $ 6,977 $(17,802) $ --- -------- -------- -------- -------- -------- --------
F-29 In conjunction with the preparation and filing of the Company's 1995 Federal tax return in late 1996, the Company identified certain items which increased the Company's deferred tax asset due primarily to differences between estimates of items made at the time of the sale of the Real Estate Companies and actual amounts reported in the Company's tax return. Also as part of this analysis, the Company updated its evaluation of all of its deferred tax assets to determine if, in accordance with SFAS 109, the realization of these assets was more likely than not. Accordingly, the Company recorded an increase in the valuation allowance to offset the increase in the deferred tax asset. Prior to 1995, a valuation allowance equal to the net deferred tax asset was established due to the uncertainty, on a consolidated basis, surrounding the Company's ability to generate sufficient taxable income in future years to utilize the NOLs. The net change in the valuation allowance in 1994, reduced the annual provision for income taxes to zero. The components of the benefit (provision) for income taxes for 1996 and 1995 is summarized as follows (in thousands):
1996 1995 1994 ------ ------ ------ Current provision $ 407 $ 608 $ -- Deferred provision 6,570 4,916 -- Change in net deferred tax asset (2,527) -- -- Change in valuation allowance for deferred tax asset 2,527 (23,326) -- -------- -------- ------- Provision (benefit) for income taxes $ 6,977 $(17,802) $ -- -------- -------- ------- -------- -------- -------
(10) SHAREHOLDERS' EQUITY AUTHORIZED STOCK The authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, $.01 par value, of which 12,586,629 shares were issued and outstanding as of December 31, 1996. TREASURY STOCK In February 1993, effective as of December 31, 1992, the Company entered into a Stock Purchase Agreement (the "Stock Agreement") with The NHP Foundation (the "Foundation"), a non-profit organization formed to provide assisted housing to low-income families. The Stock Agreement provided for reimbursement to the Company for services provided to the Foundation via redemption of shares, at approximately $10.56 per share, of the Company's common stock held by the Foundation. In 1994, the Foundation exchanged 46,500 shares in satisfaction of $0.5 million due the Company for services rendered to the Foundation in 1994. In an unrelated transaction in 1994, the Company purchased 30,000 shares at a price of $12 per share, from a member of management upon his resignation from the Company. All shares were retired by the Company, as received. On January 27, 1995, 331,950 shares of Company stock owned by the Foundation were purchased by other current Company shareholders. Additionally, on May 1, 1995, 31,250 shares of Company stock were repurchased from the Foundation at a price of $12 per share, effectively terminating the Stock Agreement. During the third quarter of 1996, 2,046 shares of the Company's common stock were received by the Company in partial payment for the exercise of certain options and were recorded as treasury stock. The shares were subsequently retired in the fourth quarter of 1996. AUTHORIZATION OF REPURCHASE OF SHARES On January 7, 1997, the Company's Board of Directors approved the repurchase of up to 750,000 shares of the Company's common stock over a period extending through June of 1998. The Company will acquire shares from time to time, depending on market conditions and subject to regulatory and legal restrictions. The Company expects to finance the stock repurchases through a combination of internally generated cash flows and its credit facility. F-30 (11) STOCK OPTION PLANS The Company has elected to follow Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options. In accordance with APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has a non-qualified stock option plan (the "1990 Plan") under which options to purchase shares of the Company's common stock have been granted to key employees. Options were granted at the fair market value of the shares on the date of grant and become exercisable cumulatively over a five-year period beginning one year after date of grant. As of December 31, 1996 and 1995, 310,000 and 405,000 options, respectively, were outstanding under the 1990 Plan. No further options may be granted under the 1990 Plan. On February 8, 1995, the Company's Board of Directors extended the exercise period of the options granted under the 1990 Plan from five to ten years. This resulted in a new measurement date for the options, and in the first quarter of 1995, compensation expense of $0.5 million was recognized by the Company, of which $0.1 million was allocated to the Real Estate Companies. Additionally, on March 3, 1995, as part of a severance agreement, the Company agreed to extend a departing employee's time to exercise his 1990 Plan options through February 28, 1997. Related compensation expense of $0.1 million was recorded in the first quarter of 1995. The corresponding credit for both of these transactions was to additional paid-in capital. On February 8, 1995, the Company's Board of Directors approved the 1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan is a qualified stock option plan under which a maximum of 1,200,000 options to purchase shares of the Company's common stock may be granted to employees. In May 1996, the Company's Board of Director's approved an amendment to the 1995 Plan, which was subsequently approved by the stockholders of the Company in July 1996, that increased the maximum number of options which can be granted under the plan from 800,000 to 1,200,000. In February 1997, the Company's Board of Directors approved an amendment to the 1995 Plan which allows for all options issued under the 1995 Plan to become vested upon a change in control of the Company. Any options granted under the 1995 Plan must have an exercise price equal to the fair market value as of date of grant, become exercisable cumulatively over a five-year period beginning one year after date of grant, and must be exercised within ten years of the date of grant. As of December 31, 1996 and 1995, 386,250 and 228,750 options, respectively, remain available to be granted under the 1995 Plan. Effective with the consummation of the IPO, the Company granted Mr. Heller non-qualified performance vesting options to purchase 120,000 shares of common stock at $16.00. The options will vest in 10 years but are subject to accelerated vesting under certain circumstances, including a change in control of the Company. Effective May 1, 1996, the Company granted non-qualified performance vesting options to purchase up to 120,000 shares of common stock at $19.43 (fair market value at award date) to an executive vice president of the Company. The options vest only if certain performance criteria are met and expire April 30, 2001. In conjunction with the distribution of shares of NHP Financial Services to the Company's existing shareholders discussed in Note 2, all of the issued and outstanding options to acquire Company common stock will be converted into an option to receive the same number of shares of Company common stock and an option to receive the number of shares of NHP Financial Services' common stock the options holder would have been entitled to receive in the distribution, if the option had been exercised immediately prior to the distribution. In addition, the exercise price of the options will be adjusted pro rata based on the assumed value at the date of the distribution of NHP Financial Services shares. The following table summarizes option activity for the years ended December 31, 1996, 1995 and 1994. 1996 1995 1994 -------- -------- -------- Number of Shares Under Stock Options: Outstanding at the beginning of year 1,096,250 443,750 537,500 Granted 492,500 711,250 -- Exercised (114,000) -- (32,500) Forfeited (130,000) (58,750) (61,250) --------- --------- ------- Outstanding at the end of year 1,344,750 1,096,250 443,750 --------- --------- ------- --------- --------- ------- Stock options exercisable at the end of the year 418,250 420,000 341,250 --------- --------- ------- --------- --------- ------- Weighted-average fair value of options granted during the year $ 7.73 $ 5.38 N/A --------- --------- --------- --------- F-31
1996 1995 1994 ---------- --------- -------- Price range of Stock Options: Granted $17.28-$19.43 $13.00-$16.00 -- Exercised $10.56-$13.00 -- $10.56 Forfeited $13.00 $10.56 $10.56 Outstanding $10.56-$19.43 $10.56-$16.00 $10.56
The following table summarizes information about fixed-price stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable --------------------------------------------- ----------------------------- Number Weighted Weighted Number Weighted Range of Outstanding Average Average Exercisable Average Exercise Price at 12/31/96 Remaining Life Exercise Price at 12/31/96 Exercise Price -------------- ----------- -------------- -------------- ----------- -------------- 10.56 310,000 4 years 10.56 310,000 10.56 13.00 417,250 9 years 13.00 108,250 13.00 16.00 120,000 9 years 16.00 -- 16.00 18.43 175,000 10 years 18.43 -- 18.43 19.43 207,500 10 years 19.43 -- 19.43 All Other 115,000 10 years 17.66 -- 17.66 --------- ------- 10.56 - 19.43 1,344,750 418,250 --------- ------- --------- -------
Weighted average option exercise price information for the years 1996 and 1995 is as follows: 1996 1995 -------- -------- Outstanding at the beginning of year $ 12.43 $ 10.56 Granted $ 18.72 $ 13.51 Exercised $ 10.97 -- Forfeited $ 13.00 $ 11.39 Outstanding at the end of year $ 14.80 $ 12.43 The Company has adopted the disclosure-only provisions of SFAS 123, "Accounting for Stock Based Compensation." Accordingly no compensation expense cost has been recognized for the employee stock option plans. Had compensation cost for the Company's employee stock option plans been determined based on the fair value at the grant date for awards in 1995 and 1996 consistent with the provisions of SFAS No. 123, the Company's net income and net income per common share would have been reduced to the pro forma amounts indicated below (dollars in thousands, except per share amounts): (Restated) 1996 1995 -------- -------- Net income - as reported $11,620 $27,442 Net income - pro forma $11,033 $27,247 Net income per common share - as reported $ .91 $ 2.85 Net income per common share - pro forma $ .87 $ 2.83 The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to awards prior to 1995, and additional awards in future years are anticipated. For purposes of this pro forma disclosure, fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1995 and 1996: dividend yield 0.0%, expected volatility of 30.0%, risk-free interest rate of 6.33% and expected lives of 5 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of F-32 highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. (12) EMPLOYEE BENEFIT PLANS Substantially all of Property Services' full-time off-site and on-site employees with at least one year of continuous service are eligible to participate in a 401(k), defined contribution retirement plan. The Company also has a non-qualified supplemental executive retirement savings plan which permits certain employees to defer salary that they would otherwise be prohibited from deferring under the 401(k) plan due to IRS restrictions. Under these plans, the employees may contribute up to 15% of their gross compensation up to the maximum allowable by the Internal Revenue Code, to various investment alternatives including, beginning in 1996, the Company's common stock. The Company will match 50 percent of each employee's contribution up to 6 percent of the employee's gross compensation. The plans also allow the Company to make discretionary contributions. Company matching contributions to the 401(k) plan vest as contributed. Company discretionary contributions to the 401(k) plan vest 20 percent after the first year of employment and an additional 20 percent in each subsequent year until fully vested in the fifth year. In addition to the vesting provisions for the 401(k) plan, the executive retirement savings plan generally requires that a participant not compete with the Company for a two-year period following separation from the Company in order to vest in Company contributions. Total net expense related to the Company's contributions to these plans, after reimbursement from the partnerships for on-site employees, was $0.9, $0.8 and $0.7 million for the years ended December 31, 1996, 1995 and 1994, respectively. Approximately 19,100 shares of the Company's common stock was held by the plans as of December 31, 1996. (13) RELATED PARTY TRANSACTIONS During 1994, the Company borrowed $3.9 million from certain shareholders to purchase general partnership interests in properties which the Company already managed. As of December 31, 1994, a total of $11.0 million was due to shareholders, excluding accrued interest of $1.4 million. These notes were due on demand, but only after repayment of all borrowings under the then existing credit agreement, and had an interest rate of 13%. As discussed in Note 8, a portion of the proceeds from the IPO along with amounts drawn on the Credit Facility was used to repay $5.5 million of the shareholder notes, including $2.4 million of interest. In addition, in consideration for the sale of the Real Estate Companies in August 1995, certain shareholders (Demeter, Capricorn and Mr. Heller) canceled $9.1 million of the Company's shareholder notes. One of the Company's directors is counsel to a law firm which provides legal services to the Company. Amounts paid for legal services provided for the Company by this firm were $0.1, $0.9 and $0.2 million, during the years ended December 31, 1996, 1995 and 1994, respectively. In November 1995, the Company issued 1,500 shares of stock to each of the members of the Board of Directors other than Mr. Heller (total of 9,000 shares) as a portion of their 1995 and 1996 annual compensation. In connection with the sale of the Real Estate Companies, the Company and the Real Estate Companies entered into agreements (the "Intercompany Agreements") which govern their ongoing relationship. Significant aspects of the Intercompany Agreements include provisions whereby (i) the Company will be selected to provide property management and related services for properties in which the Real Estate Companies have a controlling interest, subject to certain conditions, for an initial period of 25 years; (ii) upon the disposal by the Real Estate Companies of properties or interests in properties which the Company managed on August 18, 1995, the Real Estate Companies will make a payment of up to 200%, subject to certain conditions, of the annual fees the Company receives with respect to the property; (iii) the Company will provide to the Real Estate Companies, at cost, certain administrative services and advice regarding acquisition, financing, asset restructuring, disposition and similar activities relating to investment in multifamily properties, terminable on short notice by either party; (iv) the Real Estate Companies and their equity holders have granted the Company a right of first refusal with respect to any transactions resulting in a change of control of the Real Estate Companies, as defined; (v) the Real Estate Companies have indemnified the Company against F-33 any loss directly or indirectly caused by, relating to, based upon, arising out of, or incurred in connection with the Company's ownership (as opposed to management) of properties prior to, on and after August 18, 1995; (vi) the Real Estate Companies will limit the Company's liability, by an agreed-upon formula, for taxes arising from the sale of the Real Estate Companies. The Intercompany Agreements may only be amended with the approval of the Real Estate Companies and the Company. A majority of the members of the Board of Directors of the Company having no interest in the Real Estate Companies must approve such amendments if they involve a conflict of interest with directors having an interest in the Real Estate Companies. In addition, the Board of Directors has created a Conflicts Committee, consisting of directors who have no direct or indirect financial interest in and are not affiliated with entities having an interest in the Real Estate Companies, which monitors dealings between the Company and the Real Estate Companies which may present a conflict of interest. Going forward, the Company will participate in additional acquisitions with the Real Estate Companies primarily in the form of identifying and negotiating acquisitions and providing other asset acquisition services to the Real Estate Companies, acquiring rights to manage the properties through the Intercompany Agreements or other arrangements, and paying that portion of the acquisition costs allocable to the management rights. See Notes 4 and 17 for further discussion of acquisitions. The Company was due directly from the Real Estate Companies $40 thousand and $2.1 million as of December 31, 1996 and 1995, respectively. These amounts are included in receivables on the Consolidated Balance Sheet. (14) COMMITMENTS AND CONTINGENCIES CONTINUING OPERATIONS GUARANTEES As of December 31, 1996, the Company was committed to performance guarantees, loan guarantees and other guarantees totaling $8.3 million, which relate primarily to transactions consummated by the Real Estate Companies prior to their sale in August 1995. As discussed in Note 13 above, the Real Estate Companies have indemnified the Company for any costs which might be incurred by the Company related to these guarantees. In the opinion of management, future calls, if any, on these guarantees are not expected to have a material adverse effect on the Company's financial position or results of operations. Demeter, Capricorn and Mr. Heller have agreed to provide a line of credit to the Real Estate Companies in an aggregate amount of $5.5 million. The line of credit is available through August 1998 and is to be used to satisfy the Real Estate Companies' indemnification obligations, if any, to the Company. LITIGATION In the normal course of business, the Company is a party to various legal actions and claims. In the opinion of management, based on advice of counsel, the resolution of these actions and claims is not expected to have a material adverse effect on the Company's financial position or results of operations. LEASES The Company leases office space and equipment under noncancellable operating leases. Most office leases provide for the pass-through of increased operating expenses. In December 1995, the Company entered into a six-year lease agreement for new office space in Vienna, Virginia. The Company relocated its Washington, D.C. and Reston, Virginia offices to the new Vienna location during the second quarter of 1996. The Company has sublet its Reston facilities for the remainder of its lease, which expires in July 1998, at approximately its obligation under the prime lease. Net rent expense, substantially all of which is minimum rentals under operating leases, was $2.0, $1.8 and $2.1 million in 1996, 1995 and 1994, respectively. 1996 rent expense is stated net of sub-lease income. Future minimum rental commitments, net of sub-lease income, under existing operating leases having an initial or remaining noncancellable lease terms in excess of one year at December 31, 1996, are as follows (in thousands): F-34 Lease Commitments 1997 $ 2,714 1998 2,527 1999 2,478 2000 2,574 2001 2,594 Thereafter 1,342 -------- Total $ 14,229 -------- -------- DISCONTINUED OPERATIONS FANNIE MAE DUS PROGRAM NHP Financial Services bears the Level I risk of loss associated with the loans it services under the Fannie Mae Delegated Underwriting and Servicing ("DUS") multifamily loan origination program. The Level I risk of loss requires NHP Financial Services to bear a portion of the losses on mortgages it originates under the program that does not exceed 20% of the original balance of the loans. The unpaid principal balance of the Fannie Mae DUS loan servicing portfolio was approximately at $776 million at December 31, 1996. The DUS loans are secured by first liens on the underlying multifamily properties and are concentrated primarily in Texas, Nevada, Arizona, Ohio and New York. No loans are delinquent as of December 31, 1996. NHP Financial Services has provided a reserve for losses of $4.4 million as of December 31, 1996, which is included in net asset of discontinued operations on the Consolidated Balance Sheet. This reserve represents management's estimate of losses which may be incurred on loans underwritten to date that are currently being serviced. Under the DUS program, NHP Financial Services has established a $4.2 million irrevocable letter of credit on Fannie Mae's behalf to cover any loan losses at December 31, 1996. LOAN COMMITMENTS At December 31, 1996, the NHP Financial Services had mandatory delivery commitments in the amount of approximately $41.2 million to cover its origination commitments and loans held for sale. OTHER In connection with the construction loan portfolio, NHP Financial Services makes certain advances to borrowers. On FHA insured construction loans, the NHP Financial Services advances construction funds pending security holder purchases. Such advances amounted to approximately $4.2 million at December 31, 1996. NHP Financial Services is obligated to advance another $258 million on construction loans administered at December 31, 1996. In addition, NHP Financial Services makes voluntary advances under certain of its servicing agreements pending receipt from the mortgagors and the Department of Housing and Urban Development ("HUD") on applicable subsidized loans. Such advances amounted to approximately $2.0 million at December 31, 1996 and are included in net assets of discontinued operations on the Consolidated Balance Sheet. Related escrow funds, which represent borrowers' insurance, taxes and replacement reserves, of approximately $228 million at December 31, 1996, are on deposit in escrow bank accounts and are not included in the accompanying Consolidated Balance Sheet. NHP Financial Services carries blanket bond coverage of $5 million and errors and omissions coverage in the amount of $10 million. F-35 WAIVER OF FREDDIE MAC NON-COMPLIANCE As of December 31, 1996, Washington Mortgage Financial was not in compliance with a tangible net worth standard required by Freddie Mac for continued servicing and future origination of loans held by Freddie Mac. Washington Mortgage Financial's non-compliance with this standard results from the accounting treatment of servicing rights in connection with its acquisition by the Company and Freddie Mac's policy with respect to recognition of servicing rights as a tangible asset, and does not reflect any deterioration in the operating results or financial condition of Washington Mortgage Financial. On March 26, 1997, Freddie Mac advised Washington Mortgage Financial that Washington Mortgage Financial has financial strengths not recognized in the tangible net worth calculation, and that Freddie Mac did not consider Washington Mortgage Financial to be out of compliance as of December 31, 1996, and effective for the remainder of 1997. (15) FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows (in thousands):
December 31, 1996 December 31, 1995 ---------------------- ------------------------ Carrying Fair Carrying Fair Value Value Value Value -------- ----- -------- ----- Assets: Cash and cash equivalents $ 4,779 $ 4,779 $ 5,996 $ 5,996 Receivables 15,270 15,270 12,809 12,809 On-site cost reimbursement receivable 3,816 3,816 2,747 2,747 Notes Receivable 7,943 7,943 -- -- Liabilities: Accounts payable and accrued expenses 15,399 15,399 14,064 14,064 Accrued on-site salaries and benefits 3,816 3,816 2,747 2,747 Credit Facility 57,000 57,000 23,000 23,000 Other notes payable, including current portion 6,327 6,327 690 690 Real Estate related debt (Great Atlantic portfolio) 71,152 71,152 -- -- Off-balance sheet instruments: Financial guarantees -- 8,285 -- 8,637
The estimated fair value of the financial instruments has been determined based on pertinent information available to management at December 31, 1996. The basic assumptions used and the estimates disclosed represent management's best judgment of appropriate valuation methods. In certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors, and management's evaluation of those factors, change. Although management uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique. Therefore, these fair value estimates are not necessarily indicative of the amounts that the corporation would realize in a market transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value. The carrying amount of cash and cash equivalents, receivables, on-site cost reimbursement receivable, accounts payable and accrued expenses, and accrued on-site salaries and benefits approximates fair value because of the short-term maturity of these instruments. The fair value of notes receivable are estimated by discounting estimated future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. The fair value of the Credit Facility approximates carrying value because the interest rate on this debt changes with market interest rates. F-36 The fair value of other notes payable and the Real Estate related debt approximates carrying value as these notes either have a stated interest rate comparable to a current market interest rate for similar obligations, or, if non-interest bearing, have been recorded at a discount based on a current market interest rate for similar obligations. The fair value of financial guarantees is based on the estimated cost to settle the obligations. (16) NON-RECURRING EXPENSES AND EXTRAORDINARY ITEMS NON-RECURRING EXPENSES In 1993, the Company initiated a systems project to replace its three current computer systems with a single system based on a client-server technology. In December 1994, the Company concluded that the conceptual design of the new system was flawed and expensed all costs associated with the project, totaling $1.8 million, as a non-recurring expense. Subsequently, in June 1995, the Company received a net cash payment of $0.4 million from two of the parties participating in the project which has been reflected as a reduction of non-recurring expenses in the accompanying financial statements. In February 1995, as discussed in Note 11, the Company extended the exercise term of options granted under the Company's 1990 Stock Option Plan and granted a terminating employee the right to exercise his options for up to two years after his departure. As a result of these actions, non-recurring compensation expense of $0.5 million was recognized in the first quarter of 1995. EXTRAORDINARY ITEMS In connection with the repayment of the Company's credit facility in the third quarter of 1995, the Company expensed the remaining $0.7 million of deferred financing costs related to the Company's previous credit facility. This charge was recorded net of a $0.3 million income tax benefit and classified as an extraordinary item in the Consolidated Statement of Operations. F-37 (17) SUBSEQUENT EVENTS 1997 ACQUISITIONS In November 1996, the Company and Property Resources Corporation ("PRC") signed an agreement to enter into three separate joint ventures (the "PRC Acquisition"). The Company purchased a 15% interest in NHP/PRC Management Company, LLC ("NHPPRC"), a limited liability property management company, from PRC. NHPPRC is the management agent for a portfolio of 19 HUD subsidized properties containing 2,426 apartments in New York City and will subcontract the management of these properties to the Company. Because the Company has voting control over this entity, the results of NHPPRC will be consolidated with those of the Company and PRC's interest will be accounted for as a minority interest. The Company and PRC also formed Aptek Management Co. LLC which will provide property management services for third party-owned condominiums, cooperatives, public housing, university and hospital housing in the New York metropolitan region. In addition, the Company and PRC formed Aptek Maintenance Services, LLC, which will provide maintenance services for Company-managed properties and third-party-owned properties where competitive, initially in New York. Both Aptek Management Co. LLC and Aptek Maintenance Services, LLC are owned equally by PRC and the Company but PRC will control and oversee their operations. These two joint ventures will be accounted for under the equity method of accounting. The PRC Acquisition closed in escrow in late 1996 but did not receive HUD 2530 approval until January 1997. Therefore, for financial accounting purposes, the transaction will be accounted for as a 1997 acquisition. Total consideration paid by the Company to PRC was approximately $1.4 million, including a commitment to issue approximately 31,000 shares of the Company's common stock in five years, or the cash equivalent of its then current market value. As part of the transaction, PRC has the right to require the Company, at any time, upon 30 days' notice through January 2002, to purchase the remaining 85% interest of NHPPRC for $3.8 million. In conjunction with the transaction, the Company lent $4.2 million to PRC under a promissory note. The note has a rate of 7% and requires PRC to make quarterly interest payments with the principal amount due in January 2002. In January 1997, the Company acquired all of the outstanding shares of Broad Street Management, Inc. ("Broad Street"), a Columbus, Ohio-based property management company for approximately $1.8 million. Broad Street, as a wholly owned subsidiary, will continue to manage a portfolio of 17 apartment communities aggregating 1,942 units, located in Columbus, Ohio, Louisville, Kentucky and Augusta, Georgia. The acquisition will be accounted for under the purchase method of accounting. On April 16, 1997, Washington Mortgage Financial completed the acquisition of certain assets from Askew Investment Company for $4.6 million. The acquisition will be accounted for under the purchase method of accounting. AMENDMENT TO CREDIT FACILITY In February 1997, the terms of the Company's $75 million Credit Facility were amended. The significant changes in the agreement include the allowance of up to $100 million in additional senior unsecured term debt, an increase in the amount of unsubordinated borrowing allowed in connection with acquisitions from $10 million to $25 million, and a reduction in the Credit Facility's overall pricing. The interest rate has been reduced from The First National Bank of Boston's base rate or LIBOR plus 175 basis points to a sliding scale rate which ranges from LIBOR F-38 plus 75 basis points to LIBOR plus 125 basis points, depending on the Company's ratio of debt to EBITDA. In addition, the commitment fee on the unused portion of the Credit Facility may be reduced from 37.5 basis points per annum to 25 basis points per annum, also depending on the ratio of debt to EBITDA. (18) QUARTERLY FINANCIAL AND OPERATING DATA (UNAUDITED) The following table sets forth certain unaudited quarterly financial and operating data for the years ended December 31, 1996 and 1995. The Company believes that the following selected quarterly information includes all adjustments necessary for a fair presentation, in accordance with generally accepted accounting principles (dollars in thousands except per share amounts).
1996 Quarters -------------------------------------------- First Second Third Fourth ----- ------ ----- ------ Total revenue $45,805 $46,746 $47,934 $54,494 Operating income 5,080 4,963 4,760 5,874 Income from continuing operations before extraordinary item 2,803 2,504 2,141 3,017 Income from discontinued operations -- 421 182 552 Income before extraordinary item 2,803 2,925 2,323 3,569 Per common share: Income from continuing operations before extraordinary item $ .22 $ .20 $ .17 $ .24 Income from discontinued operations -- .03 .01 .04 Income before extraordinary item .22 .23 .18 .28 Dividends declared (a) -- -- -- -- Stock price: High $19 5/8 $20 5/8 $20 7/8 $ 19 Low 17 17 5/8 16 5/8 15 1/4 1995 Quarters (Restated) -------------------------------------------- First Second Third Fourth ----- ------ ----- ------ Total revenue $42,002 $42,916 $43,877 $45,879 Operating income 3,705 4,674 5,056 5,872 Income from continuing operations before extraordinary item 1,882 2,745 23,720 3,266 Income (loss) from discontinued real estate operations (4,493) 589 133 -- Income before extraordinary item (2,611) 3,334 23,853 3,266 Per common share: Income from continuing operations before extraordinary item $ .24 $ .35 $ 2.35 $ .26 Income (loss) from discontinued operations (.46) .06 .02 -- Income before extraordinary item (.22) .41 2.37 .26 Dividends declared (a) -- -- -- -- Stock price (b): High -- -- $14 $18 5/8 Low -- -- 12 13 3/4
- ---------------- F-39 (a) The Company has never paid dividends and does not intend to pay dividends in the foreseeable future. Any payment of future dividends and the amounts thereof will be dependent upon the Company's earnings, financial and other requirements, including contractual obligations. (b) The Company completed its initial public offering on August 18, 1995. Stock prices shown are only for periods subsequent to that date. F-40 Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K (a) 3 Exhibits Exhibit 23.1 - Consent of Arthur Andersen LLP dated October 27, 1997. Exhibit 23.2 - Consent of Deloitte & Touche LLP dated October 27, 1997. Exhibit 23.3 - Consent of Anders, Minkler & Diehl LLP dated October 27, 1997. Exhibit 23.4 - Consent of Dauby O'Connor & Zaleski, LLC dated October 27, 1997 Exhibit 23.5 - Consent of Edwards Leap & Sauer dated October 27, 1997. Exhibit 23.6 - Consent of George A. Hieronymous & Company, LLC dated October 27, 1997. Exhibit 23.7 - Consent of Goldenberg Rosenthal Friedlander, LLP dated October 27, 1997. Exhibit 23.8 - Consent of Hansen, Hunter & Kibbee, P.C. dated October 27, 1997. Exhibit 23.9 - Consent of J. H. Cohn LLP dated October 27, 1997. Exhibit 23.10 - Consent of J. A. Plumer & Co., P.A. dated October 27, 1997. Exhibit 23.11 - Consent of Marks Shron & Company, LLP dated October 27, 1997. Exhibit 23.12 - Consent of Reznick Fedder & Silverman dated October 27, 1997. Exhibit 23.13 - Consent of Russell Thompson Butler & Houston dated October 27, 1997. Exhibit 27 - Amended Financial Data Schedule 2 SIGNATURES 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 hereunto duly authorized. NHP INCORPORATED (Registrant) By: /s/ Ann Torre Grant Ann Torre Grant Executive Vice President, Chief Financial Officer and Treasurer (Authorized Officer and Principal Financial Officer) Dated October 27, 1997 3
EX-23.1 2 CONSENT OF ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Amended Annual Report on Form 10-K/A, into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (No. 333-11917), NHP's Registration Statement on Form S-8 (No. 333-11857), and NHP's Registration Statement on Form S-8 (No. 333-08137), all previously filed. /s/ Arthur Andersen LLP Washington, D.C. October 27, 1997 EX-23.2 3 CONSENT OF DELOITTE & TOUCHE LLP INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 2 on Form 10-K/A by NHP Incorporated (NHP) of our reports on the financial statements of certain Partnerships for the year ended December 31, 1994, which reports are dated as shown in the following Appendices (Items 1 through 5), and as indicated below (Items 6 through 16): 1) Appendix A-94 2) Appendix B-94 (each of which expresses an unqualified opinion and includes an explanatory paragraph relating to the Partnership's ability to continue as a going concern) 3) Appendix C-94 (each of which expresses a qualified opinion as a result of cumulative unpaid distributions recorded according to HUD guidelines which is not in accordance with generally accepted accounting principles) 4) Appendix D-94 (each of which expresses an unqualified opinion and includes an explanatory paragraph relating to the change in 1993 of the Partnership's method of computing depreciation) 5) Appendix E-94 (each of which expresses an unqualified opinion and includes an explanatory paragraph relating to the expiration of a Housing Assistance Payment Contract) 6) Franklin Northwoods Associates, A Limited Partnership, dated March 3, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph noting that the mortgage lender has the option to require full payment of all amounts outstanding after December 1, 1994) 7) Franklin Woods Associates, A Limited Partnership, dated March 14, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph noting that the mortgage note payable and related accrued interest are due June 30, 1997) 8) Green Mountain Manor Limited Partnership, dated February 17, 1995 (which expresses an unqualified opinion and includes explanatory paragraphs relating to the expiration of a Housing Assistance Payment Contract and a deferred acquisition note and related accrued interest which is due on February 17, 1996) Page 1 of 3 9) Hilltop Apartment Associates, A Limited Partnership, dated February 13, 1995 (which expresses an unqualified opinion and includes explanatory paragraphs relating to the change in 1993 of the Partnership's method of computing depreciation and the Partnership's revised estimate in 1993 of interest due on loans from one of its partners) 10) Leyden Limited Partnership, dated February 8, 1995 (which expresses an unqualified opinion and includes explanatory paragraphs relating to the Partnership's ability to continue as a going concern and the correction of the Partnership's method of computing accrued interest on a deferred acquisition note) 11) Madison Hill Limited Partnership, dated March 1, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph relating to the transfer of substantially all of its assets, liabilities and its deed in lieu of foreclosure, during February 1995, in return for $50,000) 12) Montblanc Garden Apartments Associates, A Limited Partnership, dated March 17, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph relating to a disputed outstanding mortgage principal balance) 13) Pavilion Associates, A Limited Partnership, dated January 19, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph relating to a deferred acquisition note and related accrued interest, and real estate notes payable which are due February 16, 1996) 14) Spring Meadow Limited Partnership, dated February 13, 1995 (which expresses an unqualified opinion and includes explanatory paragraphs relating to the Partnership's ability to continue as a going concern and the correction of the Partnership's method of computing accrued interest on a deferred acquisition note and the correction of an error relating to Partnership cash reflected in the financial statements) 15) Spruce Limited Partnership, dated February 6, 1995 (which expresses an unqualified opinion and includes an explanatory paragraph relating to the correction of the Partnership's method of computing accrued interest on a deferred acquisition note for the years 1992 and prior and the correction of an error relating to Partnership cash reflected in the financial statements) 16) Waterman Limited Partnership, dated January 13, 1995 (which expresses a qualified opinion as a result of cumulative unpaid distributions recorded according to HUD guidelines which is not in accordance with generally accepted accounting principles, and includes an explanatory paragraph regarding a deferred acquisition note and related accrued interest which is due on April 18, 1996) Page 2 of 3 We further consent to the incorporation by reference of such reports into NHP's Registration Statements on Form S-8 (No. 333-11933, No. 333-11863, No. 333-11917, No. 333-11857 and No. 333-08137), insofar as such reports relate to the financial statements of the Partnerships (identified in Items 1 through 16 above) for the year ended December 31, 1994, all filed with the Securities and Exchange Commission. /s/ Deloitte & Touche LLP Deloitte & Touche LLP McLean, Virginia October 27, 1997 Page 3 of 3 Appendix A-94 ------------- Partnership Report Date - ----------- ----------- 107-145 West 135th Street Associates February 9, 1995 Algonquin Tower Limited Partnership February 9, 1995 All Hallows Associates January 26, 1995 Allentown Towne House Limited Partnership January 26, 1995 Anglers Manor Associates February 2, 1995 Antioch Apartments, Ltd. January 11, 1995 Arvada House Associates February 2, 1995 Audobon Park Associates January 12, 1995 Baldwin Oaks Elderly, Ltd. February 6, 1995 Baldwin Towers Associates February 10, 1995 Basswood Manor Limited Partnership January 25, 1995 Bayview Hunters Point Apartments January 26, 1995 Bensalem Gardens Associates February 3, 1995 Berkley Limited Partnership February 14, 1995 Bloomsburg Elderly Associates February 1, 1995 Briarwood Apartments January 19, 1995 Brinton Manor No. 1 Associates January 21, 1995 Brinton Towers Associates January 24, 1995 Brookside Apartments Associates February 1, 1995 Buena Vista Apartments, Ltd. January 16, 1995 Cabell Associates of Lakeview January 21, 1995 California Square Limited Partnership January 30, 1995 California Square II Limited Partnership January 30, 1995 Campbell Heights Associates February 2, 1995 Canterbury Gardens Associates February 1, 1995 Capital Park Limited Partnership January 19, 1995 Center Square Associates January 25, 1995 Chapel NDP January 30, 1995 Cheyenne Village Apartments, Ltd. February 3, 1995 College Heights January 19, 1995 College Park Apartments February 8, 1995 College Park Associates January 27, 1995 Community Developers of High Point January 30, 1995 Congress Park Associates II February 9, 1995 Copperwood Limited January 31, 1995 Copperwood II Limited January 25, 1995 Cypress Gardens, Limited January 20, 1995 Darby Townhouses Associates January 18, 1995 Darbytown Development Associates January 11, 1995 Delcar - S, Ltd. January 9, 1995 Delcar - T, Ltd. January 20, 1995 DIP Limited Partnership January 20, 1995 DIP Limited Partnership - II February 3, 1995 DIP Limited Partnership III February 15, 1995 Page 1 Appendix A-94 ------------- Partnership Report Date - ----------- ----------- Discovery Limited Partnership February 7, 1995 Doral Gardens Associates February 1, 1995 Duquesne Associates No. 1 January 16, 1995 Edmond Estates Limited Partnership January 21, 1995 Elden Limited Partnership January 30, 1995 Esbro Limited Partnership January 12, 1995 Fairmont #1 Limited Partnership February 3, 1995 Fairmont #2 Limited Partnership February 6, 1995 Fairwood Associates February 6, 1995 Federal Square Village January 18, 1995 Field Associates January 21, 1995 Forest Green Limited Partnership January 16, 1995 Forest Park Elderly Associates January 13, 1995 Forrester Gardens, Ltd. January 12, 1995 Fort Carson Associates January 12, 1995 Foxwood Manor Associates January 11, 1995 Franklin Chapel Hill Associates February 23, 1995 Franklin Park Limited Partnership February 9, 1995 Friendset Housing Company January 17, 1995 Frio Housing, Ltd. February 2, 1995 G.W. Carver Limited January 26, 1995 Galion Limited Partnership January 30, 1995 Garfield Hill Associates January 17, 1995 Gateway Village Associates January 18, 1995 Gladys Hampton Houses Associates February 6, 1995 Golden Apartments I February 6, 1995 Golden Apartments II March 1, 1995 Grandview Apartments January 11, 1995 Greater Mount Calvary Terrace, Ltd. January 18, 1995 Greater Richmond Community Development Corp. I and Associates February 14, 1995 Greater Richmond Community Development Corp. II and Associates February 13, 1995 Griffith Limited Partnership January 11, 1995 Gulfway Limited Partnership January 13, 1995 H.R.H. Properties, Ltd. February 3, 1995 Hamilton Heights Associates January 26, 1995 Harold House Limited Partnership January 14, 1995 Hatillo Housing Associates March 17, 1995 Hickory Ridge Associates, Ltd. January 19, 1995 Hillcrest Green Apartments, Ltd. January 10, 1995 Hillside Village Associates February 9, 1995 Hilltop Limited Partnership January 17, 1995 Hopkins Renaissance Associates February 1, 1995 Page 2 Appendix A-94 ------------- Partnership Report Date - ----------- ----------- Hudson Terrace Associates January 26, 1995 Hurbell II Limited Partnership January 13, 1995 Indian Valley I Limited Partnership January 30, 1995 Indian Valley II Limited Partnership January 30, 1995 Indian Valley III Limited Partnership January 30, 1995 Ingram Square Apartments, Ltd. January 26, 1995 Jamestown Village Associates January 12, 1995 Jersey Park Associates January 20, 1995 JFK Associates January 26, 1995 Johnston Square Associates January 17, 1995 JVL 16 Associates January 16, 1995 Kennedy Homes Limited Partnership January 17, 1995 Key Parkway West Associates January 30, 1995 Kimberly Associates Limited Partnership January 10, 1995 La Salle Apartments January 17, 1995 La Vista Associates February 9, 1995 Lafayette Manor Associates February 15, 1995 Lafayette Towne Elderly, Ltd. February 3, 1995 Lafayette Towne Family, Ltd. February 3, 1995 Lake Forest Apartments January 20, 1995 Las Americas Housing Associates March 17, 1995 Lassen Associates January 31, 1995 Laurel Gardens February 1, 1995 Lewisburg Associates January 26, 1995 Lewisburg Elderly Associates January 19, 1995 Lincmar Associates January 31, 1995 Lincoln Park Associates February 3, 1995 Lock Haven Elderly Associates February 7, 1995 Lock Haven Gardens Associates January 30, 1995 Loring Towers Apartments Limited Partnership January 12, 1995 M & P Development Company January 13, 1995 Maple Park East Limited Partnership January 17, 1995 Maple Park West Limited Partnership January 10, 1995 Mayfair Manor Limited Partnership January 16, 1995 Meadowood Apartments - Phase I (Meadowood Associates, Ltd.) January 17, 1995 Meadowood Apartments - Phase II (Meadowood Associates, Ltd.) January 12, 1995 Meadows Apartments Limited Partnership January 23, 1995 Meadows East Apartments Limited Partnership January 17, 1995 Menlo Limited Partnership January 13, 1995 Merced Commons II February 7, 1995 Mill Street Associates February 3, 1995 Miramar Housing Associates March 17, 1995 Page 3 Appendix A-94 ------------- Partnership Report Date - ----------- ----------- Montblanc Housing Associates March 17, 1995 Morrisania Towers Housing Company January 25, 1995 Moss Gardens Ltd. February 1, 1995 Murphy Blair Associates III February 1, 1995 New Lake Village Apartments January 20, 1995 New West 111th Street Housing Company February 3, 1995 Newton Hill Limited Partnership January 30, 1995 Northgate Village Limited Partnership January 16, 1995 Northlake Terrace Associates February 8, 1995 Northwest Terrace Associates February 8, 1995 Oakland Village Townhouse Associates February 8, 1995 Ocala Place, Ltd. February 7, 1995 One Lytle Place February 2, 1995 One West Conway Associates February 22, 1995 Orange Village Associates February 8, 1995 Palm House Limited Partnership January 30, 1995 Park Avenue West I Limited Partnership January 30, 1995 Park Avenue West II Limited Partnership January 30, 1995 Park Creek Limited Partnership January 11, 1995 Place One Limited Partnership February 11, 1995 Portland Plaza Partnership February 7, 1995 Portner Place Associates February 15, 1995 Post Street Associates January 25, 1995 Pride Gardens Limited Partnership January 20, 1995 Pueblo Apartments Associates, Ltd. January 20, 1995 RI-15 Limited Partnership February 3, 1995 River Front Apartments Limited Partnership January 11, 1995 River Woods Associates February 13, 1995 Riverview II Associates January 27, 1995 Rockwell Limited Partnership January 13, 1995 Rolling Meadows Of Ada, Ltd. January 10, 1995 Ruffin Road Associates February 6, 1995 Rutherford Park Townhouses Associates February 8, 1995 San Jose Limited Partnership January 12, 1995 San Juan Del Centro Limited Partnership January 17, 1995 Sencit Towne House Limited Partnership January 25, 1995 Shoreview Apartments February 8, 1995 Site 10 Community Alliance Associates February 7, 1995 Sleepy Hollow Apartments January 26, 1995 SNI Development Company January 24, 1995 Southmont Apartments January 31, 1995 Southward Limited Partnership January 13, 1995 Stafford Apartments January 27, 1995 Stock Island Limited Partnership January 18, 1995 Page 4 Appendix A-94 ------------- Partnership Report Date - ----------- ----------- Storey Manor Associates February 3, 1995 Strawbridge Square Associates Limited Partnership February 6, 1995 Summersong Townhouses Limited Partnership January 26, 1995 Sunrise Associates February 10, 1995 Sunset Plaza Apartments January 20, 1995 Susquehanna View Limited Partnership January 16, 1995 Timberlake Apartments Limited Partnership January 19, 1995 Timuquana Park Associates January 18, 1995 Tinker Creek Limited Partnership January 10, 1995 Town North January 18, 1995 Treeslope Apartments Associates January 26, 1995 Trinity Towers - 14th Street Associates, Ltd. March 7, 1995 United Handicap Federation Apartment Associates February 13, 1995 United House Associates February 9, 1995 United Housing Partners - Carbondale, Ltd. February 8, 1995 United Redevelopment Associates January 26, 1995 University Plaza Associates February 9, 1995 Vantage 78 March 7, 1995 Villa De Guadalupe Associates January 16, 1995 Village Circle Apartments, Ltd. January 31, 1995 Village Green Limited Partnership January 20, 1995 Vistas De San Juan Associates February 13, 1995 Waico Apartments Associates January 17, 1995 Waico Phase II Associates February 1, 1995 Walden Oaks Associates January 31, 1995 Walmsley Terrace Associates January 18, 1995 Walnut Hills Associates, Ltd. January 13, 1995 Wash-West Properties January 31, 1995 Waters Towers Associates January 12, 1995 West Oak Village Limited Partnership January 27, 1995 Whitefield Place, Ltd. January 26, 1995 Woodmark Limited Partnership January 30, 1995 Yadkin Associates January 13, 1995 Page 5 Appendix B-94 ------------- Partnership Report Date - ----------- ----------- Boynton Beach Limited Partnership March 17, 1995 Central Village Associates February 10, 1995 Cheek Road Limited Partnership February 7, 1995 Clay Courts Associates January 12, 1995 Eastman Associates January 24, 1995 Elm Creek Limited Partnership February 7, 1995 Fairmeadows Limited Partnership January 12, 1995 Fairview Homes Associates January 27, 1995 Franklin Eagle Rock Associates February 28, 1995 Franklin Pheasant Ridge Associates March 1, 1995 Franklin Ridgewood Associates February 24, 1995 Hamilton Gardens, Ltd. February 13, 1995 JVL Limited January 14, 1995 JVL 18 Associates February 3, 1995 JVL 19 Associates January 27, 1995 Langenheim Associates February 1, 1995 Meadowood Associates III, Ltd. January 15, 1995 New West 111th Street Two Associates January 25, 1995 Olde Rivertown Venture February 2, 1995 Retirement Manor Associates February 17, 1995 Royal Towers Limited Partnership January 12, 1995 Southridge Apartments Limited Partnership January 10, 1995 Springfield Limited Partnership January 13, 1995 Trinity Apartments January 13, 1995 Village Park II February 3, 1995 Appendix C-94 ------------- Partnership Report Date - ----------- ----------- Cottonwood Apartments January 11, 1995 Kenneth Arms Apartments January 9, 1995 Knollcrest Apartments January 21, 1995 Manzanita Arms Apartments January 11, 1995 Overbrook Park, Ltd. January 23, 1995 Rancho Arms Apartments January 17, 1995 San Juan Apartments January 24, 1995 Trinity Hills Village Apartments January 13, 1995 Tumast Associates February 8, 1995 Verdes Del Oriente February 1, 1995 Appendix D-94 ------------- Partnership Report Date - ----------- ----------- Cumberland Court Associates February 9, 1995 Maple Hill Associates February 15, 1995 Merced Commons I February 1, 1995 Appendix E-94 ------------- Partnership Report Date - ----------- ----------- Brightwood Manor Associates January 26, 1995 Caroline Arms Limited Partnership January 18, 1995 Richlieu Associates February 11, 1995 Sherman Terrace Associates January 13, 1995 Washington Manor Limited Partnership January 26, 1995 EX-23.3 4 CONSENT OF ANDERS, MINKLER & DIEHL LLP Consent of Anders, Minkler & Diehl LLP We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated February 3, 6, 9, 11, 14, 15 and 20, 1995 with respect to the audits of these Partnerships: Pershing Waterman Phase I (DB I) Caroline Associates I PW III Associates (DB II) Columbus Square Associates I PW IV Associates (DB III) Columbus Square Associates II PW V Associates (DB IV) Savoy Court Associates PW VI Associates (DB V) Wigar, Ltd. (Winter Garden)
for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (No. 333-11917), NHP's Registration Statement on Form S-8 (No. 333-11857), and NHP's Registration Statement on Form S-8 (No. 333-08137). /s/ Anders, Minkler & Diehl LLP St. Louis, Missouri October 27, 1997
EX-23.4 5 CONSENT OF DAUBY O'CONNOR & ZALESKI LLP DAUBY O'CONNOR & ZALESKI A LIMITED LIABILITY COMPANY Certified Public Accountants Consent Letter for Independent Auditors We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated as referred to in Schedule I with respect to the audits referred to on Schedule I for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933). NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (No. 333-11917), NHP's Registration Statement on Form S-8 (No. 333-11857), and NHP's Registration Statement on Form S-8 (No. 333-08137). /s/ Dauby O'Connor & Zaleski, LLC October 27, 1997 Dauby O'Connor & Zaleski, LLC Indianapolis, Indiana Certified Public Accountants SCHEDULE I AUDITS FOR THE YEAR ENDED DECEMBER 31, 1994
REPORT DATE PARTNERSHIP NAME - ----------- ---------------- January 7, 1995 Brookview Apartments Company Limited March 13, 1995 Clover Ridge East Limited Partnership January 7, 1995 Colony Apartments Company Limited January 25, 1995 East Hampton Limited Partnership January 25, 1995 Edgewood II Associates January 20, 1995 Fairburn & Gordon Associates, Phase I January 20, 1995 Fairburn & Gordon Associates, Phase II January 30, 1995 Laing Village January 25, 1995 Oakland City/West End Associates, Ltd. January 30, 1995 Orangeburg Manor February 6, 1995, except for Note 8 which is dated June 9, 1995 Parkways Associates January 25, 1995 Pleasant Valley Apartments, Ltd. January 25, 1995 Sandy Springs Associates, Ltd. February 8, 1995 The Oak Park Partnership February 6, 1995, except for Note 8 which is dated June 9, 1995 The Rogers Park Partnership February 8, 1995 Tiffany Rehab Associates January 20, 1995 Village Green Apartments Company Limited January 25, 1995 Vineville Towers Associates, Ltd. January 20, 1995 Westgate Apartments
EX-23.5 6 CONSENT OF EDWARDS LEAP & SAUER Exhibit 23.5 [LETTERHEAD] Consent of Edwards Leap & Sauer We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated February 3, February 15, and March 15, 1995, with respect to the audits of IDA Tower, Genesee Gardens Associates, and Buffalo Village Associates, respectively, for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857), and NHP's Registration Statement on Form S-8 (333-08137). /s/ Edwards Leap & Sauer - ---------------------------- Edwards Leap & Sauer Hollidaysburg, Pennsylvania October 27, 1997 EX-23.6 7 CONSENT OF GEORGE A. HIERONYMOUS & CO. [LETTERHEAD] Consent of George A. Hieronymus and Company, L.L.C. We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated as shown in Exhibit A with respect to the audit of those entities as shown in Exhibit A for the year ended December 31, 1994, and the incorporation by reference of such report into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement of Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857), and NHP's Registration Statement on Form S-8 (333-08137). /s/ George A. Hieronymus and Company L.L.C. - -------------------------------------------- George A. Hieronymus and Company, L.L.C. Mobile, Alabama October 27, 1997 E X H I B I T A
Real Estate Partnership Report Date - ----------------------- ----------- Athens Arms Associates January 27, 1995 Colonial Terrace I Associates January 27, 1995 Colonial Terrace II Associates January 27, 1995
EX-23.7 8 CONSENT OF GOLDBERG, ROSENTHAL & FRIENDLANDER, LLP CONSENT OF GOLDENBERG ROSENTHAL FRIEDLANDER, LLP We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports with respect to the audits of Partnerships listed below for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8, (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857) and NHP's Registration Statement on Form S-8 (333-08137).
Name of Partnership -- 1994 Date of Report - --------------------------- -------------- Baisley Park Associates (A Limited Partnership) Februay 3, 1995 Brunswick Village Limited Partnership January 23, 1995 Churchview Gardens Limited Partnership January 23, 1995 Harris Gardens Limited Partnership January 23, 1995 Hawksworth Limited Partnership January 21, 1995 Hollows Associates (A Limited Partnership) February 3, 1995 Kimberton Apartments Associates (A Limited Partnership) January 18, 1995 Washington Northgate Limited Partnership February 3, 1995 Washington Westgate Limited Partnership January 28, 1995 Windsor Apartments Associates (A Limited Partnership) January 18, 1995
/s/ Goldenberg Rosenthal Friedlander, LLP Jenkintown, PA October 27, 1997
EX-23.8 9 CONSENT OF HANSEN HUNTER & KIBBEE PC HANSEN, HUNTER & KIBBEE, P.C. CERTIFIED PUBLIC ACCOUNTANTS 10260 S.W. Greenburg Road Telephone Suite 1150 Facsimile (503) 244-2134 Portland, Oregon 97223 (503) 244-9754 CONSENT OF HANSEN, HUNTER & KIBBEE, P.C. We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated, January 19, 1995, January 13, 1995, January 19, 1995, January 13, 1995, January 19, 1995, January 11, 1995, January 14, 1995, and January 13, 1995 with respect to the audits of Haines Associates Limited Partnership, King-Bell Associates, Monmouth Associates Limited Partnership, Pendleton Riverside Apartments Oreg., Ltd., Penn Hall Associates, Rodeo Drive Limited Partnership, South Mountain Terrace, Ltd., and Woodland Apartments, Oreg., Ltd. for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857), and NHP's Registration Statement on Form S-8 (333-08137). /s/ Hansen, Hunter & Kibbee, P.C. Portland, Oregon October 27, 1997 EX-23.9 10 CONSENT OF J.H. COHN LLP CONSENT OF J. H. COHN LLP We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, which is being filed with the Securities and Exchange Commission by NHP Incorporated ("NHP"), of our report dated April 26, 1995 with respect to our audit of the financial statements of Marlboro Greens Limited Partnership for the years ended December 31, 1994 and 1993, and the incorporation by reference of such report into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (No. 333-11917), NHP's Registration Statement on Form S-8 (No. 333-11857) and NHP's Registration Statement on Form S-8 (No. 333-08137). /s/ J. H. Cohn LLP J. H. COHN LLP Roseland, New Jersey October 27, 1997 EX-23.10 11 CONSENT OF J.A. PLUMER & CO., PA INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports with respect to the audits of the partnerships listed below for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (No. 333-11917), NHP's Registration Statement on Form S-8 (No. 333-11857), and NHP's Registration Statement on Form S-8 (No. 333-08137).
Date of Partnership Auditor's Report ----------- ---------------- 630 East Lincoln Avenue Associates January 24, 1995 Aspen Stratford Apartments Company B January 31, 1995 Aspen Stratford Apartments Company C February 1, 1995 Benjamin Banneker Plaza Associates January 31, 1995 Brightwood Limited Partnership January 10, 1995 Cambridge Heights Apartments, Ltd. February 15, 1995 Carter Associates Limited Partnership March 4, 1995 Cherry Estates January 18, 1995 Christopher Court Housing Company January 27, 1995 Concord Houses Associates March 7, 1995 Duke Manor Associates February 14, 1995 Elderly Housing Associates Ltd. Partnership January 25, 1995 Forest Apartments Associates February 16, 1995 Gate Manor Apartments, Ltd. January 30, 1995 Greenfield Apartments Limited Partnership January 27, 1995 Greenfield North Apartments Limited Partnership January 23, 1995 Haili Associates February 6, 1995 Houston Aristocrat Apartments, Ltd. January 24, 1995 Kapuna Associates February 6, 1995 Kinloch Urban East Housing February 10, 1995 Koolau Housing Associates February 6, 1995 Lakeview Arms Associates February 2, 1995 Lee-Hy Manor Associates Limited Partnership February 8, 1995 Locust Park Associates February 1, 1995 Loring Towers Associates March 3, 1995 Mahoning Associates January 31, 1995 Milliken Apartments Company February 1, 1995 Monument Street Limited Partnership February 8, 1995 Neighborhoods of the Universities Lock Street Apartments Company February 3, 1995 Oak Hollow South Associates February 21, 1995 Orchard Mews Associates February 15, 1995 Oxford Place Associates February 8, 1995 Pittsfield Neighborhood Associates March 9, 1995 Prince Street Towers Limited Partnership February 6, 1995 Sencit-Lebanon Company January 20, 1995 St. Nicholas Associates February 20, 1995 Tamarac Pines, Ltd. February 18, 1995 Tamarac Pines II, Ltd. February 9, 1995 Taunton Green Associates March 1, 1995 Taunton II Associates February 24, 1995 Tompkins Terrace Associates February 23, 1995 Waipahu Associates February 6, 1995 Washington Chinatown Associates February 15, 1995 Woodcrest Apartments, Ltd. January 16, 1995 Worcester Episcopal Housing Company February 23, 1995
/s/ J. A. Plumer & Co., P.A. J. A. PLUMER & CO., P.A. Bethesda, Maryland October 27, 1997
EX-23.11 12 CONSENT OF MARKS SHRON & COMPANY CONSENT OF MARKS SHRON & COMPANY, LLP We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated January 19, 1995 and January 25, 1996 with respect to the audits of Two Bridges Associates for the years ended December 31, 1994 and 1995, and the incorporation by reference of such report into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857) and NHP's Registration Statement on Form S-8 (No.333-08137). /s/ Marks Shron & Company, LLP Marks Shron & Company, LLP Great Neck, New York October 27, 1997 EX-23.12 13 CONSENT OF REZNICK FEDDER & SILVERMAN CONSENT OF REZNICK FEDDER & SILVERMAN _____________________________ We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities Exchange Commission by NHP Incorporated (NHP) of our reports dated as per the attached schedule with respect to the audits of the partnerships per the attached schedule for the year ended December 31, 1994, and the incorporation by reference of such reports into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857), and NHP's Registration Statement on Form S-8 (333-08137). REZNICK FEDDER & SILVERMAN /s/ Reznick Fedder & Silverman Bethesda, Maryland October 27, 1997 ATTACHMENT SCHEDULE OF PARTNERSHIPS
PARTNERSHIP NAME DATED - ---------------- ----- Beautiful Village Associates Redevelopment Company February 8, 1995 Branchwood Towers Limited Partnership February 7, 1995 Citrus Park Associates, Ltd. January 31, 1995 Community Circle II Limited January 26, 1995 Copperstone Limited Partnership January 19, 1995 Diakonia Associates Limited Partnership January 31, 1995 Easton Terrace I Associates January 24, 1995 Easton Terrace II Associates February 9, 1995 Eastridge Apartments January 13, 1995 Emory Grove Associates Limited Partnership February 6, 1995 First Alexandria Associates January 20, 1995 Flatbush NSA Associates January 30, 1995 Franklin Square School Associates January 12, 1995 Gates Mill I Limited Partnership February 1, 1995 Grosvenor House Associates Limited Partnership February 10, 1995 Harris Park Limited Partnership February 8, 1995 Hollybush Gardens I January 27, 1995 Hollybush Gardens II January 27, 1995 Intown West Associates Limited Partnership January 27, 1995 Lake Avenue Associates February 6, 1995 Lake Crossing Limited Partnership January 11, 1995 Lakehaven Associates One January 25, 1995 Lakehaven Associates Two January 20, 1995 Linden Court Associates January 30, 1995 Loudoun House Limited Partnership February 13, 1995 Monaco Arms Associates I January 30, 1995 Monaco Arms Associates II January 25, 1995 Muske Limited Partnership February 3, 1995 Natick Associates January 31, 1995 Oakcrest Terrace Apartments February 8, 1995 Oakwood Limited Partnership February 3, 1995 Parkview Associates January 20, 1995 Queenstown Apartments Limited Partnership February 9, 1995 Rancho Townhouse Associates February 3, 1995 Ruscombe Gardens Limited Partnership January 30, 1995 Sencit - Jacksonville Company LTD January 14, 1995 Sheffield Associates February 8, 1995 Snap IV Limited Partnership January 31, 1995 Tara Bridge Limited Partnership January 20, 1995 Twin Towers Associates February 10, 1995 Tyee Associates Limited Partnership January 13, 1995 Urbanization Maria Lopez Housing Company February 3, 1995 Westminster Associates January 31, 1995 Wollaston Manor Associates January 25, 1995 Woodside Village Limited Partnership January 13, 1995
EX-23.13 14 CONSENT OF RUSSELL, THOMPSON, BUTLER & HOUSTON [Logo] RUSSELL - THOMPSON - BUTLER & HOUSTON CERTIFIED PUBLIC ACCOUNTANTS LOUIS G. RUSSELL, CPA MICHAEL C. THOMPSON, CPA JAMES D. BUTLER, CPA ROBERT J. HOUSTON, CPA CONSENT OF RUSSELL, THOMPSON, BUTLER & HOUSTON We consent to the incorporation by reference in this Amended Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission by NHP Incorporated (NHP) of our reports dated as shown in Exhibit A with respect to the audit of those entities as shown in Exhibit A for the year ended December 31, 1994, and the incorporation by reference of such report into NHP's Registration Statement on Form S-8 (No. 333-11933), NHP's Registration Statement on Form S-8 (No. 333-11863), NHP's Registration Statement on Form S-8 (333-11917), NHP's Registration Statement on Form S-8 (333-11857), and NHP's Registration Statement on Form S-8 (333-08137). /s/ Russell, Thompson, Butler & Houston Mobile, Alabama October 27, 1997 E X H I B I T A
Real Estate Partnership Report Date - ----------------------- ----------- Housing Assistance of Mt. Dora, Ltd. January 7, 1995 Housing Assistance of Orange City, Ltd. January 7, 1995 Housing Assistance of Sebring, Ltd. January 7, 1995 Housing Assistance of Vero Beach, Ltd. January 7, 1995 Lakeview Villas, Ltd. January 7, 1995 Orange City Villas II, Ltd. January 7, 1995 Woodside Villas of Arcadia, Ltd. January 7, 1995 Grove Park Villas, Ltd. January 7, 1995 Highlands Village II January 7, 1995 Eustis Apartments, Ltd. January 7, 1995 South Hiawassee Village, Ltd. January 7, 1995 Parkview Arms Associates I January 13, 1995 Parkview Arms Associates II January 13, 1995 Twin Gables Associates January 13, 1995 Miami Elderly Associates January 13, 1995 Crosland Housing Associates January 19, 1995 Parkview Apartments, Ltd. January 19, 1995 Chesterfield Housing Associates January 19, 1995 Hemingway Housing Associates January 19, 1995 McColl Housing Associates January 19, 1995 The Meadows Apartments January 19, 1995 St. George Villas January 19, 1995 Hurbell I Limited Partnership (Holly Oak) January 21, 1995 Hurbell IV Limited Partnership (Talladega Downs) January 21, 1995 Eastcourt Village Partners January 25, 1995 United Housing Partners Cuthbert, Ltd. January 27, 1995 United Housing Partners Elmwood, Ltd. January 27, 1995 United Housing Partners Morristown, Ltd. January 27, 1995 United Housing Partners Welch, Ltd. January 27, 1995 Townview Towers I Partnership, Ltd. January 27, 1995 VOA-Nicollet Towers Associates January 28, 1995 Community Developers of Princeville January 30, 1995 Registry Square, Ltd. February 23, 1995
EX-27 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED AUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996, AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 4,779 0 17,798 2,528 0 31,577 12,774 2,359 218,141 23,335 133,759 0 0 126 55,887 218,141 0 194,979 0 174,302 0 0 3,982 17,442 6,977 10,465 1,155 0 0 11,620 0.91 0.91
-----END PRIVACY-ENHANCED MESSAGE-----