logan square housing partners, l.p. hud project no. …

LOGAN SQUARE HOUSING PARTNERS, L.P. HUD PROJECT NO. 129-44051

Financial Statements, Supporting Data Required by HUD,

Independent Auditors' Reports And Certificates of Officers

For the years ended December 31, 2015 and 2014



Independent Auditors' Repo1i

Financial Statements:

Balance Sheets Statements of Operations

Table of Contents

Statements of Changes in Partners' Deficit Statements of Cash Flows Notes to Financial Statements

Supplementary Information:

Balance Sheet - HUD Basis Statement of Profit and Loss - HUD Basis Statement of Equity - HUD Basis Statement of Cash Flows - HUD Basis Computation of Surplus Cash, Distributions and

Residual Receipts - December 31, 2015 Suppmiing Data Required by HUD Schedule of Changes in Fixed Asset Accounts

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Report on Compliance for Each Major HUD Program and Report on Internal Control Over Compliance Required by the Consolidated Audit Guide for Audits of HUD Programs

Certificates of Officers

Schedule of Findings, Questioned Costs, and Recommendations

Schedule of the Status of Prior Audit Findings, Questioned Costs, and Recommendations (Unaudited)

Page

3-4

5 6 7 8

9-17

18-19 20-22

23 24-25

26 27 28

29-30

31-32

33-34

35

36

INDEPENDENT AUDITORS' REPORT

To the Partners of Logan Square Housing Partners, L.P.:

Report on the Financial Statements

We have audited the accompanying financial statements of Logan Square Housing Partners, L.P., which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opm1on on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PO BOX 7833, SAN FRANClSCO, CA 94120-7833 TELEPHONE (415) 356-8000 FACSIMILE (415) 356-8001 http://www.novoco.com

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Logan Square Housing Partners, L.P. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Supplementary and Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information, which includes HUD-required financial data templates, is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements.

The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole.

The schedule of the status of prior audit findings, questioned costs, and recommendations, General Partner certification, and the management agent certification have not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 27, 2016 on our consideration of Logan Square Housing Partners, L.P .' s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Logan Square Housing Partners, L.P.'s internal control over financial reporting and compliance.

San Francisco, California February 27, 2016 Lead Auditor: Molly M. O'Dell

[,,l p

Employer's Identification Number: 94-3108253

LOGAN SQUARE HOUSING PARTNERS, L.P.

ASSETS Cash and cash equivalents Restricted cash Fixed assets, net Other assets, net

Total assets

BALANCE SHEETS December 31, 2015 and 2014

LIABILITIES AND PARTNERS' DEFICIT

Liabilities Accounts payable and accrued liabilities Tenant security deposits payable Note payable - U.S. Bank, N.A. Note payable - San Diego Housing Commission Accrued interest Due to related parties:

Managing General Partner fee payable Incentive supervisory fee payable

Total liabilities

Partners' deficit

Total liabilities and partners' deficit

see accompanying notes 5

2015

$ 304,305 615,992

7,352,762 180,456

$ 8,453,515

$ 51,225 60,231

8,454,320 941,643 77,304

45,000

9,629,723

(1,176,208)

$ 8,453,515

2014

$ 204,949 544,062

7,788,719 197,614

$ 8,735,344

$ 67,802 55,988

8,583,876 1,000,000

113,897

4,500 36,000

9,862,063

(1,126,719)

$ 8,735,344

LOGAN SQUARE HOUSING PARTNERS, L.P. STATEMENTS OF OPERATIONS


OPERATING REVENUE

Rental revenue Other income

Total operating revenue

OPERATING EXPENSES

General and administrative Wages and salaries Utilities Taxes and insurance Property management fees Repairs and maintenance Professional fees

Total operating expenses

Net operating income

OTHER INCOME AND (EXPENSES)

Interest income Interest expense Depreciation expense Amortization expense

Asset management fee Managing General Partner fee Partnership management fee Incentive supervisory fee Miscellaneous financial expense

Net other income and (expenses)

Net loss


$

$

2015

2,337,925 77,226

2,415,151

78,862 191,738 255,169

44,489 95,275

383,090 40,735

1,089,358

1,325,793

28 (670,806) (435,957)

(17,909) (16,083) (18,000) (16,083)

(186,417)

(1,361,227)

(35,434)

2014

$ 2,153,136 69,875

2,223,011

76,986 188,038 270,215

41,701 87,472

449,141 28,677

1,142,230

1,080,781

64 (671,814) (455,726)

(17,909) (16,083) (26,000) (16,083)

(109,917) (178)

(1,313,646)

$ (232,865)

LOGAN SQUARE HOUSING PARTNERS, L.P. STATEMENTS OF CHANGES IN PARTNERS' DEFICIT


BALANCE, JANUARY 1, 2014

Capital distributions

Net loss

BALANCE, DECEMBER 31, 2014

Capital distributions

Net loss

BALANCE, DECEMBER 31, 2015

General Partners

$ (148,782)

(21)

(148,803)

(3)

$ (148,806)


Limited Partners

$ (732,428)

(12,644)

(232,844)

(977,916)

(14,055)

(35,431)

$ (1,027,402)

Total Partners' Deficit

$ (881,210)

(12,644)

(232,865)

(1,126,719)

(14,055)

(35,434)

$ (1,176,208)

LOGAN SQUARE HOUSING PARTNERS, L.P. STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERA TING ACTIVITIES Net loss Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization Increase in restricted cash - operating (Increase) decrease, in other assets Decrease in accounts payable and accrued liabilities Increase in security deposits payable Decrease in accrued interest Increase in incentive supervisory fee payable (Decrease) increase in Managing General Partner fee payable

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in restricted cash

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on note payable - UsS. Bank, N.A, Principal payments on note payable - San Diego Housing

Commission Capital distributions

Net cash used in financing activities

NET INCREASE IN CASH & CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest


$

$

$

2015

(35,434)

453,866 (4,243)

(751) (16,577)

4,243 (36,593)

9,000 (4,500)

369,011

(67,687) (67,687)

(129,556)

(58,357) (14,055)

(201,968)

99,356

204,949

304,305

707,399

2014

$ (232,865)

473,635 (898)

1,444 (66,016)

898 (42,462) 36,000

4,500 174,236

31,329 31,329

(120,318)

(12,644) (132,962)

72,603

132,346

$ 204,949

$ 714,276


I. General

HUD PROJECT NO. 129-44051 NOTES TO FINANCIAL STATEMENTS


Logan Square Housing Partners, L.P. (the "Partnership") is a California limited partnership that was formed on September 1, 2001 to acquire, rehabilitate, and operate a 170-unit apartment project known as Bella Vista Apartments (the "Project"), located in San Diego, California. The Project rents all of the units to low-income tenants and is operated in a manner necessary to qualify for low-income housing tax credits as provided under Section 42 of the Internal Revenue Code.

The Partnership is comprised of two general partners, Casa Familiar (the "Managing General Partner"), a California nonprofit corporation, and Avalon-Logan, LLC (the "Administrative General Partner"), a California limited liability company (collectively, the "General Partners"). The limited partners were AMT AX Holdings 192, LLC (the "Investor Limited Partner"), an Ohio limited liability company, and Protech 2002-B, LLC ("Protech"), an Ohio limited liability company. On March 29, 2011, Protech withdrew from the Partnership and TCH II Pledge Pool, LLC (the "Special Limited Partner"), a Delaware limited liability company (together with the Investor Limited Partner, the "Limited Partners"), was admitted.

Profits and losses are allocated in accordance with the Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), dated July 9, 2002. Profits from operations and losses from non-recourse deductions and low-income housing tax credits are allocated 99.99% to the Investor Limited Partner, 0.001 % to the Special Limited Partner, and 0.009% to the General Partners. All other losses are allocated, to the extent allowable under Section 704(b) of the Internal Revenue Code, 99.99% to the Investor Limited Partner, 0.001 % to the Special Limited Partner, and 0.009% to the General Partners.

Pursuant to the Partnership Agreement, the Investor Limited Partner is required to make capital contributions totaling $3,731,629 over three installments. These contributions are subject to adjustments based on the amount of low-income housing tax credits ultimately allocated to the Project in addition to other occurrences as further described in the Partnership Agreement. During 2004, the capital contributions required by the Investor Limited Partner were adjusted downward by $3 1,963 due to a credit shortfall as defined in the Partnership Agreement. As of December 31, 2015 and 2014, Investor Limited Partner capital contributions totaled $3,699,666.

2. Summary of significant accounting policies and nature of operations

Basis of accounting The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

9


NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 2015 and 2014

2. Summary of significant accounting policies and nature of operations (continued)

Economic concentrations The Partnership operates one property located in San Diego, California. Future operations could be affected by changes in economic or other conditions in that geographical area or by changes in federal low-income housing subsidies or the demand for such housing. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Housing and Urban Development ("HUD"). Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

Cash and cash equivalents Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition.

Restricted cash is not considered cash equivalents and includes cash held with financial institutions for refunds of tenant security deposits, repairs and improvements to the buildings which extend their useful lives, annual insurance and property tax payments, and bond reserves.

Concentration of credit risk The Partnership maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable Management considers receivables to be fully collectible. If amounts become uncollectible, they are charged to operations in the period in which that determination is made. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

Fixed assets and depreciation Fixed assets are recorded at cost. Buildings and capital expenditures related to the rehabilitation of the Project are depreciated over their estimated useful lives of 27.5 years under the straightline method. Land improvements are depreciated over useful lives of 15 years under the 150% declining balance method. Personal property is depreciated over 5 years under the 200% declining balance method. Depreciation expense for the years ended December 31, 2015 and 2014 was $435,957 and $455,726, respectively.

IO



2. Summary of significant accounting policies and nature of operations ( continued)

Intangible assets and amortization Amortization is computed on a straight-line basis. Bond issuance costs are amortized over the 26-year average term to maturity of the underlying bonds. Permanent loan fees are amortized over 30 years. Compliance monitoring fees are amortized over 15 years. Amortization expense for the years ended December 31, 2015 and 2014 was $17,909 each year.

Future amortization is expected to be as follows:

2016 2017 2018 2019 2020 Thereafter

Total

Impairment of long-lived assets

$

$

17,909 17,529 13,290 13,290 13,290 82 136

157,444

The Partnership reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flow expected to be generated and any estimated proceeds from the eventual disposition. If the long-lived assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the asset exceeds the fair value as determined from an appraisal, discounted cash flow analysis or other valuation technique. There were no impairment losses recognized during 2015 and 2014.

Revenue recognition Rental revenue attributable to residential leases is recorded when due from residents, generally upon the first day of each month. Leases are for periods of up to one year, with rental payments due monthly. Other income includes fees earned for late payments, cleaning, damages, laundry facilities, and other charges and is recorded when earned.

Income taxes Income taxes on partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on its respective tax return.

11



2. Summary of significant accounting policies and nature of operations (continued)

Income taxes ( continued) The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the Partnership to report information regarding its exposure to various tax positions taken by the Partnership. Management has determined whether any tax positions have met the recognition threshold and has measured the Partnership's exposure to those tax positions. Management believes that the Partnership has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. Federal and state tax authorities generally have the right to examine and audit the previous three years of tax returns filed. Any interest or penalties assessed to the Partnership are recorded in operating expenses. No interest or penalties from federal or state tax authorities were recorded in the accompanying financial statements.

Subsequent events Subsequent events have been evaluated through February 27, 2016, which is the date the financial statements were available to be issued. There are no subsequent events requiring disclosure.

3. Restricted cash

Restricted cash consists of the following as of December 31, 2015 and 2014:

2015 2014 Reserve for real estate taxes and insurance $ 32,978 $ 31,696 Operating reserve 130,000 130,000 Tenant security deposits 60,231 55,988 Replacement reserve 195,976 129,988 Bond fund 167,596 167,241 Operating reserve fund 16 16 Expense fund 11,024 10,962 Principal account 523 523 Interest fund 17 648 17 648

Total restricted cash $ 615,222 $ 544 062

12



4. Fixed assets

Fixed assets consist of the following as of December 31, 2015 and 2014:

5. Other assets

Land Buildings Land improvements Personal property

Total fixed assets Less: accumulated depreciation

Fixed assets, net

2015 $ 1,705,158 $

10,800,109 1,101,474

307 110 13,913,851 (6,561,089)

$ 7.352 762 $

2014 1,705,158

10,800,109 1,101,474

307 110 13,913,851 (6,125,132) 7.788719

Other assets consist of the following as of December 31, 2015 and 2014:

Accounts receivable Prepaid expenses Bond issuance costs Permanent loan fees Compliance monitoring fees

Total other assets Less: accumulated amortization

Other assets, net

6. Housing assistance payments

$

$

2015 2014 12,701 $ 12,207 I 0,311 10,054

301,819 301,819 24,684 24,684 69 290 69 290

418,805 418,054 (23 8,349) (220.440) I 80 456 ,,,$-,.,,.1""9,b,7 g,6 ls::,4

During 1971, the prior owner of the Project was originally awarded a Section 8 Housing Assistance Payment contract and executed a Use Agreement with HUD pursuant to the United States Housing Act of 1937 and the U.S. Department of Housing and Urban Development Act. Under the Use Agreement, which was assigned to the Partnership in July 2002, HUD agreed to renew the contract subject to appropriation of funds by Congress. The Section 8 contract was last renewed by the Partnership for eighteen years, effective October 1, 2009, and will expire on September 30, 2027.

7. Contingencies

In October 2002, the Partnership entered into a Housing Assistance Payments Contract with HUD. The maximum amount of the commitment for housing assistance payments under the contract was $577,000 per annum, subject to adjustment as defined.

13



7. Contingencies {continued)

No assurance can be provided that Congress will appropriate sufficient funds to renew the contract. No provision or adjustment has been made to the accompanying financial statements for this contingency as its ultimate resolution and related impact on the Partnership are not known and cannot be estimated at this time. For the years ended December 31, 2015 and 2014, HUD increased rents by an Operating Cost Adjustment Factor; the maximum allowable rent potential per month was $189,069 and $186, 128, respectively.

8. Long-term liabilities

Note payable- U.S. Bank, N.A. In August 200 I, the Housing Authority of the City of San Diego (the "Issuer") was allocated $10,215,000 of bond volume cap by the California Debt Limit Allocation Committee on behalf of the Project. The Issuer then issued, on behalf of the Project, $10,215,000 of Multifamily Housing Revenue Bonds, Series 2002E (the "Bonds").

Subsequent to the bond allocation, the Issuer entered into an Assignment Agreement dated July 1, 2002 with U.S. Bank, N.A. (the "Trustee") for the purpose of effectuating the sale of the Bonds to the Trustee.

On July 1, 2002, the Partnership entered into loan agreements with the Trustee for $9,500,000 (the "NO! Note") and $715,000 (the "IRP Note"). The IRP Note matured in 2012.

Under the terms of the NO! Note, interest accrues at 7.42% per annum. The Partnership is required to make monthly payments of interest only on the principal balance commencing on September 1, 2002 and continuing on the first day of each month thereafter until and including the conversion date.

Commencing on the first day of the first month following the conversion date and continuing on the first day of each month thereafter, the Partnership makes equal monthly principal and interest payments of $63,511. The NO! Note will be amortized over 35 years and will mature on August 1, 2034. The NO! Note is secured by a first deed of trust on the Project. As of December 31, 2015 and 2014, the principal balance was $8,454,320 and $8,583,876, respectively, and accrued interest was $58,711 each year. Interest expense was $632,576 and $641,814, respectively, for the years ended December 31, 2015 and 2014.

14



8. Long-term liabilities (continued)

Note payable - U.S. Bank, N.A. (continued) Estimated annual principal payments are due as follows:

Year ending December 31, 2016 $ 138,645 2017 149,290 2018 160,752 2019 173,094 2020 186,383 Thereafter 7646156

Total $ 8 454 32Q

Note payable - San Diego Housing Commission On July 11, 2002, the Partnership entered into a promissory note with San Diego Housing Commission ("SDHC"), for $1,000,000. Under the terms of the note, simple interest accrues at a rate of 3.0% per annum. Commencing on March 1 of the first year following the date that the Project has been rehabilitated and on each March 1 thereafter up to the fifteenth year following the loan closing, the Partnership makes annual principal and interest payments equal to 50% of residual receipts. Subsequent to the fifteenth year, the Partnership makes annual principal and interest payments equal to the greater of 50% of residual receipts or $49,043. The note will be amortized over 55 years and will mature on March 1, 2048. The note is secured by a second deed of trust on the Project.

As of December 31, 2015 and 2014, the principal balance on the note was $941,643 and $1,000,000, respectively, and accrued interest was $18,593 and $55,186, respectively. As of December 31, 2015, the Partnership reported $223,768 of residual receipts due to SDHC. For the years ended December 31, 2015 and 2014, interest expense was $38,230 and $30,000, respectively.

Estimated annual principal payments are due as follows:

Year ending December 31, 2016 $ 2017 19,043 2018 19,614 2019 20,203 2020 20,809 Thereafter 861 974

Total $ 241 643

15



9. Transactions with related parties

Property management fee In December 2015, the Partnership renewed its Management Agreement with Logan Property Management ("LPM"), an affiliate of the Administrative General Partner. Pursuant to the Management Agreement, the Paitnership is obligated to pay LPM a monthly fee of 4.0% of the gross revenues of the Project. During the years ended December 31, 2015 and 2014, LPM earned and was paid $95,275 and $87,472, respectively, under this agreement.

Asset management fee Pursuant to the Partnership Agreement, Capmark Properties, Inc. (the "Investment Partner Manager"), an affiliate of the Investor Limited Partner, receives an annual cumulative asset management fee in an amount equal to 0.35% of the Investor Limited Partner's capital contributions (as adjusted annually by the CPI). The fee is payable from available cash flow after all priority payments as defined in the Partnership Agreement. During the years ended December 31, 2015 and 2014, the Investment Partner Manager earned and was paid $16,083 each year under this agreement.

Managing General Partner fee During the years ended December 31, 2015 and 2014, the Managing General Partner earned $18,000 and $26,000, respectively, in connection with services rendered. During 2014, the Partnership agreed to pay $8,000 in additional fees to the Managing General Partner in connection with services rendered in 2013, which is included in Managing General Partner fee on the accompanying statements of operations. As of December 31, 2015 and 2014, $0 and $4,500, respectively, was due to the Managing General Partner.

Paitnership management fee Pursuant to the Pa,tnership Agreement, the Administrative General Partner receives an annual non-cumulative partnership management fee in an amount equal to the asset management fee. The fee is payable from available cash flow after all priority payments as defined in the Partnership Agreement. During the years ended December 31, 2015 and 2014, the Administrative General Partner earned and was paid $16,083 each year under this agreement.

Incentive supervisory fee Pursuant to the Partnership Agreement, the Administrative General Partner receives an annual non-cumulative incentive supervisory fee in an amount equal to 35% of gross revenues of the Project. The fee is payable from available cash flow after all priority payments as defined in the Partnership Agreement. During the years ended December 31, 2015 and 2014, $186,417 and $109,917, respectively, was earned under this agreement, and $177,417 and $76, 167, respectively, was paid. As of December 31, 2015 and 2014, $45,000 and $36,000, respectively, was payable to the Administrative General Partner.

16



9. Transactions with related parties (continued)

Priority distribution Pursuant to the Partnership Agreement, the Investor Limited Partner receives a priority distribution equal to I 0% of available cash flow after all priority payments as defined. During the years ended December 31, 2015 and 2014, the Investor Limited Partner was paid a distribution of $14,055 and $12,644, respectively. As of December 31, 2015, the estimated distribution owed to the Investor Limited Partner was $20,024.

I 0. Litigation

Negligence and wrongful death During 2014, the Partnership was named as a defendant in a negligence and wrongful death lawsuit related to a fatal shooting that occurred at the Project during 2012. The case was settled in 2015 by an agreement between the plaintiff and the insurance carrier. No loss has been recorded in 2014 or 2015 with respect to this litigation. All related legal expenses were paid by the insurance carrier.

Eviction During 2015, the Partnership was named as a plaintiff in an eviction lawsuit related to a tenant who threatened violence against an employee of the Partnership. The case was settled in 2016 by an agreement between the plaintiff and the defendants. No gain or loss has been recorded in 2015 with respect to this litigation.

11. Low-income housing tax credits

The Partnership generated an aggregate of $4,567,950 of low-income housing tax credits ("Tax Credits"). Generally, such credits were expected to become available for use by its partners pro rata over a ten-year period that began in 2002. In order to qualify for these credits, the Project must comply with various federal and state requirements. These requirements include, but are not limited to, renting to low-income tenants at rental rates which do not exceed specified percentages of area median gross income for the first 15 years of operation. The Partnership has also agreed to maintain and operate the Project as low-income housing for an additional 40 years beyond the initial 15 year compliance period. Because the Tax Credits are subject to compliance with certain requirements, there can be no assurance that the aggregate amount of Tax Credits will be realized, and failure to meet all such requirements or to correct noncompliance within a specified time period may result in generating a lesser amount of Tax Credits than expected in future years, and/or recapture of Tax Credits previously allocated. Recapture of Tax Credits would require credit deficit payments to the Investor Limited Partner under the terms of the Partnership Agreement.

As of December 31, 2015 and 2014, the Partnership had generated $4,567,950 of Tax Credits.

17

SUPPLEMENTARY INFORMATION SUPPORTING DATA REQUIRED BY HUD


CURRENT ASSETS 1120 Cash - operations

HUD PROJECT NO. 129-44051 BALANCE SHEET - HUD BASIS

December 31, 2015

ASSETS

1130 Tenant accounts receivable 1200 Prepaid expenses

l lOOT Total current assets

1191 Tenant deposits held in trust

RESTRICTED DEPOSITS AND FUNDED RESERVES 1310 Escrow deposits 1330 Other reserves 1355 Bond reserves

1300T Total deposits

FIXED ASSETS 1410 Land 1420 Buildings 1460 Furnishings

1400T Total fixed assets

1495 Accumulated depreciation 1400N Net fixed assets

OTHER ASSETS

1520 Intangible assets, net of accumulated amortization of$238,349 I SOOT Total other assets

IOOOT TOTAL ASSETS

see independent auditors' report 18

$

$

304,305 12,701 I 0,311

327,317

60,231

32,978 325,976 196,807 555,761

1,705,158 11,901,583

307,110 13,913,851

6,561,089 7,352,762

157,444 157,444

8,453,515

CURRENT LIABILITIES

LOGAN SQUARE HOUSING PARTNERS, L.P. HUDPROJECTN0.129-44051

BALANCE SHEET - HUD BASIS (CONTINUED) December 31, 2015

LIABILITIES AND EQUITY

2110 Accounts payable - operations 2113 Accounts payable - entity 2131 Accrued interest payable - first mortgage 2134 Accrued interest payable - other loans and notes 2170 Bonds payable - short-term 2210 Prepaid revenue

2 l 22T Total current liabilities

DEPOSIT LIABILITIES

2191 Tenant deposits held in trust - contra

LONG-TERM LIABILITIES 2320 Bonds payable - first mortgage

Less: current portion 2320 Bonds payable - first mortgage

2322 Other mortgages payable - long-term

2300T Total long-term liabilities

2000T Total liabilities

3130 Total equity

2033T TOTAL LIABILITIES AND EQUITY


$

$

48,036 45,000 58,711 18,593

138,645 3,189

312,174

60,231

8,454,320 (138,645)

8,315,675

941,643

9,257,318

9,629,723

(1,176,208)

8,453,515

LOGAN SQUARE HOUSING PARTNERS, L.P. HUDPROJECTNO. 129-44051

STATEMENT OF PROFIT AND LOSS - HUD BASIS For the year ended December 31, 2015

Rental income 5120 5121

5100T

Rent revenue - gross potential Tenant assistance payments Total rental revenue

Vacancies 5220 Apartments 5250 Rental concessions

5200T Total vacancies 5 l 52N Net rental revenue (rent revenue less vacancies)

Financial revenue 5410 Financial revenue - project operations

5400T Total financial revenue

Other revenue 5910 Laundry and vending 5920 Tenant charges 5990 Miscellaneous

5900T Total other revenue 5000T Total revenue

Administrative expenses 6203 Conventions and meetings 6204 Management consultants 6210 Advertising and marketing 6250 Other renting expense 63 I I Office expenses 6320 Management fee 6330 Manager or superintendent salaries 6331 Administrative rent free unit 6340 Legal expenses - project 6350 Auditing expenses 6351 Bookkeeping fees/accounting services 6370 Bad debts 6390 Miscellaneous administrative expenses

6263T Total administrative expenses

Utilities expenses 6450 Electricity (light and miscellaneous power) 6451 Water 6452 Gas 6453 Sewer

6400T Total utilities expenses


$ 964,952 1,429,883 2,394,835

32,193 24,717 56,910

2,337,925

28 28

16,532 56,062 4,632

77,226 2,415,179

408 10

2,121 11,278 14,311 95,275 72,126 14,580 22,288

9,134 9,313

16,897 19,257

286,998

61,282 73,516 60,053 60,318

255,169


STATEMENT OF PROFIT AND LOSS - HUD BASIS (CONTINUED) For the year ended December 31, 2015

Operating and maintenance expenses 6510 Payroll 6515 Supplies 6520 6525 6530 6546 6590

6500T

Contracts Garbage and trash removal Security contract Heating/cooling repairs and maintenance Miscellaneous operating and maintenance expenses (specify) Total operating and maintenance expenses

Taxes and insurance 6710 Real estate taxes 6711 Payroll taxes (project's share) 6720 Property and liability insurance (hazard) 6722 6723 6790

6700T

Workmen's compensation Health insurance and other employee benefits Miscellaneous taxes, licenses, permits, and insurance Total taxes and insurance

Financial expenses

6820 Interest on first mortgage (or bonds) payable 6825 Interest on other mortgages

6800T Total financial expenses

Operating results 6000T Total costs of operation before depreciation 5060T Profit before depreciation 6600 Depreciation expenses 6610 Amortization expenses

5060N Operating profit

Corporate or Mortgagor revenue/expenses 7190 Other expenses (specify)

71 OOT Net entity expenses

3250 Net loss


$

75,754 34,741 71,550 43,282 49,588 34,987

148,942 458,844

1,912 12, 187 40,987 16,689 14,982 1,590

88,347

632,576 38,230

670,806

1,760,164 655,015 435,957

17,909 201,149

(236,583) (236,583)

(35,434)

Part II


STATEMENT OF PROFIT AND LOSS - HUD BASIS (CONTINUED) For the year ended December 31, 2015

SI 000-010 Total first mortgage ( or bond) principal payments required during the audit period (12 monthly payments). This applies to all direct loans, HUD-held and HUD-insured first mortgages.

S!000-020 The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit period even if deposits have been

$ 129,556

temporarily waived or suspended. .,;;;,$=====

Sl000-030 Replacement Reserves, or Residual receipts and Releases which are

included as expense items on this Profit and Loss statement. =;;,,,,$====

S 1000-040 Program that are included as expense items on this Profit and Loss

Statement. ==$=====



STATEMENT OF EQUITY - HUD BASIS For the year ended December 31, 2015

S 1100-0 IO Beginning of year balance

3250 Net loss

S 1200-420 Distributions

3130 End of year balance


$ (1,126,719)

(35,434)

(14,055)

$ (1,176,208)

LOGAN SQUARE HOUSING PARTNERS, L.P. HUDPROJECTN0.129-44051

STATEMENT OF CASH FLOWS -HUD BASIS For the year ended December 31, 2015

CASH FLOWS FROM OPERA TING ACTIVITIES Sl200-0IO Rental income received Sl200-020 Interest receipts Sl200-030 Other operating receipts S 1200-040 Total receipts

CASH PAID FOR: S 1200-050 Administrative expenses Sl200-070 Management fee expense Sl200-090 Utilities expenses Sl200-IOO Salaries and wages expense Sl200-I IO Operating and maintenance expenses Sl200-120 Real estate taxes expense Sl200-140 Property insurance expense Sl200-150 Miscellaneous taxes and insurance expense S 1200-180 Interest on first mortgage SI200-181 Interest payments - second mortgage 81200-225 Asset management fee 81200-225 Partnership management fee 81200-225 Managing General Partner fee 81200-225 Incentive supervisory fee 81200-230 Total disbursements

81200-240 Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES 81200-245 Net deposits to the mortgage escrow accounts 81200-255 Net deposits to other reserves 81200-350 Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES SI200-360 81200-370 81200-420 Sl200-460

81200-470

S 1200-480

Sl200T

Principal payments - first mortgage (or bonds) Principal payments on loans or notes payable Distributions

Net cash used in financing activities

NET INCREASE IN CASH & EQUIVALENTS

BEGINNING OF YEAR CASH

END OF YEAR CASH


$ 2,339,093 28

77,226 2,416,347

(119,597) (95,275)

(255, 169) (191,738) (401,329)

(1,912) (41,244) (1,590)

(632,576) (74,823) (16,083) (16,083) (22,500)

(177,417) (2,047,336)

369,011

(1,282) (66,405) (67,687)

(129,556) (58,357) (14,055)

(201,968)

99,356

204,949

$ 304,305


STATEMENT OF CASH FLOWS - HUD BASIS (CONTINUED) For the year ended December 3 1, 2015

RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

3250 NET LOSS

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY OPERA TING ACTIVITIES

6600 Depreciation expense 6610 Amortization expense

Changes in asset and liability accounts

Increase in assets S 1200-490 Increase in tenant accounts receivable S 1200-520 Increase in prepaid expenses S 1200-530 Increase in cash restricted for tenant security deposits

Increase (decrease) in liabilities S 1200-540 Decrease in accounts payable S1200-570 Decrease in accrued interest payable S1200-580 Increase in tenant security deposits held in trust S 1200-590 Increase in prepaid revenue

S 1200-605 Increase (decrease) in entity/construction liability accounts: S 1200-606 Incentive supervisory fee payable S 1200-606 Managing General Partner fee payable

S1200-610 NET CASH PROVIDED BY OPERATING ACTIVITIES


$ (35,434)

435,957 17,909

(494) (257)

(4,243)

(18,239) (36,593)

4,243 1,662

9,000 (4,500)

$ 369,011


COMPUTATION OF SURPLUS CASH - HUD BASIS For the year ended December 31, 2015

COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS, AND RESIDUAL RECEIPTS

Sl300-010

81300-040

S 1300-050 S 1300-075

2210 2191

Sl300-140

81300-150

S 1300-200

Cash (Accounts 1120,1170, and 1191)

Total cash

Accrued mortgage interest payable Accounts payable (due within 30 days) Prepaid revenue Tenant deposits held in trust

Less total current obligations

Surplus cash (deficiency)

Amount available for distribution during next fiscal period


$

$

$

364,536

364,536

58,711 48,036

3,189 60,231

170,167

194,369

194,369


SUPPORTING DATA REQUIRED BY HUD For the year ended December 31, 2015

DETAIL OF ACCOUNTS - STATEMENT OF PROFIT AND LOSS

MISCELLANEOUS OPERA TING AND MAINTENANCE EXPENSES (ACCOUNT 6590) Carpet cleaning/repair $ Appliance repairs Exterior repairs Interior repairs Apartment cleaning Electrical costs Plumbing Appliances Carpet/flooring Painting Roof Landscaping improvements Access gates

Miscellaneous operating and maintenance expenses

OTHER EXPENSES (ACCOUNT 7190) Asset management fee Managing General Partner fee Partnership management fee Incentive supervisory fee

Other expenses


$

$

$

7,423 2,340 2,533

48,968 2,445 7,806 5,540

14,418 29,661

2,560 9,781

14,587 880

148,942

16,083 18,000 16,083

186,417

236,583

1410 Land

1420 Buildings

1460 Furnishings

TOTAL


SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS For the year ended December 31, 2015

Beginning Balance Additions Deductions

$ 1,705,158 $ $

11,901,583

307,110

13,913,851 $ $

Accumulated depreciation (6,125,132) $ ( 435,957) $

Net book value $ 7,788,719


Ending Balance

$ 1,705,158

11,901,583

307,110

13,913,851

(6,561,089)

$ 7,352,762

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Logan Square Housing Partners, L.P., which comprise the balance sheet as of December 31, 2015, and the related statements of operations, changes in partners' deficit, and cash flows for the year then ended and the related notes to the financial statements, and have issued our report thereon dated February 27, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Logan Square Housing Partners, L.P.'s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Logan Square Housing Partners, L.P .' s internal control. Accordingly, we do not express an opinion on the effectiveness of Logan Square Housing Partners, L.P.'s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

29 PO BOX 7833, SAN FRANCISCO, CA 94120-7833 TELEPHONE {415) 356-8000 FACSIMILE (415) 356·8001 http://www.novoco.com

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Logan Square Housing Partners, L.P.'s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Other Matters

We noted certain matters that we reported to the management of Logan Square Housing Partners, L.P. in a separate letter dated February 27, 2016.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Francisco, California February 27, 2016

30

REPORT ON COMPLIANCE FOR EACH MAJOR HUD PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE CONSOLIDATED AUDIT GUIDE FOR AUDITS OF HUD PROGRAMS


Report on Compliance for Each Major HUD Program

We have audited Logan Square Housing Partners, L.P .' s compliance with the compliance requirements described in the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") that could have a direct and material effect on Logan Square Housing Partners, L.P.'s major U.S. Department of Housing and Urban Development ("HUD") program for the year ended December 31, 2015. Logan Square Housing Partners, L.P.'s major HUD program and the related direct and material compliance requirements are as follows:

Name of Major HUD Program

Section 8 Housing Assistance Payments

Management's Responsibility

Direct and Material Compliance Requirements

cash receipts, cash disbursements, tenant application, eligibility, and recertification, units leased to extremely low-income families, tenant security deposits, and management functions.

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its HUD program.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for Logan Square Housing Partners, L.P.'s major HUD program based on our audit of the compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on a major HUD program occurred. An audit includes examining, on a test basis, evidence about Logan Square Housing Partners, L.P .' s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for a major HUD program. However, our audit does not provide a legal determination of Logan Square Housing Partners, L.P .' s compliance.

31 PO BOX 7833, SAN FRANCISCO, CA 94120-7833 TELEPHONE (415) 356-8000 FACSIMILE (415) 356-8001 http://www.novoco.com

Opinion on the Major HUD Program

In our opinion, Logan Square Housing Partners, L.P. complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major HUD program for the year ended December 31, 2015.

Report on Internal Control Over Compliance

Management of Logan Square Housing Partners, L.P. is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered Logan Square Housing Partners, L.P.' s internal control over compliance with the requirements that could have a direct and material effect on its major HUD program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for a major HUD program and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Logan Square Housing Partners, L.P.'s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a compliance requirement of a HUD program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement of a HUD program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a compliance requirement of a HUD program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guide. Accordingly, this report is not suitable for any other purpose.

San Francisco, California February 27, 2016

32


December 3 I, 2015

General Pa1tner Certification

I hereby certify that I have examined the accompanying financial statements and supplemental data of Logan Square Housing Partners, L.P. and, to the best of my knowledge and belief, the same is complete and accurate.

By Ruben Islas, Managing Member Avalon-Logan, LLC

Taxpayer Identification Number 33-0983177

33

Date


December 31, 2015

Management Agent Certification

We hereby certify that we have examined the accompanying financial statements and supplemental data of Logan Square Housing Partners, L.P. and, to the best of our knowledge and belief, the same is complete and accurate.

By Martha Enriquez, President Logan Property Management, Inc.

Taxpayer Identification Number 20-1902673

34

Date


SCHEDULE OF FINDINGS, QUESTIONED COSTS, AND RECOMMENDATIONS December 31, 2015

Findings - Financial Statements Audit

Our audit disclosed no findings that are required to be reported herein under the HUD Consolidated Audit Guide.

35


SCHEDULE OF THE STATUS OF PRIOR AUDIT FINDINGS, QUESTIONED COSTS, AND RECOMMENDATIONS (Unaudited)

December 31, 2015

Findings-Financial Statements Audit for the year ended December 31. 2014

The audit disclosed no findings that are required to be reported herein under the HUD Consolidated Audit Guide.

Findings from Other Audits or Studies

There were no reports issued by HUD OIG or other Federal agencies or contract administrators during the period covered by this audit.

36

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