CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS COMMON GROUND COMMUNITY H.D.F.C., INC. AND AFFILIATES

2 C O N T E N T S Page Report of Independent Certified Public Accountants 1-2 Consolidated Financial Statements: Consolidated Statement of Financial Position as of 3 Consolidated Statement of Activities for the year ended 4 Consolidated Statement of Cash Flows for the year ended 5 Notes to Consolidated Financial Statements 6-23 Supplementary Information: Consolidating Schedule of Financial Position Information as of 24 Consolidating Schedule of Activities Information for the year ended 25

3 Audit Tax Advisory Grant Thornton LLP 666 Third Avenue, 13th Floor New York, NY T F REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Ground Community H.D.F.C., Inc. and Affiliates: We have audited the accompanying consolidated statement of financial position of Ground Community H.D.F.C., Inc. and Affiliates (collectively, Ground ) as of, and the related consolidated statements of activities and cash flows for the year then ended. These consolidated financial statements are the responsibility of Ground s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of the certain controlled limited partnerships, which statements reflect total assets of $161,900,582 or 49% as of, and total revenues of $7,236,356 or 15% for the year then ended. These statements were audited by other auditors whose report was furnished to us, and our opinion, insofar as it relates to the amounts included for those limited partnerships, is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Ground s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ground as of, and the consolidated changes in their net assets and their consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

4 Our audit was conducted for the purpose of forming an opinion on the basis consolidated financial statements of Ground as of and for the year ended, taken as whole. The accompanying supplementary consolidating schedules of financial position information and activities information are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated, in all material respects in relation to the basic consolidated financial statements taken as a whole. New York, New York June 29,

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of ASSETS Current assets: Cash $ 2,604,329 Accounts receivable 9,255,373 Development fee receivable 1,253,547 Notes and interest receivable 81,867 Other current assets 1,513,481 Total current assets 14,708,597 Noncurrent assets: Lender restricted cash and contractual reserves: Lender restricted cash 4,235,457 Contractual reserves 21,055,361 Total lender restricted cash and contractual reserves 25,290,818 Tenant security deposits 796,060 Development costs 92,196,497 Development fee receivable 9,442,343 Property and equipment, net 190,212,526 Total noncurrent assets 317,938,244 Total assets $ 332,646,841 LIABILITIES AND NET ASSETS Current liabilities: Payables and accruals $ 23,859,296 Current portion of deferred revenue 495,626 Security deposits and other payables 970,369 Loans payable - unconsolidated affiliates 17,766 Current portion of loans payable 7,177,983 Total current liabilities 32,521,040 Noncurrent liabilities: Deferred revenue 2,680,786 Interest payable 2,472,103 Loans payable 203,213,141 Total noncurrent liabilities 208,366,030 Total liabilities 240,887,070 Noncontrolling interest 29,757,815 Net assets: Unrestricted 58,339,670 Temporarily restricted 3,662,286 Total net assets 62,001,956 Total liabilities and net assets $ 332,646,841 The accompanying notes are an integral part of this consolidated financial statement. -3-

6 CONSOLIDATED STATEMENT OF ACTIVITIES For the year ended Temporarily Unrestricted restricted Total Revenues and support: Contributions $ 2,843,734 $ 1,398,974 $ 4,242,708 Government grants and contracts 21,624,377-21,624,377 Management and partnership fees 135, ,626 Development fees 3,988,927-3,988,927 Rental income 15,787,267-15,787,267 Investment income 207, ,671 Other income 1,612,701-1,612,701 Net assets released from restrictions 2,528,793 (2,528,793) - Total revenues and support 48,729,096 (1,129,819) 47,599,277 Expenses: Program services: Social services 18,479,476-18,479,476 Housing management and development 3,824,985-3,824,985 Affordable housing operations 18,062,678-18,062,678 Total program services 40,367,139-40,367,139 Supporting services: General and administrative 4,345,186-4,345,186 Fundraising 1,004,805-1,004,805 Total supporting services 5,349,991-5,349,991 Total expenses 45,717,130-45,717,130 Change in net assets before noncontrolling interest and other nonrecurring items 3,011,966 (1,129,819) 1,882,147 Noncontrolling interest 5,377,467-5,377,467 Step-up in basis from contributed limited partnership interest 16,080,000-16,080,000 Gain on forgiveness of loan 3,960,000-3,960,000 Loss in Times Square Hotel G.P. (333,059) - (333,059) Development fee adjustment 4,850,457-4,850,457 Change in net assets 32,946,831 (1,129,819) 31,817,012 Net assets, beginning of year 25,392,839 4,792,105 30,184,944 Net assets, end of year $ 58,339,670 $ 3,662,286 $ 62,001,956 The accompanying notes are an integral part of this consolidated financial statement. -4-

7 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended Cash flows from operating activities: Increase in net assets $ 31,817,012 Depreciation and amortization 4,926,809 Change in net assets attributable to noncontrolling interest (5,377,467) Unrealized loss in contractual reserves 18,120 Loss on disposal of fixed assets 6,896 Step-up in basis from contributed limited partnership interest (16,080,000) Gain on forgiveness of loan (3,960,000) Changes in assets and liabilities: Increase in accounts receivable (1,675,842) Increase in other current assets (490,779) Increase in tenant security deposits (264,704) Increase in development fee receivable (3,160,266) Decrease in loans receivable - unconsolidated affiliates 54,375 Decrease in payables and accruals (1,514,324) Increase in deferred revenue 6,343,150 Increase in security deposits and other payables 286,793 Increase in interest payable 2,472,103 Net cash provided by operating activities 13,401,876 Cash flows from investing activities: Withdrawals of contractual reserves 6,087,511 Withdrawals of lender restricted cash 38,770 Deposits to contractual reserves (7,041,356) Deposits to lender restricted cash (900,361) Capital expenditures (84,997,094) Property development 19,690,692 Proceeds from notes and interest receivable 20,976 Net cash used in investing activities (67,100,862) Cash flows from financing activities: Capital contributions 23,520,750 Syndication costs (67,383) Proceeds from loans 62,910,103 Repayments of loans (32,585,233) Net cash provided by financing activities 53,778,237 Net increase in cash 79,251 Cash, beginning of year 2,525,078 Cash, end of year $ 2,604,329 Supplemental information: Interest paid $ 1,312,080 The accompanying notes are an integral part of this consolidated financial statement. -5-

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ORGANIZATION Ground Community H.D.F.C., Inc. and Affiliates (collectively, Ground ) is a pioneer in the development of supportive housing and other research-based practices that end homelessness. Ground s network of well-designed, affordable apartments linked to the services people need to maintain their housing, restore their health, and regain their economic independence has enabled more than 4,000 individuals to overcome homelessness. Ground s primary operations are concentrated in three areas: Social Services: o Outreach Through various programs, Ground provides access to housing for the most vulnerable: those who have been homeless the longest, have the most disabling conditions, and are least likely to access housing resources. These individuals typically spend years cycling between emergency shelters, hospitals, and jails. o Prevention Ground has developed a number of programs to address the multiple factors that cause individuals and families to become homeless. o Supportive Services Once housed, Ground provides supportive services to its tenants, to ensure their shelter and well-being. Housing Management and Development: Ground develops and self-manages the majority of the buildings whose development it has sponsored. Affordable Housing Operations: Ground builds and manages a range of housing options for homeless and low-income individuals and families. These properties are attractive, affordable, well-managed and linked to the services and support people need to rebuild their lives. Ground is affiliated with and under common board control with other not-for-profit corporations and for-profit limited partnerships which have been formed as supporting entities to Ground to further Ground s organizational objectives. These entities are included in the consolidated financial statements of Ground in accordance with the Reporting of Related Entities by Not-for-Profit Organizations and Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights. The following summarizes the entities comprising Ground. -6-

9 NOTE A (continued) Ground Community H.D.F.C., Inc. ( CGC ) was organized on October 11, 1990, under Section 402 of the Not-for-Profit Corporation Law and pursuant to Article XI of the Private Housing Finance Law ( Housing Development Fund Companies Law ) of the state of New York. CGC is a not-for-profit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGC is operated for the charitable purpose of rehabilitating, maintaining, and operating low income housing projects and to provide related social service programs. In October 2009, CGC received a charitable contribution of the limited partnership interest in the T.S. Hotel Limited Partnership. This donation resulted in CGC obtaining full ownership interest in this property, a step-up in the basis of the property of approximately $16 million and the resulting liquidation of the limited partnership. Ownership of the Times Square Hotel now resides with the Times Square Hotel LLC, whose sole member is CGC. CGC is financed principally by grants from community-based and governmental organizations, as well as fees received from developing and managing properties, and contributions from the general public. Ground Community II H.D.F.C., Inc. ( CGC II ) was organized on January 26, 1995, pursuant to Article XI of The Private Housing Finance Law and under Section 402 of the Not-for-Profit Corporation Law. CGC II is a not-for-profit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGC II was formed and is operated for the charitable purpose of owning, rehabilitating, managing, maintaining, and operating low-income housing projects and to provide related social service programs to the tenants residing in buildings owned by the following limited partnerships, of which the general partner or controlling member is owned by CGC II: Prince George Associates LP, Brook Avenue Housing LP, Pitt Street LP, 410 Asylum Street LLC, and New Haven LLC. In addition, CGC II may also acquire properties for future development as low-income housing units. Ground Community III H.D.F.C., Inc. ( CGC III ) was incorporated on October 24, 2000, under Section 402 of the Not-for-Profit Corporation Law of the State of New York. CGC III is a not-forprofit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGC III was formed for the charitable purpose of owning, rehabilitating, and operating a housing project at 206 West 24 th Street, New York City (a building that was purchased through a loan from the City of New York Department of Housing Preservation and Development ( HPD ), which provides housing, access to job training, and employment services to qualifying young adults, formerly homeless, and low-income single adults. Ground Community IV H.D.F.C., Inc. ( CGC IV ) was incorporated on October 23, 2001, under Section 402 of the Not-for-Profit Corporation Law of the State of New York. CGC IV is a not-forprofit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGC IV was formed for the charitable purpose of owning, rehabilitating, and operating a housing project at 197 Bowery, New York City. CGC IV provides 146 First Step Housing units and social services for individuals transitioning from homelessness to permanent housing. -7-

10 NOTE A (continued) Ground Ventures Corp. ( CGV ) was organized on January 25, 1993, under Section 402 of the Not-for-Profit Corporation Law. CGV is a not-for-profit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. This entity holds the lease for a retail space on 104 th Street, New York City, that is subleased to two commercial tenants. Ground Jobs Training Corp. ( CGJTC ), formerly Times Square Jobs Training Corp., was organized on January 25, 1993, under Section 402 of the Not-for-Profit Corporation Law. CGJTC is a notfor-profit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGJTC was formed and is operated for the charitable purpose of providing relief to the poor, distressed, and underprivileged, by providing extensive training in job and personal skills for the employees who are residents of supportive housing. Ground Management Corp. ( CGM ) was organized on January 26, 1995, under Section 402 of the Not-for-Profit Corporation Law. CGM is a not-for-profit charitable organization exempt from income and excise taxes under Section 501(c)(3) of the Internal Revenue Code. CGM was formed and is operated for the charitable purpose of managing low-income housing projects and providing employment to underprivileged individuals in the housing management field. Ground of R.C. Corp. ( CGRC ) was organized on August 6, 1999, under Section 402 of the Not-for-Profit Corporation Law. CGRC is a not-for-profit charitable organization exempt under Section 501(c)(3) of the Internal Revenue Code. This entity holds the apartment leases related to Ground s scatter-site housing activities. Schermerhorn House H.D.F.C., Inc. ( Schermerhorn ) is a not-for-profit entity formed under Section 402 of the Not-for-Profit Corporation Law. Schermerhorn was formed to develop a 217-unit apartment building on Schermerhorn Street, Brooklyn, New York for supportive housing designed to house formerly homeless and low-income single adults. The members of Schermerhorn are CGC (51%) and the Actors Fund of America (49%). Schermerhorn is the sole shareholder of Schermerhorn Housing Corp., the General Partner of Schermerhorn LP. St. Mark s Brownsville H.D.F.C., Inc. ( St. Mark s ) was incorporated on May 23, 2006, under Section 402 of the Not-for-Profit Corporation Law. St. Mark s was formed to develop a 70-unit apartment building to house elderly or disabled persons of low income who require housing facilities and services specially designed to meet their physical, social and psychological needs. -8-

11 NOTE A (continued) Ground is the sole owner or controlling member of the general partners which each own 0.01% of their associated limited partnerships. These partnerships were formed to own individual properties which are developed and managed to provide low-income housing. Limited Partnership General Partner Prince George Associates LP Prince George GP Corporation Chelsea Residence LP Chelsea GP Corporation Brook Avenue Housing LP CG Brook Avenue Housing Corporation Schermerhorn House LP Schermerhorn Housing Corporation Pitt Street LP Pitt Street Housing Corporation 410 Asylum Street LLC Ground 410 Asylum LIHTC LLC 410 Asylum Street Historic LLC Ground 410 Asylum HTC LLC St. Mark s Brownsville LP St. Mark s Senior Housing Corporation NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Financial Statement Presentation The accompanying consolidated financial statements of Ground have been prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( US GAAP ). Accordingly, the net assets of Ground and changes therein are classified and reported based on the existence or absence of donor-imposed restrictions as follows: Unrestricted net assets - represent expendable resources that are used to carry out the operations of Ground and are not subject to donor-imposed stipulations. Temporarily restricted net assets - resources which contain donor-imposed restrictions that are satisfied either by the passage of time or by actions of Ground. Permanently restricted net assets - resources which contain donor-imposed stipulations requiring that the corpus be maintained in perpetuity, but permit Ground to expend all of the income there from for general or specific purposes. Ground had no permanently restricted net assets at. -9-

12 NOTE B (continued) Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Contributions received with donor-imposed restrictions that are met in the same year as received are reported as unrestricted revenues. Expenses are reported as decreases in unrestricted net assets. Expirations of temporary restrictions on net assets, i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed, are reported as net assets released from restrictions. 2. Principles of Consolidation Not-for-Profit Corporations - The accompanying consolidated financial statements of Ground include the accounts of Ground Community H.D.F.C., Inc. and other not-for-profit entities that are commonly controlled by Ground s Board of Directors. All intercompany transactions and accounts have been eliminated in consolidation. Limited Partnerships - Partnerships that are controlled by Ground or its affiliated not-forprofit entities are included in the consolidated financial statements. Partnerships over which Ground or its affiliates exercise significant influence are consolidated within these financial statements. The general partnership interests held by Ground entities equal 0.01% of the respective limited partnerships equity, with the remainder of the partnerships equity held by the limited partners of the respective limited partnerships. The portion of the limited partnerships not owned by Ground affiliated entities is presented in the consolidated financial statements as noncontrolling interests. 3. Revenue Recognition Contributions, including unconditional promises to give, are reported as revenues in the period received. Unconditional promises to give, due in more than one year, if any, are discounted to reflect the present value of future cash flows at a risk-adjusted rate. Management and partnership fees are recognized as earned. Revenue from government grants and contracts, the majority of which are cost reimbursable, is recognized as costs are incurred. Rental income includes rent from the operation of low-income housing projects and is recognized when earned. -10-

13 NOTE B (continued) Ground earns fees for development of properties and recognizes these fees as earned on a percentage-of-completion basis. Development fees are paid by the respective limited partnerships, to Ground entities, through funds received from equity contributions of limited partnership investors as well as from the operating cash flow of the respective limited partnerships. Only the portion of development fees to be paid from limited partnership operating cash flow is eliminated in consolidation, while the portion to be paid from third-party equity contributions is not. 4. Cash Ground maintains bank accounts with several financial institutions. These accounts are insured by the Federal Deposit Insurance Corporation up to an aggregate amount of $250,000 for each entity. Cash is maintained in financial institutions in amounts which, at times, may exceed federally insured limits. Management does not believe that there is a significant risk of loss due to the failure of any such institutions. 5. Receivables and Allowance Ground uses the direct write-off method for pledges and contracts receivable. Any such accounts determined to be uncollectible are charged to operations. The allowance method is used for receivables related to real estate activities, where allowances are established for any tenant whose rent is more than 90 days delinquent. 6. Pledges Receivable Unconditional promises to give that are expected to be collected within a year are recorded at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at their estimated present value, using a risk-adjusted rate. At, pledges receivable, which are included within accounts receivable, in the accompanying consolidated statement of financial position, were due to be collected as follows: Amounts expected to be collected: Within one year $ 1,120,415 In one to two years 100,000 Total pledges receivable 1,220,415 Less: Present value discount (4,290) Pledges receivables, net $ 1,216,

14 NOTE B (continued) 7. Contractual Reserves Contractual reserves represent amounts that are required to be maintained by contractual or other agreements and consist of cash and cash equivalents, a certificate of deposit, treasury bills, and fixed income mutual funds. Such assets are reported at fair value, with realized and unrealized gains and losses, if any, are reflected in the accompanying consolidated statement of activities. 8. Fair Value Measurements Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As required by US GAAP for fair value measurement, Ground uses a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is categorized into three levels based on the transparency of inputs as follows: Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of. A quoted price for an identical asset or liability in an active market provides the most reliable fair value measurement because it is directly observable to the market. Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of. The nature of these securities includes investments for which quoted prices are available but traded less frequently and investments that are fair valued using other securities, the parameters of which can be directly observed. Level 3 - Securities that have little to no pricing observability. These securities are measured using management s best estimate of fair value, where the inputs into the determination of fair value are not observable and require significant management judgment or estimation. -12-

15 NOTE B (continued) Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes observable requires significant judgment by Ground. Ground considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to Ground s perceived risk of that instrument. 9. Concentration of Credit and Market Risks Financial instruments that expose Ground to potential concentrations of credit and market risks consist primarily of cash and restricted reserves. All such instruments are maintained at large financial institutions and credit exposure is not limited to any one institution. Management does not believe that its marketable securities or contractual reserves are subject to significant concentrations of market risk due to diversification. 10. Property and Equipment Property and equipment are recorded at cost or fair value at date of contribution, if donated. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, as follows: Building Leasehold improvements Furniture Equipment 40 years Shorter of asset life or life of lease 5-7 years 3-5 years 11. Development Cost All third-party costs, including interest expense associated with the acquisition of property for potential development, are capitalized as development costs. Any costs associated with potential acquisitions that are not deemed probable are expensed. All construction-related costs for properties where construction has commenced are capitalized as development costs as incurred. -13-

16 NOTE B (continued) 12. Impairment of Long-Lived Assets and Asset Retirement Obligations Ground reviews its rental properties for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the fair value is less than the carrying amount of the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized for the year ended. Management has evaluated the requirements governing Conditional Asset Retirement Obligations and determined that it is not subject to such provisions. 13. Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the consolidated statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 14. Income Taxes On January 1, 2009, Ground adopted a new accounting standard which requires that a tax position be recognized or derecognized based on a more-likely-than-not threshold. The accounting standard establishes criterion that an individual tax position has to meet for some or all the benefits of that position to be recognized in an entity s financial statements. On initial application, this criterion will be applied to all tax positions for which the statute of limitations remains open. Only tax positions that meet the more-likely-than-not recognition threshold at the adoption date will be recognized or continue to be recognized. The adoption of this guidance did not have an impact on Ground s consolidated financial statements, as management believes that there are no uncertain tax positions within its consolidated financial statements. Ground has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; determine its filing and tax obligations in jurisdictions for which it has nexus; and to review other matters that may be considered tax positions. 15. Use of Accounting Estimates The preparation of consolidated financial statements in conformity with US 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -14-

17 NOTE C - LENDER RESTRICTED CASH AND CONTRACTUAL RESERVES Under the terms of various partnership agreements and mortgage loans, Ground is required to segregate and maintain funds in certain restricted accounts that can only be accessed with the permission of the respective limited partner and mortgage lender. These reserve accounts are primarily funded from the proceeds of Ground earned development fees, a portion of which is required to be placed in reserve when paid by the limited partnership. These reserves are required by the investor and lender, to fund potential limited partnership based operating deficits or building replacement needs. The amount and terms of such reserves are set forth in the respective limited partnership agreements. In addition, the following amounts were restricted as cash collateral for loans: $535,457 was held in a restricted account with Deutsche Bank as collateral for an $8 million line of credit; $1,800,000 was held in a restricted account with Mizuho Bank to collateralize a $3 million line of credit; and $1,900,000 is held in a segregated account by CGC IV, as these funds are lender designated for the preservation of low income housing. Lender restricted cash and contractual reserves, at fair value, at, consisted of the following: Cash and cash equivalents $ 5,618,915 Certificate of deposit 1,800,000 Treasury bills 12,779,863 Fixed income mutual funds 5,092,040 $ 25,290,818 The following table presents Ground s lender restricted cash and contractual reserves classified within the fair value hierarchy as of. Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 5,618,915 $ 5,618,915 $ - $ - Certificate of deposit 1,800,000-1,800,000 - Treasury bills 12,779,863-12,779,863 - Fixed income mutual funds 5,092,040 5,092, $ 25,290,818 $ 10,710,955 $14,579,863 $

18 NOTE C (continued) Investment income for the year ended, consisted of the following: Interest and dividends $ 225,791 Investment loss - net (18,120) $ 207,671 Contractual reserve fees are netted against interest income and totaled $31,911 for the year ended. NOTE D - PROPERTY AND EQUIPMENT, NET At, property and equipment, net, consisted of the following: Land $ 9,487,806 Building and improvements 209,026,338 Leasehold improvements 4,506,205 Furniture and equipment 6,636,355 Improvements in process 64, ,720,704 Less accumulated depreciation and amortization (39,508,178) $ 190,212,526 Depreciation and amortization expense totaled $4,926,809 for the year ended. NOTE E - LOANS PAYABLE The following reflects the various debt obligations outstanding as presented in the accompanying consolidated statement of financial position at. Ground and Affiliates Lender Debt obligation at December 31, 2009 Maturity date Interest rate CGC Calvert Social Investments Foundation $ 675,000 3/31/ % CGC Mennonite Mutual Aid Community Investments Partners 200,000 10/15/ % CGC Mizuho Corporate Bank (USA) 1,299,119 10/24/2011 LIBOR plus 1.5% -16-

19 NOTE E (continued) Ground and Affiliates Lender Debt obligation at December 31, 2009 Maturity date Interest rate CGC Safe Haven Loan Fund $ 1,000,000 10/31/2011 7% CGC Seedco Financial 962,513 9/2/2014 7% CGC van Ameringen Foundation 1,000,000 8/1/2014 2% CGC Astoria Federal Savings (Federal Home Loan Bank) 1,080,000 11/26/2023 Non-interest bearing Times Square Hotel LLC NYC Department of Housing Preservation and Development 28,850,107 7/1/ % CGM Metlife, Altman Foundation, AXA Equitable Life Insurance Corp 1,500,000 6/8/2011 2% CGM HSBC 1,200,000 11/30/ % CGM Deutsche Bank 3,975,000 5/31/2011 LIBOR plus 2.5% CGC IV NYC Department of Housing Preservation and Development 2,441,200 1/5/2040 1% CGC IV NYS Homeless Housing Assistance Corporation 5,698,300 1/5/2040 1% CGC IV Capital One Bank (Federal Home Loan Bank) $500,000 4/1/2021 Non-interest bearing CGC IV NYC Department of Housing Preservation and Development - Reso A 803,172 1/5/2040 1% CGC IV MacArthur Foundation 2,000,000 10/1/2018 2% CGC IV NYS Housing Finance Agency 581,000 1/5/2040 Non-interest bearing Prince George Assoc. LP NYC Department of Housing Preservation and Development 12,606,976 11/1/2028 1% Prince George Assoc. LP NYS Homeless Housing Assistance Corporation 4,000,000 11/1/2029 1% Chelsea Residence LP NYC Department of Housing Preservation and Development 16,259,309 7/1/ % Chelsea Residence LP NYS Homeless Housing Assistance Corporation 5,469,414 11/1/2029 1% Chelsea Residence LP Astoria Federal Savings (Federal Home Loan Bank) 1,000,000 11/1/2019 Non-interest bearing Schermerhorn House LP NYS Homeless Housing Assistance Corporation 6,749,800 4/30/2039 1% Schermerhorn House LP NYC Department of Housing Preservation and Development 19,809,343 4/27/2040 1% Schermerhorn House LP Sovereign Bank (Federal Home Loan Bank) 675,000 8/4/2024 Non-interest bearing Pitt Street LP New York Housing Development Corporation 14,482,578 3/1/2041 Variable floating rate Pitt Street LP NYC Department of Housing Preservation and Development 13,587,038 12/28/2036 1% Pitt Street LP NYS Homeless Housing Assistance Corporation 6,413,396 12/28/2036 1% Pitt Street LP HSBC (Federal Home Loan Bank) 1,000,000 12/28/2021 Non-interest bearing Brook Avenue Housing LP New York State Housing Financing Agency 19,865,891 11/01/2037 Variable floating rate -17-

20 NOTE E (continued) Ground and Affiliates Lender Debt obligation at December 31, 2009 Maturity date Interest rate Brook Avenue Housing LP NYC Department of Housing Preservation and Development $ 8,784,710 12/20/2039 1% Brook Avenue Housing LP NYS Homeless Housing Assistance Corporation 3,500,000 12/20/2039 1% Brook Avenue Housing LP Astoria Federal Savings (Federal Home Loan Bank) 1,500,000 12/20/2022 Non-interest bearing St Mark s Brownsville LP NYS Homeless Housing Assistance Corporation 1,797,968 6/8/2039 1% St Mark s Brownsville LP NYC Department of Housing Preservation and Development - Reso A 750,000 11/20/2048 Non-interest bearing 410 Asylum Street LLC State of Connecticut Department Of Economic and Comm. Dev. 1,850,000 3/27/2038 1% 410 Asylum Street LLC City of Hartford, CT 242,813 8/1/2039 1% 410 Asylum Street LLC Connecticut Housing Finance Authority 10,625,242 3/1/ % 410 Asylum Street LLC Connecticut Housing Finance Authority 5,656,235 3/1/2040 Non-interest bearing Total loans payable 210,391,124 Less: Current portion (7,177,983) Long-term portion $ 203,213,141 Scheduled maturities of the loans payable at follow: Amount Year ending December 31: 2010 $ 7,177, ,298, ,400, , ,189,305 Thereafter 191,799,527 Total $ 210,391,124 All loans made to Ground, for the purpose of acquiring real estate, are secured by the respective properties that they have financed. Loans to limited partnership entities for construction or acquisition are secured by the property of the respective partnership. Some of the loans made for corporate purposes and for working capital needs are secured by various accounts receivable and deposit accounts. Total interest of $1,553,971 was recorded for the year ended, of which $874,164 was expensed and $679,807 was capitalized. Additionally, at Ground had available lines of credit totaling $3,200,881, with interest rates of LIBOR plus 1.5% (1.73%) and the bank prime rate (3.25%). -18-

21 NOTE F - GOVERNMENT GRANTS AND CONTRACTS Government grants and contracts revenue for the year ended, received by Ground from various federal, New York City and state government agencies, consisted of the following: NYC Department of Homeless Services $ 10,685,017 US Department of Housing and Urban Development 6,196,627 NYC HIV/AIDS Services Administration 1,722,127 NYS Department of Health & Mental Hygiene 2,172,633 Department of Veterans Affairs 603,550 NYS Office of Temporary and Disability Assistance 94,786 Other Government Agencies 149,637 $ 21,624,377 NOTE G - DEFINED CONTRIBUTION PLAN Ground has a 403(b) Tax Deferred Savings Plan (the Plan ) that covers all administrative employees. Under the terms of the Plan, an employee may contribute any amount that would not exceed the limitations provided in the Internal Revenue Code or otherwise disqualify the Plan or Trust. Ground contributed $198,707 for the year ended. NOTE H - COMMITMENTS AND CONTINGENCIES Ground leases office space for its headquarters and space for its social services programs under operating leases which expire at various dates through 2024, and is obligated to pay annual rentals and an additional amount based upon escalations in real estate taxes, maintenance and utility costs. Rent expense totaled $2,224,795 for the year ended. The related future minimum lease payments as of, follow: Amount 2010 $ 1,948, ,129, , , ,737 Thereafter 1,803,376 Total $ 5,463,

22 NOTE H (continued) Ground, through its affiliates, is the General Partner of and sponsors of the Chelsea Residence LP, Prince George Associates LP, Schermerhorn House LP, Pitt Street LP, Brook Avenue Housing LP, 410 Asylum Street LLC, 410 Asylum Street Historic LLC, and St. Mark s Brownsville LP. Ground has guaranteed the obligations of its general partnership entities to the respective limited partners for tax credit compliance, operating deficits and construction completion for buildings under development. These obligations of Ground to the respective limited partnerships are limited by both time and amounts as follows: Chelsea Residence LP: Guarantee for tax credit compliance and operating deficits is limited to the greater of $500,000 or the amount that has accumulated in the entity s sponsor reserve account. As of, the amount of such guarantee was $534,929, expiring in Prince George Associates LP: Guarantee for tax credit compliance and operating deficits is limited to the greater of $500,000 or the amount that has accumulated in the entity s sponsor reserve account. As of, the amount of such guarantee was $1,380,501, expiring in Schermerhorn House LP: Guarantee for tax credit compliance and operating deficits is limited to $730,000 or the amount of the developer fees paid. As of, the amount of such guarantee was $500,000, expiring in Pitt Street LP: Guarantee for tax credit compliance and operating deficits is limited to $1,000,000 or the amount of the developer fees paid. As of, the amount of such guarantee was $275,000, expiring In addition, in its capacity as developer of Pitt Street LP, CGC has issued a Construction Completion Guarantee in favor of JP Morgan Chase ( JP Morgan ). JP Morgan has issued a letter of credit to enhance the credit rating of a tax-exempt bond offering by the City of New York, the proceeds of which will be used to finance the construction of this property. This guarantee will be fulfilled upon the issuance of a temporary certificate of occupancy for the building. Also related to the Pitt Street project, CGC II has issued a guarantee of $31 million for a construction loan from the New York City Housing Development Corporation, the proceeds of which were raised in the aforementioned tax-exempt bond offering. This guarantee will be relieved upon the permanent financing of the property, which is expected to occur in December

23 NOTE H (continued) Brook Avenue Housing LP: Guarantee of tax credit compliance and operating deficits is limited to the amount of the development fee that has been paid to the developer. As of, the amount of such guarantee was $400,000, expiring In addition, in its capacity as developer of Brook Avenue Housing LP, CGC has issued a Construction Completion Guarantee in favor of the Bank of America ( Bank America ). Bank America has issued a letter of credit to enhance the credit rating of a tax-exempt bond offering by the City of New York, the proceeds of which will be used to finance the construction of this property. This guarantee will be fulfilled upon the issuance of a temporary certificate of occupancy for the building. Also related to the Brook Avenue project, CGC II has issued a guarantee of $22.3 million for a construction loan from the New York State Housing Finance Agency, the proceeds of which were raised in the aforementioned tax-exempt bond offering. This guarantee will be relieved upon the permanent financing of the property, which is expected to occur in September Asylum Street LLC and 410 Asylum Street Historic LLC: Guarantee of tax credit compliance is limited to $1,750,000. CGC has guaranteed to fund operating deficits up to $325,000 for a period of three years from the date of break even operations, which is expected to be achieved in July St. Mark s Brownsville LP: Unconditional guarantee of tax credit compliance and construction completion. CGC has additionally guaranteed the payment of operating deficits prior to break-even, which is limited $1.4 million or the amount of the developer fees paid, which at was $420,000. Once break-even is achieved, the guarantee for operating deficits is limited to $303,633 for a period of three years. The building is scheduled to open in August 2010 and break-even is expected to occur by March NOTE I - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at, consisted of the following: Green Design $ 1,392,706 Brownsville 991,083 Ground Institute 724,972 Resource Development 275,000 Housing Development 278,525 $ 3,662,

24 NOTE J - NET ASSETS RELEASED FROM RESTRICTION Temporarily restricted net assets were released from restrictions during the year ended, in satisfaction of donor time or use restrictions as follows: Green Design $ 257,618 Brownsville 1,110,415 Ground Institute 785,761 Resource Development 100,000 Housing Development 124,999 Montrose 80,001 Communications 69,999 $ 2,528,793 NOTE K - SUBSEQUENT EVENTS In 2009, new guidance was issued regarding the reporting of subsequent events to incorporate the accounting and disclosure requirements for subsequent events into US GAAP. This guidance introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the statement of financial position date. Ground adopted this new guidance as of December 31, Ground evaluated its consolidated financial statements for subsequent events through June 29, 2010, the date the consolidated financial statements were available to be issued and determined that the following information was pertinent. On June 9, 2010, Ground completed syndication of a property located on Hegeman Avenue, Brooklyn, New York. This syndication resulted in the transfer of approximately $4.6 million of predevelopment costs from CGC to Hegeman Avenue L.P. These assets were transferred for cash at cost with the proceeds used to repay secured bank debt of $3.9 million and replenish working capital that was used to fund a portion of the predevelopment costs. The Hegeman project consists of 160 studio apartments for supportive housing plus one 1-bedroom apartment for a live-in superintendent and has a total development budget of $43.6 million. -22-

25 NOTE K (continued) It is expected that in July 2010, 410 Asylum Street LLC, of which Ground 410 Asylum LIHTC LLC is the Managing Member, and the Connecticut Housing Finance Authority ( CHFA ), the construction lender for this project, will enter into a Second Loan Modification Agreement (the Agreement ). The Agreement provides for the extension of the repayment of a $7.9 million construction loan until October 31, 2010 and extends the start of the amortization period on a $4 million mortgage loan until the same time. This 70 unit building opened in September 2009 and is currently fully occupied. The extension is necessary to obtain various permits that are required by the investor in this project before making their equity contribution, the proceeds of which are the source of repayment for the CHFA construction loan. 410 Asylum Street LLC has executed the Agreement, which has been sent to CHFA for final execution. On January 14, 2010, Brook Avenue LP, of which Ground, through an affiliate, is the general partner, received a temporary certificate of occupancy and began accepting tenants for this 190 unit building of supportive housing. As of June 2010 the building was 95% occupied. Additionally, in June 2010, a $15.3 million equity installment was made by the investment limited partner, the proceeds from which were used to liquidate an equal amount of a $22.3 million tax exempt bond, used to fund the project construction loan. Ground is a guarantor of the bond. As such, this contingent obligation was reduced to $7 million. The Ground board of directors is exploring a restructuring of the organization under which the national programs and specialized community development programs of Ground would be spunoff into a separate legal entity. The board has indicated an intent to come to a decision and complete the restructuring by December 31, The terms of the restructuring, including financial terms, are in the process of being determined. Ground is not aware of any other subsequent events which would require recognition or disclosure in the accompanying consolidated financial statements. -23-

26 SUPPLEMENTARY INFORMATION

27 CONSOLIDATING SCHEDULE OF FINANCIAL POSITION INFORMATION As of ASSETS Ground Community H.D.F.C., Inc. Ground Management Corp. Ground Community II H.D.F.C., Inc. Ground Community III H.D.F.C., Inc. Ground Community IV H.D.F.C., Inc. Ground Jobs Training Corp. Ground Ventures Corp. Ground of R.C. Corp. Schermerhorn House H.D.F.C., Inc. St. Mark s Brownsville H.D.F.C., Inc. General Partners Eliminations Total CGC and Affiliates Prince George Associates LP Chelsea Residence LP Schermerhorn House LP Pitt Street LP Brook Avenue Housing LP St. Mark s Brownsville LP 410 Asylum Street LLC 410 Asylum Street Historic LLC Eliminations Total Current assets: Cash $ 351,916 $ 54,458 $ 78,474 $ 50,111 $ 6,000 $ 29,136 $ 8,127 $ - $ - $ - $ 2,845 $ - $ 581,067 $ 132,831 $ 122,544 $ 195,220 $ 4,613 $ 1,440,336 $ 7,588 $ 118,243 $ 1,887 $ - $ 2,604,329 Accounts receivable 3,934, , ,154 40, ,990 16,452 6, ,766 (85,396) 4,979, , , ,734 2,032,723 1,061, ,208-19,754 (67,854) 9,255,373 Development fee receivable 3,291,014-1,446, , ,963, (3,709,657) 1,253,547 Loans receivable - consolidated affiliates 19,382,744-5,673, ,373-2,390, ,390 72,367 (28,227,842) Notes and interest receivable 325, , (243,382) 81,867 Other current assets 197, , ,633-13, ,042 82, , , , ,342 10,148-1,513,481 Total current assets 27,482, ,669 7,389, , ,623 2,662,178 28, ,390 76,978 (28,313,238) 11,552, , , ,154 2,037,336 2,501, , ,585 31,789 (4,020,893) 14,708,597 Noncurrent assets: Lender restricted cash and contractual reserves: Lender restricted cash 1,800, , ,900, ,235, ,235,457 Contractual reserves 9,313,433-73,242-25,962 2,541, ,954, , ,586 4,174, ,880,221 1,916, ,055,361 Total lender restricted cash and contractual reserves 11,113, ,457 73,242-1,925,962 2,541, ,189, , ,586 4,174, ,880,221 1,916, ,290,818 - Tenant security deposits 198, ,932 11, , ,006 61,263 76, , ,060 Development costs 4,530, , ,104, ,698,924 39,515,225 12,463, (10,586,139) 92,196,497 Investments at equity - - 1,456,072 (10,368) (18) 200 (2,030) (170,846) 1,273, (1,273,010) - Loan receivable - unconsolidated affiliates 7,634,750 2,135,444 6,600, ,979, ,349,888 (8,579,694) - (33,840) - (37,500) (9,512,576) (186,278) Development fee receivable 5,612,230-8,570, , ,005, (5,563,638) 9,442,343 Property and equipment, net 44,567, , ,169,729 1,609, , ,662,999 35,390,740 24,270,539 56,985, ,526,579 3,097 (9,626,428) 190,212,526 Total noncurrent assets 73,656,352 2,873,364 17,273,589 (10,368) 18,095,691 7,229, ,449 - (8) 200 (2,030) (170,846) 119,070,866 27,317,522 25,097,388 61,202,579 45,698,924 39,477,725 4,831,398 22,256,360 34,697 (27,049,215) 317,938,244 Total assets $ 101,138,759 $ 3,740,033 $ 24,662,785 $ 435,134 $ 18,656,314 $ 9,891,651 $ 153,883 $ - $ (8) $ 353,590 $ 74,948 $ (28,484,084) $ 130,623,005 $ 27,755,726 $ 25,637,807 $ 61,848,733 $ 47,736,260 $ 41,979,205 $ 5,533,782 $ 22,535,945 $ 66,486 $ (31,070,108) $ 332,646,841 LIABILITIES AND NET ASSETS Current liabilities: Payables and accruals $ 1,954,815 $ 7,998, $ 158,610 $ 61,005 $ 695,210 $ - $ - $ - $ 100 $ 200 $ 1,998 $ (85,396) $ 10,785,402 $ 640, $ 571,943 $ 3,356, $ 3,870,187 $ 1,861, $ 1,612,586 $ 1,129, $ 98,793 $ (67,849) $ 23,859, Development fee payable ,116 62,420 7,200,000 5,216,875 4,799, ,352 1,376,892 - (19,969,185) - Current portion of deferred revenue ,000-98,876 66, , ,626 Loan payable - consolidated affiliates - 20,394, ,784, , ,072 2,391, (28,227,842) Security deposits and other payables 314,112 7, , ,931 24, , ,168 55, , , ,369 Loans payable (receivable) - unconsolidated affiliates (316,268) (12,637,233) 4,735, ,957-82, ,715 - (94,490) - (7,777,885) 1,159, ,275 1,342,072 2,664,940 1,221, , ,719 32,787-17,766 Current portion of loans payable 200, , , ,677, ,177,983 Total current liabilities 2,152,659 16,063,280 5,224, ,962 5,587, , , ,072 2,459, (92,492) (28,313,238) 4,641,381 2,928,375 1,203,580 12,002,641 11,752,002 7,883,256 2,315,495 9,668, ,358 (20,037,034) 32,521,040 Noncurrent liabilities: Deferred revenue - - 2,310, , ,680, ,680,786 Interest payable ,860, ,635 45, ,246 45, ,435 21,377 - (243,382) 2,472,103 Loans payable 34,866,739 6,375, ,023, ,265,411 16,606,976 22,728,723 27,234,143 35,483,012 33,650,601 2,547,968 11,696, ,213,141 Total noncurrent liabilities 34,866,739 6,375,000 2,310,000-12,394, ,946,197 18,467,420 23,121,358 27,279,143 35,584,258 33,695,949 2,797,403 11,717,684 - (243,382) 208,366,030 Total liabilities 37,019,398 22,438,280 7,534, ,962 17,981, , , ,072 2,459, (92,492) (28,313,238) 60,587,578 21,395,795 24,324,938 39,281,784 47,336,260 41,579,205 5,112,898 21,386, ,358 (20,280,416) 240,887,070 Noncontrolling interest ,757,815 29,757,815 Net assets: Unrestricted 61,182,047 (19,423,219) 17,128,491 (9,828) 674,714 9,458,220 (245,657) (282,072) (2,459,539) 353, ,440 (170,846) 66,373,141 6,359,931 1,312,869 22,566, , , ,884 1,149,275 (95,872) (40,547,507) 58,339,670 Temporarily restricted 2,937, , ,662, ,662,286 Total net assets 64,119,361 (18,698,247) 17,128,491 (9,828) 674,714 9,458,220 (245,657) (282,072) (2,459,539) 353, ,440 (170,846) 70,035,427 6,359,931 1,312,869 22,566, , , ,884 1,149,275 (95,872) (40,547,507) 62,001,956 Total liabilities and net assets $ 101,138,759 $ 3,740,033 $ 24,662,785 $ 435,134 $ 18,656,314 $ 9,891,651 $ 153,883 $ - $ (8) $ 353,590 $ 74,948 $ (28,484,084) $ 130,623,005 $ 27,755,726 $ 25,637,807 $ 61,848,733 $ 47,736,260 $ 41,979,205 $ 5,533,782 $ 22,535,945 $ 66,486 $ (31,070,108) $ 332,646,841 The accompanying report of the independent certified public accountants, consolidated financial statements, and accompanying notes should be read in conjunction with this schedule. -24-