Hancock Bank 1000 Legion Place, Suite 1250 Orlando, Florida Attn: Mary Wyatt

Transcription

1 Hancock Bank 1000 Legion Place, Suite 1250 Orlando, Florida Attn: Mary Wyatt Re: The Capital Trust Agency Multifamily Housing Revenue Bonds (TMAlexander Apartments Project) Series 2011 $14,875,000 No Default Letter Dear Ms. Wyatt: In accordance with Section 3.9(a) of the Loan Agreement relating to the above referenced bonds, and to the best of our knowledge and belief, as of December 31, 2011, the Company was not in default with respect to any covenants, agreements or conditions contained in the Loan Agreement, which has been reviewed by us during our audit of the financial statements of GMF- TM Alexander, LLC. Global Ministries Fellowship (GMF) has provided you with a copy of the Company's December 31, 2011 financial statements. Very truly yours, If you have any questions regarding the above, please feel free to contact us. Memphis, Tennessee March 22, 2012 Frazee Ivy Davis PLC I CPAs who Add Value I 5100 Poplar Avenue I Suite 1400 I Memphis, Tennessee I p I fidcpa.com

2 Debt Service Coverage Ratio Calc GMF- TM Alexander, LLC December 31, Per Audited Financial Cash Basis Cash Basis Adjustment per Indenture Basis Statements ~ustment Balances Indenture Balances REVENUE Potential Gross Rental Revenue $ 1,045,584 $ - $ 1,045,584 $ - $ 1,045,584 Vacancy (8,082) (8,082) (8.082~ Net Rental Revenue 1,037,502 1,037,502 1,037,502 Other Revenue 3,730 3,730 3,730 Operating Revenue $ 1,041,232 $ - $ 1,041,232 $ - $ 1,041,232 EXPENDITURES General Administrative $ 16,161 $ - $ 16,161 $ - $ 16,161 Payroll 83,014 (12,195) 70,819-70,819 Utilities 32,544 11,191 43,735-43,735 Management Fee 42,000-42,000 (15,750) 26,250 Repairs and Maintenance 46,121 (6,914) 39,207 (23,918) 15,289 Contract Services 25,146-25,146-25,146 Insurance 17,145 11,022 28,167-28,167 Real Estate Taxes 83,412 69, ,213 (153,213) Debt service fees 5,313-5,313 (5,313) Interest expense 560,098 (560,098) Depreciation and amortization 229,865 (229,865) Replacement Reserves ,830 30,830 Total Expenditures $ 1,140,819 $ (717,058) $ 423,761 $ (167,364) $ 256,397 Net Operating Revenue DSR Fund Interest Earnings 69 Net Available for Debt Service 784,904 Bond Debt Service 553,476 Excess Cash Flow 231,428 Debt Service Coverage 1.42 Asset Management Fee (10,500) Subordinate Management Fee (5,250) Extraordinary Maintenance (23,918) Real Estate Tax Payments (153,213) Real Estate Taxes Funded at Closing 153,213 Debt Service Fees (5,313) Adjusted Excess Cash Flow 186,447

3 G:MF TM ALEXANDER, LLC PROJECT NUMBER FL29Hl42022 Financial Statements and Supplemental Information December 31,2011

4 GMF- TM Alexander, LLC PROJECT NO. FL29H Table of Contents December 31, 2011 Independent Auditor's Report... 2 Financial Statements Balance Sheet... 3 Statement of Operations Statement of Changes in Member's Deficit Statement of Cash Flows Notes to the Financial Statements Supplemental Information Balance Sheet Data Statement of Profit and Loss Data Statement of Cash Flows Data... : Schedule of Changes in Fixed Asset Accounts Schedule of Reserve for Replacements Computation of Surplus Cash, Distributions and Residual Receipts Independent Auditor's Report on Internal Control Independent Auditor's Report on Compliance with Specific Requirements Applicable to Major HUD Programs Independent Auditor's Report on Compliance with Specific Requirements Applicable to Fair Housing and Non-Discrimination Certification of Member Certification of Managing Agent Independent Accountant's Report on Applying Agreed-Upon Procedure Page

5 Independent Auditor's Report To the Member GMF- TM Alexander, LLC Memphis, Tennessee We have audited the accompanying balance sheet of GMF- TM Alexander, LLC (HUD Project No. FL29H142022) (the "Company") as of December 31, 2011 and the related statements of operations, changes in member's deficit, and cash flows for the period May 31, 2011 through December 31, These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GMF- TM Alexander, LLC (HUD Project No. FL29Hl42022) as of December 31, 2011, and the results of its operations, and its cash flows for the period May 31, 2011 through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report, dated March 22, 2012, on our consideration of GMF - TM Alexander, LLC's internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting In accordance with Government Auditing Standards, we have also issued an opinion dated March 22, 2012, on GMF- TM Alexander, LLC's compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters that could have a direct and material effect on a major HUD-assisted program. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 11 through 17 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Company. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Memphis, Tennessee March 22, 2012 Frazee Ivy Davis PLC I CPAs who Add Value I 5100 Poplar Avenue I Suite 1400 I Memphis, Tennessee I p I fidcpa.com

6 GMF- TM Alexander, LLC Balance Sheet PROJECT NO. FL29Hl42022 December 31, 2011 ASSETS Current assets Cash and cash equivalents Tenant accounts receivable Prepaid insurance Restricted deposits: Taxes and insurance escrow Trustee bond fund cash Total current assets Property and equipment, net Restriced deposits and funded reserves Tenant security deposits Replacement reserve Reserve for debt service Other assets Deferred financing costs, net of accumulated amortization of $9,598 Utility deposits $ 37,459 2,516 11,022 2, ,079 1,002,576 12,777,342 25,650 30, , , ,557 11, ,748 Total assets $ 14,950,146 LIABILITIES AND MEMBER'S DEFICIT Current liabilities Current maturities of bonds payable Accounts payable Accrued interest payable Prepaid rents Total current liabilities Long-term liabilities Tenant security deposits Bonds payable Member's deficit Total long-term liabilities Total liabilities Total liabilities and member's deficit $ 50,000 19, ,476 3, ,821 25,537 14,398,172 14,423,709 15,049,530 (99,384) $ 14,950,146 See notes to the financial statements. 3

7 G.MF- TM Alexander, LLC Statement of Operations Revenue ~etrental income Interest Other Total revenue Expenses General and administrative Payroll Utilities Management fees Repairs and maintenance Contract services Insurance Real estate taxes Debt service fees Interest expense Depreciation and amortization ~et loss Total expenses PROJECT NO. FL29H For the period May 31, 2011 through December 31, 2011 $ 1,037, ,730 1,041,335 16,161 83,014 32,544 42,000 46,121 25,146 17,145 83,412 5, , ,865 1,140,819 $ (99,484) See notes to the financial statements. 4

8 G:MF- TM Alexander, LLC Statement of Changes in Member's Deficit Member's equity, beginning of period Contributions Net loss Member's deficit, end of period PROJECT NO. FL29H For the period May 31, 2011 through December 31, 2011 $ 100 (99,484) $ (99,384) See notes to the financial statements. 5

9 GMF- TM Alexander, LLC PROJECT NO. FL29H Statement of Cash Flows For the period May 31, 2011 through December 31, 2011 Cash flows from operating activities Rental receipts Interest and other receipts General and administrative Payroll Utilities Management fees Repairs and maintenance Contract services Insurance Real estate taxes Debt service fees Tenant security deposits Net cash provided by operating activities Cash flows from investing activities Escrow deposits Deposits to reserve for replacement Purchases of property and equipment Net cash used in investing activities Cash flows from financing activities Deferred financing costs paid Net proceeds from issuance of bonds Member contributions Net cash provided by financing activities $ 1,038,222 3,833 (16,161) (70,819) (43,735) (42,000) (39,207) (25,146) (28,167) (153,213) (5,313) (113) 618,181 (I,50 I,579) (30,830) (12,927,808) (14,460,217) (562, 155) 14,441, ,879,495 Net increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ 37,459 37,459 Reconciliation of net loss to net cash provided by operating activities Net loss Depreciation and amortization Change in operating assets and liabilities Accounts receivable Prepaid expenses Tenant security deposits account Utility deposits Accounts payable Accrued liabilities Prepaid rents Tenant security deposits liability Net cash provided by operating activities $ (99,484) 229,865 (2,516) (11,022) (25,650) (11,191) 19, ,297 3,236 25,537 $ 618,181 See notes to the financial statements. 6

10 G:MF- TM Alexander, LLC PROJECT NO. FL29Hl42022 Notes to the Financial Statements December 31, 2011 Note 1 - Organization and business activity T.M. Alexander Apartments (the "Project") is a 150-unit apartment project located in Miami, Florida. The Project is owned by GMF- TM Alexander, LLC, a Tennessee limited liability company (the "Company"), formed January 26, 2011 to acquire, own and operate the Project. The Company is a single member limited liability company owned by GMF- Preservation of Affordability Corporation, a Tennessee nonprofit corporation. The Project participates in the Housing Assistance Payment Program as provided by the Section 8 Program of the National Housing Act through a Housing Assistance Payment (HAP) contract administered by the U.S. Department of Housing and Urban Development (HUD). Under the program, the Project provides housing to low and moderate income elderly tenants, subject to regulation by HUD as to rental charges and operating methods. Lower rental charges to tenants are recovered by the Project through rent subsidies under the HAP contract. The Section 8 program is a major HUD program. The HAP contract expires in November Housing assistance payments included in rental income for the period ended December 31, 2011 totaled $869,562. Note 2 - Summary of significant accounting policies Basis of accounting The accrual method of accounting is used for financial statement purposes. Cash equivalents All highly liquid investments purchased with an initial maturity of less than three months are considered cash equivalents. Accounts receivable Accounts receivable consists of amounts due from tenants and from HUD. The Project performs continual credit evaluation of its tenants and does not consider an allowance for doubtful accounts necessary. Property, equipment and depreciation Property, equipment, major renewals and betterments are recorded at cost. Expenditures for normal repair and maintenance are expensed to operations as they occur. Depreciation is provided through the straight-line method over the assets' estimated useful lives which range from five to forty years. Accelerated depreciation methods are used for tax purposes. Rental income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Company and the tenants of the property are operating leases. Under the regulatory agreement, the Project may not increase rents charged to tenants without prior HUD approval. Amortization The costs incurred in conjunction with long-term debt financing arrangements are recorded as deferred financing costs and are amortized over the life of the debt commitment. Total amortization expense for the period May 31, 2011 through December 31,2011 was $9,598. 7

11 G:MF- TM Alexander, LLC PROJECT NO. FL29Hl42022 Notes to the Financial Statements (continued) December 31, 2011 Note 2- Summary of significant accounting policies (continued) Income taxes Neither the Company nor its non-profit corporate member are subject to income taxes. The Company recognizes the tax benefits of uncertain positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for the open tax years, or expected to be taken in the Company's 2011 tax return. The Company identifies its major tax jurisdictions as U.S. Federal, Tennessee and Florida State jurisdictions; however, the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Subsequent events Management has evaluated subsequent events through March 22, 2012, the date the financial statements were available to be issued. Note 3- Property and equipment Property and equipment consisted of the following at December 31, 2011 : Land Buildings Building equipment, portable Total property and equipment Less accumulated depreciation Property and equipment, net Depreciation expense for the year $ 1,140,000 11,387, ,021 12,997, ,267 $ 12,777,342 $ 220,267 8

12 G:MF- TM Alexander, LLC PROJECT NO. FL29H Notes to the Financial Statements (continued) December 31, 2011 Note 4- Bonds payable On May 31, 2011 the Company issued $14,875,000 in The Capital Trust Agency Multifamily Housing Revenue Bonds. The bonds have staggered maturity dates from January 1, 2012 to July 1, 2046, carry interest rates from 5.8% to 6.75% and are secured by substantially all assets of the Company. Scheduled principal maturities of bonds payable during each of the next five years are as follows: Year ending December 31, Thereafter Total bonds payable Less current maturities Amount $ 50, , , , ,000 14,235,000 14,875,000 50,000 14,825,000 Less: unamortized original issue discount Bonds payable, non-current 426,828 $ 14,398,172 The bond indentures require the Company to make deposits to restricted accounts including a debt service reserve account, a repair and maintenance escrow, and a property tax and insurance escrow. Note 5 - Management fee The Company is managed by Miami Mar, Inc. (the "Agent"), an unaffiliated entity, for a fee equal to three percent (3%) of gross collections of the project. Management fees earned were $31,500 for the period ended December 31, Note 6 - Related party transactions The company pays a fee to GMF - Preservation of Affordability Corp. ("GMF-PAC") computed as an asset management fee of one percent (1 %) of gross collections if certain profitability goals are achieved. Asset management fees earned were $10,500 for the period ended December 31, 2011, these fees are payable out of entity reserves or surplus cash. 9

13 GMF- TM Alexander, LLC PROJECT NO. FL29H Notes to the Financial Statements (continued) December 31, 2011 Note 7 - Concentrations The Company deposits its cash in financial institutions. At times, deposits may exceed federally insured limits. The Company has not experienced any losses in such accounts. GMF- TM Alexander, LLC, d/b/a T.M. Alexander Apartments is a 150-unit rental assisted apartment community located in Miami, Florida. The Project's operations are concentrated in the multifamily real estate market and operate in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, 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 costs, including the additional administrative burden, to comply with a change. Note 8 - Restricted assets At December 31, 2011, the Company had $550,000 in trust, irrevocably dedicated to the repayment of The Capital Trust Agency Multifamily Housing Revenue Bonds. The Company has not been relieved of its obligation and remains the primary obligor of this debt. Therefore, the liability is recognized on the accompanying Balance Sheet. 10

14 SUPPLEMENTAL INFORMATION

15 GMF- TM Alexander, LLC Balance Sheet Data PROJECT NO. FL29H December 31, 2011 ASSETS Current assets ll20 Cash - operations 1130 Tenant accounts receivable 1135 Accounts receivable, HUD 1200 Prepaid expenses lloot Total current assets 1191 Tenant deposits held in trust Restricted deposits 1310 Escrow deposits 1320 Replacement reserve 1355 Bond reserves 1300T Total deposits Fixed assets 1410 Land 1420 Buildings 1440 Building equipment -portable 1400T Total fixed assets 1495 Accumulated depreciation 1400N Net fixed assets Other assets 1520 Deferred financing costs 1500T Total other assets looot Total assets $ 37,459 1, ,213 62,188 25,650 2,500 30,830 1,499,079 1,532,409 1,140,000 11,387, ,021 12,997, ,267 12,777, ,557 $ 14,950, T T 2000T T Current liabilities Accounts payable - operations Accrued interest Prepaid rents Current portion of mortgage payable Total current liabilities Long term liabilities Mortgage payable Tenant deposits held in trust Total long term liabilities Total liabilities Members' deficit Total liabilities and member's deficit LIABILITIES AND MEMBER'S DEFICIT $ 19, ,476 3,236 50, ,821 14,398,172 25,537 14,423,709 15,049,530 (99,384) $

16 G:MF- TM Alexander, LLC PROJECT NO. FL29Hl42022 Statement of Profit and Loss Data For the period May 31, 2011 through December 31, 2011 REVENUES 5120 Rent revenue - gross potential $ 176, Tenant assistance payments 869, T Total rent revenue 1,045, Vacancies - apartments (8,082) 5200T Total vacancies (8,082) 5152N Net rental revenue 1,037, Financial revenue - project operations T Total financial revenue Laundry and vending revenue 3, Tenant charges T Total other revenue 3, T Total revenue 1,041,335 EXPENSES 6250 Other renting expenses Office expenses 12, Management fee 42, Manager 35, T Total administrative expenses 89, Electricity 15, Water 16, T Total utilities expense 32, Payroll 38, Supplies 22, Contracts 29, Garbage and trash removal 19, T Total operating and maintenance expenses $ 109,490 12

17 GMF- TM Alexander, LLC PROJECT NO. FL29H Profit and Loss Data (continued) For the period May 31, 20111/zrouglt December 31, Real estate taxes $ 83, Payroll taxes 6, Property and liability insurance 17, Workmen's compensation insurance 1, Health insurance 1, Miscellaneous taxes, licenses, permits and insurance 3, T Total taxes and insurance 113, Interest on mortgage payable 560, Miscellaneous financial expenses 5, T Total financial expenses 565, T Total cost of operations before depreciation/amortization 910, T Profit before depreciation/amortization 130, Depreciation 220, Amortization 9, Operating loss $ (99,484) Sl Total principal payments required during the year $ S Total of 12 monthly deposits into the Replacement Reserve account $ 30,830 Equity data - Entities other than corporations Sll Beginning of the year balance $ Sl Contributions Net loss (99,484) 3130 End of the year balance $ (99,384) 13

18 GJ.\tiF- TM Alexander, LLC PROJECT NO. FL29Hl42022 Statement of Cash Flows Data For the period May 31, 2011 through December 31, 2011 Cash flows from operating activities s Rental receipts S Interest receipts S Other operating receipts S Total receipts S Administrative S Management fees S Utilities S Salaries and wages S1200-ll0 Operating and maintenance S Real estate taxes S Property insurance S Tenant security deposits S Miscellaneous financial S Total disbursements S Net cash provided by operating activities Cash flows from investing activities S Net deposits to mortgage escrow account S Net deposits to replacement reserve account Sl Net deposits to other reserves S Net purchases of property and equipment S Net cash used in investing activities Cash flows from financing activities S Proceeds from mortgages, loans, or notes payable Sl Contributions S Net cash provided by financing activities S Net increase in cash and cash equivalents S Cash and cash equivalents, beginning of period S1200T Cash and cash equivalents, end of period Reconciliation of net loss to net cash provided by operating activities 3250 Net loss 6600 Depreciation and amortization S S S S S Sl S S Sl Changes in operating assets and liabilities: Accounts receivable Prepaid expenses Tenant security deposits Accounts payable Accrued liabilities Prepaid rents Tenant security deposits Utility deposits Net cash provided by operating activities $ 1,038, ,730 1,042,055 (16,161) (42,000) (43,735) (70,819) (64,353) (153,213) (28,167) (113) (5,313) (423,874) 618,181 (2,500) (30,830) (1,499,079) (12,927,808) (14,460,217) 13,879, ,879,495 37,459 $ 37,459 $ (99,484) 229,865 (2,516) (11,022) (25,650) 19, ,297 3,236 25,537 (11,191) 618,!81 14

19 G:MF- TM Alexander, LLC Schedule o.f Clzartges in Fixed Asset Accounts PROJECT NO. FL29Hl42022 For the period May 31, 2011 through December 31, 2011 Beginning Balance Additions Deductions Ending Balance Land Buildings Building equipment, portable $ $ 1,140,000 11,387, ,021 $ $ 1,140,000 11,387, ,021 Total property and equipment 12,997,609 12,997,609 Accumulated depreciation 220, ,267 Property and equipment, net $ $ 12,777,342 $ $ 12,777,342 Additions to property and equipment for the period ended December 31,2011 are as follows: Land, project acquisition Building, project acquisition Building equipment, project acquisition Cabinet replacements Appliance purchases HV AC replacements $ 1,140,000 11,368, ,000 18,911 10,783 9,238 $ 12,997,609 15

20 GMF- TM Alexander, LLC Schedule of Reserve for Replacements Balance at beginning of period Total monthly deposits Balance at end of period PROJECT NO. FL29H For the period May 31, 2011 through December 31, 2011 $ 30,830 $ 30,830 16

21 GMF- TM Alexander, LLC PROJECT NO. FL29H Computation of Surplus Cash December 31, 2011 COMPUTATION OF SURPLUS CASH Cash $ 63,109 Tenant subsidy vouchers due for period covered by financial statement 817 Trustee bond fund cash 756,279 Total cash 820,205 Current obligations Accrued mortgage interest payable 553,476 Accounts payable 19,109 Prepaid rents 3,236 Tenant security deposits liability 25,537 Total current obligations 601,358 Surplus cash $ 218,847 17

22 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL To the Member GMF - TM Alexander, LLC Memphis, Tennessee We have audited the financial statements of GMF- TM Alexander, LLC, (HUD Project No. FL29H142022) (the "Project"), as of December 31, and for the period May 31, 2011 through December 31, 20 11, and have issued our report thereon dated March 22, We have also audited the Project's compliance with requirements applicable to major HUD-assisted programs and have issued our report thereon dated March 22, We conducted our audit 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 Consolidated Audit Guide for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether the Project complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program. The management of the Project is responsible for establishing and maintaining effective internal control. In planning and performing our audit of the financial statements and compliance, we considered the Project's internal control over financial reporting and its internal control over compliance with requirements that could have a direct and material effect on a major HUDassisted program in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and on compliance, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. Accordingly, we do not express an opinion on the effectiveness of the Project's internal control over financial reporting and internal control over compliance. A control deficiency 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 on a timely basis misstatements or noncompliance with applicable requirements of a HUD-assisted program. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process or report financial data reliably in accordance with generally accepted accounting principles, or to administer a HUD-assisted program such that there is more than a remote likelihood that (a) a misstatement of the entity's financial statements or (b) noncompliance with applicable requirements of a HUD-assisted program that is more than inconsequential will not be prevented or detected. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that (a) a material misstatement of the financial statements (b) material noncompliance with applicable requirements of a HUD-assisted program, will not be prevented or detected. Our consideration of internal control over financial reporting and internal control over compliance was for the limited purpose described above and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Project's, management, and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties. Memphis, Tennessee March 22, 2012 Frazee Ivy Davis PLC I CPAs who Add Value I 5100 Poplar Avenue I Suite 1400 I Memphis, Tennessee I p I fidcpa.com 18

23 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS To the Member GMF - TM Alexander, LLC Memphis, Tennessee We have audited the compliance of GMF- TM Alexander, LLC (HUD Project No. FL29H142022) (the "Project"), with the specific program requirements governing federal financial reports; mortgage status; the replacement reserve; the residual receipts; distributions to owners; tenant application, eligibility, and recertification; and management functions, that are applicable to each of its major HUD-assisted programs for the period May 31, 2011 through December 31, Compliance with those requirements is the responsibility of the Project's management. Our responsibility is to express an opinion on the Project's compliance based on our audit. 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 Consolidated Audit Guide for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the requirements referred to above that could have a direct and material effect on a major HUDassisted program occurred. An audit includes examining, on a test basis, evidence about the Project'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. Our audit does not provide a legal determination of the Project's compliance with those requirements. The results of our audit procedures did not disclose any immaterial instances of noncompliance with the requirements referred to above. In our opinion, the Project complied, in all material respects, with the requirements referred to above that are applicable to its major HUD-assisted program for the period May 31, 2011 through December 31, This report is intended solely for the information and use of the members, management, and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than those specified parties. Memphis, Tennessee March 22, 2012 Frazee Ivy Davis PLC I CPAs who Add Value I 5100 Poplar Avenue I Suite 1400 I Memphis, Tennessee I p I fidcpa.com 19

24 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO FAIR HOUSING AND NON-DISCRIMINATION To the Members GMF- TM Alexander, LLC Memphis, Tennessee We have applied procedures to test GMF- TM Alexander, LLC's (HUD Project No. FL29H142022) (the "Project") compliance with the Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the period May 31, 2011 through December 31, Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Project's compliance with the Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide. This report is intended solely for the information and use of the Project, management, and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than those specified parties. Memphis, Tennessee March 22, 2012 Frazee Ivy Davis PLC I CPAs who Add Value I 5100 Poplar Avenue I Suite 1400 I Memphis, Tennessee I p fidcpa.com 20

25 GMF- TM Alexander, LLC PROJECT NO. FL29Hl4202i Certification of the Member December 31, 2011 We hereby certify that we have examined the accompanying financial statements and supplemental information of GMF- TM Alexander, LLC (HUD Project No. FL29Hl42022) and, to the best of our knowledge and belief, the same is accurate and complete. 21

26 GMF- TM Alexander, LLC PROJECT NO. FL29H Certljlcatlon of Managing Agent December 31,2011 We hereby certify that we have examined the accompanying financial statements and supplemental infonnation of GMF- TM Alexander, LLC (HUD Project No. FL29Hl42022) and, to the best of our knowledge and belief, the same is accurate and complete. Federal Employer Identification No

27 INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURE To the Member GMF - TM Alexander, LLC Memphis, Tennessee We have performed the procedure described in the second paragraph of this report, which was agreed to by GMF TM Alexander, LLC and the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC), solely to assist them in determining whether the electronic submission of certain information agrees with the related hard copy documents. GMF- TM Alexander, LLC is responsible for accuracy and completeness of the electronic submission. This agreed-upon procedure engagement was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States. The sufficiency of the procedure is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. We compared the electronic submission of the items listed in the "UFRS Rule Information" column with the corresponding printed documents listed in the "Hard Copy Documents" column. The results of the performance of our agreed-upon procedure indicate agreement or non-agreement of the electronically submitted information and hard copy documents as shown in the attached chart. We were engaged to perform an audit of the financial statements of GMF- TM Alexander, LLC as of and for the period ended December 31, 2011, and have issued our reports thereon dated March 22, The information in the "Hard Copy Documents" column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplemental financial data templates dated March 22, 2012, was expressed in relation to the basic financial statements of GMF- TM Alexander, LLC taken as a whole. A copy of the financial statement package, which includes the auditor's reports, is available in its entirety from GMF - TM Alexander, LLC. We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, REAC. This report is intended solely for the information and use of GMF- TM Alexander, LLC and the U.S. Department of Housing and Urban Development, REAC, and is not intended to be and should not be used by anyone other than these specified parties. Memphis, Tennessee March 22, 2012 FrazeeivyDavisPLC I CPAswhoAddValue I 5100PoplarAvenue I Suite1400 I Memphis,Tennessee I p I fidcpa.com 23

28 December 31, 2011 ATTACHMENT TO INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURE UFRS Rule Information Hard Copy Document(s) Findings Balance Sheet, Revenue and Expense and Supplemental Schedules with Financial Agrees Cash Flow Data (account numbers 1120 to Statement Data 7100T and the Sl200 series) Surplus Cash (Sl300 series of accounts) Computation of Surplus Cash, Distributions Agrees and Residual Receipts (Annual) Footnotes (S3100 series of accounts) Notes to the Financial Statements Agrees Type of Opinion on the Financial Statements Auditor's Reports on the Financial Statements Agrees and Compliance (account numbers S2100- and Compliance 020, S ) Type of Opinion on Supplemental Data Auditor's Report on Supplemental Data Agrees (account number S ) Audit Findings Narrative (S2700 series of Schedule of Findings and Questioned Costs Agrees accounts) 24