SKID ROW HOUSING TRUST AND AFFILIATES€¦ · SKID ROW HOUSING TRUST AND AFFILIATES (A NON-PROFIT...

SKID ROW HOUSING TRUST AND AFFILIATES (A NON-PROFIT CALIFORNIA CORPORATION)

CONSOLIDATED FINANCIAL STATEMENTS, SUPPLEMENTARY SCHEDULES

AND INDEPENDENT AUDITOR’S REPORTS

DECEMBER 31, 2015 WITH COMPARATIVE INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2014


DECEMBER 31, 2015 WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

Page(s)

Independent Auditor’s Report 1 – 2

Consolidated Financial Statements with Comparative Information Consolidated Statement of Financial Position 3 – 4 Consolidated Statement of Activities and Change in Net Assets (Deficit) 5 Consolidated Statement of Functional Expenses 6 Consolidated Statement of Cash Flows 7 – 8

Notes to Consolidated Financial Statements 9 – 36

Supplementary Information Notes to Schedule I: Additional Information to the Consolidated Financial Statements (Unaudited) 38 Schedule I: Additional Information to the Consolidated Financial Statements (Unaudited) 39 Schedule II: Consolidating Statement of Financial Position 40 – 45 Schedule III: Consolidating Statement of Activities and Change in Net Assets (Deficit) 46 – 48 Schedule IV: Consolidating Financial Statements for Skid Row Housing Trust 49 – 53 Schedule V: Statement of Activities (Unaudited) 54

Boyd Hotel Limited Partnership Senator Apartments Limited Partnership Weldon Limited Partnership San Pedro House Project

Schedule VI: Statement of Activities – SRHT Property Management Company (Unaudited) 55 Schedule VII: Statement of Activities – Piece by Piece (Unaudited) 56

Supplementary Information Required by HCD: Crescent Fifth Street Partners Edward Hotel Limited Partnership Hart Limited Partnership Martinez Limited Partnership Olympia Hotel Limited Partnership

Produce Apartments Limited Partnership Sanborn Hotel Limited Partnership Simone Hotel Limited Partnership St. Marks Fifth Street Partners

Schedule VIII: HCD Schedule of Revenues 57 Schedule IX: HCD Schedule of Operating Expenses 58 – 60 Schedule X: Additional Supplementary Information Required by HCD 61 – 66 Schedule XI: HCD Computation of Operating Cash Flow/Surplus Cash 67

Schedule XII: Schedule of Expenditures of Federal Awards 68

Notes to Schedule of Expenditures of Federal Awards 69

Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Consolidated Financial Statements Performed in Accordance with Government Auditing Standards 70 – 71

Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance 72 – 73

Schedule of Findings and Questioned Costs 74

HCD Managing Agent Certification 75

HCD Mortgagor’s Certification 76

Camarillo, CA | Costa Mesa, CA | Encino, CA | Fort Worth, TX | Long Beach, CA | Los Angeles, CA | Park City, UT

Pasadena, CA | Walnut Creek, CA | Westlake Village, CA

Independent Auditor’s Report To the Board of Directors of Skid Row Housing Trust: Report on Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Skid Row Housing Trust (a non-profit California corporation) and Affiliates (collectively, the Organization), which comprise the consolidated statement of financial position as of December 31, 2015, and the related consolidated statements of activities and change in net assets (deficit), functional expenses, and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of certain controlled partnerships, which statements reflect total combined assets of $161,923,825 as of December 31, 2015 and total revenues of $6,031,002 for the year ended December 31, 2015. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these controlled 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 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’s preparation and fair presentation of the consolidated 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 Organization’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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on Consolidated Financial Statements In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Organization as of December 31, 2015, and the changes in its net assets (deficit) and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Independent Auditor’s Report (Continued)



Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information in Schedules II and III is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations, and cash flows of the individual entities, and it is not a required part of the consolidated financial statements. The accompanying supplementary information in Schedules VIII through XI consists of information required by the Department of Housing and Community Development for several wholly owned entities and is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. In addition, the accompanying schedule of expenditures of federal awards (Schedule XII), as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is also not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, which insofar as it relates to certain controlled partnership with combined assets of $161,923,825 and revenues of $6,031,002 as of and or the year ended December 31, 2015, is based on the reports of other auditors, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. The supplementary information included in Schedule I is presented for purposes of additional analysis and is not presented on a U.S. GAAP basis, but has been modified to reflect the effects of certain non-cash activities. The supplementary information in Schedules IV through VII is also presented for purposes of additional analysis of the consolidated financial statements. Such information is not a required part of the consolidated financial statements and is the responsibility of management; the information has not been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements, and, accordingly we express no opinion on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 23, 2016 on our consideration of the Organization’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 the internal control over financial reporting or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control over financial reporting and compliance. Report on Summarized Comparative Information We have previously audited the Organization’s 2014 consolidated financial statements, and we expressed an unmodified opinion on those audited consolidated financial statements in our report dated September 9, 2015. In our opinion, the comparative information presented herein as of and for the year ended December 31, 2014, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Los Angeles, California August 23, 2016

SKID ROW HOUSING TRUST AND AFFILIATES(A NON-PROFIT CALIFORNIA CORPORATION)

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONDECEMBER 31, 2015

WITH COMPARATIVE INFORMATION AS OF DECEMBER 31, 2014

2015 2014

AssetsCurrent assets

Cash and cash equivalents 3,861,705$ 4,396,463$ Tenant and subsidy receivables 198,875 282,625 Grant receivables due within one year 1,515,459 435,031 Prepaid expenses and other assets 116,422 172,988 Current assets held in controlled limited partnerships (Note 4) 2,628,990 1,531,338

Total current assets 8,321,451 6,818,445

Restricted cashOperating reserves 3,681,392 2,458,357 Replacement reserves 2,416,840 2,575,539 Transition reserve 390,000 390,000 Development reserves 1,271,791 1,226,897 Tenant security deposits 75,462 65,269

Total restricted cash 7,835,485 6,716,062

Real estate held for lease, at costLand 15,244,425 14,973,936 Building and building improvements 72,121,438 78,453,892 Furniture and equipment 1,946,189 2,075,062

Total real estate held for lease, at cost 89,312,052 95,502,890 Less: accumulated depreciation (34,011,232) (36,283,277)

Real estate held for lease, net 55,300,820 59,219,613

Real estate under development 843,013 1,744,164

Property, at costFurniture, equipment and artwork 410,649 395,413 Leasehold improvements 1,352,422 1,772,364

Total property, at cost 1,763,071 2,167,777 Less: accumulated depreciation and amortization (345,543) (801,709)

Property, net 1,417,528 1,366,068

Real estate and other assets held in controlled limited partnerships, net of current portion (Note 4) 191,077,034 169,397,953 Deferred costs, net 325,243 399,312

Total assets 265,120,574$ 245,661,617$

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONDECEMBER 31, 2015

WITH COMPARATIVE INFORMATION AS OF DECEMBER 31, 2014(CONTINUED)

2015 2014

Liabilities and Net Assets (Deficit)

Current liabilitiesAccounts payable and accrued expenses 1,385,843$ 1,063,033$ Predevelopment bank line-of-credit 470,960 1,471,150 Current portion of notes payable, secured by real property 3,313,970 2,258,491 Accrued interest payable, current 4,744 5,592 Due to affiliates (Note 5) 177,927 177,473 Tenant security deposits 153,045 144,981 Prepaid rent 454,300 136,876 Notes payable and other liabilities related to controlled limited partnerships (Note 4) 26,623,561 16,986,087

Total current liabilities 32,584,350 22,243,683

Long-term liabilitiesNotes payable secured by real property, net of current portion 65,253,272 71,811,922 Accrued interest payable, net of current portion 19,594,864 14,074,171 Notes payable and other liabilities related to controlled limited partnerships, net of current portion (Note 4) 138,034,477 116,796,665

Total long-term liabilities 222,882,613 202,682,758

Total liabilities 255,466,963 224,926,441

Commitments and contingencies (see Notes)

Net assets (deficit)Unrestricted (25,068,705) (15,267,214) Controlling interest in limited partnerships 70,961 71,623 Noncontrolling interest in limited partnerships (Notes 2b and 3) 31,618,544 34,937,074

Total unrestricted 6,620,800 19,741,483 Temporarily restricted 3,032,811 993,693

Total net assets (deficit) 9,653,611 20,735,176

Total liabilities and net assets (deficit) 265,120,574$ 245,661,617$


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CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS (DEFICIT)FOR THE YEAR ENDED DECEMBER 31, 2015

WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014

2015 Temporarily

Unrestricted Restricted 2014Fund Fund Total Total

Public supportContributions 365,955$ -$ 365,955$ 373,463$ Foundation and corporate grants 337,937 1,662,941 2,000,878 548,204 Government grants 1,481,349 - 1,481,349 2,591,673

Grants - loans (Note 7) 2,057,583 - 2,057,583 2,103,525

Total public support 4,242,824 1,662,941 5,905,765 5,616,865

RevenueRental revenue 13,309,948 - 13,309,948 12,964,400 Miscellaneous revenue 215,617 1,392,185 1,607,802 213,743 In-kind revenue 190,500 - 190,500 306,321 Interest income 16,267 - 16,267 15,267

Total revenue 13,732,332 1,392,185 15,124,517 13,499,731

Net assets released from restrictions:Satisfaction of program restrictions 1,016,008 (1,016,008) - -

Total public support and revenue 18,991,164 2,039,118 21,030,282 19,116,596

ExpensesProgram services 33,970,222 - 33,970,222 24,236,405 General and administrative 1,278,358 - 1,278,358 720,064 Fundraising 163,567 - 163,567 203,016

Total expenses 35,412,147 - 35,412,147 25,159,485

Change in net assets (deficit) (16,420,983) 2,039,118 (14,381,865) (6,042,889)

Net assets, beginning of year 19,741,483 993,693 20,735,176 9,303,060

Noncontrolling interests - contributions (Note 4) 3,300,300 - 3,300,300 17,475,005

Net assets, end of year 6,620,800$ 3,032,811$ 9,653,611$ 20,735,176$


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CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2015


2015 Program General and 2014Services Administrative Fundraising Total Total

Salaries 6,550,102$ 513,843$ 106,610$ 7,170,555$ 5,714,759$ Payroll taxes and employee benefits 2,564,142 110,540 35,165 2,709,847 2,223,954 Utilities 1,840,454 - - 1,840,454 1,712,643 Repairs and maintenance - rental properties 1,187,991 - - 1,187,991 985,484 Consultants and professional services 474,977 278,349 - 753,326 524,246 Property taxes and insurance 573,682 692 - 574,374 551,788 Office supplies and maintenance 432,186 15,733 - 447,919 418,813 Consultants and professional services - program funded 43,164 21,722 - 64,886 303,705 Other administrative expenses of controlled limited partnerships 220,627 - - 220,627 279,111 Equipment rental and expenses 211,701 32,468 - 244,169 264,867 Accounting 251,493 127,117 - 378,610 244,144 Telephone and internet 348,658 1,941 - 350,599 242,594 Rent, net of sublease rental revenue 61,576 1,575 - 63,151 216,454 Program expenses 282,749 19,130 - 301,879 183,401 Bad debt 326,070 - - 326,070 177,251 Write-off of leasehold improvements - - - - 125,942 Licenses, permits, and taxes 121,291 - - 121,291 100,706 Miscellaneous 92,544 45,749 - 138,293 98,476 Travel, mileage, and parking 62,634 10,902 - 73,536 81,880 Events 4,890 9,911 - 14,801 81,428 Property manager's unit 86,663 - - 86,663 45,193 Marketing and lease-up 251 4,999 14,997 20,247 44,700 Training and conferences 49,061 2,235 - 51,296 35,299 Legal fees 162,751 54,625 - 217,376 28,785 State taxes 5,079 19,200 - 24,279 25,539 Investor services fees 22,137 - - 22,137 20,152 Printing 6,429 6,067 5,796 18,292 13,660 Postage 11,847 1,560 999 14,406 10,191

Total before depreciation and amortization and interest expense 15,995,149 1,278,358 163,567 17,437,074 14,755,165

Depreciation and amortization 6,733,124 - - 6,733,124 6,266,398 Interest expense - controlled limited partnerships 3,527,624 - - 3,527,624 2,897,304 Interest expense 7,714,325 - - 7,714,325 1,240,618

Total 33,970,222$ 1,278,358$ 163,567$ 35,412,147$ 25,159,485$


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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2015


2015 2014

Cash flows from operating activitiesChange in net assets (deficit) (14,381,865)$ (6,042,889)$ Adjustments to reconcile change in net assets (deficit) to net cash provided by operating activities:

Depreciation and amortization 6,733,124 6,266,398 Grant revenue (1,808,525) (2,103,525) Write-off of deferred costs 34,152 - Write-off of leasehold improvements - 125,942 In-kind capitalized services (146,500) (251,337) Changes in operating assets and liabilities

Tenant receivables 16,776 (186,990) Grant receivables (1,080,428) 783,040 Prepaid expenses and other assets 61,259 95,299 Accounts payable and accrued expenses 560,386 258,876 Accrued interest payable 10,416,105 3,118,489 Prepaid rent 651,973 15,053 Tenant security deposits 17,331 (666)

Net cash provided by operating activities 1,073,788 2,077,690

Cash flows from investing activitiesNet changes in restricted cash (1,298,659) (1,407,005) Expenditures for real estate under development (30,772,321) (23,319,136) Expenditures for building improvements (2,546,013) (176,514) Expenditures for furniture and equipment (269,463) (197,994) Expenditures for deferred costs (135,277) -

Net cash used in investing activities (35,021,733) (25,100,649)

Cash flows from financing activitiesNet borrowings (payments) on predevelopment bank lines-of-credit (1,000,190) 1,043,080 Proceeds from notes payable 33,677,952 30,845,368 Payments on notes payable (2,564,875) (26,675,938) Contributions 3,300,300 17,475,005

Net cash provided by financing activities 33,413,187 22,687,515

Net change in cash and cash equivalents (534,758) (335,444)


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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2015

WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014(CONTINUED)

2015 2014

Net change in cash and cash equivalents (534,758)$ (335,444)$

Cash and cash equivalents, beginning of the year 4,396,463 4,731,907

Cash and cash equivalents, end of the year 3,861,705$ 4,396,463$

Supplemental disclosure:Cash paid for:

Interest, including controlled partnerships of $978,558 and $756,254, net of capitalized interest of $434,509 and$334,396 for 2015 and 2014, respectively 1,110,717$ 780,818$

Taxes, including controlled partnerships of $8,000for both 2015 and 2014 32,279$ 33,539$

Non-cash activity:Accrued capitalized interest 129,456$ 362,346$

Accrued construction and development costs - controlled partnerships 3,447,018$ 4,609,215$


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2015

WITH COMPARATIVE FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014

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NOTE 1. ORGANIZATION Skid Row Housing Trust (the Trust) is a non-profit California corporation founded in 1989 to acquire, develop and operate affordable housing in downtown Los Angeles, California. The Trust provides permanent supportive housing and services that allow people who have experienced homelessness, prolonged extreme poverty, poor health, disabilities, mental illness and/or addiction to lead safe, stable lives in wellness. The activities of the Trust are funded primarily by fees from affordable housing projects and direct contributions from corporations, foundations, individuals and government grants. Incorporated affiliated organizations are individually incorporated under the laws of the state of California, have independent Boards of Directors, but are directly governed by Skid Row Housing Trust’s Boards of Directors and are centrally managed in conjunction with the Skid Row Housing Trust’s housing programs. Accordingly, the assets, liabilities, support, revenues and expenses of the following affiliated entities are consolidated in the financial statements of Skid Row Housing Trust (collectively, the Organization):

i. San Pedro House is wholly owned by Skid Row Housing Trust and is a residential property

consisting of 18 units of affordable rental housing in Los Angeles, California. Skid Row Housing Trust and San Pedro House are also referred to as the Trust.

ii. SRHT Property Management Company (SRHT PMC) (a non-profit California corporation)

was established on December 15, 1994 as an affiliated non-profit corporation to manage affordable housing projects in which Skid Row Housing Trust is an owner or a general partner.

iii. Skid Row Housing Trust formed the SRHT Property Holding LLC (Holding Company) (a

single member California limited liability company). The Holding Company has acquired the limited partners’ interest in the following partnerships, generally for $1 and, combined with the Trust’s interest, own up to 100% in the following partnerships (the Partnerships):

Partnership

Holding Company Interest

Trust/ Affiliate Interest

Year Acquired/Inactive

# of Units

Hart Limited Partnership (Hart) 70% 30% 2007 39Martinez Limited Partnership (Martinez) 70% 30% 2007/2015 -St. Mark’s Fifth Street Partners (St. Marks) 70% 30% 2007 91Crescent Fifth Street Partners (Crescent) 70% 30% 2008 -Olympia Hotel Limited Partnership (Olympia) 99% 1% 2008/2015 -Sanborn Hotel Limited Partnership (Sanborn) 70% 30% 2008 46Simone Hotel Limited Partnership (Simone) 70% 30% 2008 123Produce Apartments Limited Partnership (Produce) 70% 30% 2009 97 New Carver Apartments, L.P. (New Carver) .01% 99.99% 2011 97Boyd Hotel Limited Partnership (Boyd) 99% 1% 2011 61Senator Apartments Limited Partnership (Senator) 99% 1% 2011 99Weldon Limited Partnership (Weldon) 99% 1% 2011 58Rossmore Hotel Limited Partnership (Rossmore) 99% 1% 2012 60Edward Hotel Limited Partnership (Edward) 98.99% 1% 2012 47649 Lofts LP (649 Lofts) 49% 51% 2014 -Senator 2015 LP (Senator 2015) 99% 1% 2015 -Simone 2015 LP (Simone 2015) 99% 1% 2015 -Skid Row Central 1 LP (Central 1) 99% 1% 2015 - Total units 818




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NOTE 1. ORGANIZATION (Continued)

iii. Holding Company (Continued)

On December 4, 2015, the Martinez and Olympia projects were sold to Skid Row Southeast 1 LP (Southeast 1) (Note iv). The purchase price was equal to the outstanding debt of the projects. Pursuant to accounting principles generally accepted in the United States of America (U.S. GAAP), the sale of the projects to Southeast 1 is considered a transfer or sale between entities under common control, therefore, no gain is recognized in the consolidated statement of activities.

iv. The Trust is the general partner in twelve (12) limited partnerships (Controlled Partnerships)

which invest in affordable housing projects that qualify for low-income housing tax credits under Section 42 of the Internal Revenue Code. The following is a listing of the Controlled Partnerships that are consolidated as of December 31, 2015, in which the Trust has a controlling ownership interest of up to 1%:

Partnership # of Units Abbey Apartments Limited Partnership (Abbey) 115 Charles Cobb Apartments Limited Partnership (Charles Cobb) 76 Dewey Hotel Limited Partnership (Dewey Hotel) 43 Lincoln Hotel Limited Partnership (Lincoln Hotel) 41 New Genesis Apartments, L.P. (New Genesis) 106 Rainbow Apartments Limited Partnership (Rainbow) 89 The Six Veterans Housing LP (The Six) (Note 11) 52 St. George Affordable Housing Limited Partnership (St. George) 88 Star Apartments, L.P. (Star Apartments) 102 New Pershing Apartments, L.P. (New Pershing) 69 Crest Apartments LP (Crest) (Note 11) - Skid Row Southeast 1 LP (Southeast 1) (Note 11) 103 Total units 887

v. Piece by Piece (a non-profit California corporation) was established in 2007 to provide art

instruction to low-income communities in the Los Angeles metropolitan area and to provide an outlet for the sale of artworks prepared by program participants with the goal of giving participants the skills and self-confidence to pursue employment while nurturing personal creativity and development. In 2012, Piece by Piece became a supporting organization of Skid Row Housing Trust.

vi. The Trust established the following California limited liability companies (LLCs) to own up to

a 1% general partner interest in controlled and wholly owned limited partnerships:

General Partner Partnership Star Apartments, LLC Star Apartments SRHT Crest GP LLC Crest The Six Veterans Housing GP LLC The Six New Pershing Apartments, LLC New Pershing Skid Row Southeast 1 GP LLC Southeast 1 649 Lofts GP LLC 649 Lofts Senator 2015 GP LLC Senator 2015 Simone 2015 GP LLC Simone 2015 Skid Row Central 1 GP LLC Central 1




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NOTE 1. ORGANIZATION (Continued) Description of Programs The Shelter Plus Care program (SPC) is funded by the US Department of Housing and Urban Development (HUD) and passed through the Housing Authority of the City of Los Angeles (HACLA) and consists of rental subsidy agreements awarded to the Trust for certain affordable housing projects (Note 5). The Trust has entered into subcontract agreements with five unrelated nonprofits (Subcontractors) to utilize SPC funds that would otherwise go unused due to vacancies. The Trust has the responsibility to ensure the Subcontractors comply with the agreements. The Trust is not aware of any instances of non-compliance. The Special Allocations program is funded by HUD and passed through Section 8 Housing Assistance Payment Program and provides rent subsidy awards to the Trust for various units through scattered sites. The Supportive Housing Program is also funded by HUD and passed through the Los Angeles Homeless Services Authority. Supportive Housing Program funds are restricted for use to provide support for case management, supervisory, administrative staff and related program activities to formerly homeless and HIV/AIDS affected residents of the Lincoln Hotel.

In addition, Supportive Housing Program funds are restricted for use to provide support for case management and related program services to formerly homeless and disabled affected residents of the Rainbow. The Los Angeles County Department of Health Services provides comprehensive support services, case management and program activities at the Star Apartments for residents who are formerly homeless individuals who were identified as the highest utilizers of county health services.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting, in conformity with U.S. GAAP and include the accounts of the Organization and investments in limited partnerships or limited liability companies (LLC) in which the Trust has a controlling interest. These entities are included in the consolidation in accordance with U.S. GAAP which require that the partnership or company accounts be consolidated for all limited partnerships and limited liability companies which are deemed to be controlled by the Organization. All significant intercompany balances and transactions have been eliminated in consolidation. The noncontrolling interests in the consolidated limited partnerships are shown separately in the components of net assets (deficit).




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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

b) Classification and Reporting of Funds

Revenues, expenses, gains, losses and net assets are classified in the consolidated financial statements based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows:

Unrestricted net assets – Net assets that are not subject to donor-imposed restrictions

and that may be expendable for any purpose in performing the primary objectives of the Organization.

Noncontrolling interests in limited partnerships – The noncontrolling interests in limited

partnerships represent the limited partners' equity interest, generally 99.99%, in the limited partnerships that are included in the consolidated financial statements (Note 3).

Temporarily restricted net assets – Net assets subject to Board of Director or donor-imposed restrictions that may or will be met either by actions of the Organization and/or the passage of time. As the restrictions are satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated financial statements as net assets released from restrictions. At December 31, 2015 and 2014, there were temporarily restricted net assets of $3,302,811 and $993,693, respectively (Note 3).

Permanently restricted net assets – Net assets subject to donor-imposed restrictions that resources be maintained in perpetuity. Investment income generated from these funds is available for general support of the Organization’s programs and operations unless otherwise stipulated by the donor. At December 31, 2015 and 2014, the Organization had no permanently restricted net assets.

c) Public Support and Revenue Recognition

The Organization receives contract and grant funding from federal, state and local agencies for providing permanent housing and supportive services. Revenues from such grants are recognized as it is earned through expenditure in accordance with agreements.

Contributions are recognized at the earlier of the date of receipt of funds or the date of a formal, unconditional pledge from known donors. Contributions or unconditional promises to give with payments due in future periods are discounted to present value and reported as temporarily restricted revenue. Any funds received in advance of a condition being met are recorded as a liability under temporarily restricted revenues.

Revenues from program service fees are recognized as services are performed and collection is reasonably assured.

Revenues from rental properties, primarily from short-term leases, are reflected as gross potential rents, net of vacancies, as the rents become due.




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c) Public Support and Revenue Recognition (Continued) Developer fees are recognized during the construction period based on the percentage of construction complete. Amounts not received by the completion date are recorded as a receivable. The gross profit earned on development fees is eliminated in consolidation.

Revenues from special events include individual and corporate contributions and are recognized when the event is held. The related expenses are recognized on the date of the event. The contributions received for special events scheduled to occur after year-end are recorded as deferred revenues and recognized as revenues on the date of the event. There were two special events held in 2015. Revenue from these events are included in contributions and the related direct expenses are included in events expense in the consolidated statement of activities and change in net assets (deficit). During 2014, the Trust held a special event celebrating its 25th anniversary. For the year ended December 31, 2014, revenue of $278,000 received from this event is included in contribution revenue, and the related direct expenses incurred of $68,000 are included in events expense in the consolidated statement of activities and change in net assets (deficit).

d) Restricted Reserves The Organization has set up certain operating, replacement, development and transition reserve accounts and continues to make annual deposits as required by the various loan and regulatory agreements. Reserve funds are included as restricted cash in the consolidated statement of financial position as of December 31, 2015 and 2014.

e) Accounts Receivable and Bad Debt Tenant receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of the accounts by management. U.S. GAAP requires 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.

f) Real Estate Under Development

The Trust incurs costs in connection with properties it is considering for development as well as costs associated with properties in the initial state of development. The Trust capitalizes these costs until the project is transferred to a separate entity or charges the costs to operations at the time it is determined the project is not feasible. As of December 31, 2015 and 2014, the Organization capitalized predevelopment costs of $843,013 and $1,744,164, respectively, which are included in real estate under development in the consolidated statement of financial position.




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g) Income Taxes

The nonprofit entities consolidated in these consolidated financial statements have been granted an exemption from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. In addition, these nonprofits do not have any income, which they believe would subject it to unrelated business income taxes. Income taxes on limited partnership and LLC income are included in the tax returns of the partners or members. The federal tax status as a pass-through entity is based on its legal status as a limited partnership or LLC and is required to file tax returns with the IRS and other taxing authorities. Accordingly, these consolidated financial statements do not reflect a provision for income taxes. However, the limited partnerships and the LLCs are required to pay an $800 fee to the California Franchise Tax Board. The Organization determined there are no tax positions which must be considered for disclosure. With few exceptions, the Organization is no longer subject to income tax examinations by tax authorities for years before 2011. There are no current tax examinations pending.

h) Contributed Goods and Services

Contributed goods and services are recorded as contributions at their estimated fair values at the date of donation. Contributions of services are recognized if the services received create or enhance non-financial assets or require specialized skills, and would typically need to be purchased if not provided by donation. During 2015, the Organization received donated artwork for the Trust and donated supplies and space for Piece by Piece totaling $190,500, which are reflected in the consolidated statement of activities and change in net assets (deficit) as in-kind revenue. As of December 31, 2015, the contributed artwork of $146,500 is capitalized to artwork in the consolidated statement of financial position and the supplies and space of $44,000 are included in program expenses in the consolidated statement of functional expenses. During 2014, the Organization received donated construction services related to the Star development and donated supplies and space for Piece by Piece totaling $306,321, which are reflected in the consolidated statement of activities and change in net assets (deficit) as in-kind revenue. As of December 31, 2014, the contributed construction services of $251,337 are capitalized to leasehold improvements in the consolidated statement of financial position and the supplies and space of $54,984 are included in program expenses in the consolidated statement of functional expenses.

i) Concentrations of Business and Credit Risk

The Trust along with the Holding Company, either as direct owner or general partner, has an economic interest in real estate projects (Projects). The Projects rent to residents of Los Angeles with qualifying levels of income who live in the Los Angeles area and/or to people who receive public assistance. The Projects are subject to business risks associated with the economy and level of unemployment in California and available subsidies, which affect occupancy as well as the tenants’ ability to make rental payments.




15


i) Concentrations of Business and Credit Risk (Continued) In addition, the Projects operate in a heavily regulated environment. The operations of the Projects 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 and may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

The Trust receives a significant amount of revenue from partnerships in which it is the general partner, as well as from grants and SPC subsidies (Note 5). These sources of funds are dependent upon the continued successful development of affordable housing projects by the Trust, compliance with the matching requirements, as defined by the SPC contracts, as well as the availability of funds from federal programs. As of December 31, 2015 and 2014, the Trust has cash totaling $966,206 and $1,793,152, respectively, in money market accounts. The money market accounts are considered a Level 2 investment (Note 2o). The Trust does not believe there is a significant risk associated with its investments in the money market accounts.

The Trust provides advances to affiliates involved in the development of affordable housing projects and has deferred receipt of developer fees and partnership management fees from affiliates. Such advances and fees are unsecured and realization of fees is dependent upon the success of these projects. The advances and fees have been eliminated in consolidation. The Organization’s cash and cash equivalents are maintained in various bank accounts. The Organization has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by federal deposit insurance. The Organization believes that its credit risk is not significant. For the year ended December 31, 2015 and 2014, the Trust had one federal grant and two federal grants, respectively, which accounted for more than 10% of its public support and revenues.

j) Property Tax Exemption The Projects are generally exempt from real property taxes for the residential portion of its

affordable housing real estate properties. In the event such exemption is not renewed or no longer available, the Projects’ cash flow would be negatively impacted.




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k) Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, support, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Such estimates include the treatment of contingent interest to be forgiven if the properties comply with loan requirements, in-kind contributions of goods and services, and the allocation of functional expenses. Actual results may differ from those estimates.

l) Consolidated Statement of Cash Flows

For purposes of the consolidated statement of cash flows, the Organization considers all highly liquid unrestricted investments with an original maturity of three months or less to be cash equivalents.

m) Functional Allocation of Expenses

The costs of providing the Organization’s programs and other activities have been summarized on a functional basis in the consolidated statement of functional expenses. Accordingly, expenses identified with a specific program or supporting service are allocated directly to the related program or supporting service. Expenses associated with more than one program or supporting service are allocated by management based on an evaluation of the Organization’s activities. The functional classifications are defined as follows:

Program service expenses consist of costs incurred in connection with providing services

and conducting programs.

General and administrative expenses consist of costs incurred in connection with the overall activities, which are not allocable to another functional expense category.

Fundraising expenses consist of costs incurred in connection with activities related to obtaining grants and activities designed to generate revenue.

n) Depreciation and Amortization

Depreciation and amortization of building and building improvements, furniture and equipment and leasehold improvements are provided using the straight-line method over the following estimated useful lives:

Building and building improvements 30 – 40 years Furniture, equipment, and artwork 3 – 7 years Leasehold improvements Lesser of life or lease




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n) Depreciation and Amortization (Continued)

Property, including projects under development, is stated at cost. The Organization capitalizes expenditures or betterments that materially increase asset lives and charges ordinary repairs and maintenance to operations as incurred. When assets are sold or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in operations. Abandoned projects are expensed when management determines the project is not feasible. Interest costs directly related to, and incurred during, a project’s construction period are capitalized (Notes 4 and 7).

The Organization reviews its property for impairment whenever events or circumstances indicate that the carrying value of such property may not be recoverable. When evaluating recoverability, management considers future undiscounted cash flows estimated to be generated by the property including any estimated proceeds from the eventual disposition. In the event these accumulated cash flows are less than the carrying amount of the property, the Organization recognizes an impairment loss equal to the excess of the carrying amount over the estimated fair value of the property. No impairment loss has been recognized during the years ended December 31, 2015 and 2014.

Deferred costs consist of permanent loan costs which are amortized over the lives of the related loans using a straight-line method which approximates the effective interest rate method. Deferred costs consist of the following:

2015 2014 Permanent loan costs $ 819,476 $ 929,903Less: accumulated amortization (494,233) (530,591) Deferred costs, net $ 325,243 $ 399,312

o) Fair Value Measurements

The Organization accounts for their financial instruments using fair value which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value measurement hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable. The Organization’s management used the following methods and assumptions to estimate the fair value of their financial instruments:

Level 1 – Quoted prices in active markets for identical assets or liabilities that the

reporting entity has the ability to access at the measurement date.




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o) Fair Value Measurements (Continued)

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that

are significant to the fair value of the assets or liabilities. At December 31, 2015 and 2014, the Organization has certain Los Angeles Housing Community Investment Department (HCIDLA (CRA/LA)) notes in which the interest is contingent on the fair value, as defined, of the respective project (Note 7).

p) Recently Issued Accounting Pronouncements

On April 7, 2015, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2015-03, Interest – Imputation of Interest with the intention of simplifying the presentation of debt issuance costs. It requires the Organization to present debt issuance costs as a direct deduction from the carrying value of that debt liability. ASU No. 2015-03 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Organization’s management intends to implement ASU No. 2015-03 effective January 1, 2016.

NOTE 3. NET ASSETS

Consolidated Net Assets The following is a summary of consolidated net asset balances of the Organization as of December 31, 2014 and 2015:

Unrestricted

Unrestricted – Controlling and Noncontrolling

Interests in Partnerships

Temporarily Restricted

Total

Net assets (deficit), January 1, 2014 $ (14,643,112) $ 22,405,733 $ 1,540,439 $ 9,303,060Change in net assets (deficit) (2,173,993) (4,872,041) 1,003,145 (6,042,889)Satisfaction of program restrictions 1,549,891 - (1,549,891) -Contributions – cash - 17,475,005 - 17,475,005Net assets, December 31, 2014 (15,267,214) 35,008,697 993,693 20,735,176Change in net assets (deficit) (10,817,499) (6,619,492) 3,055,126 (14,381,865)Satisfaction of program restrictions 1,016,008 - (1,016,008) -Contributions – cash - 3,300,300 - 3,300,300Net assets, December 31, 2015 $ (25,068,705) $ 31,689,505 $ 3,032,811 $ 9,653,611




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NOTE 3. NET ASSETS (Continued)

Temporarily Restricted Net Assets Temporarily restricted net assets consist of the following as of December 31, 2015 and 2014:

2015 2014 Wise Saints Fund $ - $ 100,000 California Healthcare Foundation 4,054 4,054 California Community Foundation 55,000 - Corporation for Supportive Housing 140,455 17,455 Bank of America - 20,000 MAC AIDS Foundations - 2,184 Deutsch Foundation 130,000 - HCIDLA (CRA/LA) 350,000 350,000 TFAR Funds - 300,000 Housing Obligation Funds - 200,000 Enterprise 94,406 - United Way 15,000 - OSPHD CalREACH 30,000 - Surdna Grant 940 - Capital One Services 18,900 - Green Foundation 62,538 - Hilton 333,333 - Kresge 400,000 - US Bank 6,000 - New Carver tax refund 1,392,185 - $3,032,811 $ 993,693

NOTE 4. INVESTMENTS IN CONTROLLED LIMITED PARTNERSHIPS

The Trust holds up to a 1% general partner interest in the Controlled Partnerships (Note 1iv), which have been consolidated in the consolidated financial statements. The limited partners’ interest of up to 99.99% in the Controlled Partnerships is reflected as a noncontrolling interest in the consolidated financial statements. The Trust earns a monthly property management fee, an annual partnership management fee and during the period the projects are in development, a developer fee to perform certain development activities. During 2015, The Six, Crest and Southeast 1 were under development/rehabilitation (Note 11). The Six was placed in service in September 2015. During 2014, New Pershing and The Six were under development. New Pershing was placed in service in December 2014.

In addition, SRHT PMC is reimbursed for employee costs related to the administration and maintenance of the properties. These transactions have been eliminated in the consolidation of the financial statements as of December 31, 2015 and 2014.




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NOTE 4. INVESTMENTS IN CONTROLLED LIMITED PARTNERSHIPS (Continued)

The following is the summarized combined financial information for the twelve (12) limited partnerships controlled by the Trust:

2015 2014 Current assets held in controlled limited partnerships

Cash and cash equivalents $ 2,098,909 $ 854,337Other assets 530,081 677,001

Current assets held in controlled partnerships 2,628,990 1,531,338

Real estate and other assets held in controlled limited partnerships

Property held for lease, at cost Land and land improvements 31,171,629 25,685,313

Building and building improvements 158,398,054 143,821,800Real estate under development 10,782,371 6,105,632Furniture and equipment 3,467,537 2,656,941

Total property held for lease, at cost 203,819,591 178,269,686Less: accumulated depreciation (21,351,983) (17,097,207)

Property held for lease, net 182,467,608 161,172,479Restricted cash 7,100,038 6,823,802Other assets 1,509,388 1,401,672

Real estate and other assets held in controlled limited partnerships 191,077,034 169,397,953

Assets eliminated during consolidation 10,140,803 8,524,256

Total assets before eliminating entries $ 203,846,827 $ 179,453,547

Notes payable and other liabilities related to controlled limited partnerships, current Notes payable secured by property $ 23,328,359 $ 11,556,922 Other liabilities 3,295,202 5,429,165 Notes payable and other liabilities related to Partnerships, current 26,623,561 16,986,087 Notes payable and other liabilities related to controlled limited partnerships, net of current Notes payable secured by property 122,760,686 104,488,128

Accrued interest 15,273,791 12,308,537 Notes payable and other liabilities related to controlled limited partnerships, net of current 138,034,477 116,796,665

Liabilities and unrestricted net assets eliminated during consolidation 7,499,284 10,662,098

Unrestricted net assets 31,689,505 35,008,697

Total liabilities and unrestricted net assets before eliminating entries $ 203,846,827 $ 179,453,547




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2015 2014 Rental revenues, net $ 6,337,409 $ 5,763,856Other revenues 480,672 487,073 Total revenues 6,818,081 6,250,929 Operating and other financial expenses 5,336,487 4,356,839Interest expense 3,568,781 2,945,832Depreciation and amortization expense 4,532,305 3,820,299 Total operating and financial expenses 13,437,573 11,122,970

Net loss prior to consolidation $ (6,619,492) $ (4,872,041)

Net Asset Summary in Controlled Partnerships The Trust is a general partner in twelve (12) limited partnerships with ownership interests of up to 1% (Note 1iv).

Controlling Interest

Noncontrolling Interest Total

Balance, January 1, 2014 $ 72,110 $ 22,333,623 $ 22,405,733Contributions - 17,475,005 17,475,005Net loss (487) (4,871,554) (4,872,041)Balance, December 31, 2014 71,623 34,937,074 35,008,697Contributions - 3,300,300 3,300,300Net loss (662) (6,618,830) (6,619,492)Balance, December 31, 2015 $ 70,961 $ 31,618,544 $ 31,689,505

Notes Payable and Accrued Interest The notes payable are secured by deeds of trust on real estate and have various maturity dates as defined in the respective loan agreements. Notes totaling $4,634,805 and $4,939,151 are amortizing as of December 31, 2015 and 2014, respectively, and require monthly payments of principal and interest. The remaining balance of $141,454,240 and $111,105,899 is payable from Residual Receipts, as defined, as of December 31, 2015 and 2014, respectively. The interest rate on the notes range from 0% up to 7%. During 2015 and 2014, the controlled partnerships that were under construction incurred capitalized interest of $412,674 and $502,452, respectively.




22


Notes Payable and Accrued Interest (Continued) At December 31, 2015, required principal payments of the notes payable are as follows:

Year Amount 2016 $ 23,328,3592017 203,3912018 217,3462019 232,2612020 248,203

Thereafter 121,859,485 $ 146,089,045

Included in current maturities as of December 31, 2015 and 2014 is construction debt totaling $23,138,025 and $11,253,000, respectively, that has committed sources of repayment including proceeds from permanent debt and/or limited partner investor equity (Notes 11 and 12). On May 13, 2016, construction debt of $15,091,584 was refinanced with permanent financing and limited partner capital contributions. An analysis of accrued interest for 2015 and 2014 on notes payable is as follows:

Accrued Interest 1/1/15

Capitalized

Interest Interest Expense

Interest Paid


$ 12,308,537 $ 412,674 $ 3,531,138 $ (978,558) $ 15,273,791


Capitalized


Interest Paid


$ 9,665,035 $ 502,452 $ 2,897,304 $ (756,254) $ 12,308,537 Pursuant to the Modified Promissory Note secured by a Modification to Deed of Trust to HCIDLA (CRA/LA), whereby the Martinez and Olympia (Acquired Property) debt obligation was assigned to Southeast 1, accrued but unpaid interest on these residual receipt notes, as of the date the loan is due, shall be payable only to the extent that the fair value of the property exceeds the principal balance of the loan plus the principal balance of any loans senior to the loan (Debt Balance). During 2015, Southeast 1 obtained third party certified appraisals (Level 2 input) for the purpose of acquiring the Olympia and Martinez properties (Note 1iii). As of December 31, 2015, approximately $2,200,000 of Acquired Property assumed interest was not accrued because the appraised market value of the properties did not exceed the Debt Balance. As of December 31, 2015, there is a contingent liability of approximately $2,200,000 of unpaid interest if the fair value of the property at loan maturity increases to satisfy the loans and the accrued interest.




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NOTE 5. RELATED PARTY TRANSACTIONS

The Trust has significant related party transactions with affiliates. It provides development services, property management, resident services and administrative services. The Trust also advances funds for development and operating expenses. All transactions with affiliates are eliminated in consolidation. a) Development Fee Revenue

All development fee revenue is earned in connection with affiliated entities. Fees are generally paid from permanent sources upon the completion of a project. Many of these fees are required to be deferred and paid from cash flows of the related property. The gross profit earned on development fees is eliminated in consolidation.

b) Management Fee Revenue

All of the property management and partnership management fees are for oversight services provided to the Projects. The fees are eliminated in consolidation.

c) Notes and Interest Receivable

The amounts loaned by the Trust represent predevelopment and development loans to the Projects. Payments are subject to available cash flow. The loans and related interest are eliminated in consolidation.

d) Advances

The Trust advances funds to affiliates for development and operating expenses of properties. These advances are non-interest bearing short-term advances. Payments are subject to available cash flow. The advances are eliminated in consolidation.

e) Due to Affiliate

Due to affiliate consists of outstanding asset management fees due to the Edward’s special limited partner. The special limited partner continues to have a .01% interest at December 31, 2015 and 2014.

f) Rental Subsidies

The Trust entered into various rental subsidy agreements with HACLA under the SPC program of HUD (the Contracts). The Contracts are for a fixed period of time and are subject to renewal at the end of each term. The Contracts allow for discretion regarding which projects receive rental subsidies. Under the terms of the Contracts, the Trust must provide tenants with supportive services in an amount equal to or greater than the amount of rental subsidies received. Revenue from these Contracts is passed through to the projects and is included in rental revenue in the consolidated statement of activities and change in net assets (deficit).




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NOTE 5. RELATED PARTY TRANSACTIONS (Continued)

f) Rental Subsidies (Continued) The following is a list of the SPC rent subsidies allocated to the affordable housing projects:

2015 2014 Abbey $ 739,346 $ 730,421 Boyd 251,370 260,471 Charles Cobb 600,004 602,034 Crescent 3,471 16,454 Martinez 182,557 226,557 New Genesis 121 11,610 Olympia 134,895 173,863 Rainbow 500,918 513,499 San Pedro House 88,499 106,329 Sanborn 207,174 214,424 St. George 360,408 363,744 Senator 232,567 263,201 Simone 453,636 447,086 Weldon 186,904 176,816 $ 3,941,870 $ 4,108,523

NOTE 6. LEASE COMMITMENTS

a) Office Leases

The Trust has a month to month lease with Produce for office space. The lease payment is $1 per year and shared with SRHT PMC. The lease payments are eliminated in consolidation.

The Trust entered into an operating lease to provide office space to an unaffiliated entity. Included in the consolidated financial statements is $188,699 of commercial rental revenue related to the lease. The lease expires on June 30, 2016. The scheduled future lease revenues related to the non-cancelable long-term lease is as follows:

Year Ending December 31, Amount 2016 $ 45,015

b) Master Leases

The Trust subleases space from related parties under master office lease agreements. The rental revenue and expense associated with the master office leases have been eliminated in consolidation.




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NOTE 6. LEASE COMMITMENTS (Continued)

b) Master Leases (Continued)

There are no future non-cancelable lease commitments under long-term leases as of December 31, 2015 and 2014 as the lease payments are eliminated in consolidation. The Trust executed lease agreements with unrelated parties to sublease space. The leases provide for monthly rental revenue and expire on various dates through December 2021. The scheduled future lease revenues related to non-cancelable long-term operating leases as of December 31, 2015 are as follows:

Year Ending December 31, Amount 2016 $ 259,680 2017 214,899 2018 203,845 2019 158,136 2020 89,592

Thereafter 98,808 $ 1,024,960

NOTE 7. NOTES PAYABLE

2015 2014 Amortizing

New Carver: Note payable to Citicorp USA, Inc. (Citicorp), secured by deed of trust on real property, amortizing loan with monthly payments of $19,361; simple interest at 6.03% annually, any unpaid principal and interest due August 1, 2020. $ 942,960 $ 1,112,828

Produce:

Note payable to Citibank, secured by a first deed of trust on real property, original principal of $1,350,000; annual interest at 6.45%, monthly payments of principal and interest of $3,179 through December 1, 2024. 257,875

280,564

Trust:

Notes payable to Union Bank in the form of unsecured equity equivalent investment loans (UB EQII), providing available borrowings up to $400,000 and $200,000 to be used for affordable housing predevelopment activities. Simple interest of 2.5% is due quarterly. Unpaid principal and interest is due June 1, 2019 and 2020, respectively. Provided no default, the loans may be extended through June 2021. 600,000 400,000




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NOTE 7. NOTES PAYABLE (Continued)

2015 2014 Amortizing (Continued) Trust (Continued):

Note payable to Wells Fargo Bank in the form of an unsecured equity equivalent investment loan (WF EQII), providing available borrowings up to $600,000 to be used for affordable housing predevelopment activities. Simple interest of 2%, principal payments of $75,000 are due quarterly. Unpaid principal and interest is due April 15, 2019. Provided no default, the loan may be extended through April 2021. $ 600,000 $ -

Total amortizing 2,400,835 1,793,392Non-Amortizing

Boyd: Note payable to Citibank, secured by a first deed of trust; simple interest at 3%, principal and interest due on August 2, 2035. The loan and related interest were subsequently forgiven in April 2015, which are included in grants - loans revenue in the consolidated statement of activities and change in net assets (deficit). - 415,000 Note payable to the HCIDLA (CRA/LA), secured by a second deed of trust; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined in the loan agreement, and unpaid principal and interest is due on June 29, 2035. 2,593,025 2,593,025

Crescent:

Note payable to HCD, secured by a first deed of trust on real property; simple interest at 3%, interest only payable monthly from available residual receipts, as defined, and unpaid principal and interest due June 28, 2021. 1,500,000 1,500,000 Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due June 10, 2021. 1,880,000 1,880,000

Crest: Note payable to Century Housing Corporation, secured by a deed of trust on real property; simple interest at one month LIBOR plus 5.5% with a floor of 6.5%, interest payable monthly, principal and unpaid interest due February 27, 2015. The loan was paid from construction sources in 2015 (Note 11). - 2,067,972




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NOTE 7. NOTES PAYABLE (Continued) 2015 2014 Non-amortizing (Continued) Edward:

Note payable to HCD, secured by a first trust deed; simple interest at 3%, interest only payable annually from residual receipts, as defined, unpaid principal and interest due on December 30, 2033. $ 1,175,000 $ 1,175,000 Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second trust deed; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined in the loan agreement, unpaid principal and interest due on December 22, 2023. 1,224,459 1,224,459

Hart: Note payable to HCD, secured by a first deed of trust on real property; simple interest at 3%, interest only payable annually from residual receipts and all principal and unpaid interest due on July 5, 2031. 939,320 939,320 Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due April 15, 2022. 1,442,930 1,442,930

Martinez: Note payable to HCD, was secured by a first deed of trust on real property; simple interest at 3%, interest only payable annually and all principal and unpaid interest was due on July 2, 2031. On December 4, 2015, the note was assumed by Southeast 1 in connection with the sale of the project (Note 1iii). - 1,520,000 Note payable (residual receipts note) to HCIDLA (CRA/LA), was secured by a second deed of trust on real property; simple interest at 3%, principal and interest was payable annually from available residual receipts, as defined, and unpaid principal and interest was due April 1, 2022. On December 4, 2015, the note was assumed by Southeast 1 in connection with the sale of the project (Note 1iii). - 1,681,000




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2015 2014 Non-Amortizing (Continued) Martinez (Continued):

Note payable to HCIDLA was secured by a deed of trust on the land and building; simple interest at 5%; was payable from available residual receipts, as defined; unpaid principal and interest were due in April 2026. On December 4, 2015, the note was assumed by Southeast 1 in connection with the sale of the project (Note 1iii). $ - $ 221,216

New Carver:

Note payable to HCD, secured by a second deed of trust on real property; simple interest at 3%, annual interest payments totaling $29,073 (0.42% of principal balance) are required through 2045; thereafter, interest payments are required as defined in the note agreement. The unpaid principal and interest are due July 27, 2065. In addition, the note agreement provides for additional payments of interest based on Net Cash Flow, as defined. 6,922,244 6,922,244 Note payable to the HCIDLA secured by a fourth deed of trust on the real property; simple interest at 5% per annum; payable from available residual receipts, as defined; unpaid principal and interest due in February 15, 2063. 6,066,000 6,066,000 Loan payable to the California Tax Credit Allocation Committee (CTCAC), secured by a fifth deed of trust, assignment of rents and security agreement and fixture filing, with maximum borrowings of $15,081,533 to finance construction, bearing no interest. The Partnership is not subject to repayment obligation provided that the Partnership operates the Project in compliance with the regulatory agreement during the 15 year compliance period, ending in December 2024. The loan is being amortized over the 15 years, and for the years ended December 31, 2015 and 2014, the Partnership recorded $1,006,865 as grant revenue included in the consolidated statement of activities and change in net assets (deficit). 9,061,771 10,068,637




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2015 2014 Non-Amortizing (Continued) Olympia:

Note payable to HCD, was secured by a first deed of trust on real property; simple interest at 3%, interest only was payable monthly from available residual receipts, as defined, and unpaid principal and interest was due April 5, 2033. On December 4, 2015, the note was assumed by Southeast 1 in connection with the sale of the project (Note 1iii). $ - $ 1,030,483

Note payable (residual receipts note) to HCIDLA (CRA/LA), was secured by a second deed of trust on real property; simple interest at 3%, principal and interest were payable annually from available residual receipts, as defined, and unpaid principal and interest were due February 12, 2023. On December 4, 2015, the note was assumed by Southeast 1 in connection with the sale of the project (Note 1iii). - 1,279,625

Produce:

Note payable to HCD, secured by a second deed of trust on real property; simple interest at 3%, interest only payable annually from available residual receipts, as defined, and unpaid principal and interest due November 12, 2032. 3,300,000 3,300,000

Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a third deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due September 2024. 4,500,000 4,500,000

Rossmore: Note payable (residual receipts note) to HCIDLA, secured by a first deed of trust; simple interest at 5%, interest payable annually from available residual receipts, asdefined in the loan agreement, unpaid principal and accrued interest due on January 26, 2036. 1,462,411 1,462,411 Note payable to J.P. Morgan, secured by a second deed of trust; simple interest at 0.5%, unpaid principal and accrued interest due on January 25, 2026. 420,000 420,000




30


2015 2014 Non-Amortizing (Continued)

Sanborn: Note payable to HCD, secured by a first deed of trust on real property; simple interest at 3%, interest only payable annually from residual receipts, as defined, and unpaid principal and interest due January 2032. $ 1,272,257 $ 1,272,257 Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due January 15, 2022. 1,180,000 1,180,000

Senator: Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a first trust deed; simple interest at 3%, principal and interest payable annually from available residual receipts as defined in the loan agreement, unpaid principal and interest due in May 2023. 6,086,619 6,086,619

Simone:

Note payable to HCD, secured by a first deed of trust on real property; simple interest at 3%, interest only payable annually from residual receipts, as defined, and unpaid principal due October 1, 2032. 1,545,000 1,545,000 Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due July 9, 2021. 1,550,000 1,550,000 Note payable (residual receipts note) to the Housing Authority of the County of Los Angeles (HACoLA), secured by a deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due June 1, 2067. 589,960 589,960

St. Marks:

Note payable to HCD, secured by a first deed of trust on real property; simple interest at 3%, interest only payable monthly from residual receipts and all principal and unpaid interest due on June 28, 2031. 2,650,150 2,650,150




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2015 2014 Non-Amortizing (Continued) St. Marks (Continued):

Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a second deed of trust on real property; simple interest at 3%, principal and interest payable annually from available residual receipts, as defined, and unpaid principal and interest due June 28, 2021. $ 1,140,000 $ 1,140,000

San Pedro:

Note payable to HCIDLA, secured by deed of trust on real property, available borrowings up to $950,000, non-interest bearing, principal payable annually from residual receipts, any unpaid principal due February 13, 2040. 950,000 950,000

Weldon: Note payable (residual receipts note) to HCIDLA (CRA/LA), secured by a first trust deed; simple interest at 3%, principal and interest payable annually from available residual receipts as defined in the loan agreement, unpaid principal and interest due in May 2023. 3,603,713 3,603,713

649 Lofts: Note payable to Century Housing Corporation, secured by a first deed of trust; compound interest at LIBOR plus 5.5% is due monthly. Unpaid principal and interest is due September 2016. Provided no default, the loan may be extended through March 2017. 3,111,548 -

Total non-amortizing 66,166,407 72,277,021 Total notes payable 68,567,242 74,070,413

Less: current portion (3,313,970) (2,258,491) $ 65,253,272 $ 71,811,922 The Produce and San Pedro Citibank AHP loans of $615,000 and $95,000, respectively, were forgiven during 2014 and are included in grants - loans revenue in the consolidated statement of activities and change in net asset (deficit). Central 1’s notes payable to the Trust for $300,000 was eliminated in the consolidated statement of financial position.




32

NOTE 7. NOTES PAYABLE (Continued) At December 31, 2015, required principal payments on notes payable are as follows:

Year Ending December 31,

2016 $ 3,313,9702017 214,1122018 228,5072019 242,7842020 180,884

Thereafter 64,386,985 $ 68,567,242

Included in current maturities as of December 31, 2015 and 2014 is predevelopment debt totaling $3,111,548 and $2,067,972, respectively, that has committed sources of repayment including proceeds from construction debt and/or limited partner investor equity (Notes 11 and 12).

The HCIDLA (CRA/LA) residual receipts notes are payable upon available residual receipts, as defined in the note agreements. For Crescent, Edward, Hart, Martinez, Olympia, Produce, Sanborn, Senator, Simone, St. Marks and Weldon, the partnerships are allowed a 6% return on capital from available residual receipts before payments for principal and interest are due. In addition, accrued but unpaid interest on the residual receipt notes as of the date the loan is due, shall be payable only to the extent that the fair value of the property exceeds the principal balance of the loan plus the principal balance of any loans senior to the loan. During 2015, the Martinez and Olympia promissory notes were assumed by Southeast 1 (Note 4). As of December 31, 2015 and 2014, approximately $10,000,000 and $17,400,000, respectively, of interest was not accrued because the future estimated fair value of the properties is not expected to be sufficient. During 2015, the fair value of the properties were determined based on third party appraisals or management’s estimate based on the sales price and appraisals of comparable properties sold to affiliates (Level 2 input). Due to the appraised fair value of the Simone and management’s estimate for Crescent, Edward, Hart, Produce, Sanborn and St. Marks, previously unrecorded accrued interest of approximately $6,500,000 was recorded during 2015. As of December 31, 2015, there is a contingent liability of approximately $10,000,000 of unpaid interest if the fair value of the properties at loan maturity increases to satisfy the loans and the accrued interest.

An analysis of accrued interest for 2015 on notes payable is as follows:

Current Accrued Interest Payable


Capitalized Interest

Interest Expense

Interest Paid/

Adjustment transfers


SRHT – Loan and Line-of-credit $ - $ 54,437

$ -

$ (54,437) $ -

UB EQII - 13,900 - (13,900) -WF EQII - 5,906 - (5,906) -Produce - - 12,218 (12,218) -New Carver 5,592 - 61,612 (62,460) 4,744649 Lofts - 77,048 - (77,048) - 5,592 151,291 73,830 (225,969) 4,744




33


Non-Current Accrued Interest


Capitalized Interest

Interest Expense

Interest Paid/

Adjustment transfers


Boyd $ 1,787,524 $ - $ 81,660 $ (248,899) $ 1,620,285Crescent 835,400 - 500,750 - 1,336,150Edward 556,154 - 228,621 - 784,775Hart 424,811 - 105,855 - 530,666Martinez 1,047,143 - 48,042 (1,095,185) -New Carver 2,840,421 - 510,966 (29,073) 3,322,314Olympia 689,806 - 28,431 (718,237) -Produce 1,408,336 - 3,475,029 - 4,883,365Rossmore 1,486,670 - 75,216 (28,408) 1,533,478Sanborn 861,633 - 907,841 - 1,769,474Simone 1,019,070 - 1,197,096 - 2,216,166St. Marks 1,117,203 - 480,988 - 1,598,191 14,074,171 - 7,640,495 (2,119,802) 19,594,864

$ 14,079,763 $ 151,291 $ 7,714,325 $ (2,345,771) $ 19,599,608

An analysis of accrued interest for 2014 on notes payable is as follows:

Current Accrued Interest Payable


Capitalized


Interest Paid


SRHT – Loan and Line-of-credit

$ - $ 62,959

$ 1,528

$ (64,487) $ -

Produce - - 18,780 (18,780) -New Carver 6,396 - 71,572 (72,376) 5,592 6,396 62,959 91,880 (91,156) 5,592

Non-Current Accrued Interest

Boyd 1,697,284 - 90,240 - 1,787,524Crescent 790,400 - 45,000 - 835,400Crest - 129,803 - (129,803) -Edward 520,898 - 35,256 - 556,154Hart 396,635 - 28,176 - 424,811Martinez 994,907 - 52,236 - 1,047,143New Carver 2,358,523 - 510,971 (29,073) 2,840,421Olympia 658,892 - 30,914 - 689,806Produce 1,368,147 - 99,000 (58,811) 1,408,336Rossmore 1,411,454 - 75,216 - 1,486,670Sanborn 823,461 - 38,172 - 861,633Simone 955,014 - 64,056 - 1,019,070St. Marks 1,066,404 - 79,501 (28,702) 1,117,203 13,042,019 129,803 1,148,738 (246,389) 14,074,171

$ 13,048,415 $ 192,762 $ 1,240,618 $ (402,032) $ 14,079,763




34

NOTE 8. PREDEVELOPMENT BANK LOANS AND LINES-OF-CREDIT The Trust was approved for a line-of-credit with Century Housing Corporation (Century), a

California non-profit public-benefit corporation, providing available borrowings up to $1,990,000 to be used for affordable housing acquisition and predevelopment activities. Interest is due monthly at a variable rate of LIBOR plus 4.5% per annum on total funds disbursed; however, the annual rate shall not be less than 7%. As of December 31, 2015 and 2014, the line-of-credit balance is $470,960 and $1,471,150, respectively. Available borrowings were $1,519,040 and $28,850 in 2015 and 2014, respectively. The line-of-credit maturity date was extended to March 2018 with available borrowing increased up to $3,500,000.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Guarantees The Trust has entered into various agreements with certain limited partnerships or their affiliated general partners whereby the Trust guarantees to loan funds to the partnerships in the event that the partnerships incur operating deficits, as defined in the respective partnership agreements, or fail to meet their current financial obligations. These agreements expire at various dates through the terms of the underlying partnership or debt agreements. Loans made pursuant to these guarantees are generally interest-free and unsecured. Generally, the maximum potential amount of future payments under these guarantees is equal to the amount guaranteed to the partnerships under the tax indemnification agreements discussed below. The Trust entered into various agreements with certain limited partnerships or their affiliated general partners whereby the Trust offers tax indemnification in the event of low-income housing tax credit recapture. The Trust’s potential liability under these agreements is dependent upon IRS audits and final letters of determination of the limited partnership’s qualified basis in tax credit properties. Similarly, the Trust has entered into agreements with state and local governments who have provided loans to certain limited partnerships for the development of affordable housing whereby the Trust has guaranteed any recapture of the loans resulting from non-compliance with affordable housing requirements. Management is not aware of any known liability for tax credit or loan recapture. The Trust provides guarantees to certain lenders who provide financing for the acquisition and construction of the housing projects developed by certain limited partnerships. Under these guarantees, the Trust provides assurance of project completion and provides repayment guarantees for the respective loans. The guarantees generally terminate when the construction is complete and permanent financing repays the construction loans. These agreements expire from 2015 through the terms of the underlying agreements. Litigation The Organization is involved in certain legal claims arising from its rental activities. Management does not believe that the outcome of these matters will have a material effect on the Organization’s consolidated financial position or results of operations.




35

NOTE 10. RETIREMENT PLAN

The Organization has established a salary reduction plan through a tax sheltered 403(b) annuity. Under the plan, eligible employees can elect to have their salary withheld and contributed to the plan up to the maximum allowed, as defined. The Organization does not make a discretionary contribution under the current plan.

NOTE 11. REAL ESTATE UNDER DEVELOPMENT

On August 26, 2013, the Crest was formed with the purpose of developing and operating 64 affordable units for the homeless, chronic homeless, veterans, and high utilizers of county health care services. During 2015, the Crest closed its construction financing and was amended to allow for the admittance of an unrelated party and the withdrawal of a wholly owned LLC by the Trust, as the limited partner. Since the entity continued to be controlled by the Trust as of December 31, 2015, the assets, liabilities and fund balance were transferred at historical cost and are reflected as real estate and other assets held in controlled limited partnerships in the consolidated statement of financial position. On November 3, 2014, Southeast I was formed with the purpose of developing and operating 103 affordable units for the homeless, chronic homeless, special needs, veterans, and frequent utilizers of county health care services. During 2015, Southeast 1 purchased the Martinez and Olympia properties and was amended to allow for the admittance of an unrelated party and the withdrawal of a wholly owned LLC by the Trust, as the limited partner. Since the entity continued to be controlled by the Trust as of December 31, 2015, the assets, liabilities and fund balance were transferred at historical cost and are reflected as real estate and other assets held in controlled limited partnerships in the consolidated statements of financial position. On December 17, 2014, 649 Lofts was formed with the purpose of developing and operating 55 affordable units for the homeless, chronic homeless, special needs, and frequent utilizers of county health care services. At December 31, 2015 and 2014, Skid Row Housing Trust is the general partner and an LLC wholly owned by the Trust is the limited partner for 649 Lofts. The Organization acquired a commercial property at 649 S. Wall Street in June 2015 that will be demolished and converted into a mixed use project that contains both 649 Lofts and the Clinic at 7th and Wall. The Trust entered into a development venture in 2015 with LA Christian Health Centers to develop the Clinic at 7th and Wall at 649 Lofts. The clinic project anticipates utilizing New Markets Tax Credits. On March 12, 2015, Senator 2015 was formed with the purpose of developing and operating 98 affordable units for the homeless, chronic homeless, special needs, veterans, and frequent utilizers of county health care services. Senator 2015 intends to purchase the Senator property and commence construction in 2017. At December 31, 2015, the Trust is the general partner and LLCs wholly owned by the Trust is the limited partner for Senator 2015. On August 13, 2015, Simone 2015 was formed with the purpose of developing and operating 114 affordable units for the homeless, chronic homeless, special needs, veterans, and frequent utilizers of county health care services. Simone 2015 intends to purchase the Simone property and commence construction in 2016. At December 31, 2015, the Trust is the general partner and LLCs wholly owned by the Trust is the limited partner for Simone 2015.




36

NOTE 11. REAL ESTATE UNDER DEVELOPMENT (Continued)

On August 17, 2015, Central 1 was formed with the purpose of developing and operating 113 affordable units for the homeless, chronic homeless, special needs, veterans, and frequent utilizers of county health care services. Central 1 intends to purchase the Rossmore and Weldon properties and start construction in 2016. At December 31, 2015, the Trust is the general partner and LLCs wholly owned by the Trust is the limited partner for Central 1.

NOTE 12. SUBSEQUENT EVENTS

Management has evaluated subsequent events that have occurred through August 23, 2016, which is the date that the consolidated financial statements were available to be issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements, except as disclosed below and in Note 4.

The Organization entered into the following transactions during 2016: Effective January 1, 2016, the Holding Company acquired the Dewey limited partner 99.99%

interest and, combined with the Trust’s interest, owns 100% of the partnership.

On January 29, 2016, the Organization purchased a parking lot at 600 S. San Pedro, located in Los Angeles, California with the intent to develop 80-200 units of affordable housing in a joint-venture with the Weingart Center Association.

On April 4, 2016, the Organization purchased an existing commercial warehouse at 401 E. 7th Street, located in Los Angeles, California with the intent of developing 99 units of affordable housing.

In June 2016, the Organization received an allocation of tax credits for the Simone 2015 project and Skid Row Central 1 project.

SUPPLEMENTARY INFORMATION


NOTES TO SCHEDULE I: ADDITIONAL INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 (UNAUDITED)

See independent auditor’s report on supplementary information.

38

Skid Row Housing Trust is a tax-exempt non-profit organization whose primary business activity is the development of affordable housing. One of the key mechanisms used to carry out this activity is the utilization of the federal low-income housing tax credit program, which provides approximately 60% of the total permanent financing of individual affordable housing projects. Under this federal program, private equity is invested in limited partnerships in which Skid Row Housing Trust is the general partner; the investor or its intermediary is the limited partner. The limited partner receives up to 99.99% ownership interest, with Skid Row Housing Trust having up to a 1% interest in the subject properties. In this arrangement, the limited partner/investor receives the benefit of tax credits and the non-cash losses from depreciation. Additionally, the balance of the financing is derived from public agency loans with below market interest rates in which interest is accrued at a simple (non-compounding) rate. Typically, limited partners remain in the partnership for 15 years, until the financial tax benefits are exhausted, then withdraw from the partnership. The general partner typically has the right of first refusal to purchase the limited partner’s interest. The Trust has exercised that right for 15 partnerships from 2005 to 2015, four of which have been re-syndicated through 2015, by creating a single member limited liability company to become the new limited partner. In accordance with accounting principles generally accepted in the United States of America, full ownership interest in the partnerships must be included in the Skid Row Housing Trust's consolidated financial statements. As of December 31, 2015, Skid Row Housing Trust included 11 partnerships in its consolidated financial statements as Skid Row Housing Trust became the sole owner of these properties upon completion of the 15 year tax credit compliance period, as defined in the Limited Partnership Agreement (Note 1iii). As the limited partners exit the partnership, the properties are returned to Skid Row Housing Trust and become part of its assets. The Skid Row Housing Trust consolidated financial statements also include twelve (12) controlled partnerships (Note 1iv). These properties are financed and acquired with residual receipt loans and other deferred interest loans. These loans are provided under the mandate that the properties are operated as affordable housing residences. The residual receipt loans are payable only when the properties produce surplus cash, as defined, or when the properties have residual receipts, as defined. The other deferred interest loans are subject to annual deferral of interest based on criteria defined in the loan agreement. The properties are budgeted to operate at a break-even basis. Rental rates are restricted and below market, sufficient only to cover operating costs. As a result, these properties generally do not generate residual receipts and will meet the criteria to receive the interest deferral, and therefore would not be required to make debt service payments. Management expects these loans will most likely be renewed or forgiven when they mature. Interest is accrued; however, payment of that interest is contingent upon the availability of cash flow sufficient to pay the interest due. The 12 properties that were consolidated into Skid Row Housing Trust have negative net assets. In accordance with accounting principles generally accepted in the United States of America, depreciation and interest expenses relating to these properties have been recorded in Skid Row Housing Trust's consolidated financial statements. Depreciation expense and accrued interest are non-cash items reported for consolidated financial statement purposes and are significant factors for Skid Row Housing Trust reporting consolidated negative net assets. These properties are structured on an operationally break-even-cash-basis, before depreciation and interest expenses are added. The depreciation and accruing interest create a net loss for financial reporting purposes (even though no cash was expended), and the accumulated net losses create the negative change in net assets that appears on the Skid Row Housing Trust consolidated statement of financial position.

SCHEDULE I


ADDITIONAL INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2015

WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014 (UNAUDITED)

See independent auditor’s report on supplementary information.

39

The following schedule depicts selected consolidated financial information of the Organization for 2015 and 2014, as well as cumulatively since inception, modified for the effects of the non-cash depreciation and non-cash residual receipts interest expense: For the years ended December 31,:

2015 2014 Total revenues $ 21,030,282 $ 19,116,596Total expenses (35,412,147) (25,159,485)Decrease in net assets (14,381,865) (6,042,889)Depreciation and amortization expense 6,733,124 6,266,398Residual receipt interest expense 10,770,712 3,816,508Increase in pro-forma net assets $ 3,121,971 $ 4,040,017

Cumulative net assets as of December 31,:

2015 2014 Cumulative net assets $ 9,653,611 $ 20,735,176Net assets – noncontrolling interest (31,618,544) (34,937,074)Cumulative accumulated depreciation 34,347,742 35,645,718Cumulative accrued residual receipt interest payable 19,594,864 14,074,171Pro-forma net assets, end of year $ 30,977,673 $ 35,517,991

SCHEDULE II


CONSOLIDATING STATEMENT OF FINANCIAL POSITIONDECEMBER 31, 2015

The Trust SRHT SRHT Consolidated

Skid Row San Pedro Property Property Piece Controlled Total AdjustedHousing House Management Holding by Limited Before Consolidated

Trust Project Eliminations Trust Company LLC Piece Partnerships Eliminations Eliminations Total

Assets

Current assetsCash and cash equivalents 1,322,804$ 35,045$ -$ 1,357,849$ (3,364)$ 2,457,590$ 49,630$ -$ 3,861,705$ -$ 3,861,705$ Tenant and subsidy receivables 6,399 8,211 - 14,610 - 184,265 - - 198,875 - 198,875 Grant receivables due within one year 1,450,190 - - 1,450,190 - - 65,269 - 1,515,459 - 1,515,459 Current portion due from affiliates 995,357 3,998 88,000 1,087,355 1,451,605 45,702 - - 2,584,662 (2,584,662) - Current portion developer fee receivable 1,492,000 - - 1,492,000 - - - - 1,492,000 (1,492,000) - Prepaid expenses and other assets 27,370 - - 27,370 38,939 50,113 - - 116,422 - 116,422 Current assets held in controlled

limited partnerships (Note 4) - - - - - - - 2,628,990 2,628,990 - 2,628,990

Total current assets 5,294,120 47,254 88,000 5,429,374 1,487,180 2,737,670 114,899 2,628,990 12,398,113 (4,076,662) 8,321,451

Restricted cash 2,428,301 2,032 - 2,430,333 769 5,404,383 - - 7,835,485 - 7,835,485

Real estate held for lease, at costLand - 100,000 - 100,000 - 15,144,425 - - 15,244,425 - 15,244,425 Building and building improvements - 1,290,363 - 1,290,363 - 71,862,946 - - 73,153,309 (1,031,871) 72,121,438

Furniture and equipment - 31,271 - 31,271 - 1,914,918 - - 1,946,189 - 1,946,189

Total real estate held for lease, at cost - 1,421,634 - 1,421,634 - 88,922,289 - - 90,343,923 (1,031,871) 89,312,052

Less: accumulated depreciation - (674,081) - (674,081) - (33,669,708) - - (34,343,789) 332,557 (34,011,232)

Real estate held for lease, net - 747,553 - 747,553 - 55,252,581 - - 56,000,134 (699,314) 55,300,820

Real estate under development 242,494 - - 242,494 - 600,519 - - 843,013 - 843,013

Other long term assetsDue from affiliates, net of reserve of $1,135,626 in 2015, net of current portion 1,983,086 - - 1,983,086 603,739 - - - 2,586,825 (2,586,825) - Developer fees receivable, net of reserve

of $433,566 in 2015, net of current portion 5,484,469 - - 5,484,469 - - - - 5,484,469 (5,484,469) -

Other long term assets, net 7,467,555 - - 7,467,555 603,739 - - - 8,071,294 (8,071,294) -

Property, at costFurniture, equipment, and artwork 289,780 - - 289,780 117,533 - 3,336 - 410,649 - 410,649

Leasehold improvements 1,352,422 - - 1,352,422 - - - - 1,352,422 - 1,352,422

Total property, at cost 1,642,202 - - 1,642,202 117,533 - 3,336 - 1,763,071 - 1,763,071

Less: accumulated depreciation and amortization (265,775) - - (265,775) (76,432) - (3,336) - (345,543) - (345,543)

Property, net 1,376,427 - - 1,376,427 41,101 - - - 1,417,528 - 1,417,528

Real estate and other assets held in controlled limited partnerships (Note 4) - - - - - - - 201,217,837 201,217,837 (10,140,803) 191,077,034

Deferred costs, net - - - - - 325,243 - - 325,243 - 325,243

Total assets 16,808,897$ 796,839$ 88,000$ 17,693,736$ 2,132,789$ 64,320,396$ 114,899$ 203,846,827$ 288,108,647$ (22,988,073)$ 265,120,574$

See independent auditor's report on supplementary information.

40

SCHEDULE II



(CONTINUED)

The Trust SRHT SRHT Consolidated

Skid Row San Pedro Property Property Piece Controlled Total AdjustedHousing House Management Holding by Limited Before Consolidated

Trust Project Eliminations Trust Company LLC Piece Partnerships Eliminations Eliminations Total


Current liabilitiesAccounts payable and accrued expenses 521,456$ 55,779$ 141,573 718,808$ 739,583$ 1,392,401$ 1,731$ -$ 2,852,523$ (1,466,680)$ 1,385,843$ Predevelopment bank line-of-credit 470,960 - - 470,960 - - - - 470,960 - 470,960 Current portion of notes payable secured by real property - - - - - 3,613,970 - - 3,613,970 (300,000) 3,313,970 Accrued interest payable, current - - - - - 4,744 - - 4,744 - 4,744 Due to affiliates (Note 5) 321,341 144,471 (141,573) 324,239 165,234 2,853,952 - - 3,343,425 (3,165,498) 177,927 Tenant security deposits 84,000 640 - 84,640 - 68,405 - - 153,045 - 153,045 Prepaid rent - 7,635 - 7,635 - 446,665 - - 454,300 - 454,300 Notes payable and other liabilities related to

controlled limited partnerships (Note 4) - - - - - - - 26,623,561 26,623,561 - 26,623,561

Total current liabilities 1,397,757 208,525 - 1,606,282 904,817 8,380,137 1,731 26,623,561 37,516,528 (4,932,178) 32,584,350

Long-term liabilitiesNotes payable secured by real property, net of current portion 1,200,000 950,000 - 2,150,000 - 63,103,272 - - 65,253,272 - 65,253,272 Accrued interest payable, net of current portion - - - - - 19,594,864 - - 19,594,864 - 19,594,864 Notes payable and other liabilities related to controlled limited partnerships, net of

current portion (Note 4) - - - - - - - 147,479,054 147,479,054 (9,444,577) 138,034,477

Total long-term liabilities 1,200,000 950,000 - 2,150,000 - 82,698,136 - 147,479,054 232,327,190 (9,444,577) 222,882,613

Total liabilities 2,597,757 1,158,525 - 3,756,282 904,817 91,078,273 1,731 174,102,615 269,843,718 (14,376,755) 255,466,963

Commitments and contingencies

Net assets (deficit) 14,211,140 (361,686) 88,000 13,937,454 1,227,972 (26,757,877) 113,168 29,744,212 18,264,929 (8,611,318) 9,653,611

.

Total liabilities and net assets (deficit) 16,808,897$ 796,839$ 88,000$ 17,693,736$ 2,132,789$ 64,320,396$ 114,899$ 203,846,827$ 288,108,647$ (22,988,073)$ 265,120,574$


41

SCHEDULE II



(CONTINUED)

SRHT Property Holding LLC

Edward Olympia Produce RossmoreBoyd Crescent Hotel Hart Martinez New Carver Hotel Apartments Hotel

Limited Fifth Street Limited Limited Limited Apartments, Limited Limited Limited Partnership Partners Partnership Partnership Partnership L.P. Partnership Partnership Partnership

Assets

Current assetsCash and cash equivalents 630,194$ 76,577$ 155,490$ 173,609$ 24,550$ 117,713$ 3,679$ 62,817$ 239,783$ Tenant and subsidy receivables 23,991 1,965 7,520 5,541 - 22,286 - 13,990 9,018 Current portion due from affiliates 3,922 - 31,680 - 633 - 22 2,408 - Prepaid expenses and other assets 2 168 - 1,180 - 27,328 - 4,202 2,599

Total current assets 658,109 78,710 194,690 180,330 25,183 167,327 3,701 83,417 251,400

Restricted cash 2,410 513,277 193,315 417,210 2,293 973,718 2,053 946,952 622,152

Real estate held for lease, at costLand 280,000 483,750 275,000 275,000 - 4,164,015 - 2,528,000 300,000 Building and building improvements 4,112,358 4,111,667 2,807,702 2,798,513 - 25,025,603 - 9,696,660 3,862,642

Furniture and equipment 164,512 98,827 91,444 90,877 - 401,646 - 308,026 150,342

Total real estate held for lease, at cost 4,556,870 4,694,244 3,174,146 3,164,390 - 29,591,264 - 12,532,686 4,312,984

Less: accumulated depreciation (2,307,906) (2,500,540) (2,135,690) (1,793,180) - (4,279,084) - (6,213,312) (1,965,935)

Real estate held for lease, net 2,248,964 2,193,704 1,038,456 1,371,210 - 25,312,180 - 6,319,374 2,347,049

Real estate under development - - - - - - - - -

Deferred cost, net - 15,942 27,876 11,338 - 172,736 - 21,475 -

Total assets 2,909,483$ 2,801,633$ 1,454,337$ 1,980,088$ 27,476$ 26,625,961$ 5,754$ 7,371,218$ 3,220,601$


42

SCHEDULE II



(CONTINUED)


Edward Olympia Produce RossmoreBoyd Crescent Hotel Hart Martinez New Carver Hotel Apartments Hotel

Limited Fifth Street Limited Limited Limited Apartments, Limited Limited Limited Partnership Partners Partnership Partnership Partnership L.P. Partnership Partnership Partnership


Current liabilitiesAccounts payable and accrued expenses 45,856$ 118,339$ 36,798$ 43,820$ 10,364$ 102,521$ 8,450$ 94,033$ 66,734$ Current portion of notes payable secured by real property - - - - - 180,400 - 22,022 - Accrued interest payable, current - - - - - 4,744 - - - Due to affiliates (Note 5) 19,018 305,051 182,473 - 13,922 484,803 10,174 4,932 277,552 Tenant security deposits 2,320 2,500 1,800 6,935 1,600 3,670 1,370 21,958 2,200

Prepaid rent 20,839 7,242 16,536 15,925 - 63,658 - 48,921 31,939

Total current liabilities 88,033 433,132 237,607 66,680 25,886 839,796 19,994 191,866 378,425

Long-term liabilitiesNotes payable secured by real

property, net of current portion 2,593,025 3,380,000 2,399,459 2,382,250 - 22,812,575 - 8,035,853 1,882,411 Accrued interest payable, net of

current portion 1,620,285 1,336,150 784,775 530,666 - 3,322,314 - 4,883,365 1,533,478

Total long-term liabilities 4,213,310 4,716,150 3,184,234 2,912,916 - 26,134,889 - 12,919,218 3,415,889

Total liabilities 4,301,343 5,149,282 3,421,841 2,979,596 25,886 26,974,685 19,994 13,111,084 3,794,314

Net assets (deficit) (1,391,860) (2,347,649) (1,967,504) (999,508) 1,590 (348,724) (14,240) (5,739,866) (573,713)

Total liabilities and net assets (deficit) 2,909,483$ 2,801,633$ 1,454,337$ 1,980,088$ 27,476$ 26,625,961$ 5,754$ 7,371,218$ 3,220,601$


43

SCHEDULE II



(CONTINUED)


Sanborn Senator Senator 2015 Simone Simone 2015 SRHTHotel Apartments Apartments Hotel Hotel St. Mark's Weldon Property

Limited Limited Limited Skid Row Limited Limited Fifth Street Limited 649 Holding LLCPartnership Partnership Partnership Central 1 LP Partnership Partnership Partners Partnership Lofts LP Total

Assets

Current assets

Cash and cash equivalents 40,026$ 515,964$ -$ -$ 39,757$ -$ 250,176$ 83,868$ 43,387$ 2,457,590$ Tenant and subsidy receivables 6,693 12,199 - - 34,638 - 28,619 12,495 5,310 184,265 Current portion due from affiliates 787 1,833 - - 1,954 - 1,533 930 - 45,702

Prepaid expenses and other assets 1,949 - - - 5,328 - 5,346 - 2,011 50,113

Total current assets 49,455 529,996 - - 81,677 - 285,674 97,293 50,708 2,737,670

Restricted cash 180,795 82,575 - 234,675 589,188 - 590,901 42,803 10,066 5,404,383

Real estate held for lease, at costLand 450,000 1,225,000 - - 331,500 - 184,000 898,160 3,750,000 15,144,425 Building and building improvements 3,032,336 2,112,736 - - 6,114,207 - 4,865,675 3,322,847 - 71,862,946

Furniture and equipment 93,394 51,694 - - 206,380 - 152,425 105,351 - 1,914,918

Total real estate held for lease, at cost 3,575,730 3,389,430 - - 6,652,087 - 5,202,100 4,326,358 3,750,000 88,922,289

Less: accumulated depreciation (2,240,105) (806,223) - - (4,778,411) - (2,890,164) (1,759,158) - (33,669,708)

Real estate held for lease, net 1,335,625 2,583,207 - - 1,873,676 - 2,311,936 2,567,200 3,750,000 55,252,581

Real estate under development - - 18,067 64,832 - 30,788 - - 486,832 600,519

Deferred costs, net 10,013 9,924 - - 24,070 - 17,468 14,401 - 325,243

Total assets 1,575,888$ 3,205,702$ 18,067$ 299,507$ 2,568,611$ 30,788$ 3,205,979$ 2,721,697$ 4,297,606$ 64,320,396$


44

SCHEDULE II



(CONTINUED)


Sanborn Senator Senator 2015 Simone Simone 2015 SRHTHotel Apartments Apartments Hotel Hotel St. Mark's Weldon Property

Limited Limited Limited Skid Row Limited Limited Fifth Street Limited 649 Holding LLCPartnership Partnership Partnership Central 1 LP Partnership Partnership Partners Partnership Lofts LP Total


Current liabilitiesAccounts payable and accrued expenses 228,057$ 67,613$ 352$ (493)$ 145,049$ 12,517$ 59,936$ 292,751$ 59,704$ 1,392,401$ Current portion of notes payable secured by real property - - - 300,000 - - - - 3,111,548 3,613,970 Accrued interest payable, current - - - - - - - - 4,744 Due to affiliates (Note 5) 5,000 34,304 17,715 - 90,407 18,271 270,581 51,405 1,068,344 2,853,952 Tenant security deposits 1,830 2,934 - - 3,892 - 3,480 1,850 10,066 68,405

Prepaid rent 18,010 28,177 - - 139,271 - 39,215 14,179 2,753 446,665

Total current liabilities 252,897 133,028 18,067 299,507 378,619 30,788 373,212 360,185 4,252,415 8,380,137

Long-term liabilitiesNotes payable secured by real

property, net of current portion 2,452,257 6,086,619 - - 3,684,960 - 3,790,150 3,603,713 - 63,103,272 Accrued interest payable, net of

current portion 1,769,474 - - - 2,216,166 - 1,598,191 - - 19,594,864

Total long-term liabilities 4,221,731 6,086,619 - - 5,901,126 - 5,388,341 3,603,713 - 82,698,136

Total liabilities 4,474,628 6,219,647 18,067 299,507 6,279,745 30,788 5,761,553 3,963,898 4,252,415 91,078,273

Net assets (deficit) (2,898,740) (3,013,945) - - (3,711,134) - (2,555,574) (1,242,201) 45,191 (26,757,877)

Total liabilities and net assets (deficit) 1,575,888$ 3,205,702$ 18,067$ 299,507$ 2,568,611$ 30,788$ 3,205,979$ 2,721,697$ 4,297,606$ 64,320,396$


45

SCHEDULE III


CONSOLIDATING STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS (DEFICIT)FOR THE YEAR ENDED DECEMBER 31, 2015

SRHT SRHT ConsolidatedProperty Property Piece Controlled Total Adjusted

Management Holding by Limited Before ConsolidatedTrust Company LLC Piece Partnerships Eliminations Eliminations Total

Public supportContributions 339,740$ -$ -$ 26,215$ -$ 365,955$ -$ 365,955$ Foundation and corporate grants 1,861,518 - - 139,360 - 2,000,878 - 2,000,878 Government grants 1,368,789 - - 112,560 1,481,349 - 1,481,349

Grants - loans (Note 7) - - 1,670,923 - 386,660 2,057,583 - 2,057,583

Total public support 3,570,047 - 1,670,923 278,135 386,660 5,905,765 - 5,905,765

RevenueDeveloper fees 2,306,911 - - - - 2,306,911 (2,306,911) - Partnership management fees 318,653 - - - - 318,653 (318,653) - Partnership supportive service fees 1,000,759 - - - - 1,000,759 (1,000,759) - Accounting and administrative service fees 187,644 - - - - 187,644 (187,644) - Rental revenue 429,269 - 6,740,180 - 6,337,409 13,506,858 (196,910) 13,309,948 Property management company revenue 500,000 4,963,584 - - - 5,463,584 (5,463,584) - Miscellaneous revenue 1,742,071 198 639,880 89,804 94,012 2,565,965 (958,163) 1,607,802 In-kind revenue 146,500 - - 44,000 - 190,500 - 190,500

Interest income 44,253 - 13,171 - - 57,424 (41,157) 16,267

Total revenue 6,676,060 4,963,782 7,393,231 133,804 6,431,421 25,598,298 (10,473,781) 15,124,517

Total public support and revenue 10,246,107 4,963,782 9,064,154 411,939 6,818,081 31,504,063 (10,473,781) 21,030,282

ExpensesProgram services 6,392,949 5,155,101 17,117,983 354,298 13,429,573 42,449,904 (8,479,682) 33,970,222 General and administrative 1,187,200 - 11,200 71,958 8,000 1,278,358 - 1,278,358

Fundraising 159,228 - - 4,339 - 163,567 - 163,567

Total expenses 7,739,377 5,155,101 17,129,183 430,595 13,437,573 43,891,829 (8,479,682) 35,412,147

Change in net assets (deficit) 2,506,730 (191,319) (8,065,029) (18,656) (6,619,492) (12,387,766) (1,994,099) (14,381,865)

Net assets (deficit), beginning of year 11,430,724 1,419,291 (22,294,848) 131,824 37,059,348 27,746,339 (7,011,163) 20,735,176

Noncontrolling interests - contributions - - - - 3,300,300 3,300,300 - 3,300,300

Controlling interest- contribution (distribution)(Note 1iii) - - 3,602,000 - (3,995,944) (393,944) 393,944 -

Net assets (deficit), end of year 13,937,454$ 1,227,972$ (26,757,877)$ 113,168$ 29,744,212$ 18,264,929$ (8,611,318)$ 9,653,611$


46

SCHEDULE III



(CONTINUED)


Boyd Crescent Edward Olympia Produce RossmoreHotel Fifth Hotel Hart Martinez New Carver Hotel Hotel Hotel

Limited Street Limited Limited Limited Apartments, Limited Limited Limited Partnership Partners Partnership Partnership Partnership L.P. Partnership Partnership Partnership

Public supportGrants - loans (Note 7) 664,058$ -$ -$ -$ -$ 1,006,865$ -$ -$ -$

Total public support 664,058 - - - - 1,006,865 - - -

RevenueRental revenue 390,718 335,711 272,529 336,204 297,271 979,067 233,350 862,375 516,426 Miscellaneous revenue 65 3,112 582 6,998 232,383 154 391,329 2,931 102 Interest income 1,260 1,184 777 1,093 396 234 221 1,866 1,527

Total revenue 392,043 340,007 273,888 344,295 530,050 979,455 624,900 867,172 518,055

Total public support and revenue 1,056,101 340,007 273,888 344,295 530,050 1,986,320 624,900 867,172 518,055

ExpensesProgram services and general and administrative 623,372 1,008,386 645,017 521,675 495,472 2,037,753 421,038 4,649,857 641,805

Total expenses 623,372 1,008,386 645,017 521,675 495,472 2,037,753 421,038 4,649,857 641,805

Change in net assets (deficit) 432,729 (668,379) (371,129) (177,380) 34,578 (51,433) 203,862 (3,782,685) (123,750)

Net assets (deficit), beginning of year (1,824,589) (1,679,270) (1,596,375) (822,128) (2,161,164) (297,291) (1,691,926) (1,957,181) (449,963)

Controlling interest- contribution

(distribution) (Note 1iii) - - - - 2,128,176 - 1,473,824 - -

Net assets (deficit), end of year (1,391,860)$ (2,347,649)$ (1,967,504)$ (999,508)$ 1,590$ (348,724)$ (14,240)$ (5,739,866)$ (573,713)$


47

SCHEDULE III



(CONTINUED)


Sanborn Senator Simone SRHTHotel Apartments Hotel St. Mark's Weldon Property

Limited Limited Limited Fifth Street Limited 649 Holding LLC Partnership Partnership Partnership Partners Partnership Lofts LP Total

Public supportGrants - loans -$ -$ -$ -$ -$ -$ 1,670,923$

Total public support - - - - - - 1,670,923

RevenueRental revenue 307,923 502,049 678,177 633,078 333,073 62,229 6,740,180 Miscellaneous revenue 534 89 1,497 104 - - 639,880 Interest income 442 1,268 1,165 1,439 299 - 13,171

Total revenue 308,899 503,406 680,839 634,621 333,372 62,229 7,393,231

Total public support and revenue 308,899 503,406 680,839 634,621 333,372 62,229 9,064,154

ExpensesProgram services and general and administrative 1,294,057 696,616 2,299,587 1,197,005 580,505 17,038 17,129,183

Total expenses 1,294,057 696,616 2,299,587 1,197,005 580,505 17,038 17,129,183

Change in net assets (deficit) (985,158) (193,210) (1,618,748) (562,384) (247,133) 45,191 (8,065,029)

Net assets (deficit), beginning of year (1,913,582) (2,820,735) (2,092,386) (1,993,190) (995,068) - (22,294,848)

Controlling interest- contribution

(distribution) (Note 1iii) - - - - - - 3,602,000

Net assets (deficit), end of year (2,898,740)$ (3,013,945)$ (3,711,134)$ (2,555,574)$ (1,242,201)$ 45,191$ (26,757,877)$


48

SCHEDULE IV


CONSOLIDATING STATEMENT OF FINANCIAL POSITION - SKID ROW HOUSING TRUSTDECEMBER 31, 2015

The Trust

Skid Row San PedroHousing House 2014

Trust Project Eliminations Total Total

Assets

Current assetsCash and cash equivalents 1,322,804$ 35,045$ -$ 1,357,849$ 1,695,824$ Tenant and subsidy receivables 6,399 8,211 - 14,610 99,731 Grant receivables due within one year 1,450,190 - - 1,450,190 432,172 Current portion due from affiliates 995,357 3,998 88,000 1,087,355 1,083,357 Current portion developer fee receivable 1,492,000 - - 1,492,000 1,492,000 Prepaid expenses and other assets 27,370 - - 27,370 32,936

Total current assets 5,294,120 47,254 88,000 5,429,374 4,836,020

Restricted cash 2,428,301 2,032 - 2,430,333 1,228,915

Real estate held for lease, at costLand - 100,000 - 100,000 100,000 Building and building improvements - 1,290,363 - 1,290,363 1,290,363 Furniture and equipment - 31,271 - 31,271 31,271

Total real estate held for lease, at cost - 1,421,634 - 1,421,634 1,421,634 Less: accumulated depreciation - (674,081) - (674,081) (642,799)

Real estate held for lease, net - 747,553 - 747,553 778,835

Real estate under development 242,494 - - 242,494 229,129

Other long term assetsDue from affiliates, net of reserve of $1,135,626 for 2015 and $1,226,435 for 2014, net of current portion 1,983,086 - - 1,983,086 1,341,133 Developer fees receivable, net of reserve of $433,566 in 2015 and $661,244 in 2013, net of current portion 5,484,469 - - 5,484,469 5,275,235

Other long term assets, net 7,467,555 - - 7,467,555 6,616,368

Property, at costFurniture, equipment, and artwork 289,780 - - 289,780 278,828 Leasehold improvements 1,352,422 - - 1,352,422 1,772,364

Total property, at cost 1,642,202 - - 1,642,202 2,051,192 Less: accumulated depreciation and amortization (265,775) - - (265,775) (733,046)

Property, net 1,376,427 - - 1,376,427 1,318,146

Deferred costs, net - - - - 3

Total assets 16,808,897$ 796,839$ 88,000$ 17,693,736$ 15,007,416$

WITH COMPARATIVE INFORMATION AS OF DECEMBER 31, 2014


49

SCHEDULE IV


CONSOLIDATING STATEMENT OF FINANCIAL POSITION - SKID ROW HOUSING TRUSTDECEMBER 31, 2015

WITH COMPARATIVE INFORMATION AS OF DECEMBER 31, 2014(CONTINUED)

The Trust



Liabilities and Net Assets (Deficit)Current liabilities

Accounts payable and accrued expenses 521,456$ 55,779$ 141,573$ 718,808$ 668,327$ Predevelopment bank line-of-credit 470,960 - - 470,960 1,471,150 Due to affiliates (Note 5) 321,341 144,471 (141,573) 324,239 1,395 Tenant security deposits 84,000 640 - 84,640 84,858 Prepaid rent - 7,635 - 7,635 962

Total current liabilities 1,397,757 208,525 - 1,606,282 2,226,692

Long-term liabilitiesNotes payable secured by real property, net of current portion 1,200,000 950,000 - 2,150,000 1,350,000

Total long-term liabilities 1,200,000 950,000 - 2,150,000 1,350,000

Total liabilities 2,597,757 1,158,525 - 3,756,282 3,576,692

Commitments and contingencies

Net assets (deficit) 14,211,140 (361,686) 88,000 13,937,454 11,430,724

Total liabilities and net assets (deficit) 16,808,897$ 796,839$ 88,000$ 17,693,736$ 15,007,416$


50

SCHEDULE IV


CONSOLIDATING STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS (DEFICIT) - SKID ROW HOUSING TRUST

FOR THE YEAR ENDED DECEMBER 31, 2015WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014

(CONTINUED)

The Trust



Public supportContributions 339,740$ -$ -$ 339,740$ 338,488$ Foundation and corporate grants 1,861,518 - - 1,861,518 509,144 Government grants 1,368,789 - - 1,368,789 2,530,293 Grants - loans (Note 7) - - - - 95,000

Total public support 3,570,047 - - 3,570,047 3,472,925

RevenueDeveloper fees 2,306,911 - - 2,306,911 3,093,552 Partnership management fees 318,653 - - 318,653 191,739 Partnership supportive service fees 1,000,759 - - 1,000,759 921,300 Accounting and administrative service fees 189,810 - (2,166) 187,644 195,636Rental revenue 311,044 118,225 - 429,269 332,179 Property management company revenue 500,000 - - 500,000 430,098Miscellaneous revenue 1,742,071 - - 1,742,071 41,483 In-kind revenue 146,500 - - 146,500 251,337 Interest income 44,214 39 - 44,253 52,241

Total revenue 6,559,962 118,264 (2,166) 6,676,060 5,509,565

Total public support and revenue 10,130,009 118,264 (2,166) 10,246,107 8,982,490

ExpensesProgram services 6,200,199 194,916 (2,166) 6,392,949 6,288,827 General and administrative 1,187,200 - - 1,187,200 661,602 Fundraising 159,228 - - 159,228 178,516

Total expenses 7,546,627 194,916 (2,166) 7,739,377 7,128,945

Change in net assets (deficit) 2,583,382 (76,652) - 2,506,730 1,853,545

Net assets (deficit), beginning of the year 11,627,758 (285,034) 88,000 11,430,724 9,577,179

Net assets (deficit), end of the year 14,211,140$ (361,686)$ 88,000$ 13,937,454$ 11,430,724$


51

SCHEDULE IV


CONSOLIDATING SCHEDULE OF FUNCTIONAL EXPENSES - SKID ROW HOUSING TRUSTFOR THE YEAR ENDED DECEMBER 31, 2015

WITH COMPARATIVE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014(CONTINUED)

2015

Generaland 2014

Program Administration Fundraising Total Total

Salaries 4,063,333$ 461,561$ 102,860$ 4,627,754$ 4,163,985$ Payroll taxes and employee benefits 983,507 103,479 34,576 1,121,562 936,574 Depreciation and amortization 184,520 - - 184,520 111,195 Utilities 40,769 - - 40,769 28,224 Interest expense - - - - 1,528 Repairs and maintenance - rental properties 25,589 - - 25,589 16,280 Consultants and professional services 368,916 268,349 - 637,265 386,650 Property taxes and insurance 24,021 692 - 24,713 26,385 Office supplies and maintenance 116,468 15,733 - 132,201 184,516 Consultants and professional services - program funded - 21,722 - 21,722 268,997 Equipment rental and expenses 110,069 32,468 - 142,537 74,374 Accounting - 126,972 - 126,972 24,768 Telephone and internet 102,295 1,083 - 103,378 70,465 Rent, net of sublease rental income 11,100 1,575 - 12,675 58,210 Program/contribution expenses 102,580 19,130 - 121,710 320,098 Bad debt 43,940 - - 43,940 (46,341) Write-off of leasehold improvements - - - - 127,742 Licenses, permits, and taxes 2,347 - - 2,347 2,591 Miscellaneous 54,041 44,137 - 98,178 58,022 Travel, mileage and parking 46,568 10,902 - 57,470 59,533 Events 1,195 9,911 - 11,106 76,805 Property manager's unit 17,805 - - 17,805 4,080 Marketing and lease up 251 4,999 14,997 20,247 32,200 Training and conferences 46,564 2,235 - 48,799 33,743 Legal fees 17,448 54,625 - 72,073 70,860 State taxes 2,560 - - 2,560 7,139 Printing 6,105 6,067 5,796 17,968 13,365 Postage 10,958 1,560 999 13,517 6,957 Partnership management fees 10,000 - - 10,000 10,000

Total 6,392,949$ 1,187,200$ 159,228$ 7,739,377$ 7,128,945$


52

SCHEDULE IV


CONSOLIDATING STATEMENT OF CASH FLOWS - SKID ROW HOUSING TRUSTFOR THE YEAR ENDED DECEMBER 31, 2015


2015 2014

Cash flows from operating activitiesChange in net assets (deficit) 2,506,730$ 1,853,545$ Adjustments to reconcile change in net assets (deficit) to net cash provided by (used in) operating activities:

Depreciation and amortization 184,520 111,195 Forgiveness of debt - (95,000) Changes in operating assets and liabilities

Tenant and subsidy receivables 85,121 (85,365) Grants receivables (1,018,018) 745,499 Developer fees receivable (209,234) (1,445,579) Due to/from affiliates (323,107) (1,809,536) Prepaid expenses and other assets 5,566 15,863 Accounts payable and accrued expenses 50,482 209,152 Prepaid rent 6,673 (6,547) Tenant security deposits (218) -

Net cash provided by (used in) operating activities 1,288,515 (506,773)

Cash flows from investing activitiesNet changes in restricted cash (1,201,418) 429,355 Expenditures for real estate under development (13,365) (198,149) Net expenditures for leasehold improvements (200,565) (1,207,302) Net expenditures for furniture, equipment, and artwork (10,952) (7,500)

Net cash used in investing activities (1,426,300) (983,596)

Cash flows from financing activitiesNet proceeds of predevelopment bank lines-of-credit (1,000,190) 1,043,080 Proceeds from notes payable 800,000 400,000

Net cash provided by (used in) financing activities (200,190) 1,443,080

Net change in cash and cash equivalents (337,975) (47,289)

Cash and cash equivalents, beginning of the year 1,695,824 1,743,113

Cash and cash equivalents, end of the year 1,357,849$ 1,695,824$

(CONTINUED)


53

SCHEDULE V

SKID ROW HOUSING TRUST AND AFFILIATES(A NON PROFIT CALIFORNIA CORPORATION)

STATEMENT OF ACTIVITIESBOYD, SENATOR, WELDON AND SAN PEDROFOR THE YEAR ENDED DECEMBER 31, 2015

(UNAUDITED)

Boyd Senator SanHotel Apartments Weldon Pedro

Limited Limited Limited House Partnership Partnership Partnership Project

RevenueRents - residential 172,509$ 342,877$ 175,220$ 44,124$ Rents - subsidy 255,066 234,883 186,904 88,499 Vacancy loss (45,241) (86,105) (35,170) (17,784) Interest income 1,260 1,268 299 39Managers unit 7,645 5,448 4,999 3,138 Miscellaneous revenue 65 89 - - Miscellaneous tenant charge 739 4,946 1,120 248 Grant - forgiveness of debt 664,058 - - -

Total revenue 1,056,101 503,406 333,372 118,264

ExpensesAccounting fee 6,954 11,286 6,612 2,166 Audit and tax fees 6,886 8,157 6,886 5,606 Bad debt 3,030 19,790 10,346 11,408 Cable service fee 1,228 3,215 1,494 1,489Depreciation and amortization 112,860 76,400 85,586 31,285Dues and subscriptions 72 72 72 72Equipment rental and expenses 6,853 898 1,660 9,125Insurance - general and property 10,955 17,871 9,927 4,121Interest expense 81,818 - - - Internet services 150 65 1,080 12License and permits 3,263 5,172 175 1,018Manager unit 7,645 5,448 4,999 3,138Miscellaneous expense 8,840 15,449 13,740 2,919Monthly social services fee 50,000 66,000 60,000 5,000Office supplies 9,151 7,052 4,568 1,197Partnership management fee 15,000 45,304 47,405 - Payroll expenses 141,269 115,458 88,128 48,134Professional services 1,742 2,260 1,295 416Property management fees 50,694 80,618 47,086 10,000Repairs and maintenance 36,704 51,183 48,392 19,297State taxes 800 800 800 1,476Telephone 6,102 9,638 6,190 6,096Temporary labor 14,254 63,777 64,057 8,195Utilities 47,102 90,703 70,007 22,746

Total expenses 623,372 696,616 580,505 194,916

Change in net assets (deficit) 432,729$ (193,210)$ (247,133)$ (76,652)$


54

SCHEDULE VI

RevenueProperty management fees 1,414,599$ Salary reimbursement - on site staff 1,987,503 Salary reimbursement - on site janitorial fees 748,798 Salary reimbursement - on site maintenance fees 812,684

Miscellaneous revenue 198

Total revenue 4,963,782

ExpensesAdministrative fees 500,000Audit and tax fees 9,030Contributions 277,493 Depreciation and amortization 11,105Employee recruiting 1,557Internet services 1,373Insurance - property 22,680Lease - office space 50,476License and permits 875Miscellaneous expenses 543Office supplies 21,479Payroll expenses 4,125,317Professional services 100,629Real estate tax 5,605Repairs and maintenance 15,869 Security 1,040Telephone 7,088Temporary labor 2,463

Utilities 479

Total expenses 5,155,101

Change in net assets (deficit) (191,319)$


STATEMENT OF ACTIVITIES - SRHT PROPERTY MANAGEMENT COMPANYFOR THE YEAR ENDED DECEMBER 31, 2015

(UNAUDITED)


55

SCHEDULE VII

SKID ROW HOUSING TRUST AND AFFILIATES(A NON-PROFIT CALIFORNIA CORPORATION)STATEMENT OF ACTIVITIES - PIECE BY PIECEFOR THE YEAR ENDED DECEMBER 31, 2015

TemporarilyUnrestricted Restricted

Fund Fund Total

RevenueContributions 26,215$ -$ 26,215$ Grants 139,360 112,560 251,920 In-kind revenue 44,000 - 44,000 Miscellaneous - sales of art work 89,804 - 89,804

Total revenue 299,379 112,560 411,939 Net assets released from restrictions

Satisfaction of program restrictions 112,560 (112,560) -

Total revenue 411,939 - 411,939

ExpensesProgram services expenses

Salaries 56,032 - 56,032 Payroll taxes 7,513 - 7,513 Employee benenfits 9,569 9,569 Program services professional fees 44,768 - 44,768 Program shared personnel 51,000 - 51,000 Program activity supplies 177,256 - 177,256 Program workshop meals 8,160 - 8,160

Total program services expenses 354,298 - 354,298

General and administrative expensesManaging director salaries 52,282 - 52,282 Payroll taxes 4,187 - 4,187 Employee benenfits 2,873 - 2,873 Audit & tax fees 155 - 155 Miscellaneous expenses 1,604 - 1,604 Professional fees 10,000 - 10,000 Internet services 857 - 857

Total general and administrative expenses 71,958 - 71,958

Fundraising expensesFundraising salaries 3,750 - 3,750 Fundraising payroll taxes and benefits 589 - 589

Total fundraising expenses 4,339 - 4,339

Total expenses 430,595 - 430,595

Change in net assets (deficit) (18,656) - (18,656)

Net assets, beginning of year 131,824 - 131,824

Net assets, end of year 113,168$ -$ 113,168$

(UNAUDITED)


56

SCHEDULE VIII

Crescent Edward Hart Martinez Olympia Produce Sanborn Simone St. Marks

Rent Revenue5120 Rent revenue - gross potential 270,058$ 92,052$ 184,398$ 197,687$ 157,330$ 290,780$ 125,585$ 299,909$ 193,676$

5121 Tenant assistance payments 71,955 190,435 172,727 182,557 134,895 585,214 207,174 457,390 468,272

5100T Total rent revenue 342,013 282,487 357,125 380,244 292,225 875,994 332,759 757,299 661,948

Vacancies5220 Apartments 6,302 9,958 20,921 82,973 58,875 13,619 24,836 79,122 28,870

5200T Total vacancy expense 6,302 9,958 20,921 82,973 58,875 13,619 24,836 79,122 28,870

4242N Net rental revenue 335,711 272,529 336,204 297,271 233,350 862,375 307,923 678,177 633,078

Financial Revenue5410 Financial revenue - project operations 1,184 777 1,093 396 221 1,866 442 1,165 1,439

Total financial revenue 1,184 777 1,093 396 221 1,866 442 1,165 1,439

Other Revenue5910 Laundry and vending revenue 714 480 839 1,280 1,620 2,397 446 1,238 13 5920 Tenant charges - - - 15 50 100 - 175 - 5990 Miscellaneous revenue

Miscellaneous 69 102 14 1,251 102 434 88 84 91 State tax reimbursement 2,329 - 6,145 - - - - - -

Forgiveness of fees - - - 229,837 389,557 - - - -

5900T Total other revenue 3,112 582 6,998 232,383 391,329 2,931 534 1,497 104

5000T Total revenue 340,007$ 273,888$ 344,295$ 530,050$ 624,900$ 867,172$ 308,899$ 680,839$ 634,621$


FOR THE YEAR ENDED DECEMBER 31, 2015HCD SCHEDULE OF REVENUES


57

SCHEDULE IX


Administrative Expenses6310 Office salaries 42,981$ 30,043$ 38,193$ 48,094$ 45,134$ 74,913$ 35,374$ 86,405$ 44,740$ 6311 Office expenses 2,076 1,568 1,606 2,003 1,773 3,618 2,154 15,537 9,712 6320 Management fee 46,270 36,948 35,368 48,115 37,949 100,905 36,054 99,807 73,938 6331 Administrative rent free unit - 3,979 5,056 7,846 3,766 8,430 3,766 4,215 5,178 6340 Legal expense - project 6,257 13,846 2,039 1,590 250 2,523 1,080 5,781 3,587 6350 Audit expense 6,355 9,311 8,936 1,576 1,576 8,936 8,936 8,936 8,936 6351 Bookkeeping fees/accounting services 6,270 5,358 4,446 6,840 5,472 12,540 5,244 13,110 10,374 6370 Bad debts 18,385 6,094 6,175 7,677 8,337 23,302 9,884 38,758 14,373 6390 Miscellaneous administrative expenses

Professional fees 1,750 1,064 1,004 1,298 1,052 2,526 1,041 5,376 2,561 Computer service 2,508 2,349 1,828 2,693 2,183 5,634 2,215 5,389 4,228 Contract labor 7,117 15,382 11,711 10,534 2,764 16,110 3,476 39,490 5,572 Telephone and internet 6,050 8,176 6,199 9,305 8,548 9,187 8,435 22,600 15,379 Resident services fees 30,000 - 27,500 47,250 25,000 93,009 15,000 105,000 88,000 Tenant service fee 262 222 349 361 228 523 218 1,081 432

Bank service charges 63 - - - - - - - -

6300T Total administrative expenses 176,344 134,340 150,410 195,182 144,032 362,156 132,877 451,485 287,010

Utilities Expenses6450 Electricity 29,224 24,041 17,240 22,739 18,251 43,768 28,345 38,479 37,719 6451 Water 40,222 32,517 13,030 12,138 14,014 67,582 15,924 24,242 41,386

6452 Gas 6,637 4,449 3,699 3,217 2,752 7,965 4,126 5,940 3,746

6400T Total utilities expenses 76,083 61,007 33,969 38,094 35,017 119,315 48,395 68,661 82,851

SKID ROW HOUSING TRUST AND AFFILIATES(A NON-PROFIT CALIFORNIA CORPORATION)HCD SCHEDULE OF OPERATING EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2015


58

SCHEDULE IX


(CONTINUED)


Operating and Maintenance Expenses6510 Payroll 29,149$ 36,201$ 43,920$ 37,417$ 33,465$ 103,602$ 34,310$ 84,744$ 47,020$ 6515 Supplies 25,511 15,808 17,571 11,972 12,756 38,154 27,329 34,132 35,858 6520 Contracts 31,281 10,113 6,264 8,198 16,256 45,807 12,732 16,601 44,747 6525 Garbage removal 2,160 2,244 2,160 2,358 3,930 6,192 2,160 6,336 3,600 6530 Security 435 755 1,125 1,269 555 1,000 1,145 1,393 915

6546 Heating/cooling repairs and maintenance - - - - - 6,221 228 547 -

6500T Total operating and maintenance

expenses 88,536 65,121 71,040 61,214 66,962 200,976 77,904 143,753 132,140

Taxes and Insurance6710 Real estate taxes 4,058 1,938 7,842 52 641 33,476 2,433 2,309 2,046 6711 Payroll taxes (Project's share) 6,311 6,275 8,365 7,814 6,880 15,727 6,452 14,628 7,781 6720 Property and liability insurance (hazard) 11,663 8,792 9,458 10,004 7,706 23,554 8,635 21,693 16,525 6722 Workers' compensation 19,136 19,083 21,879 24,175 22,912 50,214 19,884 46,797 25,088 6723 Health insurance and other benefits 13,859 10,573 16,638 18,799 15,318 36,947 14,142 25,394 17,338 6790 Miscellaneous taxes, licenses, permits,

and insurance

License and permits 3,913 2,345 2,128 2,922 2,634 5,632 2,842 6,985 4,923

6700T Total taxes and insurance 58,940 49,006 66,310 63,766 56,091 165,550 54,388 117,806 73,701

Total operating expenses 399,903 309,474 321,729 358,256 302,102 847,997 313,564 781,705 575,702

Financial Expenses6820 Interest on mortgage payable 45,000 35,250 28,180 42,054 28,431 98,896 38,168 46,356 79,504

6825 Interest on other mortgages 455,750 193,371 77,675 5,988 - 3,388,351 869,673 1,150,740 401,484

6800T Total financial expenses 500,750 228,621 105,855 48,042 28,431 3,487,247 907,841 1,197,096 480,988


59

SCHEDULE IX


(CONTINUED)


Depreciation and Amortization Expenses6600 Depreciation expense 105,469$ 103,824$ 80,240$ 87,087$ 88,319$ 311,334$ 71,048$ 232,619$ 125,882$

6610 Amortization expense 1,464 2,298 1,051 1,287 1,386 2,479 804 1,960 1,633

6600T Total depreciation and amortization

expenses 106,933 106,122 81,291 88,374 89,705 313,813 71,852 234,579 127,515

Net Entity Expenses7190 Other expenses

Franchise tax 800 800 800 800 800 800 800 800 800

Partnership management fee - - 12,000 - - - - 85,407 12,000

7100T Total net entity expenses 800 800 12,800 800 800 800 800 86,207 12,800

Total expenses 1,008,386$ 645,017$ 521,675$ 495,472$ 421,038$ 4,649,857$ 1,294,057$ 2,299,587$ 1,197,005$

3250 Change in Total Net Assets (Deficit) From

Operations (668,379)$ (371,129)$ (177,380)$ 34,578$ 203,862$ (3,782,685)$ (985,158)$ (1,618,748)$ (562,384)$


60

SCHEDULE X


ADDITIONAL SUPPLEMENTARY INFORMATION REQUIRED BY HCDFOR THE YEAR ENDED DECEMBER 31, 2015

A. CASH ON HAND AND IN BANKSCrescent Edward Hart Martinez Olympia Produce Sanborn Simone St. Marks

Unrestricted accounts:Operating cash account 46,191$ 20,574$ 26,142$ 17,564$ 3,542$ 62,073$ 23,199$ 38,006$ 78,188$ Operating reserve - unrestricted account 30,386 134,916 147,467 6,986 137 744 16,827 1,751 171,988

Total 76,577$ 155,490$ 173,609$ 24,550$ 3,679$ 62,817$ 40,026$ 39,757$ 250,176$

Restricted accounts:Operating reserve 200,790$ 100,542$ 134,675$ -$ 4$ 500,711$ 111,866$ 292,599$ 296,738$ Replacement reserve 310,013 90,729 275,294 - 3 423,836 67,101 291,825 290,496 Tenants security deposits 2,474 2,044 7,241 2,293 2,046 22,405 1,828 4,764 3,667

Total 513,277$ 193,315$ 417,210$ 2,293$ 2,053$ 946,952$ 180,795$ 589,188$ 590,901$

B. TENANT AND SUBSIDY ACCOUNTS RECEIVABLE

As of December 31, 2015, the partnerships have the following balances in tenant receivable and subsidy receivable:


Tenant receivable, net 4,590$ 4,251$ 939$ -$ -$ 7,756$ 3,767$ 3,550$ 10,082$ Subsidy receivable, net (2,625) 3,269 4,602 - - 6,234 2,926 31,088 18,537

Total tenant and subsidy receivables, net 1,965$ 7,520$ 5,541$ -$ -$ 13,990$ 6,693$ 34,638$ 28,619$


61

SCHEDULE X



(CONTINUED)

C. REPLACEMENT RESERVE ACCOUNT


Balance, January 1, 2015 316,504$ 95,224$ 263,915$ 146,290$ 63,162$ 425,526$ 70,064$ 292,340$ 274,982$ Deposits - - 14,560 - - 33,170 - - 20,128 HCD authorized releases (7,116) (4,680) (3,716) (146,563) (63,278) (35,710) (3,099) (1,099) (5,169) Interest earned 625 185 535 273 119 850 136 584 555

Balance, December 31, 2015 310,013$ 90,729$ 275,294$ -$ 3$ 423,836$ 67,101$ 291,825$ 290,496$

D. OPERATING RESERVE ACCOUNT


Balance, January 1, 2015 260,296$ 100,341$ 127,840$ 55,995$ 72,799$ 482,967$ 139,597$ 292,167$ 291,158$ Deposits - - 6,640 - - 16,773 - - 5,000 HCD authorized releases (60,000) - - (56,100) (72,894) - (28,000) - - Interest earned 494 201 195 105 99 971 269 432 580

Balance, December 31, 2015 200,790$ 100,542$ 134,675$ -$ 4$ 500,711$ 111,866$ 292,599$ 296,738$

E. TENANT SECURITY DEPOSITS

In accordance with the provisions of the HCD regulatory agreements, restricted cash is held by Union Bank, an FDIC insured bank, to be used for replacement of property withthe prior approval of HCD as follows:

In accordance with the provisions of the HCD regulatory agreements, restricted cash is held by Union Bank, an FDIC insured bank, to be used for unforeseen circumstances withthe prior approval of HCD as follows:

Tenant security deposits are held in a single federally insured interest bearing bank account in the name of the each partnership. At December 31, 2015, each partnership'sbalance of the security deposit account is adequate to cover the liability account for security deposits.


62

SCHEDULE X



(CONTINUED)

F. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Following are the details of property, equipment and improvements:

Property, Equipment and Balance Additions Balance Property, Equipment and Balance Additions BalanceImprovements, at Cost 1/1/2015 (Deletions) 12/31/2015 Improvements, at Cost 1/1/2015 (Deletions) 12/31/2015

Crescent MartinezLand 483,750$ -$ 483,750$ Land 473,000$ (473,000)$ -$ Buildings and improvements 4,111,667 - 4,111,667 Buildings and improvements 3,759,657 (3,759,657) - Furniture and equipment 98,827 - 98,827 Furniture and equipment 89,808 (89,808) -

Total 4,694,244$ -$ 4,694,244$ Total 4,322,465$ (4,322,465)$ -$

Edward OlympiaLand 275,000$ -$ 275,000$ Land 906,511$ (906,511)$ -$ Buildings and improvements 2,784,225 23,477 2,807,702 Buildings and improvements 2,613,983 (2,613,983) - Furniture and equipment 91,444 - 91,444 Furniture and equipment 79,920 (79,920) -

Total 3,150,669$ 23,477$ 3,174,146$ Total 3,600,414$ (3,600,414)$ -$

Hart ProduceLand 275,000$ -$ 275,000$ Land 2,528,000$ -$ 2,528,000$ Buildings and improvements 2,798,513 - 2,798,513 Buildings and improvements 9,696,660 - 9,696,660 Furniture and equipment 90,877 - 90,877 Furniture and equipment 293,295 14,731 308,026

Total 3,164,390$ -$ 3,164,390$ Total 12,517,955$ 14,731$ 12,532,686$


63

SCHEDULE X



(CONTINUED)

F. PROPERTY, EQUIPMENT AND IMPROVEMENTS (Continued)

Property, Equipment and Balance Additions BalanceImprovements, at Cost 1/1/2015 (Deletions) 12/31/2015

SanbornLand 450,000$ -$ 450,000$ Buildings and improvements 3,032,336 - 3,032,336 Furniture and equipment 93,394 - 93,394

Total 3,575,730$ -$ 3,575,730$

SimoneLand 331,500$ -$ 331,500$ Buildings and improvements 6,114,207 - 6,114,207 Furniture and equipment 206,380 - 206,380

Total 6,652,087$ -$ 6,652,087$

St. MarksLand 184,000$ -$ 184,000$ Buildings and improvements 4,861,835 3,840 4,865,675 Furniture and equipment 152,425 - 152,425

Total 5,198,260$ 3,840$ 5,202,100$


64

SCHEDULE X



(CONTINUED)

G. ACCOUNTS PAYABLE AND ACCRUED EXPENSES


Accounts payable 112,555$ 30,105$ 33,818$ 9,564$ 7,650$ 78,831$ 220,580$ 128,270$ 45,976$ Accrued expenses 5,784 6,693 10,002 800 800 15,202 7,477 16,779 13,960

Total 118,339$ 36,798$ 43,820$ 10,364$ 8,450$ 94,033$ 228,057$ 145,049$ 59,936$

Analysis of the over-30-days accounts payable is as follows:


30-60 days 18,416$ 14,444$ 15,588$ 6,835$ 3,702$ 35,434$ 20,485$ 45,383$ 24,926$ 61-89 days 14,565 4,195 2,757 175 175 2,289 11,450 9,816 4,821 Over 90 days 61,521 1,919 38 688 77 486 170,660 33,528 723

Total 94,502$ 20,558$ 18,383$ 7,698$ 3,954$ 38,209$ 202,595$ 88,727$ 30,470$

H. GROSS POTENTIAL RENT

Gross potential rent includes:Crescent Edward Hart Martinez Olympia Produce Sanborn Simone St. Marks

Tenant rents - residential 263,756$ 78,115$ 158,421$ 106,868$ 94,689$ 268,731$ 96,983$ 216,572$ 159,628$ Rental subsidies 71,955 190,435 172,727 182,557 134,895 585,214 207,174 457,390 468,272 Manager's unit - 3,979 5,056 7,846 3,766 8,430 3,766 4,215 5,178 Vacancy loss 6,302 9,958 20,921 82,973 58,875 13,619 24,836 79,122 28,870

Total gross potential rent 342,013$ 282,487$ 357,125$ 380,244$ 292,225$ 875,994$ 332,759$ 757,299$ 661,948$

Accounts payable and accrued expenses are payable to vendors and suppliers, and are being paid on a current basis, except as noted below:


65

SCHEDULE X



(CONTINUED)

I. PROPERTY TAXES

J. PROPERTY INSURANCE

K. MANAGEMENT FEE


46,270$ 36,948$ 35,368$ 48,115$ 37,949$ 100,905$ 36,054$ 99,807$ 73,938$

L. DEBT SERVICE

Debt service payments for Crescent, Edward, Hart, Martinez, Olympia, Produce, Sanborn, Simone, and St. Marks are current as of December 31, 2015.

Property management services are provided by SRHT Property Management Company, a related party. The following property management fees were incurred during 2015:

Crescent, Edward, Hart, Martinez, Olympia, Produce, Sanborn, Simone, and St. Marks have received an exemption issued by the county assessor and have paid the 2015assessments billed by the county on a current basis. For each partnership, the tax payable is impounded by the lender on a monthly basis.

Property insurance premiums are paid current as of December 31, 2015 for Crescent, Edward, Hart, Martinez, Olympia, Produce, Sanborn, Simone, and St. Marks.


66

SCHEDULE XI

Operating Cash Flow/Surplus Cash Computation - per HCD Regulatory Agreements

Operating cash flow/surplus cash will be distributed according to the HCD method.


Operating incomeTotal income 340,007$ 273,888$ 344,295$ 530,050$ 624,900$ 867,172$ 308,899$ 680,839$ 634,621$ Less: forgiveness of fees - - - (229,837) (389,557) - - - - Less: Interest on restricted reserve accounts (1,119) (386) (730) (378) (218) (1,821) (405) (1,016) (1,135)

Adjusted operating income 338,888 273,502 343,565 299,835 235,125 865,351 308,494 679,823 633,486

Operating expenses (399,903) (309,474) (321,729) (358,256) (302,102) (847,997) (313,564) (781,705) (575,702)

Adjusted net income (61,015) (35,972) 21,836 (58,421) (66,977) 17,354 (5,070) (101,882) 57,784

Other activityMandatory debt service - - - - - (19,365) - - - Deposits into replacement reserve account - - (14,560) - - (33,170) - - (20,128) Deposits into other restricted accounts per Regulatory Agreement - - (6,640) - - (16,773) - - (5,000) Withdrawals from replacement reserve account included in operating expenses - - 3,716 - - - 31,099 - 1,329

Total other activity - - (17,484) - - (69,308) 31,099 - (23,799)

Operating cash flow/surplus cash (61,015) (35,972) 4,352 (58,421) (66,977) (51,954) 26,029 (101,882) 33,985

Total cash available for distributions (net cash flow) (61,015)$ (35,972)$ 4,352$ (58,421)$ (66,977)$ (51,954)$ 26,029$ (101,882)$ 33,985$

Distributions and loan payments

Paid as follows per Regulatory Agreement100% to HCD Loan - - 4,352 - - - 26,029 - 33,985

Total distributions to lenders -$ -$ 4,352$ -$ -$ -$ 26,029$ -$ 33,985$


HCD COMPUTATION OF OPERATING CASH FLOW/SURPLUS CASHFOR THE YEAR ENDED DECEMBER 31, 2015


67

SCHEDULE XII


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED DECEMBER 31, 2015

Federal Agency or Expenditures CFDA Pass-Through Federal to

Federal Grantor/Pass-through Agent Program Title Number Grant Number Expenditures Subrecipients

Department of Housing and Urban DevelopmentPassed through Housing Authority of the City of Los Angeles Shelter Plus Care 14.238 HA-2014-025 1,166,720$ 473,600$ Shelter Plus Care 14.238 HA-2015-057 289,164 - Shelter Plus Care 14.238 HA-2015-058 62,862 - Shelter Plus Care 14.238 HA-2014-022 1,165,102 465,600 Shelter Plus Care 14.238 HA-2015-061 925,316 - Shelter Plus Care 14.238 HA-2015-060 332,706 -

3,941,870 939,200

Passed through Los Angeles Homeless Services AuthoritySupportive Housing Program (Lincoln SHP) 14.235 CA0413L9D001306 5,364 - Supportive Housing Program (Lincoln SHP) 14.235 CA0413L9D001407 53,182 - Supportive Housing Program (Rainbow SHP) 14.235 CA0494L9D001306 119,531 - Supportive Housing Program (Rainbow SHP) 14.235 CA0494L9D001407 20,879 -

198,956 -

Passed through Enterprise Community Partners, Inc

Predevelopment & Capacity Program 14.252 B-14-CB-MD-0001 94,518 -

94,518 -

Local Initiatives Support Corporation

Predevelopment & Capacity Program 14.252 B-14-CB-NY-0001 15,523 -

15,523 -

Total Department of Housing and Urban Development 4,250,867 939,200

Department of Health and Human ServicesPassed through Program from:

Substance Abuse and Mental Health Services Administration 93.243 1H79SM059121-04 93,270 - Substance Abuse and Mental Health Services Administration 93.243 1UD1TI023595-01 146,841 -

Total Department of Health and Human Services 240,111 -

Total 4,490,978$ 939,200$

See independent auditor's report and notes to schedule of expenidures of federal awards.

68

SKID ROW HOUSING TRUST AND AFFILIATES

(A NON-PROFIT CALIFORNIA CORPORATION) NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

DECEMBER 31, 2015

See independent auditor’s report and schedule of expenditures of federal awards.

69

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation The schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Skid Row Housing Trust and Affiliates under programs of the federal government for the year ended December 31, 2015. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Organization. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the presentation of, the basic consolidated financial statements. Indirect Cost Rate The Organization did not elect the de minimis indirect cost allocation rate of 10% for the year ended December 31, 2015; and instead allocates indirect costs in accordance with its cost allocation plan as allowed by the federal grant programs under Uniform Guidance.

NOTE 2. AMOUNTS PROVIDED TO SUBRECIPIENTS

The Organization provided grant funds to the following entities as subrecipients of the SPC Program during the year ended December 31, 2015:

Subrecipient Amount

GetLove $ 398,400 Step Up 168,000 Integrated Recovery Network 46,400 Ocean Park Community Center 264,000 Homeless Health Care Los Angeles 62,400 $ 939,200



Independent Auditor’s Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Consolidated Financial Statements Performed in Accordance with Government Auditing Standards

To the Board of Directors of Skid Row Housing Trust: Report on Financial Statements We have audited, 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, the consolidated financial statements of Skid Row Housing Trust (a non-profit California corporation) and Affiliates (collectively, the Organization), which comprise the consolidated statement of financial position as of December 31, 2015, and the related consolidated statements of activities and changes in net assets (deficit), functional expenses, and cash flows for the year then ended and the related notes to the consolidated financial statements, and have issued our report thereon dated August 23, 2016. Internal Control over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered the Organization’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 consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Organization’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 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization’s consolidated financial statements are free of 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

Independent Auditor’s Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Consolidated Financial Statements Performed in Accordance with Government Auditing Standards

(Continued)



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. 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 Organization’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 Organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.




Independent Auditor’s Report on Compliance for Each Major Program and

on Internal Control Over Compliance Required by Uniform Guidance To the Board of Directors of Skid Row Housing Trust: Report on Compliance for Each Major Federal Program We have audited Skid Row Housing Trust's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Skid Row Housing Trust's major federal programs for the year ended December 31, 2015. Skid Row Housing Trust's major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statues, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Skid Row Housing Trust's major federal programs based on our audit of the types of 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; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Skid Row Housing Trust'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 each major federal program. However, our audit does not provide a legal determination of Skid Row Housing Trust's compliance. Opinion on Each Major Federal Program In our opinion, Skid Row Housing Trust complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2015. Report on Internal Control Over Compliance Management of Skid Row Housing Trust is responsible for establishing and maintaining effective internal control over compliance with the requirements referred to above. In planning and performing our audit of compliance, we considered Skid Row Housing Trust’s internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program to

Independent Auditor’s Report on Compliance for Each Major Program and

on Internal Control Over Compliance Required by Uniform Guidance (Continued)



determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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 Skid Row Housing Trust’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 type of compliance requirement of a federal 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 type of compliance requirement of a federal 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 type of compliance requirement of a federal 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. 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 Uniform Guidance. Accordingly, this report is not suitable for any other purpose.



SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2015

74

Section I—Summary of Auditor’s Results Consolidated Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? _____ yes X no

Significant deficiency(ies) identified not considered to be material weaknesses? _____ yes X none reported Noncompliance material to financial statements noted? _____ yes X no

Federal Awards Internal Control over major programs:

Material weakness(es) identified? _____ yes X no Significant deficiency(ies) identified not considered to be material weaknesses? _____ yes X none reported Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a)? yes X no

Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster 14.238 Shelter Plus Care 93.243 Substance Abuse and Mental Health Services Administration Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? X yes ____no Section II—Financial Statement Findings There were no findings noted. Section III—Federal Award Findings and Questioned Costs There were no findings noted.

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