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term. The plan called for the limited partnership to sell
the properties for a profit at the end of the developers'
lease term. These early limited partnerships were referred
to by EPIC's management as income partnerships.
EPIC's success and the success of its partnerships
depended upon the appreciation of the real properties that
were purchased by the partnerships. The sales of real
estate by EPIC partnerships before 1980, as shown in
exhibits to the 83 and 84 offering memoranda, reveal high
annual appreciation.
During 1980, mortgage interest rates increased to
historic levels, and the real estate market began to
deteriorate as a result. The higher interest rates
significantly increased the costs of selling properties and
reduced profits realized by the partnerships on the sale of
properties. Accordingly, in 1980, EPIC's management made
the decision to stop selling properties until interest
rates fell. EPIC's management believed that, as an interim
measure, the company could carry the limited partnerships
until interest rates decreased and profit margins returned
to normal.
Notwithstanding the cessation of sales, EPIC continued
to syndicate real estate partnerships. This was EPIC's
core business. EPIC's management did not consider shutting
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