UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11864
NATIONAL PROPERTY INVESTORS 6
(Exact name of registrant as specified in its charter)
California | 13-3140364 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS 6
BALANCE SHEETS
(in thousands, except unit data)
| March 31, | December 31, |
|
| 2009 | 2008 |
|
| (Unaudited) | (Note) |
|
Assets |
|
| |
Cash and cash equivalents | $ 22 | $ 13 | |
Receivables and deposits | 416 | 369 | |
Other assets | 665 | 713 | |
Investment property: |
|
| |
Land | 1,366 | 1,366 | |
Buildings and related personal property | 29,078 | 28,469 | |
| 30,444 | 29,835 | |
Less accumulated depreciation | (22,600) | (22,309) | |
| 7,844 | 7,526 | |
| $ 8,947 | $ 8,621 | |
Liabilities and Partners' Deficit |
|
| |
Liabilities |
|
| |
Accounts payable | $ 284 | $ 461 | |
Tenant security deposit liabilities | 308 | 297 | |
Due to affiliates (Note B) | 2,233 | 1,577 | |
Other liabilities | 258 | 241 | |
Mortgage notes payable | 24,666 | 24,738 | |
| 27,749 | 27,314 | |
|
|
| |
Partners' Deficit |
|
| |
General partner | (735) | (734) | |
Limited partners (109,600 units issued and |
| ||
outstanding) | (18,067) | (17,959) | |
| (18,802) | (18,693) | |
| $ 8,947 | $ 8,621 | |
Note: The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 6
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
| Three Months Ended | |
| March 31, | |
| 2009 | 2008 |
Revenues: |
|
|
Rental income | $ 1,133 | $ 1,104 |
Other income | 95 | 119 |
Total revenues | 1,228 | 1,223 |
|
|
|
Expenses: |
|
|
Operating | 457 | 453 |
General and administrative | 37 | 44 |
Depreciation | 291 | 190 |
Interest | 446 | 427 |
Property taxes | 106 | 92 |
Total expenses | 1,337 | 1,206 |
|
|
|
Net (loss) income | $ (109) | $ 17 |
|
|
|
Net (loss) income allocated to general partner (1%) | $ (1) | $ -- |
Net (loss) income allocated to limited partners (99%) | (108) | 17 |
|
|
|
| $ (109) | $ 17 |
|
|
|
Net (loss) income per limited partnership unit | $ (0.99) | $ 0.16 |
|
|
|
Distribution per limited partnership unit | $ -- | $ 2.25 |
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 6
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
| Limited |
|
| |
| Partnership | General | Limited |
|
| Units | Partner | Partners | Total |
|
|
|
|
|
Original capital contributions | 109,600 | $ 1 | $ 54,800 | $ 54,801 |
|
|
|
|
|
Partners' deficit at |
|
|
|
|
December 31, 2008 | 109,600 | $ (734) | $(17,959) | $(18,693) |
|
|
|
|
|
Net loss for the three months |
|
|
|
|
ended March 31, 2009 | -- | (1) | (108) | (109) |
|
|
|
|
|
Partners' deficit at |
|
|
|
|
March 31, 2009 | 109,600 | $ (735) | $(18,067) | $(18,802) |
See Accompanying Notes to Financial Statements
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| Three Months Ended | |
| March 31, | |
| 2009 | 2008 |
Cash flows from operating activities: |
|
|
Net (loss) income | $ (109) | $ 17 |
Adjustments to reconcile net (loss) income to net cash |
|
|
provided by operating activities: |
|
|
Depreciation | 291 | 190 |
Amortization of loan costs | 10 | 10 |
Change in accounts: |
|
|
Receivables and deposits | (47) | (33) |
Other assets | 38 | 59 |
Accounts payable | (25) | 90 |
Tenant security deposit liabilities | 11 | 26 |
Due to affiliates | 46 | -- |
Other liabilities | 17 | 61 |
Net cash provided by operating activities | 232 | 420 |
|
|
|
Cash flows used in investing activities: |
|
|
Property improvements and replacements | (761) | (375) |
|
|
|
Cash flows from financing activities: |
|
|
Advances from affiliate | 610 | -- |
Distribution to partners | -- | (250) |
Payments on mortgage notes payable | (72) | (67) |
Net cash provided by (used in) financing |
|
|
activities | 538 | (317) |
|
|
|
Net increase (decrease) in cash and cash equivalents | 9 | (272) |
Cash and cash equivalents at beginning of the period | 13 | 416 |
|
|
|
Cash and cash equivalents at end of the period | $ 22 | $ 144 |
|
|
|
Supplemental disclosure of cash flow information: |
|
|
Cash paid for interest, net of capitalized interest | $ 411 | $ 418 |
|
|
|
Supplemental disclosure of non-cash activity: |
|
|
Property improvements and replacements included in |
|
|
accounts payable | $ 195 | $ 28 |
Included in property improvements and replacements for the three months ended March 31, 2009 and 2008 are approximately $347,000 and $139,000, respectively, of property improvements and replacements, which were included in accounts payable at December 31, 2008 and 2007, respectively.
See Accompanying Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A – Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 6 (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The Managing General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership's property as compensation for providing property management services. The Partnership paid to such affiliates approximately $61,000 and $60,000 for the three months ended March 31, 2009 and 2008, respectively, which are included in operating expenses.
Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $121,000 and $52,000 for the three months ended March 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the three months ended March 31, 2009 and 2008 are construction management services provided by an affiliate of the Managing General Partner of approximately $98,000 and $26,000, respectively. At March 31, 2009 and December 31, 2008, approximately $106,000 and $84,000, respectively, of reimbursements were due to the Managing General Partner and are included in due to affiliates.
For services relating to the administration of the Partnership and operation of the Partnership's property, the Managing General Partner is entitled to receive payment for non-accountable expenses up to a maximum of $150,000 per year, based upon the number of Partnership units sold, subject to certain limitations. No such reimbursements were made during the three months ended March 31, 2009 or 2008.
As compensation for services rendered in managing the Partnership, the Managing General Partner is entitled to receive Partnership management fees in conjunction with distributions of cash from operations, subject to certain limitations. No such Partnership management fees were earned or paid during the three months ended March 31, 2009 or 2008.
On March 18, 2008, the Managing General Partner terminated the revolving credit facility (the “Partnership Revolver”) that was established on behalf of the Partnership and certain affiliated partnerships to fund deferred maintenance andworking capital needs of the Partnership and certain other affiliated partnerships in the National Property Investors Partnership Series. The Managing General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to the Partnership. The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership. For more information on AIMCO Properties, L.P., including copies of its audited balance sheets, please see its reports filed with the Securities and Exchange Commission. During the three months ended March 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $610,000 to fund capital improvements at the Partnership’s investment property. No such advances were made during the three months ended March 31, 2008. The advances bear interest at the prime rate plus 2% (5.25% at March 31, 2009) per annum. Interest expense during the three months ended March 31, 2009 was approximately $24,000. No interest expense was incurred during the three months ended March 31, 2008. At March 31, 2009 and December 31, 2008, the amount of the outstanding advances and accrued interest due to AIMCO Properties, L.P. was approximately $2,127,000 and $1,493,000, respectively and is included in due to affiliates.
Upon the sale of the Partnership’s property, NPI Equity will be entitled to an Incentive Compensation Fee equal to a declining percentage of the difference between the total amount distributed to limited partners and the appraised value of their investment at February 1, 1992. The percentage amount to be realized by NPI Equity, if any, will be dependent upon the year in which the property is sold. Payment of the Incentive Compensation Fee is subordinated to the receipt by the limited partners, of: (a) distributions from capital transaction proceeds of an amount equal to their appraised investment in the Partnership at February 1, 1992, and (b) distributions from all sources (capital transactions as well as cash flow) of an amount equal to six percent (6%) per annum cumulative, non-compounded, on their appraised investment in the Partnership at February 1, 1992. Prior to2008, these preferences were met.
The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability, and vehicle liability. The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the three months ended March 31, 2009, the Partnership was charged by AIMCO and its affiliates approximately $45,000 for hazard insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2009 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $70,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2008.
Note C – Contingencies
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the settlement amounts for alleged unpaid overtime to employees were paid by those partnerships where the respective employees had worked. The Partnership was not required to pay any settlementamounts. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Managing General Partner have implemented policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s property and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations inreal estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risk; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto and the other documents the Partnership files from time to time with the Securities and Exchange Commission.
The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the three months ended March 31, 2009 and 2008:
| Average Occupancy | |
Property | 2009 | 2008 |
|
|
|
Colony at Kenilworth Apartments | 94% | 96% |
Towson, Maryland |
|
|
The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of the investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.
Results of Operations
The Partnership’s net loss for the three months ended March 31, 2009 was approximately $109,000, compared to net income of approximately $17,000 for the three months ended March 31, 2008. The decrease in net income is due to an increase in total expenses. Total expenses increased due to increases in depreciation, interest and property tax expenses, partially offset by a decrease in general andadministrative expenses. Operating expenses remained relatively constant for the comparable periods, as expenses related to minor asbestos abatement were substantially offset by a decrease in payroll related expenses at the Partnership’s investment property. Depreciation expense increased due to property improvements and replacements placed into service during the past twelve months at Colony at Kenilworth Apartments. Interest expense increased primarily due to an increase in interest on advances from an affiliate of the Managing General Partner. Property tax expense increased due to an increase in the assessed value of the property.
The decrease in general and administrative expenses is primarily due to a decrease in professional expenses associated with the administration of the Partnership. Also included in general and administrative expenses for the three months ended March 31, 2009 and 2008 are management reimbursements to the Managing General Partner as allowed under the Partnership Agreement, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.
Total revenues remained relatively constant, as an increase in rental income was substantially offset by a decrease in other income. Rental income increased due to an increase in the average rental rate, partially offset by a decrease in occupancy at Colony at Kenilworth Apartments. Other income decreased primarily due to decreases in lease cancellations fees and interest income due to lower average cash balances and lower average interest rates.
Liquidity and Capital Resources
At March 31, 2009, the Partnership had cash and cash equivalents of approximately $22,000, compared to approximately $144,000 at March 31, 2008. Cash and cash equivalents increased approximately $9,000, from December 31, 2008, due to approximately $538,000 and $232,000 of cash provided by financing and operating activities, respectively, partially offset by approximately $761,000 of cash used in investing activities. Cash provided by financing activities consisted of advances from AIMCO Properties, L.P., partially offset by principal payments made on the mortgages encumbering the Partnership’s investment property. Cash used in investing activities consisted of property improvements and replacements. The Partnership invests its working capital reserves in interest bearing accounts.
On March 18, 2008, the Managing General Partner terminated the revolving credit facility (the “Partnership Revolver”) that was established on behalf of the Partnership and certain affiliated partnerships to fund deferred maintenance and working capital needs of the Partnership and certain other affiliated partnerships in the National Property Investors Partnership Series. The Managing General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to the Partnership. The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership. For more information on AIMCO Properties, L.P., including copies of its audited balance sheets, please see its reports filed with the Securities and Exchange Commission. During the three months ended March 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $610,000 to fund capital improvements at the Partnership’s investment property. No such advances were made during the three months ended March 31, 2008. The advances bear interest at the prime rate plus 2% (5.25% at March 31, 2009) per annum. Interest expense during the three months ended March 31, 2009 was approximately $24,000. No interest expense was incurred during the three months ended March 31, 2008. At March 31, 2009 and December 31, 2008, the amount of the outstanding advances and accrued interest due to AIMCO Properties, L.P. was approximately $2,127,000 and $1,493,000, respectively and is included in due to affiliates.
The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the investment property to adequately maintain the physical asset and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitorsdevelopments in the area of legal and regulatory compliance. Capital improvements planned for the Partnership’s property are detailed below.
During the three months ended March 31, 2009, the Partnership completed approximately $609,000 of capital improvements at Colony at Kenilworth Apartments, consisting primarily of air conditioning upgrades and window replacement. These improvements were funded from operating cash flow and advances from AIMCO Properties, L.P. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2009. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations, Partnership reserves, or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. does not have an obligation to fund such advances. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.
The Partnership’s assets are thought to be generally sufficient for any near-term needs (exclusive of capital improvements and repayment of advances from affiliates) of the Partnership. The mortgage indebtedness encumbering Colony at Kenilworth Apartments of approximately $24,666,000 matures in July 2019 and July 2021, at which time balloon payments of approximately $10,415,000 and $9,451,000, respectively, will be due. The Managing General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity dates. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure.
The Partnership distributed the following amounts during the three months ended March 31, 2009 and 2008 (in thousands, except per unit data):
|
| Per Limited |
| Per Limited |
| Three months Ended | Partnership | Three months Ended | Partnership |
| March 31, 2009 | Unit | March 31, 2008 | Unit |
Additional |
|
|
|
|
financing (1) | $ -- | $ -- | $ 250 | $ 2.25 |
(1) Proceeds from the August 2007 second mortgage obtained on Colony at Kenilworth Apartments.
Future cash distributions will depend on the levels of net cash generated from operations and the timing of the debt maturities, property sale and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. In light of the significant amounts accrued and payable to affiliates of the Managing General Partner at March 31, 2009, there can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners in 2009 or subsequent periods.
Other
In addition to its indirect ownership of the Managing General Partner interest in the Partnership, AIMCO and its affiliates owned 76,622 limited partnership units (the “Units”) in the Partnership representing 69.91% of the outstanding Units at March 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing GeneralPartner. As a result of its ownership of 69.91% of the outstanding Units, AIMCO and its affiliates are in a position to influence all such voting decisions with respect to the Partnership. However, with respect to the 46,289 Units acquired on January 19, 1996, AIMCO IPLP, L.P. ("IPLP"), an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on IPLP's, AIMCO's or any other affiliates' right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as Managing General Partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.
Impairment of Long-Lived Asset
Investment property is recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.
Real property investment is subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership’s investment property. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. Any adverse changes in these factors could cause impairment of the Partnership’s asset.
Capitalized Costs Related to Redevelopment and Construction Projects
The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized in accordance with Statement of Financial Accounting Standards (“SFAS”), No. 34, “Capitalization of Interest Costs”, and SFAS No. 67, “Accounting for Costs and the Initial Rental Operations of Real Estate Properties”. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized on a straight-line basis as it isearned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease.
ITEM 4T. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
(b) Changes in Internal Control Over Financial Reporting
There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the settlement amounts for alleged unpaid overtime to employees were paid by those partnerships where the respective employees had worked. The Partnership was not required to pay any settlement amounts. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
ITEM 6. EXHIBITS
See Exhibit Index.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NATIONAL PROPERTY INVESTORS 6 |
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| By: NPI EQUITY INVESTMENTS, INC. |
| Managing General Partner |
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Date: May 13, 2009 | By: /s/Steven D. Cordes |
| Steven D. Cordes |
| Senior Vice President |
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Date: May 13, 2009 | By: /s/Stephen B. Waters |
| Stephen B. Waters |
| Vice President |
EXHIBIT INDEX
Exhibit Description of Exhibit
2.1 NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2 to the Partnership's Current Report on Form 8-K dated August 17, 1995.
2.2 Partnership Units Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2.1 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995.
2.3 Management Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2.2 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995.
3.4 (a) Agreement of Limited Partnership, incorporated by reference to Exhibit A to the Prospectus of the Partnership dated January 12, 1983, included in the Partnership's Registration Statement on Form S-11 (Reg. No. 2-80141).
(b) Amendments to Agreement of Limited Partnership, incorporated by reference to the Definitive Proxy Statement of the Partnership dated April 3, 1991.
(c) Amendments to the Partnership Agreement, incorporated by reference to the Statement Furnished in Connection with the Solicitation of the Registrant dated August 28, 1992.
10.36 Multifamily Note dated August 31, 2007 between National Property Investors 6, a California limited partnership, and Capmark Bank, a Utah industrial bank. (Incorporated by reference to the Partnership’s Current Report on Form 8-K dated August 31, 2007.)
10.37 Amended and Restated Multifamily Note dated August 31, 2007 between National Property Investors 6, a California limited partnership, and Federal Home Loan Mortgage Corporation. (Incorporated by reference to the Partnership’s Current Report on Form 8-K dated August 31, 2007.)
31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.