FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(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, 2000
[ ] 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 0-11095
NATIONAL PROPERTY INVESTORS 5
(Exact name of small business issuer as specified in its charter)
California 22-2385051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
NATIONAL PROPERTY INVESTORS 5
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2000
Assets
Cash and cash equivalents $ 1,957
Receivables and deposits 317
Restricted escrows 75
Other assets 294
Investment properties:
Land $ 2,145
Buildings and related personal property 28,433
30,578
Less accumulated depreciation (23,250) 7,328
$ 9,971
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 175
Tenant security deposit liabilities 122
Accrued property taxes 79
Due to Managing General Partner 290
Other liabilities 202
Mortgage notes payable 12,376
Partners' Deficit
General partner $ (1,256)
Limited partners (82,513 units
issued and outstanding) (2,017) (3,273)
$ 9,971
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
Revenues:
Rental income $1,200 $1,127
Other income 73 66
Total revenues 1,273 1,193
Expenses:
Operating 633 503
Interest 287 266
Depreciation 336 305
General and administrative 54 58
Property taxes 64 43
Total expenses 1,374 1,175
Net (loss) income $ (101) $ 18
Net (loss) income allocated to general partner (3%) $ (3) $ 1
Net (loss) income allocated to limited partners (97%) (98) 17
$ (101) $ 18
Net (loss) income per limited partnership unit $(1.19) $ 0.21
See Accompanying Notes to Financial Statements
c)
NATIONAL PROPERTY INVESTORS 5
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 82,513 $ 1 $41,257 $41,258
Partners' deficit at
December 31, 1999 82,513 $(1,253) $(1,919) $(3,172)
Net loss for the three months
ended March 31, 2000 -- (3) (98) (101)
Partners' deficit at
March 31, 2000 82,513 $(1,256) $(2,017) $(3,273)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net (loss) income $ (101) N $ 18
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 336 305
Amortization of loan costs 16 15
Change in accounts:
Receivables and deposits 34 (38)
Other assets 6 1
Accounts payable 30 (80)
Tenant security deposit liabilities -- 4
Accrued property taxes 22 1
Other liabilities (4) (15)
Net cash provided by operating activities 339 211
Cash flows from investing activities:
Property improvements and replacements (226) (176)
Net deposits to restricted escrows (22) (45)
Net cash used in investing activities (248) (221)
Cash flows from financing activities:
Payments of mortgage notes payable (55) (61)
Loan costs paid (95) --
Net cash used in investing activities (150) (61)
Net decrease in cash and cash equivalents (59) (71)
Cash and cash equivalents at beginning of period 2,016 972
Cash and cash equivalents at end of period $1,957 $ 901
Supplemental disclosure of cash flow information:
Cash paid for interest $ 216 $ 287
See Accompanying Notes to Financial Statements
e)
NATIONAL PROPERTY INVESTORS 5
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 5
(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-QSB and Item 310(b) of Regulation S-B.
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, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent 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.
The following transactions with the affiliates of the Managing General Partner
were incurred during the three months ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 64 $ 62
Reimbursement for services of affiliates (included in
operating and general and administrative expenses,
and investment properties) 38 40
During the three months ended March 31, 2000 and 1999, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties for providing property management services. The
Partnership paid to such affiliates approximately $64,000 and $62,000 for the
three months ended March 31, 2000 and 1999, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $38,000 and $40,000 for the
three months ended March 31, 2000 and 1999, respectively.
Upon the sale of the Partnership's properties, 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. As of March 31, 2000, an incentive management fee of approximately
$290,000 has been accrued related to the sale of The Village in 1998.
NPI Equity has established a revolving credit facility (the "Partnership
Revolver") to be used to fund deferred maintenance and working capital needs of
the National Property Investors Partnership Series. The maximum draw available
to the Partnership under the Partnership Revolver is $300,000. Loans under the
Partnership Revolver will have a term of 365 days, be unsecured and bear
interest at the rate of 2% per annum in excess of the prime rate announced from
time to time by Chemical Bank, N.A. The maturity date of such borrowing will be
accelerated in the event of: (i) the removal of the Managing General Partner
(whether or not For Cause, as defined in the Partnership Agreement); (ii) the
sale or refinancing of a property by the Partnership, or; (iii) the liquidation
of the Partnership. The Partnership has not borrowed under the Partnership
Revolver, to date.
AIMCO and its affiliates currently own 48,238 limited partnership units in the
Partnership representing 58.461% of the outstanding units. 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 make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. As a result of its
ownership of 58.461% of the outstanding units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner. However, with respect to 37,101
Units, AIMCO is required to vote such Units: (i) against any increase in
compensation payable to the Managing General Partner or to affiliates; and (ii)
on all other matters submitted by it or its affiliates, in proportion to the
votes cast by non-tendering unit holders. Except for the foregoing, no other
limitations are imposed on AIMCO's ability to influence voting decisions with
respect to the Partnership.
Note D - Disclosures about Segments of an Enterprise and Related Information
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of three apartment
complexes, two of which are located in Florida and one in Alabama. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those of the Partnership as described in Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the three months ended March 31, 2000 and 1999, is shown
in the tables below (in thousands). The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segment.
2000 Residential Other Totals
Rental income $ 1,200 $ -- $ 1,200
Other income 59 14 73
Interest expense 287 -- 287
Depreciation 336 -- 336
General and administrative expense -- 54 54
Segment loss 61 (40) (101)
Total assets 8,218 1,753 9,971
Capital expenditures for investment
properties 226 -- 226
1999 Residential Other Totals
Rental income $ 1,127 $ -- $ 1,127
Other income 60 6 66
Interest expense 266 -- 266
Depreciation 305 -- 305
General and administrative expense -- 58 58
Segment profit (loss) 70 (52) 18
Total assets 8,684 577 9,261
Capital expenditures for investment
properties 176 -- 176
Note E - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement, settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operations. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 2000 and 1999:
Average Occupancy
Property 2000 1999
Willow Park on Lake Adelaide 96% 94%
Altamonte Springs, Florida
Oakwood Village at Lake Nan Apartments 94% 95%
Winter Park, Florida
Palisades Apartments (1) 91% 87%
Montgomery, Alabama
(1) The Managing General Partner attributes the increase in occupancy to
improved marketing efforts.
Results of Operations
The Partnership realized a net loss of approximately $101,000 for the three
month period ended March 31, 2000 compared to net income of approximately
$18,000 for the comparable period in 1999. The increase in net loss for the
three months ended March 31, 2000, is due to an increase in total expenses
partially offset by an increase in total revenues. The increase in total
expenses is due to increases in operating, depreciation, and property tax
expenses. Operating expense increased as a result of maintenance expense
increases at Oakwood Village and Palisades. Maintenance expense at Oakwood
Village increased as a result of interior painting, plumbing, landscaping, and
exterminating cost increases, while maintenance expense at Palisades increased
as a result of interior painting, floor coverings, and exterminating costs. The
increase in depreciation expense is the result of assets placed in service
during the past twelve months that are now being depreciated. The increase in
property tax expense is due to the timing of the receipt of property tax bills
for 1999 which affected the accruals as of March 31, 1999. The increase in total
revenues is due to an increase in rental income. Rental income increased due to
increased rental rates at all of the Partnership's properties in addition to an
overall increase in occupancy.
Included in general and administrative expenses at both March 31, 2000 and 1999,
are management reimbursements to the Managing General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership agreement are also included.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. 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, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Capital Resources and Liquidity
At March 31, 2000, the Partnership had cash and cash equivalents of
approximately $1,957,000 as compared to approximately $901,000 at March 31,
1999. For the three months ended March 31, 2000, cash and cash equivalents
decreased by approximately $59,000 from the Partnership's year ended December
31, 1999. The decrease in cash and cash equivalents is due to approximately
$248,000 of cash used in investing activities and approximately $150,000 of cash
used in financing activities partially offset by approximately $339,000 of cash
provided by operating activities. Cash used in investing activities consisted of
property improvements and replacements and net deposits to restricted escrows
maintained by the mortgage lenders. Cash used in financing activities consisted
of principal payments made on the mortgages encumbering the Partnership's
properties and additional loan costs incurred on the refinancing of Willow Park
Apartments in December 1999 (see discussion below). The Partnership invests its
working capital reserves in money market accounts.
The Managing General Partner has extended to the Partnership a $300,000 line of
credit. At the present time, the Partnership has no outstanding amounts due
under this line of credit, and the Managing General Partner does not anticipate
the need to borrow in the near future. Other than cash and cash equivalents, the
line of credit is the Partnership's only unused source of liquidity.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state and local legal and regulatory requirements. Capital improvements
for each of the Partnership's properties are detailed below.
Willow Park on Lake Adelaide
During the three months ended March 31, 2000, the Partnership completed
approximately $57,000 of capital improvements at Willow Park, consisting
primarily of floor covering replacements, swimming pool enhancements, plumbing
enhancements, and office furniture replacements. These improvements were funded
through operating cash flow. The Partnership has budgeted, but is not limited
to, capital improvements of approximately $132,000 for the year 2000 at this
property which consist primarily of floor covering replacements, appliance
replacements, and HVAC replacements.
Oakwood Village at Lake Nan Apartments
During the three months ended March 31, 2000, the Partnership completed
approximately $131,000 of capital improvements at Oakwood Village consisting
primarily of floor covering replacements, structural improvements, plumbing
enhancements, major landscaping, and plumbing enhancements. These improvements
were funded through replacement reserves and operating cash flow. The
Partnership is currently modifying the 2000 capital improvement budget for
Oakwood Village Apartments. The budget is anticipated to include amounts to
cover the following capital improvement needs at the property: HVAC
replacements, floor covering replacements, and appliance replacements.
Palisades Apartments
During the three months ended March 31, 2000, the Partnership completed
approximately $38,000 of capital improvements at Palisades Apartments,
consisting of floor covering replacement, roof replacement, HVAC replacements,
and structural improvements. These improvements were funded through operating
cash flow. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $360,000 for the year 2000 at this property which
consist primarily of exterior painting, floor covering replacements, HVAC units,
and roof replacement.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
On December 15, 1999, the Partnership refinanced the mortgage encumbering Willow
Park Apartments. The interest rate on the new mortgage is 8.02%, compared to
8.56% on the previous mortgage. The refinancing replaced indebtedness of
$2,873,000 with a new mortgage in the amount of $4,000,000. Payments of
approximately $34,000 are due on the first day of each month until the loan
matures on January 1, 2020. The prior note was scheduled to mature in February
2001. New loan costs of approximately $46,000 were paid during the year ended
December 31, 1999. Additional loan costs of approximately $95,000 were paid
during the three month period ended March 31, 2000. These loan costs were
included in other assets and will be amortized over the life of the loan.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $12,376,000 is being amortized over varying
periods with balloon payments due over periods ranging from February 2001 to
January 2020. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
No distributions were made during the three months ended March 31, 2000 and
1999. The Partnership's distribution policy is reviewed on an annual basis.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital improvements to permit further distributions to its
partners during the remainder of 2000 or subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The plaintiffs seek monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
Managing General Partner filed a motion seeking dismissal of the action. In lieu
of responding to the motion, the plaintiffs have filed an amended complaint. The
Managing General Partner filed demurrers to the amended complaint which were
heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the Managing General Partner and its
affiliates terminated the proposed settlement. Certain plaintiffs have filed a
motion to disqualify some of the plaintiffs' counsel in the action. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 5
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: