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, 2001
[ ] 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 0-9567
NATIONAL PROPERTY INVESTORS III
(Exact name of small business issuer as specified in its charter)
California 13-2974428
(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
(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 III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 1,152
Receivables and deposits 719
Restricted escrows 334
Other assets 514
Investment properties:
Land $ 3,023
Buildings and related personal property 36,490
39,513
Less accumulated depreciation (27,734) 11,779
$ 14,498
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 76
Tenant security deposit liabilities 220
Accrued property taxes 768
Other liabilities 481
Mortgage notes payable 26,881
Partners' Deficit
General partner $ (282)
Limited partners (48,049 units
issued and outstanding) (13,646) (13,928)
$ 14,498
See Accompanying Notes to Consolidated Financial Statements
b)
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 2,178 $ 2,066
Other income 231 134
Casualty gain 35 --
Total revenues 2,444 2,200
Expenses:
Operating 912 852
General and administrative 163 140
Depreciation 442 392
Interest 517 521
Property taxes 204 187
Total expenses 2,238 2,092
Net income $ 206 $ 108
Net income allocated to general partner (1%) $ 2 $ 1
Net income allocated to limited partners (99%) 204 107
$ 206 $ 108
Net income per limited partnership unit $ 4.24 $ 2.23
Distributions per limited partnership unit $ 15.96 $ 71.07
See Accompanying Notes to Consolidated Financial Statements
c)
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 48,049 $ 1 $ 24,024 $ 24,025
Partners' deficit at
December 31, 2000 48,049 $ (276) $(13,083) $(13,359)
Net income for the three months
ended March 31, 2001 -- 2 204 206
Distributions to partners -- (8) (767) (775)
Partners' deficit at
March 31, 2001 48,049 $ (282) $(13,646) $(13,928)
See Accompanying Notes to Consolidated Financial Statements
d)
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 206 $ 108
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 442 392
Amortization of loan costs 22 24
Casualty gain (35) --
Change in accounts:
Receivables and deposits (149) 20
Other assets (38) (18)
Accounts payable (45) 5
Tenant security deposit liabilities (5) 12
Accrued property taxes 144 114
Other liabilities 8 8
Net cash provided by operating activities 550 665
Cash flows from investing activities:
Property improvements and replacements (242) (362)
Net (deposits to) withdrawals from restricted escrows (62) 132
Net insurance proceeds received 127 --
Net cash used in investing activities (177) (230)
Cash flows from financing activities:
Payments on mortgage notes payable (44) (42)
Loan costs paid -- (69)
Distributions to partners (775) (3,425)
Net cash used in financing activities (819) (3,536)
Net decrease in cash and cash equivalents (446) (3,101)
Cash and cash equivalents at beginning of period 1,598 5,577
Cash and cash equivalents at end of period $ 1,152 $ 2,476
Supplemental disclosure of cash flow information:
Cash paid for interest $ 495 $ 497
At March 31, 2000, accounts payable and property improvements and replacements
were adjusted by approximately $135,000.
See Accompanying Notes to Consolidated Financial Statements
e)
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of National
Property Investors III (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"), an affiliate of Apartment Investment
and Management Company ("AIMCO"), all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 2001, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2000.
Principles of Consolidation
The Partnership's financial statements include the accounts of National
Pinetree, LP, of which the Partnership owns a 99% limited partnership interest,
and of Summerwalk NPI III, LP, of which the Partnership owns a 99.9% interest.
The Partnership has the ability to control the major operating and financial
policies of these partnerships. All interpartnership transactions have been
eliminated.
Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the consolidated financial statements as currently presented.
Note B - 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 Managing General Partner and its affiliates
were incurred during the three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $120 $115
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expenses) 73 46
Partnership management fee (included in general and
administrative expenses) 75 85
During the three months ended March 31, 2001 and 2000, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $120,000 and $115,000 for the
three months ended March 31, 2001 and 2000, respectively.
Affiliates of the Managing General Partner received reimbursements of
accountable administrative expenses amounting to approximately $73,000 and
$46,000 for the three months ended March 31, 2001 and 2000, respectively.
For services relating to the administration of the Partnership and operation of
the Partnership's properties, the Managing General Partner is entitled to
receive payment for the non-accountable expenses up to a maximum of $100,000 per
year based upon the number of Partnership units sold, subject to certain
limitations. The Managing General Partner received approximately $75,000 and
$85,000 during the three months ended March 31, 2001 and 2000, respectively, in
connection with the distribution paid to the partners.
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 Chase Manhattan Bank, N.A. The maturity date of such borrowing
will be accelerated in the event of: (i) the removal of the NPI Equity (whether
or not for cause); (ii) the sale or refinancing of a property by the Partnership
(whether or not a borrowing under the Partnership Revolver was made with respect
to such property); or (iii) the liquidation of the Partnership. The Partnership
has not borrowed under the Partnership Revolver to date.
AIMCO and its affiliates currently own 35,209 limited partnership units in the
Partnership representing 73.28% 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 73.28% 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 the
21,380 units acquired on January 19, 1996, Insignia Properties, LP ("IPLP"), an
affiliate of the Managing General Partner, agreed to vote such unit: (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 vote cast by non tendering unit holders. Except for the
foregoing, no other limitations are imposed on IPLP's right to vote each Unit
acquired.
Note C - Distributions
During the three months ended March 31, 2001, the Partnership distributed
approximately $775,000 (approximately $767,000 to the limited partners or $15.96
per limited partnership unit) from operations. Subsequent to March 31, 2001, the
Partnership made a distribution of approximately $237,000 (approximately
$234,000 to the limited partners or $4.87 per limited partnership unit) from
operations.
During the three months ended March 31, 2000, the Partnership distributed
approximately $3,425,000 (approximately $3,415,000 to limited partners or $71.07
per limited partnership unit). This distribution represents approximately
$2,482,000 to the limited partners ($51.65 per limited partnership unit) of
refinance proceeds from Pinetree Apartments and approximately $943,000
(approximately $933,000 to limited partners or $19.42 per limited partnership
unit) of cash flow from operations.
Note D - Casualty Gain
In July 1999, a fire occurred at Summerwalk Apartments that destroyed one
building consisting of eight units. The repair costs were covered by insurance.
Reconstruction was completed during the third quarter of 2000. Net insurance
proceeds of approximately $336,000 have been received. During the year ended
December 31, 2000 and 1999, the Partnership recognized casualty gains of
approximately $232,000 and approximately $25,000, respectively. During the first
quarter of 2001, the final insurance proceeds were received and the Partnership
recognized an additional casualty gain of approximately $35,000 related to this
fire.
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, its 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, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. 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 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 court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. 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 operation. 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 for each of the properties
for both of the three months ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Lakeside Apartments 93% 94%
Lisle, Illinois
Pinetree Apartments (2) 91% 94%
Charlotte, North Carolina
Summerwalk Apartments (1) 94% 91%
Winter Park, Florida
(1) The increase in occupancy at Summerwalk Apartments is due to improved
marketing efforts, as well as the completion of the reconstruction of the
eight units damaged in a fire in 1999, as discussed below.
(2) The decrease in occupancy at Pinetree Apartments is due to lower interest
rates and a number of new apartment complexes in the local market.
Results of Operations
The Partnership's net income for the three months ended March 31, 2001 was
approximately $206,000 compared to net income of approximately $108,000 for the
three months ended March 31, 2000. The increase in net income is primarily due
to an increase in total revenues partially offset by an increase in total
expenses. The increase in total revenues is due to an increase in rental income,
other income and a casualty gain at Summerwalk Apartments, as discussed below.
The increase in rental income is primarily due to increased rental rates at all
of the Partnership's properties, and increased occupancy at Summerwalk
Apartments. Other income increased due to an increase in utility reimbursements,
tenant charges and laundry income.
Total expenses increased due to an increase in operating, depreciation, and
general and administrative expenses. The increased depreciation expense is the
result of additions of capital assets at all of the Partnership's properties
during the past twelve months. The increase in operating expense is due to
increased salaries and related employee benefits, and increased gas expense at
Lakeside Apartments. General and administrative expense increased due to an
increase in the cost of services included in the management reimbursements to
the Managing General Partner. This increase was partially offset by reduced
Partnership management fees associated with non-accountable reimbursements
allowed with distributions from operations due to reduced operating
distributions. Also included in general and administrative expenses at both
March 31, 2001 and 2000, are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
In July 1999, a fire occurred at Summerwalk Apartments that destroyed one
building consisting of eight units. The repair costs were covered by insurance.
Reconstruction was completed during the third quarter of 2000. Net insurance
proceeds of approximately $336,000 have been received. During the year ended
December 31, 2000 and 1999, the Partnership recognized casualty gains of
approximately $232,000 and approximately $25,000, respectively. During the first
quarter of 2001, the final insurance proceeds were received and the Partnership
recognized an additional casualty gain of approximately $35,000 related to this
fire.
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 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, 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, 2001, the Partnership had cash and cash equivalents of
approximately $1,152,000 as compared to approximately $2,476,000 at March 31,
2000. For the three months ended March 31, 2001, cash and cash equivalents
decreased approximately $446,000 from the Partnership's year ended December 31,
2000. The decrease in cash and cash equivalents is due to approximately $819,000
of cash used in financing activities and approximately $177,000 of cash used in
investing activities, partially offset by approximately $550,000 of cash
provided by operating activities. Cash used in investing activities consists of
property improvements and replacements and net deposits to restricted escrows
maintained by the mortgage lenders partially offset by insurance proceeds
received on a July 1999 fire at Summerwalk Apartments. Cash used in financing
activities consists of distributions to the partners and payments of principal
made on the mortgages encumbering Pinetree and Summerwalk Apartments. The
Partnership invests its working capital reserves in interest bearing 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. Based on present plans, 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 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 planned
for each of the Partnership's properties are detailed below.
Lakeside Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $54,000 of capital improvements at Lakeside Apartments consisting
primarily of furniture and fixture enhancements, water heater replacements,
floor covering replacements, major sewer replacement, and appliance
replacements. These improvements were funded from operating cash flows.
Approximately $163,000 has been budgeted for capital improvements at Lakeside
for the year 2001 consisting primarily of floor covering replacements, appliance
replacement, interior painting, and water heater replacements. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Pinetree Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $58,000 of capital improvements at Pinetree Apartments consisting
of structural improvements, interior painting, appliance replacements, and floor
covering replacements. These improvements were funded from operating cash flows.
Approximately $112,000 has been budgeted for capital improvements at Pinetree
Apartments for the year 2001 consisting primarily of plumbing improvements,
swimming pool improvements, appliance replacements and floor covering
replacements. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Summerwalk Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $130,000 of capital improvements at Summerwalk Apartments
consisting of building and structural improvements and floor covering
replacements. These improvements were funded from operating cash flows.
Approximately $486,000 has been budgeted for capital improvements at Summerwalk
Apartments for the year 2001 consisting primarily of floor covering replacement,
building and structural improvements, appliance replacements, and air
conditioning unit replacements. Additional improvements may be considered and
will depend on the physical condition of the property as well as replacement
reserves and anticipated cash flow generated by the property.
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.
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 $26,881,000 encumbering the Partnership's
properties are being amortized over varying periods with balloon payments due
over periods ranging from November 2003 to November 2019. The Managing General
Partner will attempt to refinance such remaining 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.
During the three months ended March 31, 2001, the Partnership distributed
approximately $775,000 (approximately $767,000 to the limited partners or $15.96
per limited partnership unit) from operations. Subsequent to March 31, 2001, the
Partnership made a distribution of approximately $237,000 (approximately
$234,000 to the limited partners or $4.87 per limited partnership unit) from
operations. During the three months ended March 31, 2000, the Partnership
distributed approximately $3,425,000 (approximately $3,415,000 to limited
partners or $71.07 per limited partnership unit). This distribution represents
approximately $2,482,000 to the limited partners ($51.65 per limited partnership
unit) of refinance proceeds from Pinetree Apartments and approximately $943,000
(approximately $933,000 to the limited partners or $19.42 per limited
partnership unit) of cash flow from operations. The Partnership's distribution
policy is reviewed on a quarterly 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 2001 or subsequent
periods.
AIMCO and its affiliates currently own 35,209 limited partnership units in the
Partnership representing 73.28% 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 73.28% 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 the
21,380 units acquired on January 19, 1996, Insignia Properties, LP ("IPLP"), an
affiliate of the Managing General Partner, agreed to vote such unit: (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 vote cast by non tendering unit holders. Except for the
foregoing, no other limitations are imposed on IPLP's right to vote each Unit
acquired.
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, its 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, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. 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 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 court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. 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:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
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 III
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: