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 June 30, 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 0-11095
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)
June 30, 2001
Assets
Cash and cash equivalents $ 524
Receivables and deposits 122
Restricted escrows 26
Other assets 443
Investment properties:
Land $ 2,145
Buildings and related personal property 29,497
31,642
Less accumulated depreciation (25,012) 6,630
$ 7,745
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 251
Tenant security deposit liabilities 103
Accrued property taxes 137
Due to Managing General Partner 565
Other liabilities 219
Mortgage notes payable 15,170
Partners' Deficit
General partner $ (1,379)
Limited partners (82,513 units
issued and outstanding) (7,321) (8,700)
$ 7,745
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 1,098 $ 1,178 $ 2,183 $ 2,378
Other income 96 118 200 191
Total revenues 1,194 1,296 2,383 2,569
Expenses:
Operating 588 542 1,121 1,175
Interest 314 287 604 574
Depreciation 340 348 704 684
General and administrative 73 118 167 172
Property taxes 62 65 125 129
Total expenses 1,377 1,360 2,721 2,734
Net loss $ (183) $ (64) $ (338) $ (165)
Net loss allocated to general
partner (3%) $ (5) $ (2) $ (10) $ (5)
Net loss allocated to limited
partners (97%) (178) (62) (328) (160)
$ (183) $ (64) $ (338) $ (165)
Net loss per limited partnership unit $ (2.16) $ (0.75) $ (3.98) $ (1.94)
Distributions per limited partnership
unit $ 2.06 $ 19.20 $ 39.48 $ 19.20
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, 2000 82,513 $(1,300) $(3,735) $(5,035)
Distributions to partners -- (69) (3,258) (3,327)
Net loss for the six months
ended June 30, 2001 -- (10) (328) (338)
Partners' deficit at
June 30, 2001 82,513 $(1,379) $(7,321) $(8,700)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net loss $ (338) $ (165)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 704 684
Amortization of loan costs 20 33
Change in accounts:
Receivables and deposits 50 7
Other assets (63) (4)
Accounts payable (85) (24)
Tenant security deposit liabilities (19) 2
Accrued property taxes 125 87
Other liabilities (20) --
Due to Managing General Partner 275 --
Net cash provided by operating activities 649 620
Cash flows from investing activities:
Property improvements and replacements (470) (327)
Net withdrawals from (deposits to) restricted escrows 47 (54)
Net cash used in investing activities (423) (381)
Cash flows from financing activities:
Payments of mortgage notes payable (169) (116)
Proceeds from mortgage note payable 7,000 --
Repayment of mortgage note payable (3,825) --
Loan costs paid (194) (98)
Distributions to partners (3,327) (1,624)
Net cash used in investing activities (515) (1,838)
Net decrease in cash and cash equivalents (289) (1,599)
Cash and cash equivalents at beginning of period 813 2,016
Cash and cash equivalents at end of period $ 524 $ 417
Supplemental disclosure of cash flow information:
Cash paid for interest $ 569 $ 514
Supplemental disclosures of non-cash activity:
Property improvements and replacements in accounts payable $ 92 $ --
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 and six month periods ended June 30, 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 financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2000. 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 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 property management services based on a percentage of revenue and
for reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
The following transactions with affiliates of the Managing General Partner were
incurred during the six months ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $124 $129
Reimbursement for services of affiliates (included in
operating and general and administrative expenses,
and investment properties) 137 83
Non-accountable general partner reimbursement (included in
general and administrative expenses) 20 51
During the six months ended June 30, 2001 and 2000, 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 $124,000 and $129,000 for the
six months ended June 30, 2001 and 2000, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $137,000 and $83,000 for the
six months ended June 30, 2001 and 2000, respectively.
For services relating to the administration of the Partnership and operation of
the Partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $100,000 per year, based
upon the original number of Partnership units sold, subject to certain
limitations. The Managing General Partner earned and received approximately
$20,000 and $51,000 during the six months ended June 30, 2001 and 2000,
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 June 30, 2001, an incentive management fee of approximately $290,000
has been accrued related to the sale of The Village in 1998.
The Managing General Partner 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
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. At June 30, 2001, the
Partnership had borrowed approximately $275,000 under this Partnership Revolver.
During the six months ended June 30, 2001, interest of approximately $3,000 is
included in interest expense.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 51,214 limited partnership units in
the Partnership representing 62.07% of the outstanding units at June 30, 2001. 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, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. As a
result of its ownership of 62.07% 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 its
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 C - Refinancing of Mortgage Note Payable
On February 14, 2001, the Partnership refinanced the mortgage encumbering
Oakwood Village. The refinancing replaced indebtedness of $3,825,000 with a new
mortgage in the amount of $7,000,000. The mortgage was refinanced at a rate of
7.18% compared to the prior rate of 8.56% and matures on March 1, 2021. Payments
of approximately $55,000 are due on the first day of each month until the loan
matures. Capitalized loan costs of approximately $24,000 were incurred at
December 31, 2000, and approximately $194,000 were incurred during the six
months ended June 30, 2001. These costs are included in other assets and are
being amortized over the life of the loan.
Note D - Distributions
During the six months ended June 30, 2001, the Partnership distributed
approximately $3,327,000 to the partners (approximately $3,258,000 to the
limited partners or $39.48 per limited partnership unit) consisting of
approximately $296,000 (approximately $287,000 to the limited partners or $3.48
per limited partnership unit) from operations and approximately $3,031,000
(approximately $2,971,000 to the limited partners or $36.00 per limited
partnership unit) from the remaining refinancing proceeds of Willow Park
Apartments and the refinance proceeds of Oakwood Village Apartments. During the
six months ended June 30, 2000, the Partnership distributed approximately
$1,624,000 to the partners (approximately $1,584,000 to the limited partners or
$19.20 per limited partnership unit) consisting of approximately $763,000
(approximately $740,000 to the limited partners or $8.97 per limited partnership
unit) from operations, and approximately $861,000 (approximately $844,000 to the
limited partners or $10.23 per limited partnership unit) from refinancing
proceeds of Willow Park Apartments.
Note E - 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 required that those enterprises report
selected information about operating segments in interim financial reports. It
also established 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 financial statements as currently presented.
Note F - 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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Managing General Partner
does not anticipate that any costs, whether legal or settlement 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
six months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Willow Park on Lake Adelaide 93% 97%
Altamonte Springs, Florida (1)
Oakwood Village at Lake Nan Apartments 93% 94%
Winter Park, Florida
Palisades Apartments (2) 80% 92%
Montgomery, Alabama
(1) The Managing General Partner attributes the decrease in occupancy to
increased competition in the local market.
(2) The Managing General Partner attributes the decrease in occupancy at the
Palisade Apartments to numerous evictions in the current six-month period.
Management is evicting tenants who are not complying with the collection
policy in an effort to improve the tenant base.
Results of Operations
The Partnership's net loss for the six months ended June 30, 2001, was
approximately $338,000 as compared to a net loss of approximately $165,000 for
the six months ended June 30, 2001. The Partnership's net loss for the three
months ended June 30, 2001 was approximately $183,000 compared to a net loss of
approximately $64,000 for the three months ended June 30, 2000. The increase in
net loss for the six months ended June 30, 2001 is due to a decrease in total
revenues partially offset by a decrease in total expenses. The increase in net
loss for the three months ended June 30, 2001 is due to a decrease in total
revenues and an increase in total expenses. The decrease in total revenues for
the three and six months ended June 30, 2001 is due primarily to a decrease in
rental income as a result of decreases in occupancy at all of the Partnership's
investment properties as discussed above. Other income decreased during the
three months ended June 30, 2001 due to decreased interest income resulting from
lower average cash balances in interest bearing accounts.
For the three months ended June 30, 2001, the increase in total expenses is
primarily due to an increase in operating expense and interest expense partially
offset by a decrease in general and administrative expense. Operating expense
increased due to an increase in property expense and insurance expense offset by
a decrease in maintenance expense. The decrease in total expenses for the six
months ended June 30, 2001 is due to decreases in operating expense, general and
administrative expense partially offset by increases in depreciation expense and
interest expense. Operating expense decreased due to a decrease in maintenance
expense partially offset by an increase in property expense and insurance
expense. Maintenance expense decreased primarily due to management electing to
perform minor repairs, cleaning, painting and yard and ground maintenance by
Palisades Apartments employees instead of contracting professionals and due to
the decrease in occupancy at all properties, as discussed above. Property
expense increased primarily due to increases in manager salaries and in vacant
units' electricity charges at the Palisades Apartments. Insurance expense
increased due to increases in the hazard insurance premium at all the
Partnership's investment properties. Interest expense increased primarily due to
the refinancing of the mortgage encumbering Oakwood Village resulting in a
higher debt balance, as discussed below. The increase in depreciation is the
result of fixed assets placed into service during the past twelve months.
General and administrative expense decreased primarily due to decreases in
professional and legal expense for the three and six months ended June 30, 2001.
Included in general and administrative expenses at both June 30, 2001 and 2000,
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 June 30, 2001, the Partnership had cash and cash equivalents of approximately
$524,000 as compared to approximately $417,000 at June 30, 2000. For the six
months ended June 30, 2001, cash and cash equivalents decreased by approximately
$289,000 from the Partnership's year ended December 31, 2000. The decrease in
cash and cash equivalents is due to approximately $515,000 of cash used in
financing activities and approximately $423,000 of cash used in investing
activities partially offset by approximately $649,000 of cash provided by
operating activities. Cash used in financing activities consisted of principal
payments made on the mortgages encumbering the Partnership's properties, loan
costs incurred on the refinancing of Oakwood Village Apartments in February
2001, repayment of the mortgage encumbering Oakwood Village Apartments and
distributions to partners partially offset by proceeds from the refinancing of
the mortgage encumbering Oakwood Village Apartments (see discussion below). Cash
used in investing activities consisted of property improvements and replacements
partially offset by net withdrawals from restricted escrows maintained by the
mortgage lenders. The Partnership invests its working capital reserves in
interest bearing accounts.
The Managing General Partner 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
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. At June 30, 2001, the
Partnership had borrowed approximately $275,000 under this Partnership Revolver.
During the six months ended June 30, 2001, interest of approximately $3,000 is
included in interest expense.
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 six months ended June 30, 2001, the Partnership completed
approximately $60,000 of budgeted and non-budgeted capital improvements at
Willow Park, consisting primarily of floor covering replacements, structural
improvements, cabinet upgrades and appliance replacements. These improvements
were funded through operating cash flow. The Partnership has budgeted, but is
not limited to, capital improvements of approximately $53,000 for the year 2001
at this property which consist primarily of floor covering replacements.
Oakwood Village at Lake Nan Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $78,000 of budgeted capital improvements at Oakwood Village
consisting primarily of appliance replacements, plumbing enhancements, interior
decoration, floor covering replacements and major landscaping. These
improvements were funded through replacement reserves and operating cash flow.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $95,000 for the year 2001 at this property which consist primarily
of floor covering replacements and building improvements.
Palisades Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $424,000 of budgeted capital improvements at Palisades Apartments,
consisting of floor covering replacements, appliance replacements, roof
replacements, HVAC upgrades, plumbing upgrades, interior decoration and
structural improvements. These improvements were funded through operating cash
flow and replacement reserves. The Partnership has budgeted, but is not limited
to, capital improvements of approximately $1,014,000 for the year 2001 at this
property which consist primarily of structural improvements, roof replacement
and floor covering replacements.
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 $15,170,000 is being amortized over varying
periods with a balloon payment due at maturity for the Palisades Apartments. 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. The Partnership had entered into a contract
to sell Palisades Apartments to an unaffiliated third party which is no longer
in effect. However, a letter of intent is currently in effect with another
unaffiliated third party. A sale is conditional upon the purchaser completing
due diligence review of the property and other customary conditions. There can
be no assurance; however, that a sale will be consummated, on what terms or in
what time frame.
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. New loan costs of
approximately $46,000 were paid during the year ended December 31, 1999.
Additional loan costs of approximately $98,000 were paid during the six month
period ended June 30, 2000. Subsequent to June 30, 2000, an overpayment of loan
costs of approximately $73,000 was refunded to the Partnership. These loan costs
are included in other assets and are amortized over the life of the loan.
On February 14, 2001, the Partnership refinanced the mortgage encumbering
Oakwood Village. The refinancing replaced indebtedness of $3,825,000 with a new
mortgage in the amount of $7,000,000. The mortgage was refinanced at a rate of
7.18% compared to the prior rate of 8.56% and matures on March 1, 2021. Payments
of approximately $55,000 are due on the first day of each month until the loan
matures. Capitalized loan costs of approximately $24,000 were incurred at
December 31, 2000, and approximately $194,000 were incurred during the six
months ended June 30, 2001. These costs are included in other assets and are
being amortized over the life of the loan.
During the six months ended June 30, 2001, the Partnership distributed
approximately $3,327,000 to the partners (approximately $3,258,000 to the
limited partners or $39.48 per limited partnership unit) consisting of
approximately $296,000 (approximately $287,000 to the limited partners or $3.48
per limited partnership unit) from operations, and approximately $3,031,000
(approximately $2,971,000 to the limited partners or $36.00 per limited
partnership unit) from the remaining refinancing proceeds of Willow Park
Apartments and the refinance proceeds of Oakwood Village Apartments. During the
six months ended June 30, 2000, the Partnership distributed approximately
$1,624,000 to the partners (approximately $1,584,000 to the limited partners or
$19.20 per limited partnership unit) consisting of approximately $763,000
(approximately $740,000 to the limited partners or $8.97 per limited partnership
unit) from operations, and approximately $861,000 (approximately $844,000 to the
limited partners or $10.23 per limited partnership unit) from refinancing
proceeds of Willow Park Apartments. The Partnership's distribution policy is
reviewed on a monthly 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.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 51,214 limited partnership units in
the Partnership representing 62.07% of the outstanding units at June 30, 2001. 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, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. As a
result of its ownership of 62.07% 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 its
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.
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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Managing General Partner
does not anticipate that any costs, whether legal or settlement 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 June 30, 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 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: