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 September 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 0-13454
NATIONAL PROPERTY INVESTORS 7
(Exact name of small business issuer as specified in its charter)
California 13-3230613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office 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 7
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 501
Receivables and deposits 573
Restricted escrows 382
Other assets 613
Investment properties:
Land $ 3,738
Buildings and related personal property 44,948
48,686
Less accumulated depreciation (31,110) 17,576
$ 19,645
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 116
Tenant security deposit liabilities 107
Accrued property taxes 273
Other liabilities 300
Mortgage notes payable 22,871
Partners' Deficit:
General partner $ (343)
Limited partners (60,517 units
issued and outstanding) (3,679) (4,022)
$ 19,645
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 1,819 $ 1,813 $ 5,469 $ 5,276
Other income 76 99 256 284
Total revenues 1,895 1,912 5,725 5,560
Expenses:
Operating 792 681 2,243 2,100
General and administrative 88 146 343 397
Depreciation 505 508 1,536 1,481
Interest 425 411 1,255 1,242
Property taxes 116 119 326 330
Total expenses 1,926 1,865 5,703 5,550
(Loss) income before extraordinary
item (31) 47 22 10
Extraordinary loss on early
extinguishment of debt (68) -- (68) --
Net (loss) income $ (99) $ 47 $ (46) $ 10
Net (loss) income allocated to
general partner (1%) $ (1) $ -- $ -- $ --
Net (loss) income allocated to
limited partners (99%) (98) 47 (46) 10
$ (99) $ 47 $ (46) $ 10
Per limited partnership unit:
(Loss) income before extraordinary
item $ (0.51) $ 0.78 $ 0.35 $ 0.17
Extraordinary loss on early
extinguishment of debt (1.11) -- (1.11) --
Net (loss) income $ (1.62) $ 0.78 $ (0.76) $ 0.17
Distributions per limited
partnership unit $ 26.65 $ 4.33 $ 45.19 $ 47.26
See Accompanying Notes to Financial Statements
c)
NATIONAL PROPERTY INVESTORS 7
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 60,517 $ 1 $30,259 $30,260
Partners' deficit at
December 31, 2000 60,517 $ (315) $ (898) $(1,213)
Distributions to partners -- (28) (2,735) (2,763)
Net loss for the nine months
ended September 30, 2001 -- -- (46) (46)
Partners' deficit at
September 30, 2001 60,517 $ (343) $(3,679) $(4,022)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (46) $ 10
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 1,536 1,481
Amortization of loan costs 74 70
Extraordinary loss on early extinguishment of debt 68 --
Change in accounts:
Receivables and deposits (376) (135)
Other assets (51) (30)
Accounts payable (26) (75)
Tenant security deposit liabilities 7 (3)
Accrued property taxes 221 206
Other liabilities 13 (28)
Net cash provided by operating activities 1,420 1,496
Cash flows from investing activities:
Property improvements and replacements (690) (822)
Net (deposits to) withdrawals from restricted escrows (5) 125
Net cash used in investing activities (695) (697)
Cash flows from financing activities:
Payments on mortgage note payable (72) (60)
Repayment of mortgage note payable (5,000) --
Proceeds from mortgage note payable 7,000 --
Loan costs paid (260) (16)
Distributions to partners (2,763) (2,889)
Net cash used in financing activities (1,095) (2,965)
Net decrease in cash and cash equivalents (370) (2,166)
Cash and cash equivalents at beginning of period 871 2,793
Cash and cash equivalents at end of period $ 501 $ 627
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,171 $ 1,145
See Accompanying Notes to Financial Statements
e)
NATIONAL PROPERTY INVESTORS 7
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 7
(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. (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
nine month periods ended September 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 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.
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 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 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 payments were made to the Managing General Partner and its
affiliates during the nine month periods ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $282 $272
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expenses) 428 193
Non-accountable reimbursement (included in general and
administrative expenses) 91 91
Partnership management fee (included in general and
administrative expenses) -- 40
During the nine months ended September 30, 2001 and 2000, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Partnership's properties as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$282,000 and $272,000 for the nine months ended September 30, 2001 and 2000,
respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $428,000 and
$193,000 for the nine months ended September 30, 2001 and 2000, respectively.
Included in the total is approximately $243,000 and $6,000 in construction
service reimbursements for the nine months ended September 30, 2001 and 2000,
respectively.
In addition, in connection with the refinancing of the mortgage loan encumbering
Northwoods I and II Apartments, the Partnership paid $70,000 in loan costs to an
affiliate during the nine months ended September 30, 2001. No such loan costs
were paid during the nine months ended September 30, 2000. These loan costs were
capitalized, are included in other assets and are amortized as interest expense
over the term of the loan.
For services relating to the administration of the Partnership and operation of
Partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year from
distributions from operations, based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $91,000 in reimbursements for both of the nine month periods ended
September 30, 2001 and 2000.
For managing the affairs of the Partnership, the Managing General Partner of the
Partnership is entitled to receive a partnership management fee. The fee is
equal to 4% of the Partnership's adjusted cash from operations, as defined in
the Partnership Agreement, in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited partners adjusted
cash from operations in such year which is equal to 5% of the limited partners'
adjusted invested capital, as defined, on a non-cumulative basis. In addition,
50% of the fee shall not be paid until the Partnership has distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners' adjusted invested capital on a non-cumulative basis.
The fee shall be paid when adjusted cash from operations is distributed to the
limited partners. The Managing General Partner was paid approximately $40,000
during the nine months ended September 30, 2000 for such fees. The Managing
General Partner was not entitled to receive a similar fee during the nine months
ended September 30, 2001.
The Managing General Partner has extended to the Partnership a line of credit of
up to $500,000. Loans under the line of credit will have a term of 365 days, are
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); (ii) the sale or
refinancing of a property by the Partnership; or (iii) the liquidation of the
Partnership. At the present time, the Partnership has no outstanding amounts due
under this line of credit.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 40,235.67 limited
partnership units in the Partnership representing 66.49% of the outstanding
units at September 30, 2001. A number of these units were acquired pursuant to
tender offers made by affiliates of the Managing General Partner, 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 voting on certain amendments to the Partnership Agreement and
voting to remove the Managing General Partner. As a result of its ownership of
66.49% of the outstanding units, AIMCO is in a position to influence all such
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, DeForest Ventures II L.P., from whom AIMCO,
through its merger with Insignia, acquired 25,399 Units (41.97% of the units),
had agreed for the benefit of non-tendering unit holders, that it would vote its
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 all other unit holders. Except
for the foregoing, no other limitations are imposed on AIMCO's or its
affiliates' right to vote each unit acquired.
Note C - Distributions
During the nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $2,763,000 (approximately $2,735,000 to the
limited partners or $45.19 per limited partnership unit) to its partners. The
distributions consisted of approximately $1,133,000 (approximately $1,122,000 to
the limited partners or $18.54 per limited partnership unit) of cash from
operations and approximately $1,630,000 (approximately $1,613,000 to the limited
partners or $26.65 per limited partnership unit) of cash from the refinancing
proceeds of Northwoods I and II Apartments in August 2001. During the nine
months ended September 30, 2000, the Partnership declared and paid distributions
of approximately $2,889,000 (approximately $2,860,000 to the limited partners or
$47.26 per limited partnership unit) consisting of approximately $2,004,000
(approximately $1,984,000 to the limited partners or $32.78 per limited
partnership unit) of cash from operations and approximately $885,000
(approximately $876,000 to the limited partners or $14.48 per limited
partnership unit) of cash from the refinancing proceeds of The Pines Apartments
and from refinancing proceeds in prior years.
Note D - Refinancing of Mortgage Notes Payable
On December 13, 1999, the Partnership refinanced the mortgage encumbering The
Pines Apartments. The refinancing replaced indebtedness of approximately
$3,406,000 with a new mortgage in the amount of $4,225,000. The interest rate on
the new mortgage is 7.97% as compared to 8.56% on the previous debt. The new
loan which matures on January 1, 2020 requires monthly principal and interest
payments and is scheduled to be fully amortized at maturity. Total capitalized
loan costs were approximately $88,000 during the year ended December 31, 1999.
Additional loan costs of approximately $16,000 and $7,000 were capitalized
during the nine months ended September 30, 2000 and 2001, respectively.
On August 31, 2001, the Partnership refinanced the mortgage encumbering
Northwoods I and II Apartments. The refinancing replaced indebtedness of
$5,000,000 with a new mortgage in the amount of $7,000,000. The interest rate on
the new mortgage is 7.06% as compared to 7.33% on the previous debt. The new
loan which matures on September 1, 2021 requires monthly principal and interest
payments and is scheduled to be fully amortized at maturity. Total capitalized
loan costs were approximately $253,000 at September 30, 2001. The Partnership
recognized an extraordinary loss on the early extinguishment of debt of
approximately $68,000 due to the write off of unamortized loan costs.
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. (the "Nuanes action") 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. On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Managing General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases 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 Registrant from time to time. The
discussion of the Registrant'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 Registrant'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 five apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine month periods ended September 30, 2001 and 2000:
Average Occupancy
2001 2000
Fairway View II Apartments 92% 93%
Baton Rouge, Louisiana
The Pines Apartments 95% 97%
Roanoke, Virginia
Patchen Place Apartments 88% 92%
Lexington, Kentucky
Northwoods I and II Apartments 94% 92%
Pensacola, Florida
South Point Apartments 94% 91%
Durham, North Carolina
The Managing General Partner attributes the decrease in occupancy at Patchen
Place Apartments to increased competition in the area of the property. The
Managing General Partner attributes the increase in occupancy at South Point
Apartments to increased marketing efforts and decreased home purchases.
Results of Operations
The Registrant's net loss for the nine months ended September 30, 2001 was
approximately $46,000 compared to net income of approximately $10,000 for the
nine months ended September 30, 2000. The Registrant's net loss for the three
months ended September 30, 2001 was approximately $99,000 as compared to net
income of approximately $47,000 for the three months ended September 30, 2000.
The decrease in net income for the nine months ended September 30, 2001 was due
to the extraordinary loss on the early extinguishment of the debt encumbering
Northwoods I and II Apartments and an increase in total expenses partially
offset by an increase in total revenues. The decrease in net income for the
three months ended September 30, 2001 was due to the extraordinary loss on the
early extinguishment of the debt encumbering Northwoods I and II Apartments, an
increase in total expenses, and a decrease in total revenues.
Total revenues increased for the nine months ended September 30, 2001 due to an
increase in rental income which was partially offset by a decrease in other
income. Total revenues decreased for the three months ended September 30, 2001
due to a decrease in other income which was partially offset by a slight
increase in rental income. Rental income increased for the three and nine months
ended September 30, 2001 primarily due to increased average rental rates at all
of the Partnership's investment properties and increased occupancy at Northwoods
I and II and South Point Apartments, which more than offset decreased occupancy
at Fairway View II, The Pines, and Patchen Place Apartments and increased
military discounts at South Point Apartments. In addition, concessions decreased
at South Point, Fairway View II, Patchen Place, and Northwoods I and II
Apartments. The decrease in other income was primarily due to a decrease in
interest income as a result of lower average cash balances in interest bearing
accounts held by the Partnership during 2001.
Total expenses increased for the nine months ended September 30, 2001 due to
increases in depreciation, interest, and operating expenses which were partially
offset by a decrease in general and administrative expenses. Total expenses
increased for the three months ended September 30, 2001 due to increases in
interest and operating expenses which were partially offset by a decrease in
general and administrative expenses. Depreciation expense increased for the nine
months ended September 30, 2001 due to property improvements and replacements
completed during the last twelve months. Interest expense increased for the
three and nine months ended September 30, 2001 due to the refinancing of
Northwoods I and II Apartments in August 2001 which replaced the existing debt
with a loan having a larger principal amount. Operating expenses increased for
the three and nine months ended September 30, 2001 primarily due to increased
natural gas bills at Patchen Place and The Pines Apartments and increased
insurance expense at all of the Partnership's properties. General and
administrative expenses decreased for the three and nine months ended September
30, 2001 primarily due to decreased fees paid to the Managing General Partner in
connection with the distributions from operations made during the nine months
ended September 30, 2001, reduced legal fees, and a decrease in the cost of
services included in the management reimbursements to the Managing General
Partner as allowed under the Partnership Agreement. The decreases were partially
offset by increased professional fees required to manage the Partnership. Also
included in general and administrative expenses at both September 30, 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.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each 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 Registrant 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.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $501,000 as compared to approximately $627,000 at September 30,
2000. Cash and cash equivalents decreased by approximately $370,000 from the
Partnership's year ended December 31, 2000 due to approximately $1,095,000 of
cash used in financing activities and approximately $695,000 of cash used in
investing activities, which more than offset approximately $1,420,000 of cash
provided by operating activities. Cash used in financing activities consisted of
payments of principal made on the mortgage encumbering The Pines Apartments, the
repayment of the mortgage encumbering Northwoods I and II Apartments, the
payment of loan costs, and distributions to partners which was partially offset
by the proceeds received from the refinancing of Northwoods I and II Apartments.
Cash used in investing activities consisted of property improvements and
replacements and deposits to escrow accounts maintained by the mortgage lender.
The Partnership invests its working capital reserves in interest bearing
accounts.
The Managing General Partner has extended to the Partnership a $500,000 line of
credit. 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 against the line of credit 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 Registrant and to comply with
Federal, state and local legal and regulatory requirements. Capital improvements
for each of the Registrant's properties are detailed below.
Fairway View II
During the nine months ended September 30, 2001, the Partnership completed
approximately $148,000 of budgeted and non-budgeted capital improvements at
Fairway View II, consisting primarily of carpet and vinyl replacements, plumbing
fixtures, air conditioning unit replacement, major landscaping, and structural
improvements. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the property for the current year and, as a result budgeted approximately
$90,000 for capital improvements, consisting primarily of air conditioning unit
replacement, appliances, carpet replacements, and swimming pool upgrades.
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 Pines
During the nine months ended September 30, 2001, the Partnership completed
approximately $191,000 of capital improvements at The Pines, consisting
primarily of carpet and vinyl replacements, plumbing upgrades, appliances,
swimming pool upgrades and cabinet upgrades. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has evaluated the
capital improvement needs of the property for the current year and, as a result
budgeted approximately $263,000 for capital improvements, consisting primarily
of cabinet upgrades, air conditioning unit replacement, interior decoration,
appliances, and carpet and vinyl replacement. 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.
Patchen Place
During the nine months ended September 30, 2001, the Partnership completed
approximately $108,000 of capital improvements at Patchen Place, consisting
primarily of carpet replacements, office computers, air conditioning unit
replacement, plumbing upgrades, structural improvements, and water heater
replacements. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the property for the current year and, as a result budgeted approximately
$211,000 for capital improvements, consisting primarily of carpet and vinyl
replacements, appliances, and water conservation improvements. 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.
Northwoods I and II
During the nine months ended September 30, 2001, the Partnership completed
approximately $179,000 of capital improvements at Northwoods I & II, consisting
primarily of carpet and vinyl replacements, air conditioning unit replacement,
plumbing fixtures, appliances and structural improvements. These improvements
were funded from Partnership reserves and operating cash flow. The Partnership
has evaluated the capital improvement needs of the property for the current year
and, as a result budgeted approximately $275,000 for capital improvements,
consisting primarily of air conditioning unit replacement, countertop
replacements, carpet, vinyl, and tile replacements, exterior painting,
appliances, lighting improvements, wall coverings, and water submetering.
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.
South Point
During the nine months ended September 30, 2001, the Partnership completed
approximately $64,000 of capital improvements at South Point, consisting
primarily of carpet replacements, appliances and air conditioning unit
replacements. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the property for the current year and, as a result budgeted approximately
$79,000 consisting primarily of cabinet upgrades and carpet 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 improvements 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 August 31, 2001, the Partnership refinanced the mortgage encumbering
Northwoods I and II Apartments. The refinancing replaced indebtedness of
$5,000,000 with a new mortgage in the amount of $7,000,000. The interest rate on
the new mortgage is 7.06% as compared to 7.33% on the previous debt. The new
loan which matures on September 1, 2021 requires monthly principal and interest
payments and is scheduled to be fully amortized at maturity. Total capitalized
loan costs were approximately $253,000 at September 30, 2001. The Partnership
recognized an extraordinary loss on the early extinguishment of debt of
approximately $68,000 due to the write-off of unamortized loan costs.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $4,071,000 encumbering The Pines and $7,000,000
encumbering Northwoods I and II are scheduled to be fully amortized over 20
years. The mortgage indebtedness of $11,800,000 encumbering the remaining
properties requires interest only payments with balloon payments due November 1,
2003. 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 Registrant may risk
losing such properties through foreclosure.
During the nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $2,763,000 (approximately $2,735,000 to the
limited partners or $45.19 per limited partnership unit) to its partners. The
distributions consisted of approximately $1,133,000 (approximately $1,122,000 to
the limited partners or $18.54 per limited partnership unit) of cash from
operations and approximately $1,630,000 (approximately $1,613,000 to the limited
partners or $26.65 per limited partnership unit) of cash from the refinancing
proceeds of Northwoods I and II Apartments in August 2001. During the nine
months ended September 30, 2000, the Partnership declared and paid distributions
of approximately $2,889,000 (approximately $2,860,000 to the limited partners or
$47.26 per limited partnership unit) consisting of approximately $2,004,000
(approximately $1,984,000 to the limited partners or $32.78 per limited
partnership unit) of cash from operations and approximately $885,000
(approximately $876,000 to the limited partners or $14.48 per limited
partnership unit) of cash from the refinancing proceeds of The Pines Apartments
and from refinancing proceeds in prior years. 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. The Partnership's distribution policy is reviewed on a monthly basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations after required capital expenditures, to permit
any additional 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 currently own 40,235.67 limited
partnership units in the Partnership representing 66.49% of the outstanding
units at September 30, 2001. A number of these units were acquired pursuant to
tender offers made by affiliates of the Managing General Partner, 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 voting on certain amendments to the Partnership Agreement and
voting to remove the Managing General Partner. As a result of its ownership of
66.49% of the outstanding units, AIMCO is in a position to influence all such
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, DeForest Ventures II L.P., from whom AIMCO,
through its merger with Insignia, acquired 25,399 Units (41.97% of the units),
had agreed for the benefit of non-tendering unit holders, that it would vote its
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 all other unit holders. Except
for the foregoing, no other limitations are imposed on AIMCO's or its affiliates
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. (the "Nuanes action") 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. On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Managing General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases will be material to the
Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.11, Multifamily Note dated August 31, 2001, by and
between National Property Investors 7, a California Limited
Partnership, and GMAC Commercial Mortgage Corporation, a
California Corporation.
b) Reports on Form 8-K filed during the quarter ended September
30, 2001:
None.
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 7
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:
EXHIBIT C
FHLMC Loan No. 002692805
Northwoods Apartments
MULTIFAMILY NOTE
(MULTISTATE - REVISION DATE 11-01-2000)
US $7,000,000.00 As of August 30, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Seven Million and
00/100 Dollars (US $7,000,000.00), with interest on the unpaid principal balance
at the annual rate of Seven and Sixty Thousandths percent (7.060%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, and any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of Fifty Four Thousand Five Hundred Twenty Three and 32/100 Dollars (US
$54,523.32), shall be payable on the first day of each month beginning on
October 1, 2001, until the entire unpaid principal balance evidenced by this
Note is fully paid.
(c) Any accrued interest remaining past due for 30 days or more may, at Lender's
discretion, be added to and become part of the unpaid principal balance and
shall bear interest at the rate or rates specified in this Note, and any
reference below to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on September 1, 2021 or on any earlier date on
which the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "Maturity Date"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
(d) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
amount (unless applicable law requires a lesser amount be charged, in which
event such lesser amount shall be substituted). Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the loan evidenced by this Note (the "Loan"), and
that it is extremely difficult and impractical to determine those additional
expenses. Borrower agrees that the late charge payable pursuant to this
Paragraph represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses
Lender will incur by reason of such late payment. The late charge is payable in
addition to, and not in lieu of, any interest payable at the Default Rate
pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for thirty (30) days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of four (4) percentage points
above the rate stated in the first paragraph of this Note and the maximum
interest rate which may be collected from Borrower under applicable law. If the
unpaid principal balance and all accrued interest are not paid in full on the
Maturity Date, the unpaid principal balance and all accrued interest shall bear
interest from the Maturity Date at the Default Rate. Borrower also acknowledges
that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan, that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30)
days, Lender will incur additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other obligations and to take advantage of other investment opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses. Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30) days
or any other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk. Borrower agrees that the increase in the
rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable law, in any action to enforce Borrower's personal liability under
this Paragraph 9, Borrower waives any right to set off the value of the
Mortgaged Property against such personal liability.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment (any
receipt by Lender of principal, other than principal required to be paid in
monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity
Date set forth in Paragraph 3(c)) under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on a Business Day designated as the date for such prepayment in a written
notice from Borrower to Lender given at least 30 days prior to the date of such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Paragraph 10(c). For all purposes including the accrual of interest, any
prepayment received by Lender on any day other than the last calendar day of the
month shall be deemed to have been received on the last calendar day of such
month. For purposes of this Note, a "Business Day" means any day other than a
Saturday, Sunday or any other day on which Lender is not open for business.
Unless expressly provided for in the Loan Documents, Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
However, if a partial prepayment is provided for in the Loan Documents or is
accepted by Lender in Lender's discretion, a prepayment premium calculated
pursuant to Paragraph 10(c) shall be due and payable by Borrower.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Paragraph 10(c).
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made during the period from
one hundred eighty (180) days before the scheduled Maturity Date to the
scheduled Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Any prepayment premium payable under this Note shall be computed as follows:
(1) If the prepayment is made between the date of this Note and the
date that is 180 months after the first day of the first calendar month
following the date of this Note (the "Yield Maintenance Period"), the prepayment
premium shall be whichever is the greater of subparagraphs (i) and (ii) below:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the
Assumed Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
this Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by
Lender of collateral or security to a portion of the principal
balance, the date of such application; and in any other case, the
date on which Lender accelerates the unpaid principal balance of
this Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
9.250% U.S. Treasury Security due February 1, 2016, as reported in
The Wall Street Journal, expressed as a decimal calculated to five
digits. In the event that no yield is published on the applicable
date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the
publication of such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine
the Assumed Reinvestment Rate. The selection of an alternate
security pursuant to this Paragraph shall be made in Lender's
discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(2) If the prepayment is made after the expiration of the Yield
Maintenance Period but before the period set forth in Paragraph 10(b)(A) above,
the prepayment premium shall be 1.0% of the unpaid principal balance of this
Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth in this Note represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. To the fullest extent allowed by applicable law,
Borrower shall pay all expenses and costs, including fees and out-of-pocket
expenses of attorneys (including Lender's in-house attorneys) and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. Neither this Note nor any of the other Loan Documents shall be
construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate greater than the maximum interest rate
permitted to be charged under applicable law. If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge
provided for in any Loan Document, whether considered separately or together
with other charges provided for in any other Loan Document, violates that law,
and Borrower is entitled to the benefit of that law, that interest or charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the unpaid principal balance of this Note. For the
purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness that constitutes interest, as well as all other
charges made in connection with the Indebtedness that constitute interest, shall
be deemed to be allocated and spread ratably over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family, household or agricultural
purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices; Written Modifications. All notices, demands and other
communications required or permitted to be given by Lender to Borrower pursuant
to this Note shall be given in accordance with Section 31 of the Security
Instrument. Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, that in the event of a Transfer
under the terms of the Security Instrument, any or some or all of the
Modifications to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Note:
-----
X Exhibit A Modifications to Multifamily Note
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IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
NATIONAL PROPERTY INVESTORS 7, LTD., a
California limited partnership
By: NPI Equity Investments, Inc., a Florida
corporation, its general partner
By: ___________________
Patti K. Fielding
Senior Vice President
95-4106139
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS ____ DAY OF AUGUST, 2001.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Robert D. Falese, III
Vice President
EXHIBIT A
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
3. Paragraph 19 is modified by deleting: "; provided, however, that in the
event of a Transfer under the terms of the Security Instrument, any or
some or all of the Modifications to Multifamily Note may be modified or
rendered void by Lender at Lender's option by notice to
Borrower/transferee" in the last sentence of the Paragraph; and by adding
the following new sentence:
The Modifications to Multifamily Note set forth in this Exhibit A
shall be null and void unless title to the Mortgaged Property is
vested in an entity whose Controlling Interest(s) are directly or
indirectly held by AIMCO REIT or AIMCO OP. The capitalized terms
used in this paragraph are defined in the Security Instrument.