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 0-11095
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)
September 30, 2001
Assets
Cash and cash equivalents $ 140
Receivables and deposits 177
Restricted escrows 47
Other assets 461
Investment properties:
Land $ 2,145
Buildings and related personal property 29,854
31,999
Less accumulated depreciation (25,285) 6,714
$ 7,539
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 383
Tenant security deposit liabilities 97
Accrued property taxes 210
Due to Managing General Partner and affiliates 571
Other liabilities 224
Mortgage notes payable 15,068
Partners' Deficit
General partner $ (1,389)
Limited partners (82,513 units
issued and outstanding) (7,625) (9,014)
$ 7,539
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
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 $ 1,056 $ 1,135 $ 3,239 $ 3,513
Other income 101 99 301 290
Total revenues 1,157 1,234 3,540 3,803
Expenses:
Operating 735 536 1,856 1,711
Interest 317 257 921 831
Depreciation 273 352 977 1,036
General and administrative 73 119 240 291
Property taxes 73 57 198 186
Total expenses 1,471 1,321 4,192 4,055
Net loss $ (314) $ (87) $ (652) $ (252)
Net loss allocated to general
partner (3%) $ (9) $ (3) $ (20) $ (8)
Net loss allocated to limited
partners (97%) (305) (84) (632) (244)
$ (314) $ (87) $ (652) $ (252)
Net loss per limited partnership unit $ (3.70) $ (1.02) $ (7.66) $ (2.96)
Distributions per limited partnership
unit $ -- $ -- $ 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 nine months
ended September 30, 2001 -- (20) (632) (652)
Partners' deficit at
September 30, 2001 82,513 $(1,389) $(7,625) $(9,014)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net loss $ (652) $ (252)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 977 1,036
Amortization of loan costs 30 35
Change in accounts:
Receivables and deposits (5) (23)
Other assets (85) (33)
Accounts payable 110 (23)
Tenant security deposit liabilities (25) 2
Accrued property taxes 198 144
Due to Managing General Partner and affiliates 5 --
Other liabilities (15) 2
Net cash provided by operating activities 538 888
Cash flows from investing activities:
Property improvements and replacements (890) (498)
Net withdrawals from (deposits to) restricted escrows 26 (16)
Net cash used in investing activities (864) (514)
Cash flows from financing activities:
Payments of mortgage notes payable (271) (192)
Proceeds from mortgage note payable 7,000 --
Repayment of mortgage note payable (3,825) --
Advances from affiliate 423 --
Principal payments on advances from affiliate (147) --
Loan costs paid (200) (25)
Distributions to partners (3,327) (1,624)
Net cash used in investing activities (347) (1,841)
Net decrease in cash and cash equivalents (673) (1,467)
Cash and cash equivalents at beginning of period 813 2,016
Cash and cash equivalents at end of period $ 140 $ 549
Supplemental disclosure of cash flow information:
Cash paid for interest $ 868 $ 797
Supplemental disclosures of non-cash activity:
Property improvements and replacements in accounts payable $ 29 $ --
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 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 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 nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $185 $193
Reimbursement for services of affiliates (included in
operating and general and administrative expenses,
and investment properties) 358 179
Non-accountable general partner reimbursement (included in
general and administrative expenses) 20 51
Loan costs (included in other assets) 70 --
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 Registrant's properties for providing property management services. The
Partnership paid to such affiliates approximately $185,000 and $193,000 for the
nine months ended September 30, 2001 and 2000, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $358,000 and $179,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
amounts are approximately $191,000 and $9,000, respectively, of construction
oversight costs.
In connection with the February 2001 refinancing of Oakwood Village at Lake Nan
Apartments, the Partnership paid approximately $70,000 to an affiliate of the
Managing General Partner as allowed pursuant to the Partnership Agreement. This
amount is recorded as loan costs and included in other assets on the
accompanying balance sheet.
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 nine months ended September 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 September 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 September 30,
2001, the Partnership had borrowed approximately $281,000 under this Partnership
Revolver which includes accrued interest of approximately $6,000. During the
nine months ended September 30, 2001, interest of approximately $9,000 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 September 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 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 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, 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 at Lake Nan Apartments. The refinancing replaced indebtedness of
approximately $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, at which time it will be fully amortized. 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 during
the fourth quarter 2000, and approximately $200,000 were incurred during the
nine months ended September 30, 2001. These costs are included in other assets
and are being amortized over the life of the loan. An affiliate of AIMCO has
been designated as guarantor of the mortgage.
Note D - Distributions
During the nine months ended September 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
nine months ended September 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 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 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. (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 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
nine months ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Willow Park on Lake Adelaide 94% 96%
Altamonte Springs, Florida
Oakwood Village at Lake Nan Apartments 94% 95%
Winter Park, Florida
Palisades Apartments (1) 80% 92%
Montgomery, Alabama
(1) The Managing General Partner attributes the decrease in occupancy at the
Palisade Apartments to numerous evictions in the current nine-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 nine months ended September 30, 2001, was
approximately $652,000 as compared to a net loss of approximately $252,000 for
the nine months ended September 30, 2000. The Partnership's net loss for the
three months ended September 30, 2001 was approximately $314,000 compared to a
net loss of approximately $87,000 for the three months ended September 30, 2000.
The increase in net loss for the three and nine months ended September 30, 2001
is due to a decrease in total revenues and an increase in total expenses. The
decrease in total revenues is due to a decrease in rental income as a result of
decreases in occupancy at all the Partnership's investment properties as
discussed above.
Total expenses for the three and nine months ended September 30, 2001 increased
due to increases in operating, interest and property tax expenses partially
offset by decreases in general and administrative expense and depreciation
expense. Operating expense increased due to increases in property and insurance
expenses partially offset by decreases in maintenance expense. Property expense
increased due to vacant units' electricity primarily at Palisades Apartments
resulting from the decrease in occupancy. Also contributing to the increase in
property expense was an increase in employee related expense at all of the
Partnership's properties. Insurance expense increased due to increased insurance
premiums at all of the Partnership's properties. Property tax expense increased
due to the timing of the receipt of the property tax invoices which affected the
timing of the accrual. Maintenance expense decreased primarily due to management
electing to perform minor repairs, 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. Interest
expense increased primarily due to the refinancing of the mortgage encumbering
Oakwood Village resulting in a higher debt balance, as discussed below. The
decrease in depreciation is the result of some fixed assets becoming fully
depreciated at the Palisades Apartments.
General and administrative expense decreased primarily due to decreases in
non-accountable reimbursements and legal expense for the three and nine months
ended September 30, 2001. Included in general and administrative expenses at
both September 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 September 30, 2001, the Partnership had cash and cash equivalents of
approximately $140,000 as compared to approximately $549,000 at September 30,
2000. For the nine months ended September 30, 2001, cash and cash equivalents
decreased by approximately $673,000 from the Partnership's year ended December
31, 2000. The decrease in cash and cash equivalents is due to approximately
$864,000 of cash used in investing activities and approximately $347,000 of cash
used in financing activities partially offset by approximately $538,000 of cash
provided by operating activities. Cash used in investing activities consisted of
property improvements and replacements partially offset by net withdrawals from
restricted escrows maintained by the mortgage lenders. Cash used in financing
activities consisted of principal payments made on the mortgages encumbering the
Partnership's properties, 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 and loans from the Managing General Partner (see discussion below).
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 September 30,
2001, the Partnership had borrowed approximately $281,000 under this Partnership
Revolver which includes accrued interest of approximately $6,000. During the
nine months ended September 30, 2001, interest of approximately $9,000 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 nine months ended September 30, 2001, the Partnership completed
approximately $165,000 of budgeted and non-budgeted capital improvements at
Willow Park, consisting primarily of floor covering replacements, structural and
other building improvements and appliance replacements. These improvements were
funded through operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $122,000 for the year 2001 at
this property which consist primarily of floor covering replacements.
Oakwood Village at Lake Nan Apartments
During the nine months ended September 30, 2001, the Partnership completed
approximately $134,000 of budgeted capital improvements at Oakwood Village
consisting primarily of floor covering replacements, appliance replacements, air
conditioning unit replacements, plumbing enhancements 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 $148,000 for the year 2001 at this property which consist
primarily of floor covering replacements and building improvements.
Palisades Apartments
During the nine months ended September 30, 2001, the Partnership completed
approximately $620,000 of budgeted capital improvements at Palisades Apartments,
consisting of structural improvements, floor covering replacements, interior
decoration, appliance replacements, roof replacements and plumbing upgrades.
These improvements were funded through operating cash flow and replacement
reserves. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $1,243,000 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 $15,068,000 is being amortized over varying
periods with a balloon payment of approximately $3,996,000 due July 1, 2003 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.
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
approximately $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 $25,000 were paid during the nine
month period ended September 30, 2000. These loan costs are included in other
assets and are being amortized over the life of the loan.
On February 14, 2001, the Partnership refinanced the mortgage encumbering
Oakwood Village. The refinancing replaced indebtedness of approximately
$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, at which time it will be fully amortized. 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 during
the fourth quarter 2000, and approximately $200,000 were incurred during the
nine months ended September 30, 2001. These costs are included in other assets
and are being amortized over the life of the loan. An affiliate of AIMCO has
been designated as guarantor of the mortgage.
During the nine months ended September 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
nine months ended September 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 September 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 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 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, 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. (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:
None.
b) Reports on Form 8-K:
None filed during the quarter ended September 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: