FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11095
NATIONAL PROPERTY INVESTORS 5
(Exact name of small business issuer as specified in its charter)
California 22-2385051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
NATIONAL PROPERTY INVESTORS 5
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2002
Assets
Cash and cash equivalents $ 242
Receivables and deposits, net of $98 of
allowance for doubtful accounts 216
Restricted escrows 37
Other assets 443
Investment properties:
Land $ 2,145
Buildings and related personal property 30,193
32,338
Less accumulated depreciation (25,850) 6,488
$ 7,426
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 304
Tenant security deposit liabilities 88
Accrued property taxes 76
Due to Managing General Partner 1,330
Other liabilities 316
Mortgage notes payable 14,857
Partners' Deficit
General partner $ (1,405)
Limited partners (82,513 units
issued and outstanding) (8,140) (9,545)
$ 7,426
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $ 991 $ 1,085
Other income 130 104
Total revenues 1,121 1,189
Expenses:
Operating 687 533
General and administrative 87 94
Depreciation 284 364
Interest 315 290
Property taxes 68 63
Total expenses 1,441 1,344
Net loss $ (320) $ (155)
Net loss allocated to general partner (3%) $ (10) $ (5)
Net loss allocated to limited partners (97%) (310) (150)
$ (320) $ (155)
Net loss per limited partnership unit $ (3.76) $ (1.82)
Distributions per limited partnership unit $ -- $ 37.42
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, 2001 82,513 $(1,395) $(7,830) $(9,225)
Net loss for the three months
ended March 31, 2002 -- (10) (310) (320)
Partners' deficit at
March 31, 2002 82,513 $(1,405) $(8,140) $(9,545)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net loss $ (320) $ (155)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 284 364
Amortization of loan costs 9 10
Change in accounts:
Receivables and deposits (23) (72)
Other assets (49) (54)
Accounts payable 68 (3)
Due to Managing General Partner 12 --
Tenant security deposit liabilities (7) (11)
Accrued property taxes 29 62
Other liabilities (85) (4)
Net cash (used in) provided by operating activities (82) 137
Cash flows from investing activities:
Property improvements and replacements (251) (254)
Net withdrawals from restricted escrows 7 52
Net cash used in investing activities (244) (202)
Cash flows from financing activities:
Payments of mortgage notes payable (107) (68)
Advances from affiliates 432 --
Principal payments on advances from affiliates (38) --
Proceeds from mortgage note payable -- 7,000
Repayment of mortgage note payable -- (3,825)
Loan costs paid -- (186)
Distributions to partners -- (3,154)
Net cash provided by (used in) financing activities 287 (233)
Net decrease in cash and cash equivalents (39) (298)
Cash and cash equivalents at beginning of period 281 813
Cash and cash equivalents at end of period $ 242 $ 515
Supplemental disclosure of cash flow information:
Cash paid for interest $ 296 $ 265
See Accompanying Notes to Financial Statements
e)
NATIONAL PROPERTY INVESTORS 5
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 5
(the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing
General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2002. 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, 2001. The Managing General Partner is a
subsidiary 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.
During the three months ended March 31, 2002 and 2001, 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 $51,000 and $62,000 for the
three months ended March 31, 2002 and 2001, respectively, which is included in
operating expenses.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $73,000 and $60,000 for the
three months ended March 31, 2002 and 2001, respectively, which is included in
operating and general and administrative expenses, and investment properties. As
of March 31, 2002 the Partnership owed approximately $2,000 of accrued
accountable administrative expenses to an affiliate of the Managing General
Partner.
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 number of Partnership units sold, subject to certain limitations. No
such reimbursements were earned during the three months ended March 31, 2002.
The Managing General Partner earned and received approximately $20,000 during
the three months ended March 31, 2001, which is included in general and
administrative expense.
Beginning in 2001, the Partnership began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the three months ended
March 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates
approximately $108,000 and $125,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Upon the sale of the Partnership's properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized by
NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership at February 1,
1992. As of March 31, 2002, 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. During the latter
part of 2001, the Managing General Partner agreed to advance funds in excess of
the revolving credit facility. These additional funds were needed to fund
operating expenses of two of the investment properties. During the three months
ended March 31, 2002, the Managing General Partner advanced an additional amount
of approximately $432,000 to the Partnership. The Partnership repaid
approximately $38,000 during the same period. The Managing General Partner had
not made any advances as of March 31, 2001. At March 31, 2002, the Partnership
has a balance of approximately $1,038,000 under this Partnership Revolver which
includes accrued interest of approximately $25,000. During the three months
ended March 31, 2002, interest of approximately $12,000 is included in interest
expense.
Note C - 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 Managing 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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
three months ended March 31, 2002 and 2001:
Average Occupancy
Property 2002 2001
Willow Park on Lake Adelaide 92% 93%
Altamonte Springs, Florida
Oakwood Village at Lake Nan Apartments 91% 94%
Winter Park, Florida
Palisades Apartments 76% 77%
Montgomery, Alabama
The Managing General Partner attributes the decrease in occupancy at
Oakwood Village Apartments to increased competition in the local market in
the Winter Park area.
The Partnership is making capital improvements at Palisades Apartments to
improve its curb appeal in an attempt to increase occupancy.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2002, was
approximately $320,000 as compared to a net loss of approximately $155,000 for
the three months ended March 31, 2001. The increase in net loss for the three
months ended March 31, 2002 is due to a decrease in total revenues and an
increase in total expenses. The decrease in total revenues is due primarily to a
decrease in rental income which was partially offset by an increase in other
income. Rental income decreased due to a decrease in occupancy at Oakwood
Village Apartments and an increase in delinquent tenant accounts at Palisades
Apartments. Other income increased due to an increase in utilities
reimbursements and lease cancellation fees at Oakwood Village Apartments and
laundry income and late charges at Willow Park Apartments and Palisades
Apartments partially offset by a decrease in interest income resulting from a
decrease in average cash balances maintained in interest bearing accounts at the
Partnership and Oakwood Village Apartments.
The increase in total expenses is due to an increase in operating and interest
expenses partially offset by a decrease in depreciation expense. Operating
expense increased due to an increase in maintenance expense and insurance
expense partially offset by a decrease in property expense. Maintenance expense
increased due to an increase in floor covering repairs, the purchase of
maintenance materials, roof repairs and contract interior painting at Palisades
Apartments partially offset by a decrease in interior building improvements,
landscaping supplies, contract repairs, interior painting and contract yard
maintenance at Oakwood Village Apartments. Insurance expense increased due to an
increase in insurance premiums at all of the Partnership's investment
properties. Interest expense increased due to the refinancing of the mortgage
encumbering Oakwood Village Apartments during the first quarter of 2001 as well
as interest on advances from the Managing General Partner. Depreciation expense
decreased due to some assets becoming fully depreciated at the Palisades
Apartments.
General and administrative expense remained relatively constant for the three
months ended March 31, 2002 and 2001, respectively. Included in general and
administrative expenses for the three months ended March 31, 2002 and 2001, are
management reimbursements to the Managing General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of this
plan, the Managing General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Capital Resources and Liquidity
At March 31, 2002, the Partnership had cash and cash equivalents of
approximately $242,000 as compared to approximately $515,000 at March 31, 2001.
For the three months ended March 31, 2002, cash and cash equivalents decreased
by approximately $39,000 from the Partnership's year ended December 31, 2001.
The decrease in cash and cash equivalents is due to approximately $244,000 of
cash used in investing activities and approximately $82,000 of cash used in
operating activities partially offset by approximately $287,000 of cash provided
by financing 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 provided by
financing activities consisted of advances made by the Managing General Partner
partially offset by principal payments made on the mortgages encumbering the
Partnership's properties and principal payments on advances from the Managing
General Partner. 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. During the latter
part of 2001, the Managing General Partner agreed to advance funds in excess of
the revolving credit facility. These additional funds were needed to fund
operating expenses of two of the investment properties. During the three months
ended March 31, 2002, the Managing General Partner advanced an additional amount
of approximately $432,000 to the Partnership. The Partnership repaid
approximately $38,000 during the same period. The Managing General Partner had
not made any advances as of March 31, 2001. At March 31, 2002, the Partnership
has a balance of approximately $1,038,000 under this Partnership Revolver which
includes accrued interest of approximately $25,000. During the three months
ended March 31, 2002, interest of approximately $12,000 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 three months ended March 31, 2002, the Partnership completed
approximately $21,000 of capital improvements at Willow Park, consisting
primarily of office computers and appliance and floor covering replacements.
These improvements were funded through operating cash flow. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $64,000
for the year 2002 at this property which consist primarily of air conditioning
unit replacements, major landscaping, structural improvements and appliance and
floor covering replacements.
Oakwood Village at Lake Nan Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $27,000 of capital improvements at Oakwood Village consisting
primarily of office computers, plumbing improvements and appliance and floor
covering replacements. These improvements were funded through operating cash
flow. The Partnership has budgeted, but is not limited to, capital improvements
of approximately $91,000 for the year 2002 at this property which consist
primarily of air conditioning unit replacements, plumbing improvements,
structural improvements and appliance and floor covering replacements.
Palisades Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $203,000 of capital improvements at Palisades Apartments,
consisting of office computers, pool improvements, roof replacements, structural
improvements and appliance and floor covering replacements. These improvements
were funded through operating cash flow and replacement reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $621,000 for the year 2002 at this property which consist
primarily of gutter replacement, exterior painting, park lot improvements, roof
replacements, structural improvements and appliance 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 $14,857,000 is being amortized over varying
periods with a balloon payment due at maturity for the Palisades Apartments. The
Managing General Partner will attempt to refinance such indebtedness and/or sell
the properties prior to such maturity dates. If the properties cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure.
On February 14, 2001, the Partnership refinanced the mortgage encumbering
Oakwood Village. The refinancing replaced indebtedness of $3,825,000 with a new
mortgage in the amount of $7,000,000. The mortgage was refinanced at a rate of
7.18% compared to the prior rate of 8.56% and matures on March 1, 2021. Payments
of approximately $55,000 are due on the first day of each month until the loan
matures. Capitalized loan costs of approximately $24,000 were incurred during
the fourth quarter 2000 and approximately $200,000 were incurred during the year
ended December 31, 2001. These costs are included in other assets and are being
amortized over the life of the loan.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2005. Accordingly, prior to such date the Partnership
will need to either sell its investment properties or extend the term of the
Partnership. If the Partnership is unable to extend its term, the ultimate sale
price of the investment properties may be adversely affected.
The Partnership distributed the following amounts during the three months ended
March 31, 2002 and 2001 (in thousands except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2002 Unit March 31, 2001 Unit
Operations $ -- $ -- $ 296 $ 3.48
Refinancing (1) -- -- 2,858 33.94
$ -- $ -- $3,154 $37.42
(1) From the refinancing of Oakwood Village Apartments.
The Partnership's cash available for distribution 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 distributions to its partners
during the remainder of 2002 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 51,268 limited partnership units in
the Partnership representing 62.13% of the outstanding units at March 31, 2002.
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
62.13% 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 Managing 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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 March 31, 2002.
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: May 13, 2002