UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS III
(Exact name of small business issuer as specified in its charter)
California 13-2974428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (i) 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
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2004
Assets
Cash and cash equivalents $ 633
Receivables and deposits 322
Other assets 848
Investment properties:
Land $ 2,592
Buildings and related personal property 29,593
32,185
Less accumulated depreciation (25,561) 6,624
$ 8,427
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 220
Tenant security deposit liabilities 202
Accrued property taxes 727
Other liabilities 341
Mortgage notes payable 27,439
Partners' Deficit
General partner $ (204)
Limited partners (48,049 units
issued and outstanding) (20,298) (20,502)
$ 8,427
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Restated) (Restated)
Revenues:
Rental income $ 1,396 $ 1,497 $ 2,788 $ 2,886
Other income 203 144 382 308
Total revenues 1,599 1,641 3,170 3,194
Expenses:
Operating 731 660 1,390 1,362
General and administrative 54 60 123 153
Depreciation 290 338 577 671
Interest 503 518 1,012 1,040
Property taxes 186 208 375 385
Total expenses 1,764 1,784 3,477 3,611
Loss from continuing operations (165) (143) (307) (417)
Income (loss) from discontinued
operations -- 75 (802) 183
Gain on sale of discontinued
operations (Note C) 68 -- 12,012 --
Net (loss) income $ (97) $ (68) $10,903 $ (234)
Net (loss) income allocated
to general partner (1%) $ (1) $ (1) $ 109 $ (2)
Net (loss) income allocated
to limited partners (99%) (96) (67) 10,794 (232)
$ (97) $ (68) $10,903 $ (234)
Per limited partnership unit:
Loss from continuing operations $ (3.40) $ (2.96) $ (6.33) $ (8.60)
Income (loss) from discontinued
operations -- 1.54 (16.52) 3.77
Gain on sale of discontinued
operations 1.41 -- 247.50 --
$ (1.99) $ (1.42) $224.65 $ (4.83)
Distributions per limited
partnership unit $ -- $ -- $169.79 $ 3.41
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 48,049 $ 1 $ 24,024 $ 24,025
Partners' deficit at
December 31, 2003 48,049 $ (304) $(22,934) $(23,238)
Net income for the six months
ended June 30, 2004 -- 109 10,794 10,903
Distributions to partners -- (9) (8,158) (8,167)
Partners' deficit at
June 30, 2004 48,049 $ (204) $(20,298) $(20,502)
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income (loss) $10,903 $ (234)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 577 928
Bad debt 72 129
Gain on sale of investment property (12,012) --
Loss on early extinguishment of debt 715 --
Amortization of loan costs 22 30
Change in accounts:
Receivables and deposits 62 (277)
Other assets (52) (76)
Accounts payable 49 (45)
Tenant security deposit liabilities (64) 43
Accrued property taxes (23) 124
Due to affiliates (2) --
Other liabilities 87 94
Net cash provided by operating activities 334 716
Cash flows from investing activities:
Property improvements and replacements (231) (401)
Net withdrawals from restricted escrows 14 69
Net proceeds from sale of investment property 13,589 --
Net cash provided by (used in) investing activities 13,372 (332)
Cash flows from financing activities:
Payments on mortgage notes payable (351) (394)
Repayment of mortgage note payable (4,642) 82
Payments on advances from affiliate (108) (82)
Distributions to partners (8,167) (166)
Net cash used in financing activities (13,268) (560)
Net increase (decrease) in cash and cash equivalents 438 (176)
Cash and cash equivalents at beginning of period 195 520
Cash and cash equivalents at end of period $ 633 $ 344
Supplemental disclosure of cash flow information:
Cash paid for interest $ 914 $ 1,160
Supplemental disclosure of non-cash information:
Property improvements and replacements included in accounts
payable $ 25 $ --
At December 31, 2002, approximately $75,000 of property improvements and
replacements were included in accounts payable which are included in property
improvements and replacements during the six months ended June 30, 2003.
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of National
Property Investors III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of NPI Equity Investments, Inc. ("NPI
Equity" or the "Managing General Partner") all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six months ended June 30, 2004,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2004. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2003. The Managing General Partner is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
The accompanying consolidated statements of operations for the three and six
months ended June 30, 2003 have been restated as of January 1, 2003 to reflect
the operations of Summerwalk Apartments which sold on January 15, 2004, as
income (loss) from discontinued operations in accordance with Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets".
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.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from all of the Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $164,000 and $213,000 for the six months ended June 30, 2004 and
2003, respectively, which is included in operating expenses and (loss) income
from discontinued operations.
Affiliates of the Managing General Partner charged the Partnership reimbursement
of accountable administrative expenses amounting to approximately $98,000 and
$113,000 for the six months ended June 30, 2004 and 2003, respectively, which
are included in general and administrative expense and investment properties.
Included in these amounts are fees related to construction management services
provided by an affiliate of the Managing General Partner of approximately $5,000
and $12,000 for the six months ended June 30, 2004 and 2003, respectively. The
construction management service fees are calculated based on a percentage of
current year additions to investment properties. At June 30, 2004, approximately
$1,000 of reimbursements for services was accrued by the Partnership and is
included in other liabilities.
For services relating to the administration of the Partnership and operation of
the Partnership's properties, the Managing General Partner is entitled to
receive payment for non-accountable expenses up to a maximum of $100,000 per
year based upon the number of Partnership units sold, subject to certain
limitations. The Managing General Partner received approximately $14,000 during
the six months ended June 30, 2003, in connection with the operating
distributions paid to the partners. This fee is included in general and
administrative expenses. There were no such fees for the six months ended June
30, 2004, as no operating distributions were made.
Upon the sale of the Partnership 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. In connection with the January 2004 sale of Summerwalk Apartments, an
Incentive Compensation Fee of approximately $222,000 was earned and paid to the
Managing General Partner.
NPI Equity on behalf of the Partnership and certain affiliated partnerships, has
established a revolving credit facility (the "Partnership Revolver") to be used
to fund deferred maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in 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 prime rate plus 2% per
annum. The maturity date of any such borrowing accelerates in the event of: (i)
the removal of NPI Equity as the managing general partner (whether or not for
cause); (ii) the sale or refinancing of a property by the Partnership (whether
or not a borrowing under the Partnership Revolver was made with respect to such
property); or (iii) the liquidation of the Partnership. During the six months
ended June 30, 2004, the Partnership repaid approximately $108,000, representing
the outstanding principal balance which had been previously borrowed under the
Partnership Revolver and approximately $2,000 of accrued interest. Interest
expense during the six months ended June 30, 2004 and 2003, amounted to less
than $1,000. During the six months ended June 30, 2003, the Partnership borrowed
and repaid approximately $82,000 under the Partnership Revolver. No amounts were
borrowed at any time during the six months ended June 30, 2004.
The Partnership insures 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 six months ended June 30, 2004 and 2003,
the Partnership was charged by AIMCO and its affiliates approximately $50,000
and $104,000, respectively, for insurance coverage and fees associated with
policy claims administration.
Note C - Disposition of Investment Property
On January 15, 2004, the Partnership sold Summerwalk Apartments to an unrelated
third party, for a gross sale price of $14,825,000. The net proceeds realized by
the Partnership were approximately $13,589,000 after payment of closing costs of
approximately $596,000 and a prepayment penalty of approximately $640,000 owed
by the Partnership and paid by the buyer. The Partnership paid the Managing
General Partner an incentive compensation fee of approximately $222,000 upon the
sale, in accordance with the Partnership Agreement, which is included in closing
costs. The Partnership used approximately $4,642,000 of the net proceeds to
repay the mortgage encumbering the property. The Partnership realized a gain of
approximately $68,000 and $12,012,000 for the three and six months ended June
30, 2004, respectively, as a result of this sale and this amount is included in
gain on sale of discontinued operations in the accompanying consolidated
statements of operations. The additional gain of approximately $68,000
recognized during the three months ended June 30, 2004 is due to a reduction in
the estimated costs expected to be incurred related to the sale.
The property's operations, a loss of approximately $802,000 and income of
approximately $183,000 for the six months ended June 30, 2004 and 2003,
respectively, including revenues of approximately $51,000 and $1,170,000,
respectively, are included in loss and income from discontinued operations. The
property's operations, income of approximately $75,000 for the three months
ended June 30, 2003, is included in income from discontinued operations. In
addition, the Partnership recorded a loss on early extinguishment of debt of
approximately $715,000 for the six months ended June 30, 2004 due to the
write-off of approximately $75,000 of unamortized loan costs and the payment of
approximately $640,000 for a prepayment penalty relating to the repayment of the
mortgage encumbering the property, which is also included in loss from
discontinued operations in the accompanying consolidated statements of
operations.
Note D - Contingencies
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, 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 Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the Managing General Partner and its affiliates filed a response
brief in support of the settlement and the judgment thereto. Plaintiffs have
also filed a brief in support of the settlement. On June 4, 2004, Objector filed
a reply to the briefs submitted by the Managing General Partner and Plaintiffs.
No hearing has been scheduled in the matter.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The defendants have filed an answer to the amended complaint denying
the substantive allegations. Some discovery has taken place and settlement
negotiations continue. Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its financial condition or results of operations
taken as a whole. Similarly, the Managing General Partner does not believe that
the ultimate outcome will have a material adverse effect on the Partnership's
financial condition or results of operations taken as a whole.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission is conducting an investigation relating to
certain matters. AIMCO believes the areas of investigation include AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates, and
capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations taken as a whole.
Similarly, the Managing General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations taken as a whole.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's two assets consist of a 568 unit apartment complex known as
Lakeside Apartments located in Lisle, Illinois and a 220 unit apartment complex
known as Pinetree Apartments located in Charlotte, North Carolina. The following
table sets forth the average occupancy for each of the properties for both of
the six month periods ended June 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
Lakeside Apartments 89% 90%
Lisle, Illinois
Pinetree Apartments 96% 85%
Charlotte, North Carolina
The Managing General Partner attributes the increase in occupancy at Pinetree
Apartments to increased marketing efforts by the property's management team over
the past year.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the Managing General Partner monitors
the rental market environment of its investment properties to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
Managing General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, the Managing General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to sustain such a plan. Further, a number of factors which are
outside the control of the Partnership such as the local economic climate and
weather can adversely or positively impact the Partnership's financial results.
Results of Operations
The Partnership's net income for the six months ended June 30, 2004 was
approximately $10,903,000, as compared to a net loss of approximately $234,000
for the six months ended June 30, 2003. The Partnership's net loss for the three
months ended June 30, 2004 was approximately $97,000 as compared to a net loss
of approximately $68,000 for the three months ended June 30, 2003. The increase
in net income for the six months ended June 30, 2004 is due to the recognition
of a gain from the sale of Summerwalk Apartments during the six months ended
June 30, 2004 and a decrease in loss from continuing operations partially offset
by a decrease in income from discontinued operations. The increase in net loss
for the three months ended June 30, 2004 is due to an increase in the net loss
from continuing operations for this period. The accompanying consolidated
statements of operations for the three and six months ended June 30, 2003 have
been restated as of January 1, 2003 to reflect the operations of Summerwalk
Apartments which sold on January 15, 2004, as income from discontinued
operations in accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
On January 15, 2004, the Partnership sold Summerwalk Apartments to an unrelated
third party, for a gross sale price of $14,825,000. The net proceeds realized by
the Partnership were approximately $13,589,000 after payment of closing costs of
approximately $596,000 and a prepayment penalty of approximately $640,000 owed
by the Partnership and paid by the buyer. The Partnership paid the Managing
General Partner an incentive compensation fee of approximately $222,000 upon the
sale, in accordance with the Partnership Agreement which is included in closing
costs. The Partnership used approximately $4,642,000 of the net proceeds to
repay the mortgage encumbering the property. The Partnership realized a gain of
approximately $68,000 and $12,012,000 for the three and six months ended June
30, 2004, respectively, as a result of this sale and this amount is included in
gain on sale of discontinued operations in the accompanying consolidated
statements of operations. The additional gain of approximately $68,000
recognized during the three months ended June 30, 2004 is due to a reduction in
the estimated costs expected to be incurred related to the sale. The property's
operations, a loss of approximately $802,000 and income of approximately
$183,000 for the six months ended June 30, 2004 and 2003, respectively,
including revenues of approximately $51,000 and $1,170,000, respectively, are
included in loss and income from discontinued operations. The property's
operations, income of approximately $75,000 for the three months ended June 30,
2003, is included in income from discontinued operations. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$715,000 for the six months ended June 30, 2004 due to the write-off of
approximately $75,000 of unamortized loan costs and the payment of approximately
$640,000 for a prepayment penalty relating to the repayment of the mortgage
encumbering the property, which is also included in loss from discontinued
operations in the accompanying consolidated statements of operations.
The Partnership's loss from continuing operations for the six months ended June
30, 2004 was approximately $307,000, compared to a loss from continuing
operations of approximately $417,000 for the six months ended June 30, 2003. The
decrease in loss from continuing operations is due to a decrease in total
expenses offset slightly by a decrease in total revenues. The Partnership's loss
from continuing operations for the three months ended June 30, 2004 was
approximately $165,000, compared to a loss from continuing operations of
approximately $143,000 for the three months ended June 30, 2003. The increase in
loss from continuing operations is due to a decrease in total revenues,
partially offset by a decrease in total expenses.
The decrease in total revenues for both the three and six months ended June 30,
2004 is due to a decrease in rental income partially offset by an increase in
other income. Rental income decreased due to a decrease in the average rental
rates and an increase in concessions at Lakeside Apartments partially offset by
an increase in occupancy at Pinetree Apartments, as discussed above. The
increase in other income is primarily attributable to Lakeside Apartments now
submetering utilities to residents.
Total expenses for both the three and six months ended June 30, 2004 decreased
due to decreases in general and administrative, depreciation, interest and
property tax expenses slightly offset by an increase in operating expense.
Depreciation expense decreased due to some property improvements and
replacements becoming fully depreciated at both of the Partnership's investment
properties during the past twelve months which more than offset depreciation on
new improvements and replacements. Interest expense decreased due to the payment
of scheduled principal payments on the mortgages encumbering the Partnership's
investment properties which has reduced the average outstanding balance over the
past twelve months. The decrease in property tax expense is a result of the tax
bill for 2002 which was received and paid during the second quarter of 2003
being higher than had been estimated for at Lakeside Apartments. Upon receipt
and payment of the 2002 tax bill in the second quarter, the Partnership revised
its estimate of its 2003 liability at Lakeside Apartments which resulted in an
increase in property tax expense for the year ended December 31, 2003. The
Partnership has based its estimate of the 2004 property expense for Lakeside
Apartments upon the actual bill received during the 2003 calendar year.
Operating expense increased due to an increase in property expense partially
offset by a decrease in maintenance expense. Property expense increased due to
an increase in utilities and salaries and related employee benefits at both of
the Partnership's investment properties. Maintenance expense decreased due to a
decrease in snow removal at Lakeside Apartments and a decrease in contract
services at Pinetree Apartments.
General and administrative expenses decreased for both the three and six months
ended June 30, 2004 due to the decrease in non-accountable reimbursements paid
with distributions from operations. Included in general and administrative
expenses are management reimbursements paid to an affiliate of the Managing
General Partner as allowed under the Partnership Agreement. 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.
Capital Resources and Liquidity
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$633,000 as compared to approximately $344,000 at June 30, 2003. Cash and cash
equivalents increased approximately $438,000 from December 31, 2003 due to
approximately $13,372,000 and $334,000 of cash provided by investing and
operating activities, respectively, partially offset by approximately
$13,268,000 of cash used in financing activities. Cash provided by investing
activities consisted of net proceeds from the sale of Summerwalk Apartments and
withdrawals from restricted escrows maintained by the mortgage lenders slightly
offset by property improvements and replacements. Cash used in financing
activities consisted of distributions to the partners, the repayment of the
mortgage note payable for Summerwalk Apartments, principal payments made on the
mortgages encumbering the Partnership's properties and payments on advances
received from an affiliate of the Managing General Partner. The Partnership
invests its working capital reserves in interest bearing accounts.
NPI Equity on behalf of the Partnership and certain affiliated partnerships, has
established a revolving credit facility (the "Partnership Revolver") to be used
to fund deferred maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in 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 prime rate plus 2% per
annum. The maturity date of any such borrowing accelerates in the event of: (i)
the removal of NPI Equity as the managing general partner (whether or not for
cause); (ii) the sale or refinancing of a property by the Partnership (whether
or not a borrowing under the Partnership Revolver was made with respect to such
property); or (iii) the liquidation of the Partnership. During the six months
ended June 30, 2004, the Partnership repaid approximately $108,000, representing
the outstanding principal balance which had been previously borrowed under the
Partnership Revolver and approximately $2,000 of accrued interest. Interest
expense during the six months ended June 30, 2004 and 2003, amounted to less
than $1,000. During the six months ended June 30, 2003, the Partnership borrowed
and repaid approximately $82,000 under the Partnership Revolver. No amounts were
borrowed at any time during the six months ended June 30, 2004. Other than cash
and cash equivalents, the Partnership Revolver is the Partnership's only unused
source of liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance, including increased legal and audit fees.
Capital improvements planned for each of the Partnership's properties are
detailed below.
Lakeside Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $167,000 of capital improvements at Lakeside Apartments consisting
primarily of floor covering, gutter and water heater replacements, major
landscaping, new fitness equipment and plumbing fixture upgrades. These
improvements were funded from operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $145,000 in capital improvements during the remainder
of 2004. Additional capital improvements may be considered and will depend on
the physical condition of the property as well as the anticipated cash flow
generated by the property.
Pinetree Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $89,000 of capital improvements at Pinetree Apartments consisting
primarily of structural improvements, major landscaping and floor covering
replacements. These improvements were funded from operating cash flow. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $32,000 in capital
improvements during the remainder of 2004. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as the anticipated cash flow generated by the property.
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 assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering both of the Partnership's properties of approximately
$27,439,000 is being amortized over varying periods. The mortgages encumbering
Lakeside and Pinetree Apartments mature in January 2022 and November 2019,
respectively, at which time the mortgages are scheduled to be fully amortized.
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.
The Partnership distributed the following amounts during the six months ended
June 30, 2004 and 2003 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2004 Unit June 30, 2003 Unit
Sale (1) $ 8,167 $169.79 $ -- $ --
Operations -- -- 166 3.41
$ 8,167 $169.79 $ 166 $ 3.41
(1) Cash from the sale proceeds of Summerwalk Apartments.
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 cash available for
distribution is reviewed on a monthly basis. There can be no assurance that the
Partnership will generate sufficient funds after required capital expenditures
to permit additional distributions to its partners in 2004 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 36,316 limited partnership units
(the "Units") in the Partnership representing 75.58% of the outstanding Units at
June 30, 2004. 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 acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its ownership of 75.58% of
the outstanding Units, AIMCO and its affiliates are in a position to influence
all voting decisions with respect to the Partnership. However, with respect to
the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P. (previously
known as Insignia Properties, L.P.), an affiliate of the Managing General
Partner and of AIMCO, agreed to vote such Units: (i) against any increase in
compensation payable to the Managing General Partner or to its affiliates; and
(ii) on all other matters submitted by it or its affiliates, in proportion to
the vote cast by third party unitholders. Except for the foregoing, no other
limitations are imposed on AIMCO IPLP L.P.'s, AIMCO's or any other affiliates'
right to vote each Unit held. Although the Managing General Partner owes
fiduciary duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the Managing General Partner, as managing general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO, as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, 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 Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the Managing General Partner and its affiliates filed a response
brief in support of the settlement and the judgment thereto. Plaintiffs have
also filed a brief in support of the settlement. On June 4, 2004, Objector filed
a reply to the briefs submitted by the Managing General Partner and Plaintiffs.
No hearing has been scheduled in the matter.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The defendants have filed an answer to the amended complaint denying
the substantive allegations. Some discovery has taken place and settlement
negotiations continue. Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its financial condition or results of operations
taken as a whole. Similarly, the Managing General Partner does not believe that
the ultimate outcome will have a material adverse effect on the Partnership's
financial condition or results of operations taken as a whole.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
See Exhibit Index attached.
b) Reports on Form 8-K filed during the quarter ended June 30,
2004:
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 III
By: NPI EQUITY INVESTMENTS, INC.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 13, 2004
EXHIBIT INDEX
Exhibit
2.1 NPI, Inc. Stock Purchase Agreement dated as of August 17,
1995, incorporated by reference to Exhibit 2 to the
Partnership's Current Report on Form 8-K dated August 17,
1995.
3.4 (a) Agreement of Limited Partnership incorporated by
reference to Exhibit A to the Prospectus of the
Partnership dated October 24, 1979 contained in the
Partnership's Registration Statement on Form S-11 (Reg.
No. 2-63733).
3.4 (b) Amendments to Agreement of Limited Partnership dated as
of November 25, 1980 incorporated by reference to
Exhibits 3 and 4 to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1981.
3.4 (c) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Definitive Proxy
Statement of the Partnership dated April 3, 1981.
3.4 (d) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Statement Furnished in
Connection With The Solicitation of Consents of the
Partnership dated August 28, 1992.
3.5 First Amendment to Partnership Agreement Summerwalk NPI
III, L.P., dated January 15, 2004.
10.1 Form of Property Management Agreement dated June 21, 1991, by
and between the Partnership and NPI Management with respect to
each of the Partnership's properties, incorporated by
reference to Exhibit 10.6 to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1991.
10.6 Multifamily Note dated December 23, 1998, by and between
Summerwalk NPI III, L.P. and Collateral Mortgage, Ltd. For
Summerwalk Apartments incorporated by reference to Exhibit
10.16 to the Partnership's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
10.7 Addendum to Multifamily Note dated December 23, 1998, by
and between Summerwalk NPI III, L.P. and Collateral
Mortgage, Ltd. For Summerwalk Apartments incorporated by
reference to Exhibit 10.17 to the Partnership's Annual
Report on Form 10-KSB for the year ended December 31,
1998.
10.8 Multifamily Note dated December 14, 2001, by and between
National Property Investors III, L.P., a California
limited partnership, and GMAC Commercial Mortgage
Corporation, a California corporation filed with the
Registrant's Form 10-KSB for the year ended December 31,
2002.
10.9 (a) Purchase and Sale Contract between Summerwalk NPI III,
L.P. and Summerwalk Associates, LLC (successor in
interest to Blackhawk Realty Advisors, Inc.), dated
November 7, 2003. (1)
10.9 (b) First Amendment to Purchase and Sale Contract -
Summerwalk Apartments, dated November 25, 2003. (1)
10.9 (c) Second Amendment to Purchase and Sale Contract -
Summerwalk Apartments, dated December 15, 2003. (1)
10.9 (d) Third Amendment to Purchase and Sale Contract -
Summerwalk Apartments, dated December 18, 2003. (1)
10.9 (e) Fourth Amendment to Purchase and Sale Contract -
Summerwalk Apartments, dated January 12, 2004. (1)
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(1) Filed as exhibits 10.9(a) through (e) to the Registrant's Current Report
on Form 8-K dated January 15, 2004 and incorporated herein by reference.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of NPI Equity
Investments, Inc., equivalent of the
chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President of NPI Equity
Investments, Inc., equivalent of the
chief financial officer of the
Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of National Property
Investors III (the "Partnership"), for the quarterly period ended June 30, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of
the Partnership, and Stephen B. Waters, as the equivalent of the Chief Financial
Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: August 13, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.