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 0-13454
NATIONAL PROPERTY INVESTORS 7
(Exact name of small business issuer as specified in its charter)
California 13-3230613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS 7
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2004
Assets
Cash and cash equivalents $ 299
Receivables and deposits 143
Restricted escrows 181
Other assets 219
Investment property:
Land $ 1,094
Buildings and related personal property 9,978
11,072
Less accumulated depreciation (7,343) 3,729
$ 4,571
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 78
Tenant security deposit liabilities 17
Accrued property taxes 25
Other liabilities 143
Mortgage note payable 5,090
Partners' Deficit:
General partner $ (309)
Limited partners (60,517 units
issued and outstanding) (473) (782)
$ 4,571
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
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 $ 279 $ 330 $ 575 $ 663
Other income 17 14 34 30
Total revenues 296 344 609 693
Expenses:
Operating 150 128 247 224
General and administrative 86 94 135 206
Depreciation 94 92 188 186
Interest 92 95 185 190
Property taxes 12 12 24 24
Total expenses 434 421 779 830
Loss from continuing operations (138) (77) (170) (137)
(Loss) income from discontinued
operations (Note A) (1,185) 17 (1,171) 5
Gain on sale of discontinued operations
(Note C) 6,628 -- 6,628 --
Net income (loss) $ 5,305 $ (60) $ 5,287 $ (132)
Net income (loss) allocated to general
partner (1%) $ 53 $ (1) $ 53 $ (1)
Net income (loss) allocated to limited
partners (99%) 5,252 (59) 5,234 (131)
$ 5,305 $ (60) $ 5,287 $ (132)
(Loss) income per limited partnership unit:
Loss from continuing operations (2.26) (1.25) (2.78) (2.24)
(Loss) income from discontinued
operations (19.38) 0.28 (19.16) 0.08
Income from sale of discontinued
operations 108.43 -- 108.43 --
$ 86.79 $ (0.97) $ 86.49 $ (2.16)
Distributions per limited partnership
unit $ 70.91 $ 21.45 $113.84 $ 26.82
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 60,517 $ 1 $30,259 $30,260
Partners' (deficiency) capital
at December 31, 2003 60,517 $ (293) $ 1,182 $ 889
Distributions to partners -- (69) (6,889) (6,958)
Net income for the six months
ended June 30, 2004 -- 53 5,234 5,287
Partners' deficit at
June 30, 2004 60,517 $ (309) $ (473) $ (782)
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income (loss) $ 5,287 $ (132)
Adjustments to reconcile net income (loss) to net cash
(used in ) provided by operating activities:
Depreciation 317 1,064
Amortization of loan costs 6 37
Loss on early extinguishment of debt 1,119 14
Gain on sale of investment property (6,628) --
Change in accounts:
Receivables and deposits 230 (148)
Other assets 3 (116)
Accounts payable (196) 28
Tenant security deposit liabilities (18) (4)
Accrued property taxes 25 185
Due to affiliates (72) --
Other liabilities (229) (131)
Net cash (used in) provided by operating activities (156) 797
Cash flows from investing activities:
Property improvements and replacements (106) (233)
Net receipts from restricted escrows 88 147
Net proceeds from sale of discontinued operations 8,748 --
Net cash provided by (used in) investing activities 8,730 (86)
Cash flows from financing activities:
Repayment of mortgage notes payable (3,790) (7,600)
Debt extinguishment costs (1,027) --
Proceeds from mortgage notes payable -- 9,290
Payments on mortgage notes payable (113) (212)
Loan cost additions (15) (210)
Distributions to partners (6,958) (1,639)
Net cash used in financing activities (11,903) (371)
Net (decrease) increase in cash and cash equivalents (3,329) 340
Cash and cash equivalents at beginning of period 3,628 614
Cash and cash equivalents at end of period $ 299 $ 954
Supplemental disclosure of cash flow information:
Cash paid for interest $ 282 $ 890
Supplemental disclosure of non-cash activity:
Replacement reserves in accounts receivable $ -- $ 93
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 7
(the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of NPI Equity Investments, Inc. (the "Managing General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six month periods 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 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.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying statement of operations for the three and six months ended June
30, 2003 has been restated to reflect the operations of Patchen Place,
Northwoods I & II and South Point Apartments as (loss) income from discontinued
operations due to their sales in 2003. Patchen Place was sold in October 2003
and Northwoods I and II and South Point were sold in December 2003. In addition,
The Pines of Roanoke Apartments is included in income (loss) from discontinued
operations for the six months ended June 30, 2004 and 2003 due to its sale in
April 2004.
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.
During the six months ended June 30, 2004 and 2003, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $60,000 and
$181,000 for the six months ended June 30, 2004 and 2003, respectively, which is
included in operating expenses and (loss) income from discontinued operations.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $64,000 and
$119,000 for the six months ended June 30, 2004 and 2003, respectively, which is
included in general and administrative expenses.
For services relating to the administration of the Partnership and operation of
Partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year from
distributions from operations, based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $58,000 in reimbursements for the six month period ended June 30,
2003, which is included in general and administrative expenses. No such fees
were earned during the same period in 2004 as there were no distributions from
operations.
For managing the affairs of the Partnership, the Managing General Partner of the
Partnership is entitled to receive a partnership management fee. The fee is
equal to 4% of the Partnership's adjusted cash from operations, as defined in
the Partnership Agreement, in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited partners adjusted
cash from operations in such year which is equal to 5% of the limited partners'
adjusted invested capital, as defined, on a non-cumulative basis. In addition,
50% of the fee shall not be paid until the Partnership has distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners' adjusted invested capital on a non-cumulative basis.
The fee shall be paid when adjusted cash from operations is distributed to the
limited partners. The Managing General Partner was not entitled to receive this
fee during the six months ended June 30, 2004 or 2003.
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 $500,000. 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. At June 30, 2004, the
Partnership had no outstanding amounts due under this Partnership Revolver.
In addition to reimbursement for services of affiliates, an affiliate of the
Managing General Partner earned approximately $93,000 for services related to
the refinancing of Patchen Place and South Point Apartments during the six
months ended June 30, 2003. No such reimbursements were earned during the same
period in 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 $13,000
and $92,000 respectively, for the insurance coverage and fees associated with
policy claims administration.
Note C- Sale of Investment Properties
On April 30, 2004, the Partnership sold The Pines Apartments to an unrelated
third party for net proceeds of approximately $8,748,000 after payment of
closing costs. The Partnership realized a gain of approximately $6,628,000 as a
result of the sale. The Partnership used approximately $3,790,000 of the net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$1,119,000 as a result of unamortized loan costs being written off and a
prepayment penalty. This amount is included in (loss) income from discontinued
operations. In accordance with SFAS 144, the accompanying statements of
operations for the three and six months ended June 30, 2003 have been restated
to reflect the operations of The Pines Apartments as discontinued operations.
Included in (loss) income from discontinued operations for the six months ended
June 30, 2004 and 2003 is approximately $473,000 and $738,000 respectively, of
revenue generated by the property.
Note D - Refinancing of Mortgage Notes Payable
On May 16, 2003, the Partnership refinanced the mortgage encumbering Patchen
Place Apartments. The refinancing replaced the existing mortgage of $3,000,000
with a new mortgage in the amount of $4,290,000. Total capitalized loan costs
were approximately $98,000 during the six months ended June 30, 2003. The
Partnership recognized a loss on the early extinguishment of debt of
approximately $7,000 during the six months ended June 30, 2003, due to the write
off of unamortized loan costs and debt discounts, which is included in (loss)
income from discontinued operations.
On June 27, 2003, the Partnership refinanced the mortgage encumbering South
Point Apartments. The refinancing replaced the existing mortgage of $4,600,000
with a new mortgage in the amount of $5,000,000. Total capitalized loan costs
were approximately $112,000 during the six months ended June 30, 2003. The
Partnership recognized a loss on the early extinguishment of debt of
approximately $7,000 during the six months ended June 30, 2003, due to the write
off of unamortized loan costs and debt discounts, which is included in (loss)
income from discontinued operations.
Initially the May 16, 2003 refinancing of Patchen Place Apartments and the June
27, 2003 refinancing of South Point Apartments were under an interim credit
facility ("Interim Credit Facility") which also provided for the refinancing of
several other properties. The Interim Credit Facility created separate loans for
each property refinanced thereunder, which loans were not cross-collateralized
or cross-defaulted with each other. During the term of the Interim Credit
Facility, Patchen Place and South Point Apartments were required to make
interest-only payments. The first month's interest rate for Patchen Place
Apartments was 2.78% and for South Point Apartments was 2.60%.
As of July 1 and August 1, 2003, the loan on Patchen Place and South Point
Apartments, respectively, were assumed by a different lender. The credit
facility ("Permanent Credit Facility") with the new lender had a maturity date
of September 2007 with an option for the Partnership to elect one five-year
extension. This Permanent Credit Facility also created separate loans for each
property refinanced thereunder, which loans are not cross-collateralized or
cross-defaulted with each other. Each note under this Permanent Credit Facility
was initially a variable rate loan, and after three years the Partnership had
the option of converting the note to a fixed rate loan. The interest rate on the
variable rate loans was 85 basis points over the Fannie Mae discounted
mortgage-backed security index (1.8% per annum at July 1, 2003), and the rate
reset monthly. Each loan automatically renewed at the end of each month. In
addition, monthly principal payments were required based on a 30-year
amortization schedule, using the interest rate in effect during the first month
that the properties were on the Permanent Credit Facility. The loans could be
prepaid without penalty. The loans were repaid when Patchen Place Apartments
sold in October 2003 and South Point Apartments sold in December 2003.
Note E - 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 property 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 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 investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
six month periods ended June 30, 2004 and 2003:
Average Occupancy
2004 2003
Fairway View II Apartments (1) 80% 92%
Baton Rouge, Louisiana
(1) The Managing General Partner attributes the decrease in occupancy at
Fairway View II Apartments to strong competition from new construction in
the local market area.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
property, interest rates on the mortgage loan, costs incurred to operate the
investment property, 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 property 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 three and six months ended June 30, 2004
was approximately $5,305,000 and $5,287,000, respectively, compared to net loss
of approximately $60,000 and $132,000 for the three and six month periods ended
June 30, 2003, respectively. The increase in net income for the three and six
months period is primarily due to the recognition of the gain on sale of The
Pines Apartments.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying statement of operations for the three and six months ended June
30, 2003 has been restated to reflect the operations of Patchen Place,
Northwoods I & II and South Point Apartments as (loss) income from discontinued
operations due to their sales in 2003. Patchen Place was sold in October 2003
and Northwoods I and II and South Point were sold in December 2003.
On April 30, 2004, the Partnership sold The Pines Apartments to an unrelated
third party for net proceeds of approximately $8,748,000 after payment of
closing costs. The Partnership realized a gain of approximately $6,628,000 as a
result of the sale. The Partnership used approximately $3,790,000 of the net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$1,119,000 as a result of unamortized loan costs being written off and a
prepayment penalty. This amount is included in (loss) income from discontinued
operations. In accordance with SFAS 144, the accompanying statements of
operations for the three and six months ended June 30, 2003 have been restated
to reflect the operations of Pines of Roanoke as discontinued operations.
Included in (loss) income from discontinued operations for the six months ended
June 30, 2004 and 2003 is approximately $473,000 and $738,000 respectively, of
revenue generated by the property.
Excluding the gain on sale and the discontinued operations, the Partnership's
net loss from continuing operations for the three and six months ended June 30,
2004 was approximately $138,000 and $170,000 compared to net loss of
approximately $77,000 and $137,000 for the corresponding period in 2003. The
decrease in income for the three month period is due to a decrease in total
revenue and an increase in total expenses. The decrease in income for the six
month period is due to a decrease in total revenue, partially offset by a
decrease in total expenses. Total revenues decreased for both periods due to a
decrease in rental income. Rental income decreased due to a decrease in
occupancy and an increase in bad debt expenses at Fairway View II Apartments,
partially offset by an increase in rental rates.
Total expenses decreased for the six month period principally due to a decrease
in general and administrative expenses partially offset by an increase in
operating expenses. Total expenses increased for the three month period
principally due to an increase in operating expenses partially offset by a
decrease in general and administrative expenses. Operating expenses increased
for both periods due to an increase in administrative expense. Administrative
expense increased due to increases in training and travel expenses.
General and administrative expense decreased for both periods due to decreases
in the management reimbursements paid to the Managing General Partner, as
allowed under the Partnership Agreement, and in the fees paid to the Managing
General Partner in connection with distributions from operations. Also included
in general and administrative expenses for the six months ended June 30, 2004
and 2003 are costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement.
Liquidity and Capital Resources
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$299,000 compared to approximately $954,000 at June 30, 2003. For the six months
ended June 30, 2004, cash and cash equivalents decreased by approximately
$3,329,000 due to approximately $11,903,000 of cash used in financing activities
and approximately $156,000 of cash used in operating activities partially offset
by approximately $8,730,000 of cash provided by investing activities. Cash used
in financing activities consisted of the repayment of the mortgage encumbering
The Pines Apartments, principal payments on the mortgages encumbering the
Partnership's investment properties, debt extinguishment costs, loan cost
additions, and distributions to the partners. Cash provided by investing
activities consisted of net sales proceeds and net receipts from restricted
escrows, partially offset by property improvements and replacements. The
Partnership invests its working capital 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 $500,000. 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. At June 30, 2004, the
Partnership had no outstanding amounts due under this Partnership Revolver.
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 property 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 the Partnership's property are detailed below.
Fairway View II
During the six months ended June 30, 2004, the Partnership completed
approximately $71,000 of capital improvements at Fairway View II Apartments,
consisting primarily of roof replacements, structural upgrades and floor
covering and air conditioning unit 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 $41,000 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 replacement reserves and the
anticipated cash flow generated by the property.
The Pines
During the six months ended June 30, 2004, the Partnership completed
approximately $35,000 of capital improvements at The Pines Apartments,
consisting primarily of floor covering and roof replacements and heating system
upgrades. These improvements were funded from operating cash flow. The Pines
Apartments were sold April 30, 2004.
The additional capital improvements will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
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 the investment property of approximately $5,090,000
matures December 1, 2021 at which time the loan is scheduled to be fully
amortized.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2008. 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
Operations $ -- $ -- $ 610 $ 9.98
Refinancing (2) -- -- 1,029 16.84
Sale (1) 6,958 113.84 -- --
Total $6,958 $113.84 $1,639 $26.82
(1) Proceeds from the sales of South Point Apartments in December 2003
and The Pines Apartments in April 2004.
(2) Proceeds from the refinancing of Patchen Place Apartments during May 2003.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of debt maturity,
refinancing and/or property sale. The Partnership's cash available for
distribution is reviewed on a monthly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures, to permit further distributions to its partners
during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the Managing General Partner interest
in the Partnership, AIMCO and its affiliates owned 41,649.67 limited partnership
units (the "Units") in the Partnership representing 68.82% 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. In this regard, on June 13,
2004, AIMCO Properties, L.P., commenced a tender offer to acquire up to
18,867.34 Units for a purchase price of $40.27 per Unit. Subsequent to June 30,
2004, AIMCO Properties, L.P. extended the expiration date of the offer to August
13, 2004. Pursuant to the Partnership Agreement, unit holders 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 68.82% of the outstanding Units, AIMCO and its
affiliates are in a position to influence all such voting decisions with respect
to the Partnership. However, DeForest Ventures II L.P., from whom AIMCO IPLP,
L.P., an affiliate of the Managing General Partner and of AIMCO, acquired 25,399
Units (41.97% of the units), agreed for the benefit of non-tendering unit
holders, that it would vote its Units: (i) against any increase in compensation
payable to the Managing General Partner or to its affiliates; and (ii) on all
other matters submitted by it or its affiliates, in proportion to the votes cast
by third party unit holders. Except for the foregoing, no other limitations are
imposed on IPLP'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 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 property is 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 property. 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:
None filed during the quarter ended June 30, 2004.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 7
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/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 Number Description of Exhibit
2.5 Master Indemnity Agreement dated as of August 17, 1995.(1)
3.4 (a) Agreement of Limited Partnership. (3)
(b) Amendments to the Agreement of Limited Partnership. (4)
(c) Amendments to the Agreement of Limited Partnership. (5)
(d) Amendments to the Agreements of Limited Partnership. (6)
10.3 Property Management Agreement dated June 21, 1991, by and
between the Registrant and NPI Management incorporated by
reference to Exhibit 10.4 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991.
(7)
10.10 Multifamily Note dated December 9, 1999, by and between
National Property Investors 7, a California limited
partnership and GMAC Commercial Mortgage Corporation, a
California corporation. (10)
(1) Incorporated by reference to Exhibit 2.5 to Form 8-K
filed by Insignia with the Securities and Exchange
Commission on September 1, 1995.
(3) Incorporated by reference to Exhibit A to the Prospectus of
the Registrant dated July 5, 1978, contained in the
Registrant's Registration Statement on Form S-11 (Reg. No.
2-599991).
(4) Incorporated by reference to the Definitive Proxy
Statement of the Partnership dated July 2, 1981.
(5) Incorporated by reference to Definitive Proxy statement of the
Partnership dated April 3, 1991.
(6) Incorporated by reference, to the Statement Furnished in
Connection With the Solicitation of Consents of the Registrant
dated August 28, 1992.
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991. Identical
agreements have been entered into for each of the Registrant's
properties. The only difference in the agreements is that the
applicable property name has been inserted into the agreement.
(10) Incorporated by reference to the Registrant's Annual
Report on Form 10-KSB for the period ended December 31,
1999.
10.11 Multifamily Note dated August 31, 2001, by and between
National Property Investors 7, a California Limited
Partnership, and GMAC Commercial Mortgage Corporation, a
California Corporation relating to Northwoods I and II
Apartments. (incorporated by reference to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2001).
10.12 Multifamily Note dated November 30, 2001, by and between
National Property Investors 7, a California Limited
Partnership and GMAC Commercial Mortgage Corporation, a
California corporation relating to Fairway View II
Apartments (incorporated by reference to the Registrant's
Annual Report on Form 10-KSB for the year ended December
31, 2002).
10.13 Multifamily Note dated May 16, 2003, between National
Property Investors 7, a California limited partnership,
and GMAC Commercial Mortgage Corporation, a California
corporation, related to Patchen Place Apartments
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended June 30,
2003).
10.14 Seventh Reaffirmation and Joinder Agreement dated June 16,
2003 between AIMCO Properties, LP, a Delaware limited
partnership, National Property Investors 7, a California
limited partnership, GMAC Commercial Mortgage Corporation, a
California corporation, the parties who are the current
borrowers under the Loan Agreement, the parties who are the
Spring Hill Guarantors under the Loan Agreement and Fannie
Mae, a federally chartered and stockholder-owned corporation,
related to Patchen Place Apartments (incorporated by reference
to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 2003).
10.15 Multifamily Note dated June 27, 2003, between National
Property Investors 7, a California limited partnership,
and Stewart Title of North Carolina, Inc., a North
Carolina corporation, related to South Point Apartments
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended June 30,
2003).
10.16 Eighth Reaffirmation and Joinder Agreement dated July 17, 2003
between AIMCO Properties, LP, a Delaware limited partnership,
National Property Investors 7, a California limited
partnership, GMAC Commercial Mortgage Corporation, a
California corporation, the parties who are the current
borrowers under the Loan Agreement, the parties who are the
Spring Hill Guarantors under the Loan Agreement and Fannie
Mae, a federally chartered and stockholder-owned corporation,
related to South Point Apartments (incorporated by reference
to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 2003).
10.17 Purchase and Sale Contract between Registrant and Vermeil,
LLC, dated July 31, 2003 (incorporated by reference to the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2003).
10.18 Reinstatement and Amendment of Purchase and Sale Contract
between Registrant and Vermeil, LLC, dated September 5, 2003
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2003).
10.19 Purchase and Sale Contract between Registrant and Watervliet
Shores Associates, dated September 11, 2003 (incorporated by
reference to the Registrant's Current Report on Form 8-K dated
December 9, 2003).
10.20 Purchase and Sale Contract between Registrant and The Dilweg
Companies, LLC, dated October 20, 2003 (incorporated by
reference to the Registrant's Current Report on Form 8-K dated
December 30, 2003).
10.21 Amendment to Purchase and Sale Contract between Registrant and
The Dilweg Companies, LLC, dated October 27, 2003
(incorporated by reference to the Registrant's Current Report
on Form 8-K dated December 30, 2003).
10.22 Reinstatement and Second Amendment to Purchase and Sale
Contract between Registrant and The Dilweg Companies, LLC,
dated November 6, 2003 (incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 30,
2003).
10.23 Third Amendment to Purchase and Sale Contract between
Registrant and The Dilweg Companies, LLC, dated December 17,
2003 (incorporated by reference to the Registrant's Current
Report on Form 8-K dated December 30, 2003).
10.24 Assignment and Assumption of Real Estate Sale Agreement
between The Dilweg Companies, LLC and HD South Point, LLC,
dated December 30, 2003 (incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 30,
2003).
10.25 Purchase and Sale Contract between Registrant and Jackson
Square Properties, LLC, dated February 21, 2004
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended March 31,
2004).
10.26 Amendment to Purchase and Sale Contract between Registrant and
Jackson Square Properties, LLC dated March 23, 2004
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2004).
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.
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 7;
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 7;
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 7 (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.