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 September 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)
September 30, 2004
Assets
Cash and cash equivalents $ 331
Receivables and deposits 109
Restricted escrows 182
Other assets 197
Investment property:
Land $ 1,094
Buildings and related personal property 10,054
11,148
Less accumulated depreciation (7,437) 3,711
$ 4,530
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 90
Tenant security deposit liabilities 21
Accrued property taxes 37
Other liabilities 155
Mortgage note payable 5,053
Partners' Deficit:
General partner $ (310)
Limited partners (60,517 units
issued and outstanding) (516) (826)
$ 4,530
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Restated) (Restated)
Revenues:
Rental income $ 302 $ 321 $ 877 $ 984
Other income 32 26 66 56
Total revenues 334 347 943 1,040
Expenses:
Operating 175 145 422 369
General and administrative 24 99 159 305
Depreciation 93 91 281 277
Interest 91 93 276 283
Property taxes 12 12 36 36
Total expenses 395 440 1,174 1,270
Loss from continuing operations (61) (93) (231) (230)
Income (loss) from discontinued
operations (Note A) -- 189 (1,171) 194
Gain on sale of discontinued
operations (Note C) 17 -- 6,645 --
Net (loss) income $ (44) $ 96 $ 5,243 $ (36)
Net (loss) income allocated to
general partner (1%) $ (1) $ 1 $ 52 $ --
Net (loss) income allocated to
limited partners (99%) (43) 95 5,191 (36)
$ (44) $ 96 $ 5,243 $ (36)
Net (loss) income per limited partnership unit:
Loss from continuing operations $ (0.99) $ (1.52) $ (3.78) $ (3.76)
Income (loss) from discontinued
operations -- 3.09 (19.15) 3.17
Gain on sale of discontinued
operations 0.28 -- 108.71 --
$ (0.71) $ 1.57 $ 85.78 $ (0.59)
Distributions per limited
partnership unit $ -- $ 10.72 $113.84 $ 37.54
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 nine months
ended September 30, 2004 -- 52 5,191 5,243
Partners' deficit at
September 30, 2004 60,517 $ (310) $ (516) $ (826)
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net income (loss) $ 5,243 $ (36)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation 411 1,586
Amortization of loan costs 9 53
Casualty gain -- (54)
Loss on early extinguishment of debt 1,119 14
Gain on sale of discontinued operations (6,645) --
Change in accounts:
Receivables and deposits 264 (144)
Other assets 7 (112)
Accounts payable (167) (41)
Tenant security deposit liabilities (14) (1)
Accrued property taxes 37 293
Due to affiliates (72) --
Other liabilities (217) (169)
Net cash (used in) provided by operating activities (25) 1,389
Cash flows from investing activities:
Property improvements and replacements (182) (426)
Insurance proceeds received -- 59
Net receipts from restricted escrows 87 147
Net proceeds from sale of discontinued operations 8,748 --
Net cash provided by (used in) investing activities 8,653 (220)
Cash flows from financing activities:
Repayment of mortgage note payable (3,790) (7,600)
Debt extinguishment cost (1,027) --
Proceeds from mortgage notes payable -- 9,290
Payments on mortgage notes payable (150) (349)
Loan costs additions -- (213)
Distributions to partners (6,958) (2,295)
Net cash used in financing activities (11,925) (1,167)
Net (decrease) increase in cash and cash equivalents (3,297) 2
Cash and cash equivalents at beginning of period 3,628 614
Cash and cash equivalents at end of period $ 331 $ 616
Supplemental disclosure of cash flow information:
Cash paid for interest $ 371 $ 1,285
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
nine month periods ended September 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 statements of operations for the three and nine months ended
September 30, 2003 have been restated to reflect the operations of Patchen
Place, Northwoods I & II and South Point Apartments as income (loss) from
discontinued operations due to their sales in 2003. Patchen Place was sold in
October 2003 and Northwoods I & II and South Point were sold in December 2003.
In addition, the statements of operations have been restated as of January 1,
2003 to reflect the operations of The Pines Apartments as income (loss) from
discontinued operations due to its sale in April 2004.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends 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 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 $75,000 and $271,000 for the nine months ended September 30, 2004
and 2003, respectively, which is included in operating expenses and income
(loss) from discontinued operations.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $81,000 and
$178,000 for the nine months ended September 30, 2004 and 2003, respectively,
which is included in general and administrative expenses 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 $6,000 and $13,000 for the nine months ended September 30, 2004
and 2003, respectively. The construction management service fees are calculated
based on a percentage of current year additions to investment properties.
For services relating to the administration of the Partnership and operation of
Partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year from
distributions from operations, based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $91,000 in reimbursements for the nine months ended September 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 nine months ended September 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 September 30, 2004,
the Partnership had no outstanding amounts due under this Partnership Revolver.
Subsequent to September 30, 2004, the Partnership received approximately
$290,000 under this revolver to pay outstanding accounts payable at Fairway View
II Apartments.
In addition to reimbursement for services of affiliates, an affiliate of the
Managing General Partner earned approximately $93,000 for services related to
the refinancings of Patchen Place and South Point Apartments during the nine
months ended September 30, 2003. No such reimbursements were earned during the
same period in 2004.
The Partnership insures its property 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 property above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the nine months ended September 30, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$44,000 and $92,000 respectively, for insurance coverage and fees associated
with policy claims administration.
Note C- Sale of Investment Property
On April 30, 2004, the Partnership sold The Pines Apartments to a third party
for net proceeds of approximately $8,748,000 after payment of closing costs. The
Partnership realized a gain of approximately $6,645,000 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 income (loss) from discontinued operations. In accordance with
SFAS 144, the accompanying statements of operations have been restated as of
January 1, 2003 to reflect the operations of The Pines Apartments as
discontinued operations. Included in income (loss) from discontinued operations
for the nine months ended September 30, 2004 and 2003 is approximately $473,000
and $1,122,000 respectively, of revenue generated by the property. The
additional gain of approximately $17,000 recognized during the three months
ended September 30, 2004 was due to the write off of expense reserves
established at the time of the sale which were determined to be unneeded.
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 nine months ended September 30, 2003. The
Partnership recognized a loss on the early extinguishment of debt of
approximately $7,000 during the nine months ended September 30, 2003, due to the
write off of unamortized loan costs and debt discounts, which is included in
income (loss) 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 $115,000 during the nine months ended September 30, 2003. The
Partnership recognized a loss on the early extinguishment of debt of
approximately $7,000 during the nine months ended September 30, 2003, due to the
write off of unamortized loan costs and debt discounts, which is included in
income (loss) 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 loans 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 (1.9% per annum at September 30, 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 - Casualty Gain
On February 15, 2003 an ice storm caused damage to exterior sections on some of
the buildings and to the landscaping at Patchen Place Apartments. No actual
units were damaged during the storm. As a result of the damage, approximately
$40,000 of fixed assets and approximately $35,000 of accumulated depreciation
were written off. The property received approximately $59,000 in insurance
proceeds and recognized a casualty gain of approximately $54,000 as a result of
the difference between the proceeds received and the net book value of the
assets written off. This amount is included in income (loss) from discontinued
operations due to the sale of Patchen Place Apartments in October 2003.
Note F - 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 captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. 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 (the "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. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the 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. The 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.
In addition both the Objector and plaintiffs filed briefs in connection with the
second appeal. The Court of Appeals heard oral argument on both appeals on
September 22, 2004 and took the matters under submission.
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 the
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.
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.
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 (the "SEC") is conducting a formal
investigation relating to certain matters. Although the staff of the SEC is not
limited in the areas that it may investigate, 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, capitalization of payroll and certain other costs, and tax
credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict
when the matter will be resolved. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations. 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.
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
nine month periods ended September 30, 2004 and 2003:
Average Occupancy
2004 2003
Fairway View II Apartments (1) 83% 91%
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 and to stricter credit standards for tenants.
The Partnership's financial results depend 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 that are outside the
control of the Partnership such as the local economic climate and weather can
adversely or positively affect the Partnership's financial results.
Results of Operations
The Partnership's net loss for the three months ended September 30, 2004 was
approximately $44,000 compared to net income of approximately $96,000 for the
corresponding period in 2003. The Partnership's net income for the nine months
ended September 30, 2004 was approximately $5,243,000 compared to net loss of
approximately $36,000 for the corresponding period in 2003. The decrease in net
income for the three month period is due to a decrease in income from
discontinued operations partially offset by the gain on sale of discontinued
operations. The decrease in net loss for the nine month period is due to the
recognition of the gain on sale of The Pines Apartments partially offset by a
decrease in income from discontinued operations.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying statements of operations for the three and nine months ended
September 30, 2003 have been restated to reflect the operations of Patchen
Place, Northwoods I & II and South Point Apartments as income (loss) from
discontinued operations due to their sales in 2003. Patchen Place was sold in
October 2003 and Northwoods I & II and South Point were sold in December 2003.
In addition, the statements of operations have been restated as of January 1,
2003 to reflect the operations of The Pines Apartments as income (loss) from
discontinued operations due to its sale in April 2004.
On April 30, 2004, the Partnership sold The Pines Apartments to a third party
for net proceeds of approximately $8,748,000 after payment of closing costs. The
Partnership realized a gain of approximately $6,645,000 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 income (loss) from discontinued operations. In accordance with
SFAS 144, the accompanying statements of operations have been restated as of
January 1, 2003 to reflect the operations of The Pines Apartments as
discontinued operations. Included in income (loss) from discontinued operations
for the nine months ended September 30, 2004 and 2003 is approximately $473,000
and $1,122,000 respectively, of revenue generated by the property. The
additional gain of approximately $12,000 recognized during the three months
ended September 30, 2004 is due to expense reserves established at the time of
the sale, which were determined to be unneeded.
Excluding the gain on sale and the discontinued operations, the Partnership's
loss from continuing operations for the three and nine months ended September
30, 2004 was approximately $61,000 and $231,000, respectively, compared to loss
from continuing operations of approximately $93,000 and $230,000 for the
corresponding periods in 2003. The decrease in loss from continuing operations
for the three month period is due to a decrease in total expenses partially
offset by a decrease in total revenue. Although the loss from continuing
operations for the nine month period remained relatively constant, a decrease in
total revenues was 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 expense at
Fairway View Apartments.
Total expenses decreased for the three and nine month periods due to a decrease
in general and administrative expense, partially offset by an increase in
operating expense. Operating expense increased due to increases in advertising
and administrative expense. Advertising expense increased due to an increase in
leasing promotions at the investment property. Administrative expense increased
due to increases in training and travel expenses and credit collection and
eviction expenses. In addition, the Partnership expensed loan costs for a
refinancing of the mortgage encumbering the investment property which did not
close.
General and administrative expense decreased for both periods due to decreases
in the costs of services included 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 nine
months ended September 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 September 30, 2004, the Partnership had cash and cash equivalents of
approximately $331,000 compared to approximately $616,000 at September 30, 2003.
For the nine months ended September 30, 2004, cash and cash equivalents
decreased by approximately $3,297,000 due to approximately $25,000 and
$11,925,000 of cash used in operating and financing activities, respectively,
partially offset by approximately $8,653,000 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,
and distributions to the partners. Cash provided by investing activities
consisted of net proceeds from the sale of The Pines Apartments 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 September 30, 2004,
the Partnership had no outstanding amounts due under this Partnership Revolver.
Subsequent to September 30, 2004, the Partnership received approximately
$290,000 under this revolver to pay outstanding accounts payable at Fairway View
II Apartments.
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. Capital improvements planned for the
Partnership's property are detailed below.
Fairway View II
During the nine months ended September 30, 2004, the Partnership completed
approximately $147,000 of capital improvements at Fairway View II Apartments,
consisting primarily of roof replacements, electrical upgrades and floor
covering, appliance, 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 $380,000 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 nine months ended September 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 $5,053,000
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 property or extend the term of the
Partnership.
The Partnership distributed the following amounts during the nine months ended
September 30, 2004 and 2003 (in thousands, except per unit data):
Nine Months Per Limited Nine Months Per Limited
Ended Partnership Ended Partnership
September 30, 2004 Unit September 30, 2003 Unit
Operations $ -- $ -- $ 948 $15.50
Sale (1) 6,958 113.84 -- --
Refinancing (2) -- -- 1,347 22.04
Total $6,958 $113.84 $2,295 $37.54
(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 in 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 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 42,461.67 limited partnership
units (the "Units") in the Partnership representing 70.16% of the outstanding
Units at September 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, 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 70.16% 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 captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. 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 (the "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. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the 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. The 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.
In addition both the Objector and plaintiffs filed briefs in connection with the
second appeal. The Court of Appeals heard oral argument on both appeals on
September 22, 2004 and took the matters under submission.
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 the
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.
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.
ITEM 6. EXHIBITS
See Exhibit Index attached.
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: November 12, 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)
(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.
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).
10.17 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: November 12, 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: November 12, 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 September 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: November 12, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 12, 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.