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 0-9567
NATIONAL PROPERTY INVESTORS III
(Exact name of small business issuer as specified in its charter)
California 13-2974428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2004
Assets
Cash and cash equivalents $ 101
Receivables and deposits 256
Other assets 754
Assets held for sale (Note A) 1,521
Investment property:
Land $ 2,093
Buildings and related personal property 22,718
24,811
Less accumulated depreciation (19,749) 5,062
$ 7,694
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 123
Tenant security deposit liabilities 149
Accrued property taxes 515
Other liabilities 269
Due to affiliates 208
Mortgage notes payable 22,867
Liabilities related to assets held for sale (Note A) 4,505
Partners' Deficit
General partner $ (208)
Limited partners (48,049 units
issued and outstanding) (20,734) (20,942)
$ 7,694
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Restated) (Restated)
Revenues:
Rental income $ 1,167 $ 1,220 $ 3,395 $ 3,612
Other income 145 110 480 364
Total revenues 1,312 1,330 3,875 3,976
Expenses:
Operating 461 504 1,517 1,509
General and administrative 68 50 191 203
Depreciation 240 234 717 736
Interest 417 427 1,255 1,287
Property taxes 152 172 495 523
Total expenses 1,338 1,387 4,175 4,258
Loss from continuing operations (26) (57) (300) (282)
(Loss) income from discontinued
operations (55) 86 (890) 77
Gain on sale of discontinued
operations (Note C) -- -- 12,012 --
Net (loss) income $ (81) $ 29 $10,822 $ (205)
Net (loss) income allocated
to general partner (1%) $ (1) $ -- $ 108 $ (2)
Net (loss) income allocated
to limited partners (99%) (80) 29 10,714 (203)
$ (81) $ 29 $10,822 $ (205)
Per limited partnership unit:
Loss from continuing operations $ (0.54) $ (1.16) $ (6.18) $ (5.80)
(Loss) income from discontinued
operations (1.13) 1.77 (18.34) 1.58
Gain on sale of discontinued
operations -- -- 247.50 --
$ (1.67) $ .61 $222.98 $ (4.22)
Distributions per limited
partnership unit $ 7.40 $ -- $177.19 $ 3.41
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 48,049 $ 1 $ 24,024 $ 24,025
Partners' deficit at
December 31, 2003 48,049 $ (304) $(22,934) $(23,238)
Net income for the nine months
ended September 30, 2004 -- 108 10,714 10,822
Distributions to partners -- (12) (8,514) (8,526)
Partners' deficit at
September 30, 2004 48,049 $ (208) $(20,734) $(20,942)
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net income (loss) $10,822 $ (205)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 870 1,333
Bad debt expense 118 188
Gain on sale of investment property (12,012) --
Loss on early extinguishment of debt 715 --
Amortization of loan costs 31 45
Change in accounts:
Receivables and deposits 32 (280)
Other assets (42) (157)
Accounts payable (44) (25)
Tenant security deposit liabilities (68) 43
Accrued property taxes (187) 5
Due to affiliates (60) 18
Other liabilities 109 (133)
Net cash provided by operating activities 284 832
Cash flows from investing activities:
Property improvements and replacements (362) (557)
Net withdrawals from restricted escrows 14 64
Net proceeds from sale of investment property 13,589 --
Net cash provided by (used in) investing activities 13,241 (493)
Cash flows from financing activities:
Payments on mortgage notes payable (543) (602)
Repayment of mortgage note payable (4,642) --
Advances received from affiliate 200 190
Payments on advances from affiliate (108) (82)
Distributions to partners (8,526) (166)
Net cash used in financing activities (13,619) (660)
Net decrease in cash and cash equivalents (94) (321)
Cash and cash equivalents at beginning of period 195 520
Cash and cash equivalents at end of period $ 101 $ 199
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,377 $ 1,750
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 21 $ 78
At December 31, 2002, approximately $75,000 of property improvements and
replacements were included in accounts payable which are included in property
improvements and replacements during the nine months ended September 30, 2003.
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of National
Property Investors III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of NPI Equity Investments, Inc. ("NPI
Equity" or the "Managing General Partner") all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine months 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
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2003. The Managing General Partner is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
The accompanying consolidated statements of operations for the three and nine
months ended September 30, 2003 have been restated as of January 1, 2003 to
reflect the operations of Summerwalk Apartments which sold on January 15, 2004,
(see Note C) and Pinetree Apartments which is currently held for sale as income
(loss) from discontinued operations in accordance with Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". The Partnership has committed to a plan to sell Pinetree
Apartments within one year. In accordance with SFAS No. 144, the assets and
liabilities of Pinetree have been classified as held for sale at September 30,
2004. Included in the income (loss) from discontinued operations is a loss of
approximately $55,000 and $88,000 for the three and nine months ended September
30, 2004, respectively, and a net loss of approximately $32,000 and $224,000 for
the three and nine months ended September 30, 2003, respectively. Included in
the loss from discontinued operations for the three and nine months ended
September 30, 2004 was revenues of approximately $315,000 and $922,000,
respectively. Included in the loss from discontinued operations for the three
and nine months ended September 30, 2003 was revenues of approximately $297,000
and $845,000, respectively.
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 are entitled to receive 5% of gross
receipts from all of the Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $243,000 and $328,000 for the nine months ended September 30, 2004
and 2003, respectively, which is included in operating expenses and income
(loss) from discontinued operations.
Affiliates of the Managing General Partner charged the Partnership reimbursement
of accountable administrative expenses amounting to approximately $129,000 and
$166,000 for the nine months ended September 30, 2004 and 2003, respectively,
which are included in general and administrative expense and investment
properties. Included in these amounts are fees related to construction
management services provided by an affiliate of the Managing General Partner of
approximately $7,000 and $15,000 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. At
September 30, 2004, approximately $7,000 of reimbursements for services was
accrued by the Partnership and is included in due to affiliates.
For services relating to the administration of the Partnership and operation of
the Partnership's properties, the Managing General Partner is entitled to
receive payment for non-accountable expenses up to a maximum of $100,000 per
year based upon the number of Partnership units sold, subject to certain
limitations. The Managing General Partner received approximately $31,000 and
$14,000 during the nine months ended September 30, 2004 and 2003, respectively,
in connection with the operating distributions paid to the partners. This fee is
included in general and administrative expenses.
Upon the sale of the Partnership properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized by
NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive Compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership at February 1,
1992. In connection with the January 2004 sale of Summerwalk Apartments, an
Incentive Compensation Fee of approximately $222,000 was earned and paid to the
Managing General Partner.
NPI Equity on behalf of the Partnership and certain affiliated partnerships, has
established a revolving credit facility (the "Partnership Revolver") to be used
to fund deferred maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $300,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and accrue interest at the prime rate plus 2%
per annum. The maturity date of any such borrowing accelerates in the event of:
(i) the removal of NPI Equity as the managing general partner (whether or not
for cause); (ii) the sale or refinancing of a property by the Partnership
(whether or not a borrowing under the Partnership Revolver was made with respect
to such property); or (iii) the liquidation of the Partnership. During the nine
months ended September 30, 2004, the Partnership borrowed approximately $200,000
and repaid approximately $108,000, representing the outstanding principal
balance which had been previously borrowed under the Partnership Revolver and
approximately $2,000 of accrued interest. Interest expense during the nine
months ended September 30, 2004 and 2003, amounted to approximately $2,000 and
less than $1,000, respectively. During the nine months ended September 30, 2003,
the Partnership borrowed approximately $190,000 and repaid approximately $82,000
under the Partnership Revolver. At September 30, 2004 approximately $201,000 was
owed, including accrued interest, and is included in due to affiliates.
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 nine months ended September 30, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$82,000 and $104,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note C - Disposition of Investment Property
On January 15, 2004, the Partnership sold Summerwalk Apartments to a third
party, for a gross sale price of $14,825,000. The net proceeds realized by the
Partnership were approximately $13,589,000 after payment of closing costs of
approximately $596,000 and a prepayment penalty of approximately $640,000 owed
by the Partnership and paid by the buyer. The Partnership paid the Managing
General Partner an incentive compensation fee of approximately $222,000 upon the
sale, in accordance with the Partnership Agreement, which is included in closing
costs. The Partnership used approximately $4,642,000 of the net proceeds to
repay the mortgage encumbering the property. The Partnership realized a gain of
approximately $12,012,000 for the nine months ended September 30, 2004, as a
result of this sale and this amount is included in gain on sale of discontinued
operations in the accompanying consolidated statements of operations.
The property's operations, a loss of approximately $802,000 and income of
approximately $301,000 for the nine months ended September 30, 2004 and 2003,
respectively, including revenues of approximately $51,000 and $1,808,000,
respectively, are included in loss and income from discontinued operations. The
property's operations, income of approximately $118,000 for the three months
ended September 30, 2003, is included in income from discontinued operations. In
addition, the Partnership recorded a loss on early extinguishment of debt of
approximately $715,000 for the nine months ended September 30, 2004 due to the
write-off of approximately $75,000 of unamortized loan costs and the payment of
approximately $640,000 for a prepayment penalty relating to the repayment of the
mortgage encumbering the property, which is also included in loss from
discontinued operations in the accompanying consolidated statements of
operations.
Note D - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint 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 consolidated
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 consolidated 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 two assets consist of a 568 unit apartment complex known as
Lakeside Apartments located in Lisle, Illinois and a 220 unit apartment complex
known as Pinetree Apartments located in Charlotte, North Carolina, that is held
for sale. The following table sets forth the average occupancy for each of the
properties for both of the nine month periods ended September 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
Lakeside Apartments 91% 92%
Lisle, Illinois
Pinetree Apartments 96% 88%
Charlotte, North Carolina
The Managing General Partner attributes the increase in occupancy at Pinetree
Apartments to increased marketing efforts by the property's management team over
the past year.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Partnership, the Managing General Partner monitors the
rental market environment of its investment properties to assess the feasibility
of increasing rents, maintaining or increasing occupancy levels and protecting
the Partnership from increases in expenses. As part of this plan, the Managing
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, the Managing General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to sustain such a plan. Further, a number of factors 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 income for the nine months ended September 30, 2004 was
approximately $10,822,000, as compared to a net loss of approximately $205,000
for the nine months ended September 30, 2004. The Partnership's net loss for the
three months ended September 30, 2004 was approximately $81,000 as compared to
net income of approximately $29,000 for the three months ended September 30,
2003. The increase in net income for the nine months ended September 30, 2004 is
due to the recognition of a gain from the sale of Summerwalk Apartments during
the nine months ended September 30, 2004 partially offset by an increase in
losses from both continuing and discontinued operations. The increase in net
loss for the three months ended September 30, 2004 is due to a decrease in
income from discontinued operations, partially offset by a decrease in loss from
continuing operations for this period. The accompanying consolidated statement
of operations for the three and nine months ended September 30, 2004 have been
restated as of January 1, 2003 to reflect the operations of Summerwalk
Apartments which sold on January 15, 2004 and Pinetree Apartments which is
currently held for sale, as income (loss) from discontinued operations in
accordance with Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long- Lived Assets".
On January 15, 2004, the Partnership sold Summerwalk Apartments to a third
party, for a gross sale price of $14,825,000. The net proceeds realized by the
Partnership were approximately $13,589,000 after payment of closing costs of
approximately $596,000 and a prepayment penalty of approximately $640,000 owed
by the Partnership and paid by the buyer. The Partnership paid the Managing
General Partner an incentive compensation fee of approximately $222,000 upon the
sale, in accordance with the Partnership Agreement, which is included in closing
costs. The Partnership used approximately $4,642,000 of the net proceeds to
repay the mortgage encumbering the property. The Partnership realized a gain of
approximately $12,012,000 for the nine months ended September 30, 2004, as a
result of this sale and this amount is included in gain on sale of discontinued
operations in the accompanying consolidated statements of operations.
The properties' operations, a loss of approximately $890,000 and income of
approximately $77,000 for the nine months ended September 30, 2004 and 2003,
respectively, including revenues of approximately $973,000 and $2,653,000,
respectively, are included in loss and income from discontinued operations. The
properties' operations, a loss of approximately $55,000 and income of $86,000
for the three months ended September 30, 2004 and 2003, respectively, including
revenues of approximately $315,000 and $935,000, respectively, are included in
loss and income from discontinued operations. In addition, the Partnership
recorded a loss on early extinguishment of debt of approximately $715,000 for
the nine months ended September 30, 2004 due to the write-off of approximately
$75,000 of unamortized loan costs and the payment of approximately $640,000 for
a prepayment penalty relating to the repayment of the mortgage encumbering
Summerwalk Apartments, which is also included in loss from discontinued
operations in the accompanying consolidated statements of operations.
The Partnership's loss from continuing operations for the nine months ended
September 30, 2004 was approximately $300,000, compared to a loss from
continuing operations of approximately $282,000 for the nine months ended
September 30, 2003. The increase in loss from continuing operations is due to a
decrease in total revenues offset slightly by a decrease in total expenses. The
Partnership's loss from continuing operations for the three months ended
September 30, 2004 was approximately $26,000, compared to a loss from continuing
operations of approximately $57,000 for the three months ended September 30,
2003. The decrease in loss from continuing operations is due to a decrease in
total expenses partially offset by a decrease in total revenues.
The decrease in total revenues for the three and nine months ended September 30,
2004 is due to a decrease in rental income partially offset by an increase in
other income. Rental income decreased due to a decrease in occupancy and the
average rental rates and an increase in concessions at Lakeside Apartments. The
increase in other income is primarily attributable to Lakeside Apartments now
submetering utilities to residents and an increase in lease cancellation fees.
Total expenses for the nine months ended September 30, 2004 decreased due to
decreases in general and administrative, depreciation, interest and property tax
expenses slightly offset by an increase in operating expense. Depreciation
expense decreased due to some property improvements and replacements becoming
fully depreciated at Lakeside Apartments during the past twelve months which
more than offset depreciation on new improvements and replacements. Interest
expense decreased due to the payment of scheduled principal payments on the
mortgage encumbering Lakeside Apartments, which has reduced the average
outstanding balance over the past twelve months. The decrease in property tax
expense is a result of the tax bill for 2002, which was received and paid during
the second quarter of 2003 being higher than had been estimated for at Lakeside
Apartments. Upon receipt and payment of the 2002 tax bill in the second quarter,
the Partnership revised its estimate of its 2003 liability, which resulted in an
increase in property tax expense for the year ended December 31, 2003. The
Partnership has based it estimate of the 2004 property tax expense for Lakeside
Apartments upon the actual bill received during the 2003 calendar year.
Operating expense increased primarily due to an increase in property expense.
Property expense increased due to an increase in utility costs, salaries and
related employee benefits at Lakeside Apartments.
Total expenses for the three months ended September 30, 2004 decreased due to
the decreases in interest and property tax expenses as discussed above, a
decrease in operating expense partially offset by increases in general and
administrative and depreciation expenses. Operating expenses decreased for the
three months due to a decrease in maintenance costs incurred at Lakeside
Apartments. The increase in depreciation expense is due to property improvements
and replacements being placed into service over the past twelve months.
General and administrative expense decreased for the nine months ended September
30, 2004 and increased for the three months ended September 30, 2004. The
decrease for the nine months is due to a decrease in reimbursements to the
Managing General Partner allowed under the Partnership Agreement associated with
the management of the Partnership. The decrease in these costs is due to the
sale of Summerwalk Apartments. The increase for the three months is due to an
increase in non-accountable reimbursements paid with distributions from
operations. Costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
Capital Resources and Liquidity
At September 30, 2004, the Partnership had cash and cash equivalents of
approximately $101,000 as compared to approximately $199,000 at September 30,
2003. Cash and cash equivalents decreased approximately $94,000 from December
31, 2003 due to approximately $13,619,000 of cash used in financing activities
partially offset by approximately $13,241,000 and $284,000 of cash provided by
investing and operating activities, respectively. Cash used in financing
activities consisted of distributions to the partners, the repayment of the
mortgage note payable for Summerwalk Apartments, principal payments made on the
mortgages encumbering the Partnership's properties and payments on advances
received from an affiliate of the Managing General Partner partially offset by
advances received from an affiliate of the Managing General Partner. Cash
provided by investing activities consisted of net proceeds from the sale of
Summerwalk Apartments and withdrawals from restricted escrows maintained by the
mortgage lenders slightly offset by property improvements and replacements. The
Partnership invests its working capital reserves in interest bearing accounts.
NPI Equity on behalf of the Partnership and certain affiliated partnerships, has
established a revolving credit facility (the "Partnership Revolver") to be used
to fund deferred maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $300,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and accrue interest at the prime rate plus 2%
per annum. The maturity date of any such borrowing accelerates in the event of:
(i) the removal of NPI Equity as the managing general partner (whether or not
for cause); (ii) the sale or refinancing of a property by the Partnership
(whether or not a borrowing under the Partnership Revolver was made with respect
to such property); or (iii) the liquidation of the Partnership. During the nine
months ended September 30, 2004, the Partnership borrowed approximately $200,000
and repaid approximately $108,000, representing the outstanding principal
balance which had been previously borrowed under the Partnership Revolver and
approximately $2,000 of accrued interest.
Interest expense during the nine months ended September 30, 2004 and 2003,
amounted to approximately $2,000 and less than $1,000, respectively. During the
nine months ended September 30, 2003, the Partnership borrowed approximately
$190,000 and repaid approximately $82,000 under the 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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance. Capital improvements planned for each of
the Partnership's properties are detailed below.
Lakeside Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $250,000 of capital improvements at Lakeside Apartments consisting
primarily of floor covering, gutter and water heater replacements, major
landscaping, new fitness equipment, plumbing fixture upgrades, and fire safety
equipment. 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 $63,000 in capital
improvements during the remainder of 2004. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as the anticipated cash flow generated by the property.
Pinetree Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $133,000 of capital improvements at Pinetree Apartments consisting
primarily of structural improvements, appliance and floor covering replacements
and major landscaping. 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 $42,000 in capital
improvements during the remainder of 2004. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as the anticipated cash flow generated by the property.
Additional capital expenditures will be incurred only if cash is available from
operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering Lakeside Apartments of approximately $22,867,000 is
being amortized over 20 years and matures in January 2022, at which time the
mortgage is scheduled to be fully amortized. The mortgage indebtedness
encumbering Pinetree Apartments of approximately $4,380,000 is included in
liabilities related to assets held for sale and is being amortized over 20 years
and matures in November 2019, at which time the mortgage is scheduled to be
fully amortized.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2005. Accordingly, prior to such date the Partnership
will need to either sell its investment properties or extend the term of the
Partnership.
The Partnership distributed the following amounts during the 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
Sale (1) $ 8,167 $169.79 $ -- $ --
Operations 359 7.40 166 3.41
$ 8,526 $177.19 $ 166 $ 3.41
(1) Cash from the sale proceeds of Summerwalk Apartments.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of debt maturities,
refinancings and/or property sales. The Partnership's cash available for
distribution is reviewed on a monthly basis. There can be no assurance that the
Partnership will generate sufficient funds after required capital expenditures
to permit additional distributions to its partners in 2004 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 36,316 limited partnership units
(the "Units") in the Partnership representing 75.58% of the outstanding Units at
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, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its ownership of 75.58% of
the outstanding Units, AIMCO and its affiliates are in a position to influence
all voting decisions with respect to the Partnership. However, with respect to
the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P. (previously
known as Insignia Properties, L.P.), an affiliate of the Managing General
Partner and of AIMCO, agreed to vote such Units: (i) against any increase in
compensation payable to the Managing General Partner or to its affiliates; and
(ii) on all other matters submitted by it or its affiliates, in proportion to
the vote cast by third party unitholders. Except for the foregoing, no other
limitations are imposed on AIMCO IPLP L.P.'s, AIMCO's or any other affiliates'
right to vote each Unit held. Although the Managing General Partner owes
fiduciary duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the Managing General Partner, as managing general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint 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 consolidated
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 III
By: NPI EQUITY INVESTMENTS, INC.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 12, 2004
EXHIBIT INDEX
Exhibit
2.1 NPI, Inc. Stock Purchase Agreement dated as of August 17,
1995, incorporated by reference to Exhibit 2 to the
Partnership's Current Report on Form 8-K dated August 17,
1995.
3.4 (a) Agreement of Limited Partnership incorporated by reference
to Exhibit A to the Prospectus of the Partnership dated
October 24, 1979 contained in the Partnership's
Registration Statement on Form S-11 (Reg. No. 2-63733).
3.4 (b) Amendments to Agreement of Limited Partnership dated as of
November 25, 1980 incorporated by reference to Exhibits 3
and 4 to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1981.
3.4 (c) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Definitive Proxy Statement
of the Partnership dated April 3, 1981.
3.4 (d) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Statement Furnished in
Connection With The Solicitation of Consents of the
Partnership dated August 28, 1992.
3.5 First Amendment to Partnership Agreement Summerwalk NPI
III, L.P., dated January 15, 2004. (1)
10.8 Multifamily Note dated December 14, 2001, by and between
National Property Investors III, L.P., a California limited
partnership, and GMAC Commercial Mortgage Corporation, a
California corporation filed with the Registrant's Form 10-KSB
for the year ended December 31, 2002.
10.9 (a) Purchase and Sale Contract between Summerwalk NPI III, L.P.
and Summerwalk Associates, LLC (successor in interest to
Blackhawk Realty Advisors, Inc.), dated November 7, 2003.
(1)
10.9 (b) First Amendment to Purchase and Sale Contract - Summerwalk
Apartments, dated November 25, 2003. (1)
10.9 (c) Second Amendment to Purchase and Sale Contract - Summerwalk
Apartments, dated December 15, 2003. (1)
10.9 (d) Third Amendment to Purchase and Sale Contract - Summerwalk
Apartments, dated December 18, 2003. (1)
10.9 (e) Fourth Amendment to Purchase and Sale Contract - Summerwalk
Apartments, dated January 12, 2004. (1)
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(1) Filed as exhibits 3.5 and 10.9(a) through (e) to the Registrant's Current
Report on Form 8-K dated January 15, 2004 and incorporated herein by
reference.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: 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 III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: 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 III (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.