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 March 31, 2005
[ ] 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)
March 31, 2005
Assets
Cash and cash equivalents $ 123
Receivables and deposits 233
Other assets 744
Assets held for sale (Note A) 1,600
Investment property:
Land $ 2,093
Buildings and related personal property 22,926
25,019
Less accumulated depreciation (20,045) 4,974
$ 7,674
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 235
Tenant security deposit liabilities 139
Accrued property taxes 860
Other liabilities 250
Due to affiliates 211
Mortgage note payable 22,525
Liabilities related to assets held for sale (Note A) 4,348
Partners' Deficit
General partner $ (208)
Limited partners (48,049 units
issued and outstanding) (20,686) (20,894)
$ 7,674
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
March 31,
2005 2004
(Restated)
Revenues:
Rental income $ 1,133 $ 1,110
Other income 173 156
Total revenues 1,306 1,266
Expenses:
Operating 569 504
General and administrative 46 69
Depreciation 102 237
Interest 413 421
Property taxes 174 172
Total expenses 1,304 1,403
Income (loss) from continuing operations 2 (137)
Income (loss) from discontinued operations 23 (807)
Gain on sale of discontinued operations (Note C) -- 11,944
Net income $ 25 $11,000
Net income allocated to general partner (1%) $ -- $ 110
Net income allocated to limited partners (99%) 25 10,890
$ 25 $11,000
Per limited partnership unit:
Income (loss) from continuing operations $ 0.04 $ (2.83)
Income (loss) from discontinued operations 0.48 (17.08)
Gain on sale of discontinued operations -- 246.55
Net income per limited partnership unit $ 0.52 $226.64
Distributions per limited partnership unit $ -- $169.79
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, 2004 48,049 $ (208) $(20,711) $(20,919)
Net income for the three months
ended March 31, 2005 -- -- 25 25
Partners' deficit at
March 31, 2005 48,049 $ (208) $(20,686) $(20,894)
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2005 2004
Cash flows from operating activities:
Net income $ 25 $ 11,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 102 287
Amortization of loan costs 9 12
Bad debt expense 49 40
Gain on sale of investment property -- (11,944)
Loss on early extinguishment of debt -- 715
Change in accounts:
Receivables and deposits (15) 89
Other assets (71) (107)
Accounts payable 38 (52)
Tenant security deposit liabilities (3) (59)
Accrued property taxes 126 123
Due to affiliates (4) (2)
Other liabilities (100) 180
Net cash provided by operating activities 156 282
Cash flows from investing activities:
Property improvements and replacements (98) (61)
Net withdrawals from restricted escrows -- 14
Net proceeds from sale of investment property -- 13,589
Net cash (used in) provided by investing activities (98) 13,542
Cash flows from financing activities:
Repayment of mortgage note payable -- (4,642)
Payments on mortgage notes payable (226) (138)
Payments on advances from affiliate -- (108)
Distributions to partners -- (8,167)
Net cash used in financing activities (226) (13,055)
Net (decrease) increase in cash and cash equivalents (168) 769
Cash and cash equivalents at beginning of period 291 195
Cash and cash equivalents at end of period $ 123 $ 964
Supplemental disclosure of cash flow information:
Cash paid for interest $ 512 $ 390
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 117 $ 15
At December 31, 2004, approximately $14,000 of property improvements and
replacements were included in accounts payable which are included in property
improvements and replacements during the three months ended March 31, 2005.
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 months ended March 31, 2005, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2005. 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, 2004. 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 months
ended March 31, 2004 have been restated as of January 1, 2004 to reflect the
operations of Pinetree Apartments, which is currently held for sale, as income
(loss) from discontinued operations in accordance with Statement of Financial
Accounting Standards ("SFAS") 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 March 31,
2005. Included in the income (loss) from discontinued operations is net income
for Pinetree Apartments of approximately $23,000 for the three months ended
March 31, 2005 and a net loss for Pinetree Apartments of approximately $5,000
for the three months ended March 31, 2004. Included in the income (loss) from
discontinued operations for the three months ended March 31, 2005 and 2004 are
revenues for Pinetree Apartments of approximately $299,000 and $304,000,
respectively. See Note C - Disposition of Investment Property for information
related to Summerwalk Apartments which was sold on January 15, 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 received 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
$80,000 and $85,000 for the three months ended March 31, 2005 and 2004,
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 $38,000 and
$61,000 for the three months ended March 31, 2005 and 2004, respectively, which
is included in general and administrative expenses, investment property and
assets held for sale. The portion of these reimbursements included in investment
property and assets held for sale for the three months ended March 31, 2005 and
2004 are fees related to construction management services provided by an
affiliate of the Managing General Partner of approximately $3,000 for both
periods. The construction management service fees are calculated based on a
percentage of current year additions to investment property. At March 31, 2005,
approximately $3,000 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. There were no such fees for the three months ended March 31, 2005
and 2004, as no operating distributions were made.
Upon the sale of the Partnership properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized by
NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive Compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership at February 1,
1992. In connection with the January 2004 sale of Summerwalk Apartments, an
Incentive Compensation Fee of approximately $222,000 was earned and paid to the
Managing General Partner.
NPI Equity on behalf of the Partnership and certain affiliated partnerships, has
established a revolving credit facility (the "Partnership Revolver") to be used
to fund deferred maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $300,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and accrue interest at the prime rate plus 2%
per annum (7.75% at March 31, 2005). 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 three months ended March 31, 2004, the Partnership
repaid approximately $108,000, representing the outstanding principal balance
which had been previously borrowed under the Partnership Revolver and
approximately $2,000 of accrued interest. Interest expense during the three
months ended March 31, 2005 and 2004 was approximately $4,000 and less than
$1,000, respectively. At March 31, 2005, approximately $208,000 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 three months ended March 31, 2005, the
Partnership was charged by AIMCO and its affiliates approximately $53,000 for
hazard insurance coverage and fees associated with policy claims administration.
Additional charges will be incurred by the Partnership during 2005 as other
insurance policies renew later in the year. The Partnership was charged by AIMCO
and its affiliates approximately $91,000 for insurance coverage and fees
associated with policy claims administration during the year ended December 31,
2004.
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 $11,944,000 for the three months ended March 31, 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 for the three months
ended March 31, 2004, including revenues of approximately $51,000, are included
in loss from discontinued operations. In addition, the Partnership recorded a
loss on early extinguishment of debt of approximately $715,000 for the three
months ended March 31, 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 28, 2002, the trial court granted defendants
motion to strike the complaint.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 May 4, 2004,
the Objector filed a second appeal challenging the court's use of a referee and
its order requiring Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. The Managing General Partner and its affiliates
are currently scheduled to file an answer to Objector's petition on May 18,
2005.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
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.
The complaint attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company 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. Oral argument relating to the
certification of the collective action took place on May 12, 2005 and the
parties await a ruling from the Court. 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.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, the presence of hazardous
substances on a property could result in claims by private plaintiffs for
personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership and operation of its properties, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the Managing General Partner believes that these measures
will eliminate, or at least minimize, the effects that mold could have on
residents. To date, the Partnership has not incurred any material costs or
liabilities relating to claims of mold exposure or to abate mold conditions.
Because the law regarding mold is unsettled and subject to change the Managing
General Partner can make no assurance that liabilities resulting from the
presence of or exposure to mold will not have a material adverse effect on the
Partnership's consolidated financial condition or results of operations.
SEC Investigation
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.
At the end of the first quarter of 2005, the SEC added certain tender offers for
limited partnership interests as an area of investigation. AIMCO is cooperating
fully. AIMCO is not able to predict when the investigation 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 three month periods ended March 31, 2005 and 2004:
Average Occupancy
Property 2005 2004
Lakeside Apartments 91% 90%
Lisle, Illinois
Pinetree Apartments 93% 95%
Charlotte, North Carolina
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 three months ended March 31, 2005 was
approximately $25,000 compared to net income of approximately $11,000,000 for
the three months ended March 31, 2004. The decrease in net income is due to the
recognition of a gain from the sale of Summerwalk Apartments during the three
months ended March 31, 2004 partially offset by an increase in income from
continuing and discontinued operations.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144
the accompanying consolidated statement of operations for the three months ended
March 31, 2004 has been restated to reflect the operations of Pinetree
Apartments which is currently held for sale as loss from discontinued
operations. The operations of Summerwalk Apartments which sold on January 15,
2004 had previously been classified as held for sale for the three months ended
March 31, 2004. The Partnership has committed to a plan to sell Pinetree
Apartments within one year.
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 $11,944,000 for the three months ended March 31, 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 net loss of approximately $802,000 for the three months
ended March 31, 2004, including revenues of approximately $51,000 are included
in loss from discontinued operations. In addition, the Partnership recorded a
loss on early extinguishment of debt of approximately $715,000 for the three
months ended March 31, 2004 due to the write-off of approximately $75,000 of
unamortized loan costs and the payment of approximately $640,000 for a
prepayment penalty relating to the repayment of the mortgage encumbering the
property, which is also included in loss from discontinued operations in the
accompanying consolidated statements of operations.
The Partnership recognized income from discontinued operations of approximately
$23,000 and a loss of approximately $807,000 for the three months ended March
31, 2005 and 2004, respectively. Excluding the loss from discontinued operations
related to Summerwalk Apartments, discussed above, the loss from discontinued
operations for the three months ended March 31, 2004 was approximately $5,000.
The increase in income from discontinued operations for the comparable periods
is due to a decrease in depreciation expense at Pinetree Apartments since
October 1, 2004, when the assets were classified as held for sale.
The Partnership's income from continuing operations for the three months ended
March 31, 2005 was approximately $2,000, compared to a net loss from continuing
operations of approximately $137,000 for the three months ended March 31, 2004.
The increase in income from continuing operations is due to an increase in total
revenues and a decrease in total expenses. The increase in total revenues is due
to an increase in rental income and other income. Rental income increased due to
a slight increase in occupancy and in the average rental rate at Lakeside
Apartments. The increase in other income is primarily attributable to
submetering utilities to residents at Lakeside Apartments which commenced in
February 2004.
Total expenses decreased due to decreases in general and administrative,
depreciation and interest expenses partially offset by an increase in operating
expenses. Property tax expense remained relatively constant during the
comparable period. 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 the 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.
Operating expenses increased due to increases in property, administrative and
maintenance expenses. Property expenses increased due to increases in utility
costs, salaries and related employee benefits. Administrative expenses increased
due to increases in costs related to tenant application processes. Maintenance
expenses increased due to an increase in contract services at Lakeside
Apartments.
General and administrative expenses decreased 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 2004 sale of Summerwalk Apartments. 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 March 31, 2005, the Partnership had cash and cash equivalents of
approximately $123,000 as compared to approximately $964,000 at March 31, 2004.
Cash and cash equivalents decreased approximately $168,000 from December 31,
2004 due to approximately $226,000 and $98,000 of cash used in financing and
investing activities, respectively, partially offset by approximately $156,000
of cash provided by operating activities. Cash used in financing activities
consisted of principal payments made on the mortgages encumbering the
Partnership's properties. Cash used in investing activities consisted of
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 (7.75% at March 31, 2005). 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 three months ended March 31, 2004, the Partnership
repaid approximately $108,000, representing the outstanding principal balance
which had been previously borrowed under the Partnership Revolver and
approximately $2,000 of accrued interest. Interest expense during the three
months ended March 31, 2005 and 2004 was approximately $4,000 and less than
$1,000, respectively. At March 31, 2005, approximately $208,000 was owed,
including accrued interest, and is included in due to affiliates.
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 three months ended March 31, 2005, the Partnership completed
approximately $147,000 of capital improvements at Lakeside Apartments consisting
primarily of swimming pool upgrades, floor covering and water heater
replacements and fire safety equipment. These improvements were funded from
operating cash flow. The Partnership regularly evaluates the capital improvement
needs of the property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Pinetree Apartments
During the three months ended March 31, 2005, the Partnership completed
approximately $54,000 of capital improvements at Pinetree Apartments consisting
primarily of interior decoration and signage and floor covering replacements.
These improvements were funded from operating cash flow. The Partnership
regularly evaluates the capital improvement needs of the property. While the
Partnership has no material commitments for property improvements and
replacements, certain routine expenditures are anticipated during 2005. Such
capital expenditures will depend on the physical condition of the property as
well as 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 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 $22,525,000 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 $4,289,000 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. The Managing General Partner is currently
evaluating an extension of the Partnership's term and expects to have such
extension completed by the end of 2005.
The Partnership distributed the following amounts during the three months ended
March 31, 2005 and 2004 (in thousands, except per unit data):
Per Limited Per Limited
Three Months Ended Partnership Three Months Ended Partnership
March 31, 2005 Unit March 31, 2004 Unit
Sale (1) $ -- $ -- $ 8,167 $ 169.79
(1) Cash from the sale proceeds of Summerwalk Apartments.
Future cash distributions will depend on the levels of net cash generated from
operations, the timing of debt maturities, property sales and/or refinancings.
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 capital expenditures to permit distributions to its partners in 2005
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
March 31, 2005. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. In this regard, on February 16, 2005
AIMCO Properties, L.P. commenced a tender offer to purchase any remaining Units
held by unaffiliated third parties at a price of $178.35 per Unit. Such offer
expires on May 31, 2005. 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., 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.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. 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.
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 28, 2002, the trial court granted defendants
motion to strike the complaint.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 May 4, 2004,
the Objector filed a second appeal challenging the court's use of a referee and
its order requiring Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. The Managing General Partner and its affiliates
are currently scheduled to file an answer to Objector's petition on May 18,
2005.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
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.
The complaint attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company 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. Oral argument relating to the
certification of the collective action took place on May 12, 2005 and the
parties await a ruling from the Court. 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 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
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: May 13, 2005
NATIONAL PROPERTY INVESTORS III
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 of the equivalent of the Chief Executive
Officer and Chief Financial Officer 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: May 13, 2005
/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: May 13, 2005
/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 March 31, 2005
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: May 13, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: May 13, 2005
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.