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, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-13454
NATIONAL PROPERTY INVESTORS 7
(Exact name of small business issuer as specified in its charter)
California 13-3230613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes __ No X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS 7
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2005
Assets
Cash and cash equivalents $ 122
Receivables and deposits 157
Restricted escrows 76
Other assets 182
Investment property:
Land $ 1,094
Buildings and related personal property 10,558
11,652
Less accumulated depreciation (7,835) 3,817
$ 4,354
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 77
Tenant security deposit liabilities 28
Accrued property taxes 37
Other liabilities 150
Due to affiliates (Note B) 405
Mortgage note payable 4,897
Partners' Deficit:
General partner $ (314)
Limited partners (60,517 units
issued and outstanding) (926) (1,240)
$ 4,354
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 294 $ 302 $ 879 $ 877
Other income 21 32 63 66
Total revenues 315 334 942 943
Expenses:
Operating 172 160 436 407
General and administrative 28 24 97 159
Depreciation 102 93 302 281
Interest 89 106 274 291
Property taxes 12 12 37 36
Total expenses 403 395 1,146 1,174
Loss from continuing operations (88) (61) (204) (231)
Loss from discontinued operations (Note A) -- -- -- (1,171)
Gain on sale of discontinued
operations (Note C) -- 17 -- 6,645
Net (loss) income $ (88) $ (44) $ (204) $ 5,243
Net (loss) income allocated to
general partner (1%) $ (1) $ (1) $ (2) $ 52
Net (loss) income allocated to
limited partners (99%) (87) (43) (202) 5,191
$ (88) $ (44) $ (204) $ 5,243
Net (loss) income per limited partnership unit:
Loss from continuing operations $ (1.44) $ (0.99) $ (3.34) $ (3.78)
Loss from discontinued operations -- -- -- (19.15)
Gain on sale of discontinued
operations -- 0.28 -- 108.71
$ (1.44) $ (0.71) $ (3.34) $ 85.78
Distributions per limited partnership unit $ -- $ -- $ -- $113.84
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 60,517 1 $30,259 $30,260
Partners' deficit
at December 31, 2004 60,517 $ (312) $ (724) $(1,036)
Net loss for the nine months
ended September 30, 2005 -- (2) (202) (204)
Partners' deficit at
September 30, 2005 60,517 $ (314) $ (926) $(1,240)
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net (loss) income $ (204) $ 5,243
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation 302 411
Bad debt 18 21
Amortization of loan costs 7 9
Loss on early extinguishment of debt -- 1,119
Gain on sale of discontinued operations -- (6,645)
Change in accounts:
Receivables and deposits (93) 243
Other assets -- 7
Accounts payable (37) (167)
Tenant security deposit liabilities 5 (14)
Accrued property taxes 37 37
Due to affiliates 9 (72)
Other liabilities 17 (217)
Net cash provided by (used in) operating activities 61 (25)
Cash flows from investing activities:
Property improvements and replacements (270) (182)
Net receipts from restricted escrows 106 87
Net proceeds from sale of discontinued operations -- 8,748
Net cash (used in) provided by investing activities (164) 8,653
Cash flows from financing activities:
Repayment of mortgage note payable -- (3,790)
Advances from affiliates 122 --
Repayment of advances from affiliates (27) --
Debt extinguishment cost -- (1,027)
Payments on mortgage notes payable (118) (150)
Distributions to partners -- (6,958)
Net cash used in financing activities (23) (11,925)
Net decrease in cash and cash equivalents (126) (3,297)
Cash and cash equivalents at beginning of period 248 3,628
Cash and cash equivalents at end of period $ 122 $ 331
Supplemental disclosure of cash flow information:
Cash paid for interest $ 274 $ 371
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts payable $ 70 $ --
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 7
(the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of NPI Equity Investments, Inc. (the "Managing General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
nine month periods ended September 30, 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 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.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying statements of operations for the three and nine months ended
September 30, 2004 reflect the operations of The Pines of Roanoke Apartments as
loss from discontinued operations due to its sale in April 2004 (see "Note C").
Certain 2004 balances have been reclassified to conform with the 2005
presentation.
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 receive 5% of gross receipts from the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $45,000 and
$75,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses and loss from discontinued operations.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $76,000 and $81,000 for the
nine months ended September 30, 2005 and 2004, which is included in general and
administrative expenses and investment property. The portion of these
reimbursements included in investment property for the nine months ended
September 30, 2005 and 2004 are fees related to construction management services
provided by an affiliate of the Managing General Partner of approximately
$31,000 and $6,000, respectively. The construction management service fees are
calculated based on a percentage of additions to the investment property. At
September 30, 2005, approximately $12,000 in reimbursements was due to the
Managing General Partner and is included in due to affiliates.
For services relating to the administration of the Partnership and operation of
the Partnership's property, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year from
distributions from operations, based upon the number of Partnership units sold,
subject to certain limitations. No such fees were earned or paid during the nine
months ended September 30, 2005 and 2004.
For managing the affairs of the Partnership, the Managing General Partner of the
Partnership is entitled to receive a partnership management fee. The fee is
equal to 4% of the Partnership's adjusted cash from operations, as defined in
the Partnership Agreement, in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited partners adjusted
cash from operations in such year which is equal to 5% of the limited partners'
adjusted invested capital, as defined, on a non-cumulative basis. In addition,
50% of the fee shall not be paid until the Partnership has distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners' adjusted invested capital on a non-cumulative basis.
The fee shall be paid when adjusted cash from operations is distributed to the
limited partners. The Managing General Partner was not entitled to receive this
fee during the nine months ended September 30, 2005 or 2004.
NPI Equity, on behalf of the Partnership and certain affiliated partnerships,
has established a revolving credit facility (the "Partnership Revolver") to be
used to fund deferred maintenance and working capital needs of the Partnership
and certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $500,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and bear interest at the prime rate plus 2% per
annum, approximately 8.75% at September 30, 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. The Managing General Partner advanced the
Partnership approximately $122,000 to pay outstanding accounts payable and for
property improvements and replacements at Fairway View II Apartments during the
nine months ended September 30, 2005. During the nine months ended September 30,
2005, the Partnership paid approximately $40,000 in principal payments and
interest. Interest expense for the nine months ended September 30, 2005 was
approximately $18,000. There was no such interest expense for the nine months
ended September 30, 2004. At September 30, 2005, approximately $393,000 in
principal and accrued interest was included in due to affiliates. Subsequent to
September 30, 2005, the Managing General Partner advanced the Partnership
approximately $74,000 to fund property improvements and replacements at Fairway
View II Apartments.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers' compensation, property casualty, general
liability and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the nine months ended
September 30, 2005 and 2004, the Partnership was charged by AIMCO and its
affiliates approximately $21,000 and $43,000, respectively, for insurance
coverage and fees associated with policy claims administration.
Note C - Sale of Discontinued Operations
On April 30, 2004, the Partnership sold The Pines of Roanoke Apartments to an
unrelated third party for net proceeds of approximately $8,748,000 after payment
of closing costs. The Partnership realized a gain of approximately $6,645,000 as
a result of the sale. The Partnership used approximately $3,790,000 of the net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$1,119,000 as a result of unamortized loan costs being written off and a
prepayment penalty. This amount is included in loss from discontinued
operations. In accordance with SFAS 144, the accompanying statements of
operations for the three and nine months ended September 30, 2004 reflect the
operations of The Pines Apartments as discontinued operations. Included in loss
from discontinued operations for the nine months ended September 30, 2004 is
approximately $473,000, of revenue generated by the property. The additional
gain of approximately $17,000 recognized during the three months ended September
30, 2004 was due to a change in the estimated costs associated with the sale.
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. Plaintiffs took an appeal from this order.
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. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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, filed in the United States District Court for the District of
Columbia, 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 excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
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.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that is 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, and potential fines or
penalties imposed by such agencies in connection therewith, 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, operation and management of its property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
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 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 financial condition
or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its 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 have included 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, tax credit transactions, and
tender offers for limited partnership interests. 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 financial condition or results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
nine month periods ended September 30, 2005 and 2004:
Average Occupancy
2005 2004
Fairway View II Apartments 84% 83%
Baton Rouge, Louisiana
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage loans, costs incurred to operate the investment property,
general economic conditions and weather. As part of the ongoing business plan of
the Partnership, the Managing General Partner monitors the rental market
environment of its investment property to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses. As part of this plan, the Managing General Partner
attempts to protect the Partnership from the burden of inflation-related
increases in expenses by increasing rents and maintaining a high overall
occupancy level. However, the Managing General Partner may use rental
concessions and rental rate reductions to offset softening market conditions;
accordingly, there is no guarantee that the Managing General Partner will be
able to sustain such a plan. Further, a number of factors that are outside the
control of the Partnership such as the local economic climate and weather can
adversely or positively affect the Partnership's financial results.
Results of Operations
The Partnership's net loss for the three months ended September 30, 2005 was
approximately $88,000 compared to a net loss of approximately $44,000 for the
corresponding period in 2004. The Partnership's net loss for the nine months
ended September 30, 2005 was approximately $204,000 compared to net income of
approximately $5,243,000 for the corresponding period in 2004. The increase in
net loss for the three month period is due to a decrease in total revenues, an
increase in total expenses and a decrease in the gain on sale of discontinued
operations. The decrease in net income for the nine month period is due to the
recognition of a gain on the sale of The Pines of Roanoke Apartments during 2004
partially offset by a decrease in loss from discontinued operations. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the statements of operations for the three and nine months ended September 30,
2004 reflect the operations of The Pines of Roanoke Apartments as loss from
discontinued operations due to its sale in April 2004.
On April 30, 2004, the Partnership sold The Pines of Roanoke Apartments to an
unrelated third party for net proceeds of approximately $8,748,000 after payment
of closing costs. The Partnership realized a gain of approximately $6,645,000 as
a result of the sale. The Partnership used approximately $3,790,000 of the net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$1,119,000 as a result of unamortized loan costs being written off and a
prepayment penalty. This amount is included in loss from discontinued
operations. Included in loss from discontinued operations for the nine months
ended September 30, 2004 is approximately $473,000, of revenue generated by the
property. The additional gain of approximately $17,000 recognized during the
three months ended September 30, 2004 was due to the write off of expense
reserves established at the time of the sale, which were determined to be
unneeded.
Excluding the gain on sale and loss from discontinued operations, the
Partnership's loss from continuing operations for the three and nine months
ended September 30, 2005 was approximately $88,000 and $204,000 respectively,
compared to loss from continuing operations of approximately $61,000 and
$231,000 for the same period in 2004. The increase in loss from continuing
operations for the three-month period is due to a decrease in total revenues and
an increase in total expenses. The decrease in loss from continuing operations
for the nine month period is due to a decrease in total expenses. Total revenues
remained relatively constant for the nine month period. The decrease in total
revenues for the three-month period is due to a decrease in other income. Other
income decreased due to a decrease in late charges at the investment property.
Total expenses increased for the three month period due to increases in
operating and depreciation expenses, partially offset by a decrease in interest
expense. Total expenses decreased for the nine month period due to decreases in
general and administrative and interest expenses, partially offset by an
increase in operating and depreciation expenses. Operating expense increased for
the three month period due to an increase in administrative expense, partially
offset by a decrease in maintenance expense. Operating expense increased for the
nine months due to an increase in property and administrative expenses,
partially offset by a decrease in maintenance expense. Property expense
increased for the nine month period due to increases in utilities and referral
fees, partially offset by a decrease in payroll and related benefits.
Administrative expense increased for both periods due to increases in temporary
agency help and training and travel. Maintenance expense decreased for both
periods due to decreases in contract labor. Depreciation expense increased for
both periods due to property improvements and replacements placed into service
the past twelve months. Interest expense decreased for both periods due to the
payment of fees in 2004 on a refinancing that fell through on Fairway View
Apartments, partially offset by an increase in interest on the advances from an
affiliate of the Managing General Partner.
General and administrative expense decreased for the nine month period due to
reduced costs of services included in the management reimbursements paid to the
Managing General Partner as allowed under the Partnership Agreement and reduced
professional fees associated with managing the Partnership. Also included in
general and administrative expenses for the three and nine months ended
September 30, 2005 and 2004 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $122,000 compared to approximately $331,000 at September 30, 2004.
The decrease in cash and cash equivalents of approximately $126,000 from the
Partnership's year ended December 31, 2004 is due to approximately $164,000 and
$23,000 of cash used in investing and financing activities, respectively,
partially offset by approximately $61,000 of cash provided by operating
activities. Cash used in investing activities consisted of property improvements
and replacements partially offset by net withdrawals from restricted escrows.
Cash used in financing activities consisted of principal payments on the
mortgage encumbering the Partnership's investment property and repayments of
advances from an affiliate of the Managing General Partner partially offset by
advances from an affiliate of the Managing General Partner. The Partnership
invests its working capital in interest bearing accounts.
NPI Equity, on behalf of the Partnership and certain affiliated partnerships,
has established a revolving credit facility (the "Partnership Revolver") to be
used to fund deferred maintenance and working capital needs of the Partnership
and certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $500,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and bear interest at the prime rate plus 2% per
annum, approximately 8.75% at September 30, 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. The Managing General Partner advanced the
Partnership approximately $122,000 to pay outstanding accounts payable and for
property improvements and replacements at Fairway View II Apartments during
2005. During the nine months ended September 30, 2005, the Partnership paid
approximately $40,000 in principal payments and interest. Interest expense for
the nine months ended September 30, 2005 was approximately $18,000. There was no
such interest expense for the nine months ended September 30, 2004. At September
30, 2005, approximately $393,000 in principal and accrued interest was included
in due to affiliates. Subsequent to September 30, 2005, the Managing General
Partner advanced the partnership approximately $111,000 to fund property
improvements and replacements at Fairway View II Apartments.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal, state,
and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance. Capital improvements planned for the
Partnership's property are detailed below.
During the nine months ended September 30, 2005, the Partnership completed
approximately $340,000 of capital improvements at Fairway View II, consisting
primarily of siding, stairway and wood replacements, exterior painting,
electrical upgrades, and air conditioning unit, appliance, gutter, roof and
floor covering replacements. These improvements were funded from operating cash
flow, advances from affiliates of the Managing General Partner and replacement
reserves. 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 replacement reserves and anticipated cash
flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations
or from Partnership reserves. To the extent that capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the investment property of approximately $4,897,000
matures December 1, 2021 at which time the loan is scheduled to be fully
amortized.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2008. Accordingly, prior to such date the Partnership
will need to either sell its investment property or extend the term of the
Partnership.
The Partnership distributed the following amounts during the nine months ended
September 30, 2005 and 2004 (in thousands, except per unit data):
Nine Months Per Limited Nine Months Per Limited
Ended Partnership Ended Partnership
September 30, 2005 Unit September 30, 2004 Unit
Sale proceeds (1) $ -- $ -- $6,958 $113.84
(1) Proceeds from the sales of South Point in December 2003 and The Pines
of Roanoke Apartments in April 2004.
Future cash distributions will depend on the levels of net cash generated from
operations and the timing of the debt maturity, property sale and/or
refinancing. The Partnership's cash available for distribution is reviewed on a
monthly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations after planned capital expenditures to
permit distributions to its partners in 2005 or subsequent periods.
Other
In addition to its indirect ownership of the Managing General Partner interest
in the Partnership, AIMCO and its affiliates owned 42,461.67 limited partnership
units (the "Units") in the Partnership representing 70.16% of the outstanding
Units at September 30, 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. Pursuant to the Partnership
Agreement, unit holders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its ownership of 70.16% of
the outstanding Units, AIMCO and its affiliates are in a position to influence
all such voting decisions with respect to the Partnership. However, DeForest
Ventures II L.P., from whom AIMCO IPLP, L.P., an affiliate of the Managing
General Partner and of AIMCO, acquired 25,399 Units (41.97% of the units),
agreed for the benefit of non-tendering unit holders, that it would vote its
Units: (i) against any increase in compensation payable to the Managing General
Partner or to its affiliates; and (ii) on all other matters submitted by it or
its affiliates, in proportion to the votes cast by third party unit holders.
Except for the foregoing, no other limitations are imposed on IPLP's, AIMCO's or
any other affiliates right to vote each unit held. Although the Managing General
Partner owes fiduciary duties to the limited partners of the Partnership, the
Managing General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General Partner, as
Managing General Partner, to the Partnership and its limited partners may come
into conflict with the duties of the Managing General Partner to AIMCO as its
sole stockholder.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the property may be impaired, the Partnership will make an assessment
of its recoverability by estimating the undiscounted future cash flows,
excluding interest charges, of the property. If the carrying amount exceeds the
aggregate future cash flows, the Partnership would recognize an impairment loss
to the extent the carrying amount exceeds the fair value of the property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
asset.
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. Plaintiffs took an appeal from this order.
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. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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, filed in the United States District Court for the District of
Columbia, 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 excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
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 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 7
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
NATIONAL PROPERTY INVESTORS 7
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.5 Master Indemnity Agreement dated as of August 17, 1995. (1)
3.4 (a) Agreement of Limited Partnership. (2)
(b) Amendments to the Agreement of Limited Partnership. (3)
(c) Amendments to the Agreement of Limited Partnership. (4)
(d) Amendments to the Agreements of Limited Partnership. (5)
(1) Incorporated by reference to Exhibit 2.5 to Form 8-K filed
by Insignia with the Securities and Exchange Commission on
September 1, 1995.
(2) Incorporated by reference to Exhibit A to the Prospectus of
the Registrant dated July 5, 1978, contained in the
Registrant's Registration Statement on Form S-11 (Reg. No.
2-599991).
(3) Incorporated by reference to the Definitive Proxy Statement of
the Partnership dated July 2, 1981.
(4) Incorporated by reference to Definitive Proxy statement of the
Partnership dated April 3, 1991.
(5) Incorporated by reference, to the Statement Furnished in
Connection With the Solicitation of Consents of the Registrant
dated August 28, 1992.
10.12 Multifamily Note dated November 30, 2001, by and between
National Property Investors 7, a California Limited
Partnership and GMAC Commercial Mortgage Corporation, a
California corporation relating to Fairway View II
Apartments (incorporated by reference to the Registrant's
Annual Report on Form 10-KSB for the year ended December
31, 2002).
10.25 Purchase and Sale Contract between Registrant and Jackson
Square Properties, LLC, dated February 21, 2004 (incorporated
by reference to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended March 31, 2004).
10.26 Amendment to Purchase and Sale Contract between Registrant and
Jackson Square Properties, LLC dated March 23, 2004
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2004).
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification 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.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors 7;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 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 7;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 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 7 (the "Partnership"), for the quarterly period ended September 30,
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: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 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.