FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-13454
NATIONAL PROPERTY INVESTORS 7
(Exact name of Registrant as specified in its charter)
California 13-3230613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 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
a) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted cash $ 2,832
Restricted 405
Escrow deposits 835
Other assets 445
Investment properties:
Land $ 3,738
Buildings and related personal property 41,057
44,795
Less accumulated depreciation (21,520) 23,275
$ 27,792
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 505
Tenants' security deposits 160
Mortgage notes payable 18,166
Partners' Capital (Deficit):
General partner $ (212)
Limited partners (60,517 units issued
and outstanding) 9,173 8,961
$ 27,792
<FN>
See Accompanying Notes to Consolidated Financial Statements
b) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Rental income $ 1,754 $ 1,689 $ 3,494 $ 3,349
Other income 95 65 168 112
Total revenues 1,849 1,754 3,662 3,461
Expenses:
Operating 912 854 1,814 1,694
Interest 356 399 746 773
Depreciation 415 448 829 896
General and administrative 95 72 175 143
Total expenses 1,778 1,773 3,564 3,506
Net income (loss) $ 71 $ (19) $ 98 $ (45)
Net income (loss) allocated
to general partner (1%) $ 1 $ -- $ 1 $ --
Net income (loss) allocated
to limited partners (99%) 70 (19) 97 (45)
$ 71 $ (19) $ 98 $ (45)
Net income (loss) per
limited partnership unit $ 1.16 $ (.31) $ 1.61 $ (.74)
<FN>
See Accompanying Notes to Consolidated Financial Statements
c) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (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) capital
at December 31, 1995 60,517 $ (213) $ 9,076 $ 8,863
Net income for the six
months ended June 30, 1996 -- 1 97 98
Partners' (deficit) capital
at June 30, 1996 60,517 $ (212) $ 9,173 $ 8,961
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 98 $ (45)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 829 896
Amortization of loan costs 23 29
Change in accounts:
Escrow deposits (244) (226)
Other assets 172 10
Accounts payable and accrued expenses 286 117
Tenants' security deposit liabilities (13) 5
Net cash provided by operating activities 1,151 786
Cash flows from investing activities:
Property improvements and replacements (172) (109)
Increase in restricted cash (256) (395)
Net cash used in investing activities (428) (504)
Cash flows from financing activities:
Payment of deferred interest payable -- (456)
Mortgage principal repayments (158) (162)
Loan costs paid (10) (44)
Net cash used in financing activities (168) (662)
Net increase (decrease) in cash and cash equivalents 555 (380)
Cash and cash equivalents at beginning of period 2,277 1,621
Cash and cash equivalents at end of period $ 2,832 $ 1,241
Supplemental information:
Interest paid $ 715 $ 1,189
<FN>
See Accompanying Notes to Consolidated Financial Statements
e) NATIONAL PROPERTY INVESTORS 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements 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
consolidated 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 six month period
ended June 30, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the year ended December 31,
1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
Note B - Transactions with Affiliated Parties
National Property Investors 7 (the "Partnership") has no employees and is
dependent on NPI Equity Investments, Inc. 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.
The following transactions with Insignia Financial Group, Inc. ("Insignia"),
National Property Investors, Inc. ("NPI, Inc."), and affiliates were charged to
expense in 1996 and 1995:
For the Six Months Ended
June 30,
1996 1995
Property management fees (included in operating
expenses) $180,000 $169,000
Reimbursement for services of affiliates (included
in general and administrative expenses) 115,000 113,000
For the period from January 19, 1996, to June 30, 1996, the Partnership
insured its properties under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the Managing General Partner who
received payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of
the Managing General Partner by virtue of the agent's obligations is not
significant.
Included in operating expenses for the six months ended June 30, 1995, are
insurance premiums of approximately $94,000 which were paid to the Managing
General Partner under a master insurance policy arranged for by the Managing
General Partner.
NPI Equity is the general partner of the Partnership. NPI Equity is a
wholly-owned subsidiary of NPI.
On August 17, 1995, the stockholders of NPI, Inc. entered into an agreement
to sell to IFGP Corporation, a Delaware corporation and an affiliate of Insignia
Financial Group, Inc.("Insignia"), a Delaware corporation , all of the issued
and outstanding common stock of NPI, Inc. for an aggregate purchase price of
$1,000,000. NPI, Inc. is the sole shareholder of the Managing General Partner.
The closing of the transactions contemplated by the above mentioned agreement
(the "Closing") occurred on January 19, 1996.
Upon the Closing, the officers and directors of NPI, Inc. and the Managing
General Partner resigned and IFGP Corporation caused new officers and directors
of each of those entities to be elected.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of five apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the six month periods ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Fairway View II Apartments
Baton Rouge, Louisiana 95% 97%
Northwoods Apartments
Pensacola, Florida 96% 98%
Patchen Place Apartments
Lexington, Kentucky 93% 91%
The Pines Apartments
Roanoke, Virginia 98% 98%
South Point Apartments
Durham, North Carolina 94% 95%
The Partnership's net income for the three and six month periods ended June
30, 1996, was approximately $71,000 and $98,000 respectively, versus net losses
of $19,000 and $45,000, respectively for the same periods of 1995. The increase
in net income is primarily attributable to an increase in rental income due to
rental rate increases at all properties. In addition, other income increased
due to the Partnership maintaining higher cash balances in interest-bearing
accounts. Partially offsetting these increases to income was an increase in
operating expenses and general and administrative expenses. The increase in
operating expense was primarily attributable to the completion of repair work
related to a fire at Fairway View II in 1995. The increase in general and
administrative expense is due to increased professional expenses, such as audit
and legal expenses.
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 expense. 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, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership had cash and cash equivalents of
approximately $2,832,000 as compared to $1,241,000 at June 30, 1995. Net cash
provided by operating activities increased primarily as a result of the increase
in net income, as discussed above, an increase in accounts payable and accrued
expenses and a decrease in other assets. Net cash used in investing activities
decreased due to decreased restricted cash at the Partnership's three U.S.
Department of Housing and Urban Development ("HUD") mortgaged properties. Net
cash used in financing activities decreased due to the payment of $456,000 in
1995 of deferred interest related to Northwoods Apartments.
The Managing General Partner has extended to the Partnership a credit line of
up to $500,000. At the present time, the Partnership has no outstanding amounts
due under this line of credit. Based on present plans, management does not
anticipate the need to borrow in the near future. Other than cash and cash
equivalents, the line of credit is the Partnership's only unused source of
liquidity.
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. Such assets are currently thought
to be sufficient for any near-term needs of the partnership. The mortgage
indebtedness of $18,166,000 is amortized over varying periods with required
balloon payments ranging from September 1, 1996, to September 2021, at which
time the properties will either be refinanced or sold. Currently, the Managing
General Partner is working to refinance all of the Partnership's properties with
the exception of the Pines Apartments. Northwoods Apartments' mortgage matured
May 1, 1996. An extension to July 1, 1996, was granted. The mortgage was
refinanced as of July 1, 1996, with Lehman Brothers Holdings Inc.; the new
principal amount is $5,000,000 with a maturity date of September 1, 1996. The
Managing General Partner is working to secure permanent financing; however,
there can be no assurance that this will be achieved in which case the property
will either be sold or could be foreclosed. Future cash distributions will
depend on the levels of cash generated from operations, property sales, and the
availability of cash reserves. No cash distributions were paid in 1995 or
during the second quarter of 1996. At this time, it appears that the investment
objective of capital growth will not be attained and that investors will not
receive a return of all of their invested capital.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K: None were filed during the quarter ended
June 30, 1996.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL PROPERTY INVESTORS 7
By: NPI EQUITY INVESTMENTS, INC.
MANAGING GENERAL PARTNER
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: August 13, 1996