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 March 31, 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) (Zip Code)
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)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted cash $ 2,528
Restricted 561
Escrow deposits 624
Other assets 423
Investment properties:
Land $ 3,738
Buildings and related personal property 40,957
44,695
Less accumulated depreciation (21,115) 23,580
$ 27,716
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 414
Tenants' security deposits 166
Mortgage notes payable 18,246
Partners' Capital (Deficit):
General partner $ (213)
Limited partners (60,517 units issued
and outstanding) 9,103 8,890
$ 27,716
<FN>
See Accompanying Notes to Consolidated Financial Statements
b) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 1,740 $ 1,660
Other income 73 47
Total revenues 1,813 1,707
Expenses:
Operating 902 840
General and administrative 80 71
Depreciation 414 448
Interest 390 374
Total expenses 1,786 1,733
Net income (loss) $ 27 $ (26)
Net income (loss) allocated to general partner (1%) $ -- $ --
Net income (loss) allocated to limited partners (99%) 27 (26)
Net income (loss) $ 27 $ (26)
Net income (loss) per limited partnership unit $ .44 $ (.43)
<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 three
months ended March 31, 1996 -- -- 27 27
Partners' (deficit) capital
at March 31, 1996 60,517 $ (213) $ 9,103 $ 8,890
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) NATIONAL PROPERTY INVESTORS 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 27 $ (26)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 414 448
Amortization of loan costs 16 7
Change in accounts:
Escrow deposits (33) (103)
Other assets 200 21
Accounts payable and accrued expenses 195 70
Tenants' security deposit liabilities (7) 6
Net cash provided by operating activities 812 423
Cash flows from investing activities:
Property improvements and replacements (48) (44)
Increase in restricted cash (412) (269)
Net cash used in investing activities (460) (313)
Cash flows from financing activities:
Payment of deferred interest payable -- (456)
Mortgage principal repayments (78) (78)
Loan costs paid (23) (15)
Net cash used in financing activities (101) (549)
Net increase (decrease) in cash and cash equivalents 251 (439)
Cash and cash equivalents at beginning of period 2,277 1,621
Cash and cash equivalents at end of period $ 2,528 $ 1,182
Supplemental information:
Interest paid $ 358 $ 824
<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 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 month period ended March 31, 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
The Partnership has no employees and is dependent on NPI Equity Investments,
Inc. ("NPI Equity" or 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.
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 Three Months Ended
March 31,
1996 1995
Property management fees (included in operating
expenses) $ 90,000 $ 84,000
Reimbursement for services of affiliates (included
in general and administrative expenses) 53,000 60,000
For the period from January 19, 1996, to March 31, 1996, the Partnership insured
its property 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 three months ended March 31, 1995, are
insurance premiums of approximately $47,000 which were paid to the Managing
General Partner under a master insurance policy arranged for by the Managing
General Partner.
NPI Equity Investments, Inc. is the general partner of the Partnership. NPI
Equity is a wholly-owned subsidiary of NPI, Inc.
On August 17, 1995, the stockholders of NPI, Inc. entered into an agreement to
sell to IFGP Corporation, a Delaware corporation, an affiliate of Insignia
Financial Group, Inc., a Delaware corporation ("Insignia"), 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 the
three months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Fairway View II Apartments
Baton Rouge, Louisiana 94% 97%
Northwoods Apartments
Pensacola, Florida 95% 98%
Patchen Place Apartments
Lexington, Kentucky 93% 91%
The Pines Apartments
Roanoke, Virginia 99% 99%
South Point Apartments
Durham, North Carolina 98% 97%
The Managing General Partner attributes the decrease in occupancy at Fairway
View II to the fire in 1995 which damaged several apartment units. The units
have been completely restored and are currently occupied. The decrease in
occupancy at Northwoods Apartments has been the result of military turnover.
The Managing General Partner expects a new training program at the local
military base and the resulting influx of trainees to increase occupancy in the
near future.
The Partnership's net income for the three months ended March 31, 1996, was
approximately $27,000 versus a net loss of $26,000 for the same period 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 general and administrative expenses 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 March 31, 1996, the Partnership had cash and cash equivalents of
approximately $2,528,000 as compared to $1,182,000 at March 31, 1995. Net cash
provided by operating activities increased primarily as a result of an increase
in accounts payable and prepaid rents shown as accrued expenses. In addition,
the decrease in other assets also increased cash provided by operations. Also
contributing to the increase was the increase in net income as discussed above.
Net cash used in investing activities increased due to increased 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.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. 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 $18,246,000 is amortized over varying periods with required
balloon payments ranging from July 1996 to September 2021, at which time the
properties will either be refinanced or sold. Northwoods Apartments' mortgage
matured May 1, 1996. An extension to July 1, 1996, was granted and it is
expected that the mortgage will be refinanced during the second quarter of 1996.
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 first 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:
A Form 8-K dated January 19, 1996, was filed reporting the change
in control of the Registrant.
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: May 15, 1996