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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Ended MARCH 31, 2001
Commission File Number 0-12438
REAL ESTATE ASSOCIATES LIMITED V
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3768810
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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 [ ]
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, March 31, 2001 and December 31, 2000 .................... 1
Statements of Operations,
Three Months Ended March 31, 2001 and 2000 .......................... 2
Statement of Partners' Equity (Deficiency),
Three Months Ended March 31, 2001 ................................... 3
Statements of Cash Flows,
Three Months Ended March 31, 2001 and 2000 .......................... 4
Notes to Financial Statements ........................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ....................................................... 12
Item 6. Exhibits and Reports on Form 8-K ........................................ 12
Signatures ...................................................................... 13
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
ASSETS
2001 2000
(Unaudited) (Audited)
----------- -----------
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 674,617 $ 611,617
CASH AND CASH EQUIVALENTS (Note 1) 355,143 386,033
----------- -----------
TOTAL ASSETS $ 1,029,760 $ 997,650
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable $ 6,014 $ 12,064
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (147,106) (147,488)
Limited partners 1,170,852 1,133,074
----------- -----------
1,023,746 985,586
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 1,029,760 $ 997,650
=========== ===========
The accompanying notes are an integral part of these financial statements.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
-------- --------
INTEREST INCOME $ 4,416 $ 4,501
-------- --------
OPERATING EXPENSES:
Legal and accounting 11,975 32,885
Management fees - general partner (Note 3) 10,480 10,480
Administrative (Note 3) 6,801 5,321
-------- --------
Total operating expenses 29,256 48,686
-------- --------
LOSS FROM OPERATIONS (24,840) (44,185)
EQUITY IN INCOME OF LIMITED
PARTNERSHIP AND AMORTI-
ZATION OF ACQUISITION
COSTS (Note 2) 63,000 2,000
-------- --------
NET INCOME (LOSS) $ 38,160 $(42,185)
======== ========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ 5 $ (5)
======== ========
The accompanying notes are an integral part of these financial statements.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
General Limited
Partners Partners Total
---------- ---------- ----------
PARTNERSHIP INTERESTS 7,808
==========
EQUITY (DEFICIENCY),
January 1, 2001 $ (147,488) $1,133,074 $ 985,586
Net income for the three months
ended March 31, 2001 382 37,778 38,160
---------- ---------- ----------
EQUITY (DEFICIENCY),
March 31, 2001 $ (147,106) $1,170,852 $1,023,746
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 38,160 $ (42,185)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs (63,000) (2,000)
Increase in due from NAPICO -- (2,958)
Decrease in accounts payable (6,052) (4,816)
--------- ---------
Net cash used in operating activities (30,892) (51,959)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (30,892) (51,959)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 386,033 398,889
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 355,143 $ 346,930
========= =========
The accompanying notes are an integral part of these financial statements.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the annual report for
the year ended December 31, 2000 prepared by Real Estate Associates
Limited V (the "Partnership"). Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year end. The
results of operations for the interim period presented are not
necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position as
of March 31, 2001, and the results of operations and changes in cash
flows for the three months then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective individual
investments. National Partnership Investments Corp. (NAPICO) is the
corporate general partner of the Partnership. Casden Properties Inc. owns
a 95.25% economic interest in NAPICO, with the balance owned by Casden
Investment Corporation ("CIC"). CIC, which is wholly owned by Alan I.
Casden, owns 95% of the voting common stock of NAPICO.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investment in limited partnerships is accounted for on the equity
method. Acquisition, selection and other costs related to the acquisition
of the projects are capitalized as part of the investment balance and are
being amortized on a straight line basis over the estimated lives of the
underlying assets, which is generally 30 years.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER LIMITED PARTNERSHIP INTEREST
Net income per limited partnership interest was computed by dividing the
limited partners' share of net income by the number of limited
partnership interests outstanding during the period. The number of
limited partnership interests was 7,808 for the periods presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of three months or less. The
Partnership has its cash and cash equivalents on deposit primarily with
two high credit quality financial institutions. Such cash and cash
equivalents are in excess of the FDIC insurance limit.
INCOME TAXES
No provision has been made for income taxes in the accompanying financial
statements since such taxes, if any, are the liability of the individual
partners.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been
any permanent impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. If
the sum of the expected future cash flows is less than the carrying
amount of the assets, the Partnership recognizes an impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of March 31, 2001, the Partnership holds limited partnership interests
in 3 limited partnerships. The limited partnerships owned as of March 31,
2001, residential low income rental projects consisting of 228 apartment
units. The mortgage loans of these projects are payable to or insured by
various governmental agencies.
The Partnership, as a limited partner, is entitled to 99 percent of the
profits and losses in these limited partnerships.
Equity in losses of limited partnerships is recognized in the financial
statements until the limited partnership investment account is reduced to
a zero balance. Losses incurred after the limited partnership investment
account is reduced to zero are not recognized.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Distributions from the limited partnerships are accounted for as a return
of capital until the investment balance is reduced to zero or to a
negative amount equal to further capital contributions required.
Subsequent distributions received are recognized as income.
The following is a summary of the investment in limited partnerships for
the three months ended March 31, 2001:
Balance, beginning of period $ 611,617
Amortization of acquisition costs (3,000)
Equity in income of limited partnerships 66,000
---------
Balance, end of period $ 674,617
=========
The following are unaudited combined estimated statements of operations
for the three months ended March 31, 2001 and 1999 for the limited
partnerships in which the Partnership has investments:
Three months Three months
ended ended
March 31, 2001 March 31, 2000
-------------- --------------
REVENUES
Rental income $793,000 $782,000
-------- --------
EXPENSES
Depreciation 81,000 78,000
Interest 300,000 303,000
Operating 310,000 283,000
-------- --------
691,000 664,000
-------- --------
Net income $102,000 $120,000
======== ========
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included above.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Under recent adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in an
amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements
of existing loans insured by the Federal Housing Administration of HUD
("FHA") unless such mortgage loans are restructured. In order to address
the reduction in payments under HAP Contracts as a result of this new
policy, the Multi-family Assisted Housing Reform and Affordability Act of
1997 ("MAHRAA"), which was adopted in October 1997, provides for the
restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will
be amortized on a current basis and a low interest second mortgage loan
payable to FHA which will only be payable on maturity of the first
mortgage loan. This restructuring results in a reduction in annual debt
service payable by the owner of the FHA-insured mortgage loan and is
expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA
also phases out project-based subsidies on selected properties serving
families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
On December 30, 1998, after obtaining consents of the limited partners,
the Partnership sold its limited partnership interests in 16 local
limited partnerships to affiliates of Casden Properties Inc. The sale
resulted in cash proceeds to the Partnership of $1,063,235, which was
collected in 1999. In March 1999, the Partnership made cash distributions
of $2,042,603 to the limited partners and $20,632 to the general
partners, which included using proceeds from the sale of the partnership
interests.
NOTE 3 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partners, the Partnership is obligated to NAPICO for an annual management
fee equal to 0.4 percent of the invested assets of the limited
partnerships. Invested assets are defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage
loans related to the Partnership's interests in the capital accounts of
the respective partnerships. The fee was approximately $10,000 and
$10,000 for the three months ended March 31, 2001 and 2000, respectively.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2001
NOTE 3 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER (CONTINUED)
The Partnership reimburses NAPICO for certain expenses. The reimbursement
paid to NAPICO was approximately $1,400 and $1,600 for the three months
ended March 31, 2001 and 2000, respectively, and is included in
administrative expenses.
NOTE 4 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in Real Estate Associates Limited III (an
affiliated partnership in which NAPICO is the managing general partner)
and two investors holding an aggregate of five units of limited
partnership interest in Real Estate Associates Limited VI (another
affiliated partnership in which NAPICO is the managing general partner)
commenced an action in the United States District Court for the Central
District of California against the Partnership, NAPICO and certain other
affiliated entities. The complaint alleges that the defendants breached
their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the
consent solicitation statements sent to the limited partners of such
partnerships relating to approval of the transfer of partnership
interests in limited partnerships, owning certain of the properties, to
affiliates of Casden Properties Inc., organized by an affiliate of
NAPICO. The plaintiffs seek equitable relief, as well as compensatory
damages and litigation related costs. On August 4, 1999, one investor
holding one unit of limited partnership interest in Housing Programs
Limited (another affiliated partnership in which NAPICO is the managing
general partner) commenced a virtually identical action in the United
States District Court for the Central District of California against the
Partnership, NAPICO and certain other affiliated entities. The second
action has been subsumed in the first action, which has been certified as
a class action. The managing general partner of such NAPICO managed
partnerships and the other defendants believe that the plaintiffs' claims
are without merit and intend to contest the actions vigorously.
The corporate general partner of the Partnership is involved in various
lawsuits arising from transactions in the ordinary course of business. In
the opinion of management and the corporate general partner, the claims
will not result in any material liability to the Partnership.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. The carrying amount of assets
and liabilities reported on the balance sheets that require such
disclosure approximates fair value due to their short-term maturity.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income earned
from investing available cash and distributions from limited partnerships
in which the Partnership has invested. The Partnership made a
distribution to investors in March 1999, which included using proceeds
from the disposition of its investments in certain limited partnerships.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in an
amount equal to .4 percent of invested assets is payable to the corporate
general partner.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized in accordance
with the equity accounting method.
Distributions received from limited partnerships are recognized as return
of capital until the investment balance has been reduced to zero or to a
negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely interests in other limited
partnerships primarily owning government-assisted projects. Available
cash is invested in these funds earning interest income as reflected in
the statement of operations. These funds can be converted to cash to meet
obligations as they arise. The Partnership intends to continue investing
available funds in this manner.
Under recent adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long- term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in an
amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements
of existing loans insured by the Federal Housing Administration of HUD
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
("FHA") unless such mortgage loans are restructured. In order to address
the reduction in payments under HAP Contracts as a result of this new
policy, the Multi-family Assisted Housing Reform and Affordability Act of
1997 ("MAHRAA"), which was adopted in October 1997, provides for the
restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will
be amortized on a current basis and a low interest second mortgage loan
payable to FHA which will only be payable on maturity of the first
mortgage loan. This restructuring results in a reduction in annual debt
service payable by the owner of the FHA-insured mortgage loan and is
expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA
also phases out project-based subsidies on selected properties serving
families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
On December 30, 1998, after obtaining the consents of the limited
partners, the Partnership sold its limited partnership interests in 16
local limited partnerships to affiliates of Casden Properties Inc. The
sale resulted in cash proceeds to the Partnership of $1,063,235, which
was collected subsequent to year-end. In March 1999, the Partnership made
cash distributions of $2,042,603 to the limited partners and $20,632 to
the general partners, primarily using proceeds from the sale of the
partnership interests.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 2001
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to affiliates of Casden
Properties Inc., organized by an affiliate of NAPICO. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another affiliated partnership in which NAPICO is
the managing general partner) commenced a virtually identical action in the
United States District Court for the Central District of California against the
Partnership, NAPICO and certain other affiliated entities. The second action has
been subsumed in the first action, which has been certified as a class action.
The managing general partner of such NAPICO managed partnerships and the other
defendants believe that the plaintiffs' claims are without merit and intend to
contest the actions vigorously.
The corporate general partner is involved in various lawsuits. None of these are
related to REAL V.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 6 of regulation
S-K and no reports on Form 8-K were filed during the quarter ended
March 31, 2001.
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REAL ESTATE ASSOCIATES LIMITED V
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 2001
SIGNATURES
Pursuant to 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.
REAL ESTATE ASSOCIATES LIMITED V
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
/s/ BRUCE NELSON
----------------------------------------
Bruce Nelson
President
Date: MAY 15, 2001
----------------------------------------
/s/ BRIAN H. SHUMAN
----------------------------------------
Brian H. Shuman
Chief Financial Officer
Date: MAY 15, 2001
----------------------------------------
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