-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RsZmojsE/3/i9cqsiMa2jB/RjBr/mADClXp0lQRtqJ22kzYV2wJdbhqFctWqtM8w nKvBYw8hkKuJgDojYoaXdA== 0000711642-02-000262.txt : 20020819 0000711642-02-000262.hdr.sgml : 20020819 20020819154914 ACCESSION NUMBER: 0000711642-02-000262 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE ASSOCIATES LTD V CENTRAL INDEX KEY: 0000702644 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953768810 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12438 FILM NUMBER: 02742541 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10QSB 1 real5.txt REAL5 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 June 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-12438 REAL ESTATE ASSOCIATES LIMITED V (A California Limited Partnership) California 95-3768810 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) 9090 Wilshire Blvd., Suite 201, Beverly Hills, California 90211 (Address of former principal executive offices) REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) INDEX TO FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2002 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheet June 30, 2002 1 Statements of Operations, Three and Six Months Ended June 30, 2002 and 2001 2 Statement of Partners' Equity (Deficit), Six Months Ended June 30, 2002 3 Statements of Cash Flows, Six Months Ended June 30, 2002 and 2001 4 Notes to Financial Statements 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 10 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 EXHIBIT 14 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) BALANCE SHEET JUNE 30, 2002 (Unaudited) ASSETS Investments in limited partnerships (Note 2) $ 758,733 Cash and cash equivalents 325,556 Total assets $1,084,289 LIABILITIES AND PARTNERS' (DEFICIT) EQUITY Liabilities: Accounts payable and accrued expenses $ 32,315 Contingencies (Note 4) Partners' (deficit) equity: General partners (146,824) Limited partners 1,198,798 1,051,974 Total liabilities and partners' equity $1,084,289 The accompanying notes are an integral part of these financial statements. REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 Interest income $ 545 $ 2,401 $ 1,220 $ 6,817 Operating Expenses: Management fees - partners (Note 3) 10,478 10,479 20,958 20,959 General and administrative (Note 3) 1,277 7,803 9,752 14,604 Legal and accounting 3,278 15,150 21,252 27,125 Total operating expenses 15,033 33,432 51,962 62,688 Loss from Partnership operations (14,488) (31,031) (50,742) (55,871) Distributions from limited partnerships recognized as income (Note 2) 8,136 6,523 8,136 6,523 Equity in income of limited partnerships and amortization of acquisition costs (Note 2) 57,544 69,745 96,743 132,745 Net income $ 51,192 $ 45,237 $ 54,137 $ 83,397 Net income allocated to general partners (1%) $ 512 $ 452 $ 541 $ 834 Net income allocated to limited partners (99%) 50,680 44,785 53,596 82,563 $ 51,192 $ 45,237 $ 54,137 $ 83,397 Net income per limited partnership interest (Note 1) $ 6 $ 6 $ 7 $ 11 The accompanying notes are an integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) STATEMENT OF PARTNERS' (DEFICIT) EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2002 (Unaudited)
General Limited Partners Partners Total Partnership interests 7,808 Partners' (deficit) equity, January 1, 2002 $ (147,365) $1,145,202 $ 997,837 Net income for the six months ended June 30, 2002 541 53,596 54,137 Partners' (deficit) equity, June 30, 2002 $ (146,824) $1,198,798 $1,051,974 The accompanying notes are an integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 54,137 $ 83,397 Adjustments to reconcile net income to net cash used in operating activities: Equity in income of limited partnerships and amortization of acquisition costs (96,743) (132,745) Increase (decrease) in: Accounts payable and accrued expenses (11,972) 7,318 Net cash used in operating activities (54,578) (42,030) Cash flows PROVIDED BY investing activities: Distributions from limited partnerships recognized as a return of capital -- 118,099 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (54,578) 76,069 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 380,134 386,033 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 325,556 $ 462,102 The accompanying notes are an integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1 - ORGANIZATION AND 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, 2001 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 June 30, 2002, and the results of operations and changes in cash flows for the three and six months then ended. The general partners have a one 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. The general partner of the Partnership is National Partnership Investments Corp. ("NAPICO" or the "Managing General Partner"). Prior to March 11, 2002, Casden Properties Inc. owned 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, owned 95% of the voting common stock of NAPICO, prior to March 11, 2002. On December 3, 2001, Casden Properties Inc., entered into a merger agreement and certain other transaction documents with Apartment Investment and Management Company, a Maryland corporation ("AIMCO") and certain of its subsidiaries, pursuant to which, on March 11, 2002, AIMCO acquired Casden Properties Inc. and its subsidiaries, including 100% of the 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. Cash and Cash Equivalents Cash and cash equivalents consist of cash and money market mutual funds. The Partnership has its cash and cash equivalents on deposit with one money market fund which is uninsured. 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. 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. 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 June 30, 2002, the Partnership holds limited partnership interests in three limited partnerships. The limited partnerships owned as of June 30, 2002, 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. 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 investments in Limited Partnerships for the six months ended June 30, 2002: Balance, beginning of period $ 661,990 Amortization of acquisition costs (2,921) Equity in income of limited partnerships 99,664 Balance, end of period $ 758,733 The following are unaudited combined estimated statements of operations for the three and six months ended June 30, 2002 and 2001 for the limited partnerships in which the Partnership has invested:
Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 Revenues Rental and other $ 774,000 $ 793,000 $1,548,000 $1,586,000 Expenses Depreciation 83,000 81,000 166,000 162,000 Interest 300,000 300,000 600,000 600,000 Operating 304,000 310,000 608,000 620,000 687,000 691,000 1,374,000 1,382,000 Net income $ 87,000 $ 102,000 $ 174,000 $ 204,000
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 may be 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 ("FHA") of HUD 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") 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 payments to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payments 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. 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 $20,958 and $20,959 for the six months ended June 30, 2002 and 2001, respectively. The Partnership reimburses NAPICO for certain expenses. The reimbursement paid to NAPICO was approximately $2,310 for both the six months ended June 30, 2002 and 2001 and is included in general and administrative expense. 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. On August 21, 2001, plaintiffs filed a supplemental complaint, which added new claims, including a recission of the transfer of partnership interests and an accounting. Trial is scheduled for October 1, 2002. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and are vigorously contesting the actions. Secondly, a plaintiff, who is a limited partner in the Partnership, claims that NAPICO and other defendants (1) have refused to provide the plaintiff with access to the books and records of the Partnership, and (2) have breached their fiduciary duties and the partnership agreement by failing to act in the best interest of the Partnership. The defendants have, however, provided their books and records to plaintiff pursuant to a protective order. This case was dismissed during the second quarter of 2002. The Managing 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 Managing 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 sheet that require such disclosure approximates fair value due to their short-term maturity. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 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. Results of Operations Partnership revenues consist primarily of interest income earned on temporary investment of funds not required for investment in local partnerships. An annual management fee is payable to the Managing General Partner of the Partnership and is calculated at 0.4 percent of the Partnership's invested assets. The management fee is paid to the Managing General Partner for its continuing management of partnership affairs. The fee is payable beginning with the month following the Partnership's initial investment in a local limited partnership. Management fees were $20,958 and $20,959 for the six months ended June 30, 2002 and 2001, respectively. Operating expenses, other than management fees, consist of legal and accounting fees for services rendered to the Partnership and administrative expenses. Legal and accounting fees were $21,252 and $27,125 for the six months ended June 30, 2002 and 2001, respectively. General and administrative expenses were $9,752 and $14,604 for the periods ended June 30, 2002 and 2001, respectively. 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 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 money market funds earning interest income as reflected in the statements of operations. These funds can be converted to cash to meet obligations as they arise. 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 may be 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 ("FHA") of HUD 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") 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 payments 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. 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. On August 21, 2001, plaintiffs filed a supplemental complaint, which added new claims, including a recission of the transfer of partnership interests and an accounting. Trial is scheduled for October 1, 2002. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and are vigorously contesting the actions. Secondly, a plaintiff, who is a limited partner in the Partnership, claims that NAPICO and other defendants (1) have refused to provide the plaintiff with access to the books and records of the Partnership, and (2) have breached their fiduciary duties and the partnership agreement by failing to act in the best interest of the Partnership. The defendants have, however, provided their books and records to plaintiff pursuant to a protective order. This case was dismissed during the second quarter of 2002. The Managing General Partner is involved in various lawsuits. None of these are related to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 3, Restated Certificate and Agreement of Limited Partnership dated May 7, 1982 filed with the Securities and Exchange Commission Form S-11 No. 277645, which is hereby incorporated by reference. Exhibit 99, Certification of Chief Executive Officer and Chief Financial Officer. (b) Reports on Form 8-K filed during the quarter ended June 30, 2002: None. 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. REAL ESTATE ASSOCIATES LIMITED V (a California limited partnership) By: National Partnership Investments Corp. General Partner By: /s/Charles H. Boxenbaum Charles H. Boxenbaum Chairman of the Board of Directors and Chief Executive Officer By: /s/Brian H. Shuman Brian H. Shuman Chief Financial Officer Date: August 19, 2002 Exhibit 99 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 Real Estate Associates Limited V (the "Partnership"), for the quarterly period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Charles H. Boxenbaum, as the equivalent of the Chief Executive Officer of the Partnership, and Brian H. Shuman, 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/ Charles H. Boxenbaum Name: Charles H. Boxenbaum Date: August 19, 2002 /s/ Brian H. Shuman Name: Brian H. Shuman Date: August 19, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----