-----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, INN9srNQ7OOLgeRjZJBeFcYLyoFavymmKIGloBofQDl/P4mCkzKY1aqZcyWpYzHw Y8rlTRveYc93kZ7E6wo7ew== /in/edgar/work/0000711642-00-000279/0000711642-00-000279.txt : 20001109 0000711642-00-000279.hdr.sgml : 20001109 ACCESSION NUMBER: 0000711642-00-000279 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL PROPERTY INVESTORS 7 CENTRAL INDEX KEY: 0000732439 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 133230613 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13454 FILM NUMBER: 755611 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 0001.txt FORM 10-QSB FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] 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 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___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) NATIONAL PROPERTY INVESTORS 7 BALANCE SHEET (Unaudited) (in thousands, except per unit data) September 30, 2000
Assets Cash and cash equivalents $ 627 Receivables and deposits 472 Restricted escrows 322 Other assets 482 Investment properties: Land $ 3,738 Buildings and related personal property 44,099 47,837 Less accumulated depreciation (29,066) 18,771 $ 20,674 Liabilities and Partners' Deficit Liabilities Accounts payable $ 91 Tenant security deposit liabilities 104 Accrued property taxes 273 Other liabilities 273 Mortgage notes payable 20,965 Partners' Deficit: General partner $ (313) Limited partners (60,517 units issued and outstanding) (719) (1,032) $ 20,674
See Accompanying Notes to Financial Statements b) NATIONAL PROPERTY INVESTORS 7 STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Revenues: Rental income $ 1,813 $ 1,808 $ 5,276 $ 5,405 Other income 99 70 284 211 Total revenues 1,912 1,878 5,560 5,616 Expenses: Operating 681 710 2,100 2,114 General and administrative 146 45 397 189 Depreciation 508 450 1,481 1,321 Interest 411 409 1,242 1,230 Property taxes 119 103 330 319 Total expenses 1,865 1,717 5,550 5,173 Net income $ 47 $ 161 $ 10 $ 443 Net income allocated to general partner (1%) $ -- $ 2 $ -- $ 4 Net income allocated to limited partners (99%) 47 159 10 439 $ 47 $ 161 $ 10 $ 443 Net income per limited partnership unit $ 0.78 $ 2.63 $ 0.17 $ 7.25 Distributions per limited partnership unit $ 4.33 $ -- $ 47.26 $ 4.91
See Accompanying Notes to Financial Statements c) NATIONAL PROPERTY INVESTORS 7 STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except per 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, 1999 60,517 $ (284) $ 2,131 $ 1,847 Distributions to partners -- (29) (2,860) (2,889) Net income for the nine months ended September 30, 2000 -- -- 10 10 Partners' deficit at September 30, 2000 60,517 $ (313) $ (719) $(1,032)
See Accompanying Notes to Financial Statements d) NATIONAL PROPERTY INVESTORS 7 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2000 1999 Cash flows from operating activities: Net income $ 10 $ 443 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,481 1,321 Amortization of loan costs 70 83 Change in accounts: Receivables and deposits (135) 48 Other assets (30) (62) Accounts payable (75) 45 Tenant security deposit liabilities (3) (12) Accrued property taxes 206 (31) Other liabilities (28) (8) Net cash provided by operating activities 1,496 1,827 Cash flows from investing activities: Property improvements and replacements (822) (523) Net withdrawals from (deposits to) restricted escrows 125 (49) Net cash used in investing activities (697) (572) Cash flows from financing activities: Payments on mortgage note payable (60) (30) Loan costs paid (16) -- Distributions to partners (2,889) (300) Net cash used in financing activities (2,965) (330) Net (decrease) increase in cash and cash equivalents (2,166) 925 Cash and cash equivalents at beginning of period 2,793 1,074 Cash and cash equivalents at end of period $ 627 $ 1,999 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,145 $ 1,144
See Accompanying Notes to Financial Statements e) 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" or "NPI Equity"), 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, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - Transactions with Affiliated Parties The Partnership has no employees and is dependent 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. The following payments were made to the Managing General Partner and its affiliates during the nine month periods ended September 30, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $272 $285 Reimbursement for services of affiliates (included in investment properties and general and administrative expenses) 193 139 Non-accountable reimbursement (included in general and administrative expenses) 91 -- Partnership management fee (included in general and administrative expenses) 40 -- During the nine months ended September 30, 2000 and 1999, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $272,000 and $285,000 for the nine months ended September 30, 2000 and 1999, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $193,000 and $139,000 for the nine months ended September 30, 2000 and 1999, respectively. For services relating to the administration of the Partnership and operation of Partnership properties, 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. The Managing General Partner received approximately $91,000 in reimbursements for the nine months ended September 30, 2000. The Managing General Partner was not entitled to receive a similar reimbursement during the nine months ended September 30, 1999 because there were no distributions from operations. 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 paid approximately $40,000 during the nine months ended September 30, 2000 for such fees. The Managing General Partner was not entitled to receive a similar reimbursement during the nine months ended September 30, 1999, because there were no distributions from operations. The Managing General Partner has extended to the Partnership a line of credit of up to $500,000. Loans under the line of credit will have a term of 365 days, be unsecured and bear interest at the rate of 2% per annum in excess of the prime rate announced from time to time by Chase Manhattan Bank, N.A. The maturity date of such borrowing will be accelerated in the event of: (i) the removal of the Managing General Partner (whether or not For Cause); (ii) the sale or refinancing of a property by the Partnership; or (iii) the liquidation of the Partnership. At the present time, the Partnership has no outstanding amounts due under this line of credit. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 39,584.33 limited partnership units in the Partnership representing 65.41% of the outstanding units. A number of these units were acquired pursuant to tender offers made by affiliates of the Managing General Partner, AIMCO, or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 65.41% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. However, DeForest Ventures II L.P., from whom AIMCO, through its merger with Insignia, acquired 25,399 Units (approximately 41.97%), had 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 affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by all other units holders. Except for the foregoing, no other limitations are imposed on Insignia Properties, L.P.'s right to vote each Unit acquired. Note D - Distributions During the nine months ended September 30, 2000, the Partnership declared and paid distributions of approximately $2,889,000 (approximately $2,860,000 to the limited partners or $47.26 per limited partnership unit) consisting of approximately $2,004,000 (approximately $1,984,000 to the limited partners or $32.78 per limited partnership unit) of cash from operations and approximately $885,000 (approximately $876,000 to the limited partners or $14.48 per limited partnership unit) of cash from the refinance proceeds of The Pines Apartments and from refinancing proceeds in prior years. Subsequent to September 30, 2000, the Partnership declared and paid a distribution of approximately $290,000 (approximately $287,000 to the limited partners or $4.74 per limited partnership unit) consisting of cash from operations. A distribution of approximately $300,000 (approximately $297,000 to the limited partners or $4.91 per limited partnership unit) from refinancing proceeds in prior years was paid during the nine months ended September 30, 1999. Note E - Refinancing of Mortgage Note Payable On December 13, 1999, the Partnership refinanced the mortgage encumbering The Pines Apartments. The refinancing replaced indebtedness of approximately $3,406,000 with a new mortgage in the amount of $4,225,000. The interest rate on the new mortgage is 7.97% as compared to 8.56% on the previous debt. The new loan which matures on January 1, 2020 requires monthly principal and interest payments and is being amortized over 20 years. Total capitalized loan costs were approximately $88,000 during the year ended December 31, 1999. Additional loan costs of approximately $16,000 were capitalized during the nine months ended September 30, 2000. Note F - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of five apartment complexes located in the Southeast. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those of the Partnership as described in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999. Note F - Segment Reporting (continued) Factors management used to identify the enterprise's reportable segments: The Partnership's reportable segment is investment properties that offer similar products and services. Although each of the investment properties is managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the three and nine month periods ended September 30, 2000 and 1999, is shown in the tables below (in thousands). The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment.
Three Months Ended September 30, 2000 Residential Other Totals Rental income $ 1,813 $ -- $ 1,813 Other income 98 1 99 Interest expense 411 -- 411 Depreciation 508 -- 508 General and administrative expense -- 146 146 Segment profit (loss) 192 (145) 47 Nine Months Ended September 30, 2000 Residential Other Totals Rental income $ 5,276 $ -- $ 5,276 Other income 266 18 284 Interest expense 1,242 -- 1,242 Depreciation 1,481 -- 1,481 General and administrative expense -- 397 397 Segment profit (loss) 389 (379) 10 Total assets 20,523 151 20,674 Capital expenditures for investment properties 822 -- 822 Three Months Ended September 30, 1999 Residential Other Totals Rental income $ 1,808 $ -- $ 1,808 Other income 69 1 70 Interest expense 409 -- 409 Depreciation 450 -- 450 General and administrative expense -- 45 45 Segment profit (loss) 205 (44) 161 Nine Months Ended September 30, 1999 Residential Other Totals Rental income $ 5,405 $ -- $ 5,405 Other income 203 8 211 Interest expense 1,230 -- 1,230 Depreciation 1,321 -- 1,321 General and administrative expense -- 189 189 Segment profit (loss) 624 (181) 443 Total assets 22,408 196 22,604 Capital expenditures for investment properties 523 -- 523
Note G - 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. 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 purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. 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 nine month periods ended September 30, 2000 and 1999: Average Occupancy 2000 1999 Fairway View II Apartments 93% 96% Baton Rouge, Louisiana The Pines Apartments 97% 96% Roanoke, Virginia Patchen Place Apartments 92% 93% Lexington, Kentucky Northwoods I and II Apartments 92% 95% Pensacola, Florida South Point Apartments 91% 93% Durham, North Carolina The Managing General Partner attributes the decrease in occupancy at Fairway View II Apartments to tenants temporarily moving in during the first nine months of 1999 because of a fire at a neighboring complex owned by an affiliated Partnership, which inflated occupancy for the period and to students moving out due to a local employer no longer offering an intern program. The Managing General Partner attributes the decrease in occupancy at Northwoods I and II Apartments to a current road expansion project. Traffic issues and road barriers have impacted new prospect traffic as well as the property's curb appeal. Results of Operations The Registrant's net income for the nine months ended September 30, 2000 was approximately $10,000 compared to net income of approximately $443,000 for the nine months ended September 30, 1999. The Registrant's net income for the three months ended September 30, 2000 was approximately $47,000 as compared to net income of approximately $161,000 for the three months ended September 30, 1999. The decrease in net income for the nine months ended September 30, 2000 as compared to the comparable period in 1999 was due to a decrease in total revenues and an increase in total expenses. The decrease in net income for the three month period ended September 30, 2000 as compared to the comparable period in 1999 was due to an increase in total expenses which was partially offset by an increase in total revenues. Total revenues decreased for the nine months ended September 30, 2000 due to a decrease in rental income which was partially offset by an increase in other income. Total revenues increased for the three month period ended September 30, 2000 due to an increase in rental income and other income. Rental income decreased for the nine months ended September 30, 2000 primarily due to decreased occupancy at Fairway View II, Northwoods I and II, Patchen Place, and South Point Apartments, as well as increased concessions at Fairway View II, South Point, and Northwoods I and II Apartments and increased bad debt expense at all of the Partnership's properties. These decreases were partially offset by increased rental rates at all the Partnership's properties. Rental income increased for the three months ended September 30, 2000 primarily due to increased average rental rates at Patchen Place and South Point Apartments as well as decreased concessions at Patchen Place Apartments. The increase in other income for the three and nine month periods ended September 30, 2000 was primarily due to an increase in interest income as a result of higher average cash balances in interest bearing accounts held by the Partnership during 2000 and increased telephone commissions primarily at Fairway View II Apartments and Northwoods Apartments. Total expenses increased for the three and nine months ended September 30, 2000 as compared to the comparable periods in 1999 due to increases in depreciation expense and general and administrative expenses. Depreciation expense increased due to property improvements and replacements completed during the last twelve months which are now being depreciated. General and administrative expenses increased primarily due to fees paid to the Managing General Partner in connection with the distributions from operations made during the nine months ended September 30, 2000. For the nine months ended September 30, 1999, no similar fees were paid because no distributions were paid during this period from operations. General and administrative expenses also increased due to an increase in the cost of services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement. Included in general and administrative expenses at both September 30, 2000 and 1999, are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. Costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of each 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 Registrant 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. Liquidity and Capital Resources At September 30, 2000, the Partnership had cash and cash equivalents of approximately $627,000 as compared to approximately $1,999,000 at September 30, 1999. Cash and cash equivalents decreased by approximately $2,166,000 from the Partnership's year ended December 31, 1999 due to approximately $2,965,000 of cash used in financing activities and approximately $697,000 of cash used in investing activities, which more than offset approximately $1,496,000 of cash provided by operating activities. Cash used in financing activities consisted of partner distributions and, to a lesser extent, the payment of loan costs and payments of principal made on the mortgage encumbering The Pines Apartments. Cash used in investing activities consisted of property improvements and replacements which was partially offset by withdrawals from escrow accounts maintained by the mortgage lender. The Partnership invests its working capital reserves in money market accounts. The Managing General Partner has extended to the Partnership a $500,000 line of credit. The Partnership has no outstanding amounts due under this line of credit. Based on present plans, the Managing General Partner does not anticipate the need to borrow against the line of credit 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 various properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state and local legal and regulatory requirements. Capital improvements for each of the Registrant's properties are detailed below. Fairway View II During the nine months ended September 30, 2000, the Partnership completed approximately $105,000 of budgeted and non-budgeted capital improvements at Fairway View II, consisting primarily of carpet and vinyl replacements, structural improvements, and clubhouse renovations. These improvements were funded from Partnership reserves and operating cash flow. The Partnership has evaluated the capital improvement needs of the property for the current year and, as a result budgeted approximately $82,000 for capital improvements, consisting primarily of air conditioning unit replacement, appliances, carpet and vinyl replacements, and structural improvements. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The Pines During the nine months ended September 30, 2000, the Partnership completed approximately $116,000 of budgeted and non-budgeted capital improvements at The Pines, consisting primarily of carpet replacement, parking area improvements, cabinet upgrades, and swimming pool upgrades. These improvements were funded from operating cash flow. The Partnership has evaluated the capital improvement needs of the property for the current year and, as a result budgeted approximately $98,000 for capital improvements, consisting primarily of parking area improvements, swimming pool upgrades, air conditioning unit replacement, window treatments, appliances, and carpet replacement. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Patchen Place During the nine months ended September 30, 2000, the Partnership completed approximately $206,000 of capital improvements at Patchen Place, consisting primarily of carpet and vinyl replacement, submetering improvements, appliances, air conditioning unit replacement, and plumbing enhancements. These improvements were funded from operating cash flow. The Partnership has evaluated the capital improvement needs of the property for the current year and, as a result budgeted approximately $227,000 for capital improvements, consisting primarily of air conditioning unit replacement, appliances, carpet and vinyl replacement, structural improvements, and plumbing upgrades. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Northwoods I and II During the nine months ended September 30, 2000, the Partnership completed approximately $347,000 of budgeted and non-budgeted capital improvements at Northwoods I & II, consisting primarily of air conditioning unit replacement, carpet and vinyl replacements, exterior painting, plumbing upgrades, appliances and structural improvements. These improvements were funded from Partnership reserves and operating cash flow. The Partnership has evaluated the capital improvement needs of the property for the current year and, as a result budgeted approximately $362,000 for capital improvements, consisting primarily of air conditioning unit replacement, carpet and vinyl replacements, electrical upgrades, major landscaping, parking lot improvements, appliances, sprinkler systems, interior decoration, and plumbing upgrades. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. South Point During the nine months ended September 30, 2000, the Partnership completed approximately $48,000 of budgeted and non-budgeted capital improvements at South Point, consisting primarily of carpet and vinyl replacement, golf carts, cabinet replacements, and appliances. These improvements were funded from Partnership reserves and operating cash flow. The Partnership has evaluated the capital improvement needs of the property for the current year and, as a result budgeted approximately $59,000 for capital improvements, consisting primarily of appliances and carpet and vinyl replacement. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The additional capital improvements will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. On December 13, 1999, the Partnership refinanced the mortgage encumbering The Pines Apartments. The refinancing replaced indebtedness of approximately $3,406,000 with a new mortgage in the amount of $4,225,000. The interest rate on the new mortgage is 7.97% as compared to 8.56% on the previous debt. The new loan which matures on January 1, 2020 requires monthly principal and interest payments and is being amortized over 20 years. Total capitalized loan costs were approximately $88,000 during the year ended December 31, 1999. Additional loan costs of approximately $16,000 were capitalized during the nine months ended September 30, 2000. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $4,165,000 encumbering The Pines is amortized over 20 years. The mortgage indebtedness of $16,800,000 encumbering the remaining properties is interest only with required balloon payments due November 1, 2003. The Managing General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant may risk losing such properties through foreclosure. During the nine months ended September 30, 2000, the Partnership declared and paid distributions of approximately $2,889,000 (approximately $2,860,000 to the limited partners or $47.26 per limited partnership unit) consisting of approximately $2,004,000 (approximately $1,984,000 to the limited partners or $32.78 per limited partnership unit) of cash from operations and approximately $885,000 (approximately $876,000 to the limited partners or $14.48 per limited partnership unit) of cash from the refinance proceeds of The Pines Apartments and from refinancing proceeds in prior years. Subsequent to September 30, 2000, the Partnership declared and paid a distribution of approximately $290,000 (approximately $287,000 to the limited partners or $4.74 per limited partnership unit) consisting of cash from operations. A distribution of approximately $300,000 (approximately $297,000 to the limited partners or $4.91 per limited partnership unit) from refinancing proceeds in prior years was paid during the nine months ended September 30, 1999. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. The Registrant's distribution policy is reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any additional distributions to its partners during the remainder of 2000 or subsequent periods. 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. 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 purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. 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 filed during the third quarter of 2000: 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. NATIONAL PROPERTY INVESTORS 7 By: NPI EQUITY INVESTMENTS, INC. Its Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: EX-27 2 0002.txt THIRD QUARTER 10-QSB
5 This schedule contains summary financial information extracted from NATIONAL PROPERTY INVESTORS 7 2000 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000732439 NATIONAL PROPERTY INVESTORS 7 1,000 9-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 627 0 472 0 0 0 47,837 (29,066) 20,674 0 20,965 0 0 0 (1,032) 20,674 0 5,560 0 0 5,550 0 1,242 0 0 0 0 0 0 10 0.17 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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