-----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, LOOC5jGhiI86eUSqt1z7cOZnQUhoSClsZgGWq39Yh+w76cB1/QKoO/1h5eMt8CZ8 rN1itkMXrkOzEU06lKvfHA== 0000711642-01-500132.txt : 20010810 0000711642-01-500132.hdr.sgml : 20010810 ACCESSION NUMBER: 0000711642-01-500132 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL PROPERTY INVESTORS 7 CENTRAL INDEX KEY: 0000732439 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133230613 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13454 FILM NUMBER: 1702052 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 npi7.txt NPI7 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 June 30, 2001 [ ] 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) June 30, 2001
Assets Cash and cash equivalents $ 664 Receivables and deposits 310 Restricted escrows 425 Other assets 411 Investment properties: Land $ 3,738 Buildings and related personal property 44,467 48,205 Less accumulated depreciation (30,605) 17,600 $ 19,410 Liabilities and Partners' Deficit Liabilities Accounts payable $ 72 Tenant security deposit liabilities 105 Accrued property taxes 157 Other liabilities 473 Mortgage notes payable 20,896 Partners' Deficit: General partner $ (325) Limited partners (60,517 units issued and outstanding) (1,968) (2,293) $ 19,410 See Accompanying Notes to Financial Statements
b) NATIONAL PROPERTY INVESTORS 7 STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 Revenues: Rental income $ 1,822 $ 1,712 $ 3,650 $ 3,463 Other income 95 112 180 185 Total revenues 1,917 1,824 3,830 3,648 Expenses: Operating 674 715 1,451 1,419 General and administrative 101 160 255 251 Depreciation 517 489 1,031 973 Interest 415 411 830 831 Property taxes 106 105 210 211 Total expenses 1,813 1,880 3,777 3,685 Net income (loss) $ 104 $ (56) $ 53 $ (37) Net income (loss) allocated to general partner (1%) $ 1 $ (1) $ 1 $ -- Net income (loss) allocated to limited partners (99%) 103 (55) 52 (37) $ 104 $ (56) $ 53 $ (37) Net income (loss) per limited partnership unit $ 1.70 $ (0.91) $ 0.86 $ (0.61) Distributions per limited partnership unit $ 6.74 $ 22.97 $ 18.54 $ 42.93 See Accompanying Notes to Financial Statements
c) NATIONAL PROPERTY INVESTORS 7 STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 60,517 $ 1 $30,259 $30,260 Partners' deficit at December 31, 2000 60,517 $ (315) $ (898) $(1,213) Distributions to partners -- (11) (1,122) (1,133) Net income for the six months ended June 30, 2001 -- 1 52 53 Partners' deficit at June 30, 2001 60,517 $ (325) $(1,968) $(2,293) See Accompanying Notes to Financial Statements
d) NATIONAL PROPERTY INVESTORS 7 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 2001 2000 Cash flows from operating activities: Net income (loss) $ 53 $ (37) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,031 973 Amortization of loan costs 50 49 Change in accounts: Receivables and deposits (113) (80) Other assets (10) (2) Accounts payable (70) (40) Tenant security deposit liabilities 5 (2) Accrued property taxes 105 87 Other liabilities 186 31 Net cash provided by operating activities 1,237 979 Cash flows from investing activities: Property improvements and replacements (209) (589) Net (deposits to) withdrawals from restricted escrows (48) 78 Net cash used in investing activities (257) (511) Cash flows from financing activities: Payments on mortgage note payable (47) (37) Loan costs paid (7) (16) Distributions to partners (1,133) (2,624) Net cash used in financing activities (1,187) (2,677) Net decrease in cash and cash equivalents (207) (2,209) Cash and cash equivalents at beginning of period 871 2,793 Cash and cash equivalents at end of period $ 664 $ 584 Supplemental disclosure of cash flow information: Cash paid for interest $ 780 $ 755 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"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2001. 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, 2000. The Managing General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Managing General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the financial statements as currently presented. Note B - 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 six month periods ended June 30, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $189 $180 Reimbursement for services of affiliates (included in investment properties and general and administrative expenses) 124 84 Non-accountable reimbursement (included in general and administrative expenses) 91 91 Partnership management fee (included in general and administrative expenses) -- 35 During the six months ended June 30, 2001 and 2000, 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 $189,000 and $180,000 for the six months ended June 30, 2001 and 2000, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $124,000 and $84,000 for the six months ended June 30, 2001 and 2000, 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 both of the six month periods ended June 30, 2001 and 2000. 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 $35,000 during the six months ended June 30, 2000 for such fees. The Managing General Partner was not entitled to receive a similar reimbursement during the six months ended June 30, 2001. 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, are 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 40,211.67 limited partnership units in the Partnership representing 66.45% 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 66.45% 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 (41.97% of the units), 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 unit holders. Except for the foregoing, no other limitations are imposed on AIMCO's or its affiliates' right to vote each unit acquired. Note C - Distributions During the six months ended June 30, 2001, the Partnership declared and paid distributions from operations of approximately $1,133,000 (approximately $1,122,000 to the limited partners or $18.54 per limited partnership unit). During the six months ended June 30, 2000, the Partnership declared and paid distributions of approximately $2,624,000 (approximately $2,598,000 to the limited partners or $42.93 per limited partnership unit) consisting of approximately $1,739,000 (approximately $1,722,000 to the limited partners or $28.45 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. Note D - 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 scheduled to be fully amortized at maturity. Total capitalized loan costs were approximately $88,000 during the year ended December 31, 1999. Additional loan costs of approximately $16,000 and $7,000 were capitalized during the six months ended June 30, 2000 and 2001, respectively. Note E - 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001 to file a fourth amended complaint. The Managing General Partner does not anticipate that any costs, whether legal or settlement 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 six month periods ended June 30, 2001 and 2000: Average Occupancy 2001 2000 Fairway View II Apartments 91% 93% Baton Rouge, Louisiana The Pines Apartments 96% 97% Roanoke, Virginia Patchen Place Apartments 90% 92% Lexington, Kentucky Northwoods I and II Apartments 93% 90% Pensacola, Florida South Point Apartments 94% 88% Durham, North Carolina The Managing General Partner attributes the increase in occupancy at Northwoods I and II Apartments to the completion of a road expansion project. Traffic issues and road barriers were eliminated, thereby increasing new prospect traffic as well as the property's curb appeal. The Managing General Partner attributes the increase in occupancy at South Point Apartments to increased marketing efforts and decreased home purchases. Results of Operations The Registrant's net income for the six months ended June 30, 2001 was approximately $53,000 compared to a net loss of approximately $37,000 for the six months ended June 30, 2000. The Registrant's net income for the three months ended June 30, 2001 was approximately $104,000 as compared to a net loss of approximately $56,000 for the three months ended June 30, 2000. The increase in net income for the six months ended June 30, 2001 was due to an increase in total revenues which was partially offset by an increase in total expenses. The increase in net income for the three months ended June 30, 2001 was due to an increase in total revenues and a decrease in total expenses. Total revenues increased for the three and six months ended June 30, 2001 due to an increase in rental income which was partially offset by a decrease in other income. Rental income increased primarily due to increased average rental rates at all of the Partnership's investment properties and increased occupancy at Northwoods I and II and South Point Apartments, which more than offset decreased occupancy at Fairway View II, The Pines, and Patchen Place Apartments. In addition, concessions decreased at Patchen Place, South Point, and Northwoods I and II Apartments which more than offset increased concessions at Fairway View II Apartments. The decrease in other income was primarily due to a decrease in interest income as a result of lower average cash balances in interest bearing accounts held by the Partnership during 2001. Total expenses increased for the six months ended June 30, 2001 due to increases in depreciation and operating expenses. Total expenses decreased for the three months ended June 30, 2001 due to decreases in operating and general and administrative expenses which were partially offset by an increase in depreciation expense. Depreciation expense increased for the three and six months ended June 30, 2001 due to property improvements and replacements completed during the last twelve months. Operating expenses increased for the six months ended June 30, 2001 primarily due to increased gas bills at Patchen Place and The Pines Apartments and increased property management fees at all of the Partnership's properties. Operating expenses decreased for the three months ended June 30, 2001 primarily due to decreased maintenance expenses at Fairway View II, Patchen Place, South Point, and Northwoods I and II Apartments. General and administrative expenses decreased for the three months ended June 30, 2001 primarily due to decreased fees paid to the Managing General Partner in connection with the distributions from operations made during the three months ended June 30, 2001 and reduced legal and professional fees required to manage the Partnership. These decreases were partially offset by an increase in the costs of services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses at both June 30, 2001 and 2000 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. 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 June 30, 2001, the Partnership had cash and cash equivalents of approximately $664,000 as compared to approximately $584,000 at June 30, 2000. Cash and cash equivalents decreased by approximately $207,000 from the Partnership's year ended December 31, 2000 due to approximately $1,187,000 of cash used in financing activities and approximately $257,000 of cash used in investing activities, which more than offset approximately $1,237,000 of cash provided by operating activities. Cash used in financing activities consisted of distributions to partners 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 and deposits to escrow accounts maintained by the mortgage lender. The Partnership invests its working capital reserves in interest bearing 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 six months ended June 30, 2001, the Partnership completed approximately $35,000 of capital improvements at Fairway View II, consisting primarily of carpet and vinyl replacements, plumbing fixtures, air conditioning unit replacement, major landscaping, 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 $56,000 for capital improvements, consisting primarily of air conditioning unit replacement, appliances, carpet replacements, and swimming pool 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. The Pines During the six months ended June 30, 2001, the Partnership completed approximately $43,000 of capital improvements at The Pines, consisting primarily of carpet and vinyl replacements, water heater replacements, and cabinet upgrades. 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 $191,000 for capital improvements, consisting primarily of cabinet upgrades, air conditioning unit replacement, interior decoration, 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. Patchen Place During the six months ended June 30, 2001, the Partnership completed approximately $38,000 of capital improvements at Patchen Place, consisting primarily of carpet replacements, office computers, air conditioning unit replacement, and structural improvements. 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 $153,000 for capital improvements, consisting primarily of carpet and vinyl replacements, appliances and water conservation 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. Northwoods I and II During the six months ended June 30, 2001, the Partnership completed approximately $74,000 of capital improvements at Northwoods I & II, consisting primarily of carpet and vinyl replacements, air conditioning unit replacement, interior decoration, 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 $183,000 for capital improvements, consisting primarily of air conditioning unit replacement, countertop replacements, carpet replacements, swimming pool improvements, parking lot improvements, exterior painting, appliances, structural improvements, and recreational facility 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 six months ended June 30, 2001, the Partnership completed approximately $19,000 of capital improvements at South Point, consisting primarily of carpet replacements and air conditioning unit replacements. 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 $50,000 consisting primarily of cabinet upgrades and carpet replacements. 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. 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 $4,096,000 encumbering The Pines is fully amortized over 20 years. The mortgage indebtedness of $16,800,000 encumbering the remaining properties requires interest only payments with 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 six months ended June 30, 2001, the Partnership declared and paid distributions from operations of approximately $1,133,000 (approximately $1,122,000 to the limited partners or $18.54 per limited partnership unit). During the six months ended June 30, 2000, the Partnership declared and paid distributions of approximately $2,624,000 (approximately $2,598,000 to the limited partners or $42.93 per limited partnership unit) consisting of approximately $1,739,000 (approximately $1,722,000 to the limited partners or $28.45 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. 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 Partnership'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 2001 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 40,211.67 limited partnership units in the Partnership representing 66.45% 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 66.45% 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 (41.97% of the units), 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 unit holders. Except for the foregoing, no other limitations are imposed on AIMCO's or its affiliates right to vote each unit acquired. 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001 to file a fourth amended complaint. The Managing General Partner does not anticipate that any costs, whether legal or settlement 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: None. b) Reports on Form 8-K filed during the quarter ended June 30, 2001: 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: -----END PRIVACY-ENHANCED MESSAGE-----