FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
Commission file number 0-9138
NATIONAL PROPERTY INVESTORS II
(Exact name of small business issuer as specified in its charter)
California 13-2906846
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's phone 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 II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents $ 210
Escrow for taxes 114
Other assets 91
Investment properties:
Land $ 352
Buildings and related personal property 5,239
5,591
Less accumulated depreciation (4,030) 1,561
$ 1,976
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 142
Tenant security deposits 56
Mortgage note payable 1,108
Partners' Capital (Deficit):
Limited partners' (45,656 units outstanding) $ 693
General partner's (23) 670
$ 1,976
See Notes to Financial Statements
b) NATIONAL PROPERTY INVESTORS II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Rental income $ 289 $ 249 $ 883 $ 826
Other income 20 15 52 46
Total revenues 309 264 935 872
Expenses:
Operating 219 167 600 514
Interest 28 30 85 94
Depreciation 44 55 132 165
General and administrative 27 47 109 147
Total expenses 318 299 926 920
Net (loss) income $ (9) $ (35) $ 9 $ (48)
Net (loss) income allocated
to general partner (1%) $ -- $ -- $ -- $ --
Net (loss) income allocated
to limited partners (99%) (9) (35) 9 (48)
$ (9) $ (35) $ 9 $ (48)
Net (loss) income per
limited partnership unit $ (.20) $ (.76) $ .20 $(1.04)
See Notes to Financial Statements
c) NATIONAL PROPERTY INVESTORS II
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited General Limited
Partnership Partner's Partners'
Units Deficit Equity Total
<S> <C> <C> <C> <C>
Original capital contributions 45,656 $ 1 $ 22,828 $ 22,829
Partners' (deficit) capital
at December 31, 1995 45,656 $ (23) $ 684 $ 661
Net income for the nine
months ended September 30, 1996 -- 9 9
Partners' (deficit) capital
at September 30, 1996 45,656 $ (23) $ 693 $ 670
<FN>
See Notes to Financial Statements
</TABLE>
d) NATIONAL PROPERTY INVESTORS II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 9 $ (48)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 132 165
Amortization of mortgage costs -- 5
Change in accounts:
Escrow for taxes 26 (73)
Other assets (4) 4
Accounts payable and accrued expenses 2 49
Tenant security deposit liabilities (7) (10)
Net cash provided by operating activities 158 92
Cash flows from investing activities:
Property improvements and replacements (43) (52)
Net cash used in investing activities (43) (52)
Cash flows from financing activities:
Payments of mortgage note payable (121) (115)
Net cash used in financing activities (121) (115)
Net decrease in cash and cash equivalents (6) (75)
Cash and cash equivalents at beginning of period 216 330
Cash and cash equivalents at end of period $ 210 $ 255
Supplemental information:
Cash paid for interest $ 87 $ 89
See Notes to Financial Statements
e) NATIONAL PROPERTY INVESTORS II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of National Property Investors
II (the "Partnership") 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. ("NPI Equity" or 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 nine month periods ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-K
for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on 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.
NPI Equity is the general partner of the Partnership. NPI Equity is a wholly-
owned subsidiary of National Properties Investors, Inc. ("NPI").
On August 17, 1995, the stockholders of NPI entered into an agreement to sell to
IFGP Corporation, a Delaware corporation, an affiliate of Insignia Financial
Group, Inc. ("Insignia"), a Delaware corporation, all of the issued and
outstanding common stock of NPI for an aggregate purchase price of $1,000,000.
The closing of the transactions contemplated by the above mentioned agreement
(the "Closing") occurred on January 19, 1996.
Upon the Closing, the officers and directors of NPI and the Managing General
Partner resigned and IFGP Corporation caused new officers and directors to each
of those entities to be elected.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were charged to expense in 1996 and 1995:
For the Nine Months Ended
September 30,
1996 1995
Property management fees (included in operating
expenses) $ 46,000 $ 41,000
Reimbursement for services of affiliates
(included in general and administrative
expenses) $ 72,000 127,000
For the period from January 19, 1996, to September 30, 1996, the Partnership
insured its property under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the Managing General Partner who
received payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
Included in operating expenses for the nine months ended September 30, 1995, are
insurance premiums of approximately $30,000 which were paid to the Managing
General Partner under a master insurance policy arranged for by the Managing
General Partner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership has one investment property, Sugar Mill Apartments, located in
Melbourne, Florida. The average occupancy for both the nine month periods ended
September 30, 1996 and 1995, was 91%.
The Partnership's net income for the nine months ended September 30, 1996, was
approximately $9,000 compared to a net loss of approximately $48,000 for the
same period of 1995. The Partnership incurred a net loss of approximately
$9,000 for the three months ended September 30, 1996, compared to a net loss of
approximately $35,000 for the three months ended September 30, 1995. The
increase in net income for the nine month period is attributable to an increase
in revenues and a decrease in depreciation and general and administrative
expenses, offset by an increase in operating expense. While occupancy remained
consistent for both the nine months ended September 30, 1996 and 1995, average
rental rates increased leading to an increase in rental income at Sugar Mill
Apartments. The decrease in depreciation expense was due to approximately
$396,000 of fixed assets becoming fully depreciated in 1995. The decrease in
general and administrative expenses is due to a decrease in cost reimbursements
paid to affiliates of the Managing General Partner. Operating expense increased
due to increased advertising costs, utility costs and plumbing repairs at Sugar
Mill Apartments.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At September 30, 1996, the Partnership had unrestricted cash of $210,000 as
compared to $255,000 at September 30, 1995. Net cash provided by operating
activities increased as a result of an increase in net income, as noted above,
and a decrease in escrows for taxes. The decrease in escrows for taxes was
caused by a change in the timing of the payment of the real estate taxes. The
decrease in cash used in investing activities is due to a decrease in property
improvements. The increase in cash used in financing activities is due to the
increase in payments of the mortgage notes payable.
The Managing General Partner has extended to the Partnership a $300,000 line of
credit. At the present time, 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 in the near future. Other than cash and
cash equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $1,108,000 is based on a variable rate, amortized over a ten
year period so that the mortgage will be repaid on the maturity date of October
5, 2001, subject to the holder's right to call the mortgage at one year
intervals commencing October 5, 1994. If the mortgage is not called by the
holder, the Partnership is required to pay an "extension fee" equal to one-half
on one percent (0.5%) of the then outstanding principal balance on the mortgage
for each year during which the mortgage is not so called. The Managing General
Partner is currently in negotiations to sell the Partnership's investment
property to an unaffiliated third party. Future cash distributions will depend
on the levels of cash generated from operations, a property sale, and the
availability of cash reserves. No cash distributions were paid in 1995 or
during the nine months ended September 30, 1996.
To date, limited partners have received cash in excess of their original
investment. Any additional return is dependent upon the operations and eventual
sales price of the Partnership's remaining property.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
b) Reports on Form 8-K: None filed during the quarter ended September 30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL PROPERTY INVESTORS II
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: November 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors II 1996 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000216679
<NAME> NATIONAL PROPERTY INVESTORS II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 210
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,591
<DEPRECIATION> 4,030
<TOTAL-ASSETS> 1,976
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,108
0
0
<COMMON> 0
<OTHER-SE> 670
<TOTAL-LIABILITY-AND-EQUITY> 1,976
<SALES> 0
<TOTAL-REVENUES> 935
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 926
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9
<EPS-PRIMARY> .20<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
