FORM 10-KSB- ANNUAL OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS III
(Name of small business issuer in its charter)
California 13-2974428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year. $8,578,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. Market value
information for registrant's partnership interests is not available. Should a
trading market develop for these interests, it is the Managing General Partner's
belief that the aggregate market value of the voting partnership interests would
not exceed $25 million.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
National Property Investors III (the "Partnership or the "Registrant") is a
California limited partnership formed as of February 1, 1979. The Partnership
is engaged in the business of operating and holding for investment, income
producing real estate properties. NPI Equity Investments, Inc. (the "Managing
General Partner or "NPI Equity"), a Florida corporation, became the
Partnership's general partner on June 21, 1991, succeeding NPI Management Corp.
(the "Prior Managing General Partner"). The Managing General Partner was a
wholly owned subsidiary of National Property Investors, Inc. ("NPI") until
December 31, 1996, at which time the stock of NPI Equity was acquired by
Insignia Properties Trust.
Reference is made to the Prospectus of the Partnership dated October 24, 1979,
as supplemented by Supplements dated January 24, 1980, April 24, 1980, July 16,
1980, September 3, 1980, October 2, 1980, and October 16, 1980, which have been
filed pursuant to Rules 424(b) and 424(c) under the Securities Act of 1933, as
amended, all of which are incorporated herein by reference. The Prospectus was
filed as part of the Partnership's Registration Statement pursuant to which
66,000 units of Limited Partnership Interest (the "Units") were registered. The
Partnership sold 48,049 units aggregating $24,024,500. The general partner
contributed capital in the amount of $1,000 for a 1% interest in the
Partnership. As of December 24, 1980, the Partnership had invested all the net
proceeds available for investment in six apartment complexes, three of which
have been disposed of at foreclosure sales.
The Managing General Partner of the Partnership intends to maximize the
operating results and, ultimately, the net realizable value of each of the
Partnership's properties in order to achieve the best possible return for the
investors. Such results may best be achieved through property sales,
refinancings, debt restructurings or relinquishment of the assets. The
Partnership intends to evaluate each of its holdings periodically to determine
the most appropriate strategy for each of the assets.
The Partnership has no full time employees. The Managing General Partner is
vested with full authority as to the general management and supervision of the
business and affairs of the Partnership. The limited partners have no right to
participate in the management or conduct of such business and affairs. NPI-AP
Management L.P. ("NPI-AP"), an affiliate of the Managing General Partner,
provides day-to-day management services to the Partnership's investment
properties.
The business in which the Partnership is engaged is highly competitive, and the
Partnership is not a significant factor in its industry. Each of its apartment
properties is located in or near a major urban area and, accordingly, competes
for rentals not only with similar apartment properties in its immediate area but
with hundreds of similar apartment properties throughout the urban area,
including properties owned and/or managed by affiliates of the Partnership.
Such competition is primarily on the basis of location, rents, services, and
amenities. In addition, the Partnership competes with significant numbers of
individuals and organizations (including similar partnerships, real estate
investment trusts and financial institutions) with respect to the sale of
improved real properties, primarily on the basis of the prices and terms of such
transactions.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
Changes in Control
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of NPI Equity and NPI. In connection with these
transactions, affiliates of Insignia appointed new officers and directors of NPI
Equity and NPI. See "Item 9. Directors, Executive Officers, Promoters and
Control Persons, Compliance with Section 16(a) of the Exchange Act" for
information on the directors and executive officers of the Partnership.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders. If the closing occurs, AIMCO will then control the Managing
General Partner of the Partnership.
The Tender Offer
On January 19, 1996, DeForest Ventures II L.P., the entity which tendered for
units of the Partnership in 1994 and 1995, and certain of its affiliates sold
the units then held by them (21,340 units representing approximately 44% of the
total outstanding units at such time) to Insignia NPI L.L.C. ("Insignia LLC"),
an affiliate of Insignia. Insignia LLC subsequently transferred these units to
Insignia Properties L.P. ("IPLP"). As a result, IPLP could be in a position to
significantly influence all voting decisions with respect to the Partnership.
Under the Partnership Agreement, unit holders holding a majority of the Units
are entitled to take action with respect to a variety of matters. When voting
on matters, IPLP would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of its
affiliation with the Managing General Partner. However, IPLP has agreed for the
benefit of non-tendering unit holders, that it will vote its Units acquired on
January 19, 1996: (i) against any proposal to increase the fees and other
compensation payable by the Partnership to the Managing General Partner and any
of its affiliates; and (ii) with respect to any proposal made by the Managing
General Partner or any of its affiliates, in proportion to votes cast by other
unit holders.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the Partnership's investment in properties.
<TABLE>
<CAPTION>
Date of Type of
Property Purchase Ownership Use
<S> <C> <C> <C>
Pinetree Apartments 7/1/80 Fee ownership, subject to a Apartment-
Charlotte, North Carolina first deed of trust. 220 units
Lakeside Apartments 12/18/80 Fee ownership, subject to a Apartment-
Lisle, Illinois first deed of trust. 568 units
Summerwalk Apartments (1) 12/24/80 Fee ownership, subject to a Apartment-
Winter Park, Florida first deed of trust. 304 units
<FN>
(1) The Partnership acquired the co-tenant's 10% interest in the property in
January, 1997, for $50,000.
</FN>
</TABLE>
SCHEDULE OF PROPERTIES (IN THOUSANDS):
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Pinetree Apartments $ 6,208 $ 4,232 5-27.5 yrs. SL $ 1,923
Lakeside Apartments 21,597 14,165 5-27.5 yrs. SL 7,572
Summerwalk Apartments 7,679 5,112 5-27.5 yrs. SL 2,421
$35,484 $23,509 $11,916
<FN>
See "Note A" to the consolidated financial statements included in "Item 7.
Financial Statements" for a description of the Partnership's depreciation
policy.
</FN>
</TABLE>
SCHEDULE OF MORTGAGE (IN THOUSANDS):
<TABLE>
<CAPTION>
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1997 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Pinetree Apartments $ 2,214 9.87% 25 yrs. 7/01/01 $ 2,090
Lakeside Apartments 17,200 7.33% (1) 11/01/03 17,200
Summerwalk Apartments 5,000 7.13% 30 yrs. 1/01/08 4,312
$ 24,414
<FN>
(1) Monthly payments are interest only.
</FN>
</TABLE>
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's rental properties and by pledge of revenues from the respective
rental properties. The mortgage notes payable include prepayment penalties if
repaid prior to maturity.
On December 23, 1997, the Partnership refinanced the mortgage encumbering
Summerwalk Apartments. The refinancing replaced indebtedness of $4,443,000 with
a new first mortgage in the amount of $5,000,000. The mortgage was refinanced
at a rate equal to 7.13% and matures on January 1, 2008, with a balloon payment
of approximately $4,312,000 due to maturity. The previous mortgage had an
interest rate of 9.75% and had matured on September 1, 1996. Total capitalized
loan costs were approximately $190,000 during the year ended December 31, 1997.
In connection with the refinancing, the Partnership was required to transfer all
the assets and liabilities of Summerwalk to a newly formed subsidiary,
Summerwalk NPI III, L.P.
On November 15, 1996, the Partnership refinanced the mortgage encumbering
Lakeside Apartments. The refinancing replaced indebtedness of $16,943,000, with
a new mortgage in the amount of $17,200,000. The mortgage was refinanced at a
rate equal to 7.33%, compared to the prior rate of 8.25%. Payments of interest
only are due on the first day of each month until the loan matures on November
1, 2003. The prior note was scheduled to mature in August of 1999. Total
capitalized loan costs were approximately $417,000 during the year ended
December 31, 1996. Total capitalized loan costs were approximately $14,000
during the year ended December 31, 1997. The Partnership recognized an
extraordinary loss on early extinguishment of debt in the amount of
approximately $75,000 due to the write off of unamortized loan costs.
SCHEDULE OF RENTAL RATES AND OCCUPANCY
Average Annual Average Annual
Rental Rates Occupancy
Property 1997 1996 1997 1996
Pinetree Apartments $6,432/unit $6,092/unit 94% 91%
Lakeside Apartments 9,294/unit 9,042/unit 96% 93%
Summerwalk Apartments 6,187/unit 6,032/unit 98% 92%
The Managing General Partner attributes the increases in occupancy to enhanced
marketing efforts and increased curbside appeal.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other apartment complexes in the area. The Managing General
Partner believes that all of the properties are adequately insured. All of the
lease terms are for one year or less. No individual tenant occupies 10% or more
of the available rental space.
Real estate taxes (in thousands) and rates in 1997 for each property were:
1997 1997
Billing Rate
Pinetree Apartments $ 59 1.4%
Lakeside Apartments 521 7.1%
Summerwalk Apartments 104 1.9%
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
routine in nature. The Managing General Partner of the Partnership believes
that all such pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition, or operations of
the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The unit holders of the Partnership did not vote on any matter during the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Partnership, a publicly-held limited partnership, sold 48,049 Limited
Partnership Units aggregating $24,025,000. As of January 1, 1998, the
Partnership currently has 48,049 units outstanding held by 1,813 limited
partners of record. There is no intention to sell additional Limited
Partnership Units nor is there an established market for these Units.
No distributions were made during the years ended December 31, 1997 and 1996.
See "Item 6. Management's Discussion and Analysis or Plan of Operation" for a
discussion of the Partnership's financial ability to make distributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net income for the year ended December 31, 1997, was
approximately $934,000 versus approximately $25,000 for the year ended December
31, 1996. This increase in net income for the year ended December 31, 1997, is
primarily attributable to increases in rental and other income and decreases in
general and administrative, interest and property tax expenses. In addition,
the Partnership recognized an extraordinary loss on early extinguishment of debt
of approximately $75,000 in 1996 as discussed below. The increase in rental
income is due to the increase in occupancy and rental rates at the Partnership's
properties. The increase in other income is primarily due to an increase in pet
fees at Lakeside and an increase in lease cancellation fees at Summerwalk. The
Partnership reimburses the Managing General Partner and its affiliates for its
costs involved in the management and administration of all partnership
activities. The decrease in general and administrative expenses during the
twelve month period ended December 31, 1997, is primarily due to a decrease in
reimbursements to affiliates, which is directly attributable to the transition
and relocation of the administrative offices during the first quarter of 1996.
The decrease in interest expense is primarily due to the refinancing of the
mortgage encumbering Lakeside Apartments in 1996 at a lower interest rate. The
decrease in property tax expense is primarily due to an underestimate of accrued
taxes at December 31, 1995, due to the timing of the receipt of the tax bills
for Lakeside. As a result, these taxes were expensed when paid in 1996.
Included in operating expense for 1997 is approximately $217,000 of major
repairs and maintenance comprised primarily of landscaping, exterior building
repairs, and parking lot repairs. Included in operating expense for 1996 is
approximately $152,000 of major repairs and maintenance comprised primarily of
exterior building repairs and landscaping.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties 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 market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Capital Resources and Liquidity
At December 31, 1997, the Partnership had unrestricted cash and cash equivalents
of approximately $1,508,000 as compared to approximately $964,000 at December
31, 1996 and cash equivalents. The net increase in cash and cash equivalents
for the year ended December 31, 1997, was approximately $544,000 as compared to
approximately $43,000 for the year ended December 31, 1996. Net cash provided
by operating activities increased primarily due to an increase in rental income
and a decrease in interest expense, as discussed above. This increase was
partially offset by an increase in cash used for accounts payable due to the
timing of payments. Net cash used in investing activities increased due to an
increase in property improvements and replacements as well as the acquisition of
the 10% interest in Summerwalk previously held by an unaffiliated third party.
Net cash provided by financing activities increased due to a reduction in
mortgage principal payments due to the refinancing of the mortgage encumbering
Lakeside in 1996, which requires interest only payments. This increase is also
due to higher net proceeds from the refinancing of Summerwalk in 1997 as
compared to the refinancing of Lakeside in 1996.
The Managing General Partner has made available to the Partnership a $500,000
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.
On December 23, 1997, the Partnership refinanced the mortgage encumbering
Summerwalk Apartments. The refinancing replaced indebtedness of $4,443,000 with
a new first mortgage in the amount of $5,000,000. The mortgage was refinanced
at a rate equal to 7.13% and matures on January 1, 2008, with a balloon payment
of approximately $4,312,000. The previous mortgage had an interest rate of
9.75% and had matured on September 1, 1996. Total capitalized loan costs were
approximately $190,000. In connection with the refinancing, the Partnership was
required to transfer all the assets and liabilities of Summerwalk to a newly
formed subsidiary, Summerwalk NPI III, L.P.
On November 15, 1996, the Partnership refinanced the mortgage encumbering
Lakeside Apartments. The refinancing replaced indebtedness of $16,943,000 with
a new mortgage in the amount of $17,200,000. The mortgage was refinanced at a
rate equal to 7.33%, compared to the prior rate of 8.25%. Payments of interest
only are due on the first day of each month until the loan matures on November
1, 2003. The prior note was scheduled to mature in August of 1999. Total
capitalized loan costs were approximately $431,000. The Partnership recognized
an extraordinary loss on early extinguishment of debt in the amount of
approximately $75,000 due to the write off of unamortized loan costs.
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 properties to adequately maintain the physical
assets and the 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 $24,414,000 is being amortized over varying periods
with balloon payments due at maturity at which time the properties will either
be refinanced or sold. Future cash distributions will depend on the levels of
cash generated from operations, property sales, property refinancings and the
availability of cash reserves. No cash distributions were paid during the years
ended December 31, 1997 and 1996.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are
not completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this annual report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
forward-looking statements speak only as of the date of this annual report. The
Partnership expressly disclaims any obligation or undertaking to release
publicly any updates of revisions to any forward-looking statements contained
herein to reflect any change in the Partnership's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
ITEM 7. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS III
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1997
Consolidated Statements of Operations - Years ended December 31, 1997 and 1996
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
To The Partners
National Property Investors III
Greenville, South Carolina
We have audited the accompanying consolidated balance sheet of National Property
Investors III, (a limited partnership) (the "Partnership") and its subsidiaries
as of December 31, 1997, and the related consolidated statements of operations,
changes in partners' deficit and cash flows for each of the two years in the
period ended December 31, 1997. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note F to the consolidated financial statements, in 1996 the
Partnership corrected its accounting for the rental of a laundry room facility,
effective January 1, 1995.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National Property Investors III and its subsidiaries, as of December 31, 1997,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/Imowitz Koenig & Co., LLP
Certified Public Accountants
New York, New York
January 17, 1998
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
December 31, 1997
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,508
Receivables and deposits 624
Restricted escrows 760
Other assets 636
Investment properties (Notes A and D):
Land $ 3,023
Buildings and related personal property 32,461
35,484
Less accumulated depreciation (23,509) 11,975
$ 15,503
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 34
Tenant security deposits payable 158
Accrued property taxes 606
Other liabilities 295
Mortgage notes payable (Note C) 24,414
Partners' Deficit
Limited partners' (48,049 units issued
and outstanding) $ (9,724)
General partner's (280) (10,004)
$ 15,503
See Accompanying Notes to Consolidated Financial Statements
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996
<S> <C> <C>
Revenues:
Rental income $ 8,177 $ 7,617
Other income 401 336
Total revenues 8,578 7,953
Expenses:
Operating 3,456 3,390
General and administrative 199 237
Depreciation 1,323 1,288
Interest 2,002 2,113
Property taxes 664 825
Total expenses 7,644 7,853
Income before extraordinary item 934 100
Extraordinary loss on early extinguishment
of debt (Note C) -- (75)
Net income $ 934 $ 25
Net income allocated to general partner (1%) $ 9 $ --
Net income allocated to limited partners (99%) 925 25
$ 934 $ 25
Net income per limited partnership unit:
Income before extraordinary item $ 19.25 $ 2.07
Extraordinary loss -- (1.55)
Net income $ 19.25 $ .52
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 48,049 $ 1 $ 24,025 $ 24,026
Partners' deficit at
December 31, 1995 48,049 $ (289) $ (10,674) $ (10,963)
Net income for the year ended
December 31, 1996 -- -- 25 25
Partners' deficit at
December 31, 1996 48,049 (289) (10,649) (10,938)
Net income for the year ended
December 31, 1997 -- 9 925 934
Partners' deficit at
December 31, 1997 48,049 $ (280) $ (9,724) $ (10,004)
<FN>
See Accompanying Notes to Consolidated Financial Statements
<FN>
</TABLE>
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 934 $ 25
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,323 1,288
Amortization of loan costs 74 51
Loss on disposal of property 17 --
Extraordinary loss on early extinguishment
of debt -- 75
Change in accounts:
Receivables and deposits (234) (45)
Other assets 62 (57)
Accounts payable (263) 185
Tenant security deposit payable (13) (42)
Accrued property taxes 52 127
Other liabilities (38) 55
Net cash provided by operating activities 1,914 1,662
Cash flows from investing activities:
Net deposits to restricted escrows (298) (233)
Buyout of Summerwalk co-tenant (50) --
Property improvements and replacements (1,234) (806)
Net cash used in investing activities (1,582) (1,039)
Cash flows from financing activities:
Mortgage principal payments (141) (420)
Repayment of mortgage note payable (4,443) (16,943)
Proceeds from mortgage note payable 5,000 17,200
Loan costs (204) (417)
Net cash provided by (used in) in
financing activities 212 (580)
Net increase in cash and cash equivalents 544 43
Cash and cash equivalents at beginning of period 964 921
Cash and cash equivalents at end of period $ 1,508 $ 964
Supplemental disclosure on cash flow information:
Cash paid for interest $ 1,964 $ 2,081
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
NATIONAL PROPERTY INVESTORS III
Notes to Consolidated Financial Statements
December 31, 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization:
National Property Investors III (the "Partnership"), a limited partnership, was
organized under the Uniform Limited Partnership Laws of California as of
February 1, 1979, for the purpose of acquiring and operating income-producing
residential real estate. The Partnership currently owns garden apartments in
Charlotte, North Carolina, Lisle, Illinois and Winter Park, Florida. The
general partner is NPI Equity Investments, Inc. ("NPI Equity" or the "Managing
General Partner"). The Partnership will terminate on December 31, 2005, or
sooner, in accordance with the terms of the Partnership Agreement. A total of
48,049 units of the limited partnership were issued for $500 each, for an
aggregate capital contribution of $24,024,500. In addition, the general partner
contributed a total of $1,000 to the Partnership.
Principles of Consolidation:
The Partnership's financial statements include the accounts of National
Pinetree, LP, of which the Partnership owns a 99% interest, and of Summerwalk
NPI III, LP, of which the Partnership owns a 99.9% interest. The Partnership
has the ability to control the major operating and financial policies of these
partnerships. All intercompany transactions have been eliminated.
Cash and Cash Equivalents:
The Partnership considers all highly liquid investments with a maturity, when
purchased, of three months or less to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Security Deposits:
The Partnership requires security deposits from leasees for the duration of the
lease and such deposits are included in receivables and deposits. The security
deposits are refunded when the tenant vacates, provided the tenant has not
damaged its space, and is current on its rental payments.
Investment Properties:
Investment properties are stated at cost. Acquisition fees are capitalized as a
cost of real estate. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", the Partnership records impairment
losses on long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amounts of
those assets.
Depreciation:
Depreciation is calculated by the straight-line method over the estimated lives
of the rental properties and related personal property ranging from 5 to 27.5
years.
Leases:
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on its leases.
Advertising Costs:
Advertising costs of approximately $131,000 in 1997 and approximately $155,000
in 1996 were charged to expense as incurred and are included in operating
expenses.
Loan Costs:
Loan costs of approximately $705,000 are included in other assets in the
accompanying consolidated balance sheet and are being amortized on a straight-
line basis over the life of the loans. At December 31, 1997, accumulated
amortization is approximately $112,000. Amortization of loan costs is included
in interest expense.
Income Taxes:
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. No provision for income taxes is made in the consolidated
financial statements of the Partnership.
Fair Value of Financial Instruments:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance. Due to significant prepayment
penalties associated with portions of the debt, it would not be beneficial to
the Partnership to refinance those obligations.
Allocation of Income, Loss and Distributions:
Net income, loss and distributions of cash of the Partnership are allocated
between general and limited partners in accordance with the provisions of the
Partnership Agreement.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to the 1996 balances to conform to the
1997 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.
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of NPI Equity and National Property Investors, Inc.
("NPI"). NPI was the sole stockholder of NPI Equity until December 31, 1996, at
which time the stock of NPI Equity was acquired by Insignia Properties Trust, an
affiliate of Insignia. In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity and NPI.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred during the twelve month periods ended December 31, 1997 and
1996 (in thousands):
1997 1996
Property management fees (included in operating
expenses) $ 423 $ 392
Reimbursement for services of affiliates, including
$61,000 and $19,000 of construction services
reimbursements in 1997 and 1996, respectively
(included in investment properties, and operating
and general and administrative expenses) 204 198
During the year ended December 31, 1996, the Partnership paid approximately
$174,000 to affiliates of the Managing General Partner for brokerage fees
incurred in connection with the November 15, 1996, refinancing of Lakeside
Apartments (see "Note C"). These charges have been capitalized as loan costs
and will be amortized over the life of the loan.
For the period from January 19, 1996, to August 31, 1997, the Partnership
insured its properties 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 master policy. The 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.
NPI Equity is entitled to receive 1% of distributions of cash from operations
and an allocation of 1% of the net income or loss of the Partnership.
Upon sale of the Partnership properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized
by NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive Compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative, non-
compounded, on their appraised investment in the Partnership at February 1,
1992.
NPI Equity has established a revolving credit facility (the "Partnership
Revolver") to be used to fund deferred maintenance and working capital needs of
the National Property Investors Partnership Series. The maximum draw available
to the Partnership under the Partnership Revolver is $500,000. Loans under the
Partnership Revolver 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 NPI Equity (whether
or not For Cause); (ii) the sale or refinancing of a property by the Partnership
(whether or not a borrowing under the Partnership Revolver was made with respect
to such property); or (iii) the liquidation of the Partnership. The Partnership
has not borrowed under the Partnership Revolver, to date.
NOTE C - MORTGAGE NOTES PAYABLE
The principle terms of mortgage notes payable are as follows (in thousands):
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1997 Interest Rate Date Maturity
<S> <C> <C> <C> <C> <C>
Lakeside $ 17,200 $ 105 (1) 7.33% 11/01/03 $ 17,200
Pinetree 2,214 21 9.87% 7/01/01 2,090
Summerwalk 5,000 34 7.13% 1/01/08 4,312
$ 24,414 $ 160
<FN>
(1) Amount is interest only.
</FN>
</TABLE>
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's rental properties and by pledge of revenues from the respective
rental properties. The mortgage notes payable include prepayment penalties if
repaid prior to maturity.
On December 23, 1997, the Partnership refinanced the mortgage encumbering
Summerwalk Apartments. The refinancing replaced indebtedness of $4,443,000 with
a new first mortgage in the amount of $5,000,000. The mortgage was refinanced
at a rate equal to 7.13% and matures on January 1, 2008, with a balloon payment
of approximately $4,312,000 due at maturity. The previous mortgage had an
interest rate of 9.75% and had matured on September 1, 1996. Total capitalized
loan costs were approximately $190,000 during the year ended December 31, 1997.
In connection with the refinancing, the Partnership was required to transfer all
the assets and liabilities of Summerwalk to a newly formed subsidiary,
Summerwalk NPI III, L.P.
On November 15, 1996, the Partnership refinanced the mortgage encumbering
Lakeside Apartments. The refinancing replaced indebtedness of $16,943,000 with
a new mortgage in the amount of $17,200,000. The mortgage was refinanced at a
rate equal to 7.33%, compared to the prior rate of 8.25%. Payments of interest
only are due on the first day of each month until the loan matures on November
1, 2003. The prior note was scheduled to mature in August of 1999. Total
capitalized loan costs were approximately $417,000 during the year ended
December 31, 1996. Total capitalized loan costs were approximately $14,000
during the year ended December 31, 1997. The Partnership recognized an
extraordinary loss on early extinguishment of debt in the amount of
approximately $75,000 due to the write off of unamortized loan costs.
Scheduled principal payments on the mortgage notes payable subsequent to
December 31, 1997, are as follows (in thousands):
1998 $ 76
1999 87
2000 95
2001 2,172
2002 65
Thereafter 21,919
$ 24,414
NOTE D - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION (IN THOUSANDS)
Initial Cost
To Partnership
Buildings Net Costs
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Lakeside $ 17,200 $ 2,087 $ 15,363 $ 4,147
Pinetree 2,214 493 3,873 1,842
Summerwalk 5,000 427 6,347 905
$ 24,414 $ 3,007 $ 25,583 $ 6,894
<TABLE>
<CAPTION>
Gross Amount at Which Carried
At December 31, 1997
Buildings Accumu- Deprec-
And Related lated Year Of Date Of iable
Personal Deprec- Construc- Acqu- Life-
Description Land Property Total iation tion sition Years
<S> <C> <C> <C> <C> <C> <C> <C>
Lakeside $ 2,093 $ 19,504 $21,597 $14,165 1973/1975 12/80 5-27.5 yrs.
Pinetree 499 5,709 6,208 4,232 1974 7/80 5-27.5 yrs.
Summerwalk 431 7,248 7,679 5,112 1974 12/80 5-27.5 yrs.
$ 3,023 $ 32,461 $35,484 $23,509
</TABLE>
Reconciliation of Investment Properties and Accumulated Depreciation:
December 31,
1997 1996
Investment Properties
Balance at beginning of year $ 34,255 $ 33,449
Disposal of property (55) --
Buyout of Summerwalk co-tenant 50 --
Property improvements 1,234 806
Balance at end of year $ 35,484 $ 34,255
Accumulated Depreciation
Balance at beginning of year $ 22,224 $ 20,936
Disposal of property (38) --
Additions charged to expense 1,323 1,288
Balance at end of year $ 23,509 $ 22,224
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997 and 1996, is $35,529,000 and $34,230,000, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1997 and 1996, is $23,613,000 and $18,400,000, respectively.
In January 1997, the Partnership acquired the 10% interest in Summerwalk
previously held by an unaffiliated third party for $50,000. This amount has
been accounted for as an increase in the Partnership's investment in the
property.
NOTE E - INCOME TAXES (IN THOUSANDS, EXCEPT UNIT DATA)
The Partnership files its tax returns on an accrual basis and has computed
depreciation for tax purposes using accelerated methods, which are not in
accordance with generally accepted accounting principles. A reconciliation of
net income from the consolidated financial statements to the net taxable income
to partners is as follows:
Years Ended December 31,
1997 1996
Net income as reported $ 934 $ 25
Difference between income and
expenses for the consolidated
financial statements and tax
reporting 11 42
Depreciation differences 156 243
Federal taxable income $ 1,101 $ 310
Federal taxable income per limited
partnership unit $ 22.68 $ 6.39
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
1997
Net liabilities as reported $ (10,004)
Land and buildings 95
Accumulated depreciation (101)
Syndication and distribution costs 2,727
Prepaid rent 35
Other 74
Net liabilities-Federal tax basis $ (7,174)
NOTE F - CORRECTION OF AN ERROR
The Partnership has corrected its accounting for the rental of the laundry room
facility at Lakeside which began January 1, 1995, and terminates December 31,
2005. The initial payment of $110,000 is being recognized on a straight-line
basis and is included in rental income. The full amount of the initial payment
had previously been recognized as other income for the year ended December 31,
1995. The effect on the consolidated statement of operations for the year ended
December 31, 1996, was an increase in income before extraordinary item and net
income of $10,000. The effect on net income per limited partnership unit for
the same period was an increase in income before extraordinary item and net
income of $0.21. The effect on the consolidated statement of operations for the
year ended December 31, 1995, was a decrease in net income of $100,000. The
effect on net income per limited partnership unit for the same period was a
decrease in net income of $2.05.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There were no disagreements with Imowitz Koenig & Co., LLP regarding the 1997 or
1996 audits of the Partnership's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
National Property Investors III (the "Partnership") has no officers or
directors. NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General
Partner"), manages substantially all of the Partnership's affairs and has
general responsibility in all matters affecting its business. NPI Equity was a
wholly owned subsidiary of National Property Investors, Inc. ("NPI") until
December 31, 1996, at which time Insignia Properties Trust ("IPT") acquired the
stock of NPI Equity. As of January 29, 1998, the names, ages and positions held
by executive officers and directors of NPI Equity are as follows:
Name Age Position
William H. Jarrard, Jr. 51 President and Director
Ronald Uretta 41 Vice President and
Treasurer
Martha L. Long 38 Controller
Robert D. Long, Jr. 30 Vice President
Daniel M. LeBey 32 Vice President and
Secretary
Kelley M. Buechler 40 Assistant Secretary
William H. Jarrard, Jr. has been President and Director of the Managing General
Partner since January 1996. He has acted as Senior Vice President of IPT since
May 1997. Mr. Jarrard previously acted as Managing Director - Partnership
Administration of Insignia Financial Group, Inc. ("Insignia") from January 1991
through September 1997 and served as Managing Director - Partnership
Administration and Asset Management of Insignia from July 1994 until January
1996.
Ronald Uretta has been Vice President and Treasurer of the Managing General
Partner since January 1996 and Insignia's Treasurer since January 1992. Since
August 1996, he has also served as Insignia's Chief Operating Officer. He has
also served as Insignia's Secretary from January 1992 to June 1996 and as
Insignia's Chief Financial Officer from January 1992 to August 1996.
Martha L. Long has been Controller of the Managing General Partner since
December 1996 and Senior Vice President - Finance and Controller of Insignia
since January 1997. In June 1994, Ms. Long joined Insignia as its Controller,
and was promoted to Senior Vice President - Finance in January 1997. Prior to
that time, she was Senior Vice President and Controller of the First Savings
Bank, in Greenville, SC.
Robert D. Long, Jr. has been Vice President of the Managing General Partner
since January 2, 1998. Mr. Long joined Metropolitan Asset Enhancement, L.P.
("MAE"), an affiliate of Insignia, in September 1993. Since 1994 he has acted
as Vice President and Chief Accounting Officer of the MAE subsidiaries. Mr.
Long was an accountant for Insignia until joining MAE in 1993. Prior to joining
Insignia, Mr. Long was an auditor for the State of Tennessee and was associated
with the accounting firm of Harsman Lewis and Associates.
Daniel M. LeBey has been Vice President and Secretary of the Managing General
Partner since January 29, 1998, and Insignia's Assistant Secretary since April
30, 1997. Since July 1996 he has also served as Insignia's Associate General
Counsel. From September 1992 until June 1996, Mr. LeBey was an attorney with
the law firm of Alston & Bird LLP, Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the Managing General Partner
since June 1996 and Assistant Secretary of Insignia since 1991.
No family relationships exist among any of the officers or directors of the
Managing General Partner.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the Managing General Partner. The Partnership has no
plan, nor does the Partnership presently propose a plan, which will result in
any remuneration being paid to any officer or director upon termination of
employment. However, reimbursements and other payments have been made to the
Partnership's Managing General Partner and its affiliates, as described below in
"Item 12. Certain Relationships and Related Transactions".
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding limited partnership
units of the Partnership owned by each person who is known by the Partnership to
own beneficially or exercise voting or dispositive control over more than 5% of
the Partnership's limited partnership units, by each of NPI Equity's directors
and by all directors and executive officers of NPI Equity as a group as of
January 1, 1998.
Name and address of Amount and nature of
Beneficial Owner Beneficial Ownership % of Class
Insignia Properties, LP 21,460 44.7
One Insignia Financial Plaza
Greenville, SC 29602
All directors and -- --
executive officers as a group
(six persons)
As a result of its ownership of 21,460 limited partnership units, Insignia
Properties, L.P. ("IPLP") could be in a position to significantly influence all
voting decisions with respect to the Partnership. Under the Partnership
Agreement, unit holders holding a majority of the Units are entitled to take
action with respect to a variety of matters. When voting on matters, IPLP would
in all likelihood vote the Units it acquired in a manner favorable to the
interest of the Managing General Partner because of its affiliation with the
Managing General Partner. However, DeForest Ventures II LP, from whom IPLP
acquired its Units, had agreed for the benefit of non-tendering unit holders,
that it would vote its Units acquired on January 19, 1996, (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 vote cast by non tendering unit holders. Except for the
foregoing, no other limitations are imposed on IPLP's right to vote each Unit
acquired.
There are no arrangements known to the Partnership, the operation of which may
at a subsequent date, result in a change in control of the Partnership.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No transactions have occurred between the Partnership and any officer or
director of the Managing General Partner.
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.
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia acquired all of the issued and outstanding shares of stock of NPI
Equity and NPI. In connection with these transactions, affiliates of Insignia
appointed new officers and directors of NPI Equity and NPI.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders. If the closing occurs, AIMCO will then control the Managing
General Partner of the Partnership.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred during the twelve month periods ended December 31, 1997 and
1996 (in thousands):
1997 1996
Property management fees $ 423 $ 392
Reimbursement for services of affiliates, including
$61,000 and $19,000 of construction services
reimbursements in 1997 and 1996, respectively 204 198
During the year ended December 31, 1996, the Partnership paid approximately
$174,000 to affiliates of the Managing General Partner for brokerage fees
incurred in connection with the November 15, 1996, refinancing of Lakeside
Apartments.
For the period from January 19, 1996, to August 31, 1997, the Partnership
insured its properties 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 master policy. The 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.
NPI Equity is entitled to receive 1% of distributions of cash from operations
and an allocation of 1% of the net income or loss of the Partnership.
Upon sale of the Partnership properties, NPI Equity will be entitled to an
Inventive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized
by NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive Compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at
February 1, 1992, and (b) distributions from all sources (capital transactions
as well as cash flow) of an amount equal to six percent (6%) per annum
cumulative, non-compounded, on their appraised investment in the Partnership at
February 1, 1992.
NPI Equity has established a revolving credit facility (the "Partnership
Revolver") to be used to fund deferred maintenance and working capital needs of
the National Property Investors Partnership Series. The maximum draw available
to the Partnership under the Partnership Revolver is $500,000. Loans under the
Partnership Revolver 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 NPI Equity (whether
or not For Cause); (ii) the sale or refinancing of a property by the Partnership
(whether or not a borrowing under the Partnership Revolver was made with respect
to such property); or (iii) the liquidation of the Partnership. The Partnership
has not borrowed under the Partnership Revolver, to date.
At December 31, 1997, an affiliate of Insignia owned approximately 44.7% of the
limited partnership units of the Partnership, as discussed in "Item 11. Security
Ownership of Certain Beneficial Owners and Management" above.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index contained herein.
(b) Reports on Form 8-K during the fourth quarter of 1997: None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS III
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
Date: March 25, 1998
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
date indicated.
Signature/Name Title Date
/s/ William H. Jarrard, Jr. President and March 25, 1998
William H. Jarrard, Jr. Director
/s/ Ronald Uretta Vice President and March 25, 1998
Ronald Uretta Treasurer
EXHIBIT INDEX
Exhibit
2.1 NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995,
incorporated by reference to Exhibit 2 to the Partnership's
Current Report on Form 8-K dated August 17, 1995.
2.3 Management Purchase Agreement dated as of August 17, 1995,
incorporated by reference to Exhibit 2.2 to Form 8-K filed by
Insignia Financial Group, Inc. with the Securities and Exchange
Commission on September 1, 1995.
2.4 Limited liability Company Agreement of Riverside Drive L.L.C.
dated as of August 17, 1995, Incorporated by reference to Exhibit
2.4 to Form 8-K filed by Insignia Financial Group, Inc. with the
Securities and Exchange Commission on September 1, 1995.
2.5 Master Indemnity Agreement dated as of August 17, 1995,
incorporated by reference to Exhibit 2.5 to Form 8-K filed by
Insignia Financial Group, Inc. with the Securities and Exchange
Commission on September 1, 1995
3.4 (a) Agreement of Limited Partnership incorporated by reference to
Exhibit A to the Prospectus of the Partnership dated October 24,
1979 contained in the Partnership's Registration Statement on
Form S-11 (Reg. No. 2-63733).
3.4 (b) Amendments to Agreement of Limited Partnership dated as of
November 25, 1980 incorporated by reference to Exhibits 3 and 4
to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1981.
3.4 (c) Amendments to the Agreement of Limited Partnership Incorporated
by reference to the Definitive Proxy Statement of The Partnership
dated April 3, 1981.
3.4 (d) Amendments to the Agreement of Limited Partnership Incorporated
by reference to the Statement Furnished In Connection With The
Solicitation of Consents of the Partnership dated August 28,
1992.
10.1 Form of Property Management Agreement dated June 21, 1991, by and
between the Partnership and NPI Management with respect to each
of the Partnership's properties, incorporated by reference to
Exhibit 10.6 to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1991.
10.2 Mortgage Note dated June 30, 1994, made by National Pinetree
Limited Partnership for the benefit of Main America Capital, L.C.
in the original principal balance of $2,300,000, incorporated by
reference to Exhibit 10.1 to the Partnership's Quarterly Report
on Form 10-Q for the period ended September 30, 1994.
10.3 Deed of Trust and Security Agreement among National Pinetree
Limited Partnership, as borrower, and Main America Capital L.C.,
as beneficiary, dated June 30, 1994, incorporated by reference to
Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q
for the period ended September 30, 1994.
10.4 Multifamily Note dated September 30, 1996, by and between the
Partnership and Lehman Brothers Holding, Inc. for Lakeside
Apartments incorporated by reference to Exhibit 10.14 to the
Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
10.5 Multifamily Note dated November 1, 1996, by and between the
Partnership and Lehman Brothers Holding, Inc. for Lakeside
Apartments incorporated by reference to Exhibit 10.15 to the
Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
10.6 Multifamily Note dated December 23, 1997, by and between
Summerwalk NPI III, L.P. and Collateral Mortgage, Ltd. for
Summerwalk Apartments incorporated by reference to Exhibit 10.16
to the Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
10.7 Addendum to Multifamily Note dated December 23, 1997, by and
between Summerwalk NPI III, L.P. and Collateral Mortgage, Ltd.
for Summerwalk Apartments incorporated by reference to Exhibit
10.17 to the Partnership's Annual Report on Form 10-KSB for the
year ended December 31, 1997.
27 Financial Data Schedule.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors III 1997 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000310485
<NAME> NATIONAL PROPERTY INVESTORS III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,508
<SECURITIES> 0
<RECEIVABLES>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 35,484
<DEPRECIATION> 23,509
<TOTAL-ASSETS> 15,503
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 24,414
0
0
<COMMON> 0
<OTHER-SE> (10,004)
<TOTAL-LIABILITY-AND-EQUITY> 15,503
<SALES> 0
<TOTAL-REVENUES> 8,578
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,002
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 934
<EPS-PRIMARY> 19.25<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
EXHIBIT 10.16
MULTIFAMILY NOTE
US $5,000,000.00
Winter Park, Florida
December 23, 1997
For value received, the undersigned promise to pay Collateral Mortgage, Ltd., an
Alabama limited partnership, or order, the principal sum of Five Million and
No/100 Dollars, with interest on the unpaid principal balance from the date of
this Note, until paid, at the rate of 7.13 percent per annum. The principal and
interest shall be payable at 524 Lorna Square, Birmingham, Alabama 35216, or
such other place as the holder hereof may designate in writing, in consecutive
monthly installments of Thirty-Three Thousand Seven Hundred Two and 80/100
Dollars (US $33,702.80) on the first day of each month beginning February, 1998
(herein "amortization commencement date"), until the entire indebtedness
evidenced hereby is fully paid, except that any remaining indebtedness, if not
sooner paid, shall be due and payable on January 1, 2008.
If any installment under this Note is not paid when due, the entire principal
amount outstanding hereunder and accrued interest thereon shall at once become
due and payable, at the option of the holder hereof. The holder hereof may
exercise this option to accelerate during any default by the undersigned
regardless of any prior forbearance. In the event of any default in the payment
of this Note, and if the same is referred to an attorney at law for collection
or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder here off all expenses and cost, including, but
not limited to, attorney's fees.
If any installment under this Note is not received by the holder hereof within
ten (10) calendar days after the installment is due, the undersigned shall pay
to the holder hereof a late charge of five (5) percent of such installment, such
late charge to be immediately due and payable without demand by the holder
hereof. IF any installment under this Note remains past due for thirty (30)
calendar days or more, the outstanding principal balance of this Note shall bear
interest during the period in which the undersigned is in default at a rate of
11.13 percent per annum or, if such increased rate of interest may not collected
from the undersigned under applicable law, then at the maximum increased rate of
interest, if any, which may be collected from the undersigned under applicable
law.
From time to time, without affecting the obligation of the undersigned or the
successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all makers,
sureties, guarantors and endorsers hereof. This Note shall be the joint and
several obligation of all makers, sureties, guarantors and endorsers, and shall
be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated December, 1997, and reference is made thereto for rights as to
acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
The attached Addendum to Multifamily Note dated the date of this Multifamily
Note is incorporated into and is deemed to amend and supplement this Multifamily
Note.
SUMMERWALK NPI III, L.P.,
a South Carolina limited partnership
By: SUMMERWALK GP, INC.,
a South Carolina corporation
Its sole general partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
COLLATERAL MORTGAGE, LTD.,
an Alabama limited partnership
By: /s/ David A. Roberts
David A. Roberts
Vice President
EXHIBIT 10.17
ADDENDUM TO MULTIFAMILY NOTE
THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made this day of
December, 1997, and is incorporated into and shall be deemed to amend and
supplement the Multifamily Note (the "Multifamily Note") made by the undersigned
(the "Borrower") to Collateral Mortgage, Ltd., an Alabama limited partnership,
and its successors, assigns and transferees (the "Lender"), dated the same date
as this Addendum (the Multifamily Note as amended and supplemented by this
Addendum, any other addendum to the Multifamily Note, and any future amendments
to the Multifamily Note is referred to as the "Note"). The debt evidenced by
the Note is secured by a Multifamily Mortgage, Deed of Trust or Deed to Secure
Debt of the same date (the "Multifamily Instrument"), covering the property
described in the Multifamily Instrument and defined therein as the "Property,"
located at 7000 University Boulevard, Winter Park, Florida.
This Property is located entirely within Florida (the "Property Jurisdiction").
The Multifamily Instrument is amended and supplemented by the Rider to
Multifamily Instrument (the "Rider") and any other rider to Multifamily
Instrument given by Borrower to Lender and dated the same date as the
Multifamily Instrument. (The Multifamily Instrument as amended and supplemented
by the Rider and any other rider to the Multifamily Instrument and any future
amendments to the Instrument is referred to as the "Instrument".)
The term "Loan Documents" when used in this Addendum shall mean, collectively,
the following documents: (i) the Instrument, (ii) the Note, and (iii) all other
documents or agreements, including any Collateral Agreements (as defined in the
Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or
made in connection with, the loan evidenced by the Note, as such Loan Documents
may be amended.
The covenants and agreements of this Addendum, and the covenants and agreements
of any other addendum to the Multifamily Note, shall be incorporated into and
shall amend and supplement the covenants and agreements of the Multifamily Note
as if this Addendum and the other addenda were a part of the Multifamily Note,
and all references to the Note in the Loan Documents shall mean the Note as so
amended and supplemented. Any conflict between the provisions of the
Multifamily Note and this Addendum shall be resolved in favor of this Addendum.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the
Multifamily Note Borrower and Lender further covenant and agree as follows:
A. Prepayments
1. Yield Maintenance Period
During the first nine and 1/2 years of the Note term beginning with the date of
the Note (the "Yield Maintenance Period") and upon giving Lender 60 days prior
written notice, Borrower may prepay the entire unpaid principal balance of the
Note on the last Business Day before a scheduled monthly payment date by paying
in addition to the entire unpaid principal balance, accrued interest and any
other sums due Lender at the time of prepayment a prepayment premium equal to
the greater of:
(a) 1% of the entire unpaid principal balance of the Note, or
(b) The product obtained by multiplying (1) the entire unpaid principal balance
of the Note at the time of prepayment, times (2) the difference obtained by
subtracting from the interest rate on the Note the yield rate (the "Yield
Rate") on the 6.125% U.S. Treasury Security due August, 2007, (the
"Specified U.S. Treasury Security"), as the Yield Rate is reported in the
Wall Street Journal on the fifth Business Day preceding (x) the date notice
of prepayment is given to Lender where prepayment is voluntary, or (y) the
date Lender accelerates the loan, times (3) the present value factor
calculated using the following formula:
1-(1-r)-n
---------
r
[r = Yield Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the expiration of the Yield Maintenance Period]
In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be selected
at Lender's sole discretion. If the publication of such Yield Rates in the Wall
Street Journal is discontinued, Lender shall determine such Yield Rates from
another source selected by Lender.
Except as provided in paragraph A.3.of this Addendum, no partial prepayments are
permitted.
1. After Yield Maintenance Period
After the expiration of the Yield Maintenance Period and upon giving Lender 60
days prior written notice, Borrower may prepay the entire unpaid principal
balance of the Note on the last Business Day before a scheduled monthly payment
date by paying, in addition to the entire unpaid principal balance, accrued
interest and any other sums due Lender at the time of prepayment, a prepayment
premium equal to 1% of the entire unpaid principal of the Note. No prepayment
premium shall be due for any full prepayment made by Borrower in accordance with
the provisions of the preceding sentence within 90 days of the maturity date of
the Note.
Except as provided in paragraph A.3. of this Addendum, no partial prepayments
are permitted.
2. Partial Prepayments
Borrower shall have no right to make a partial prepayment of the outstanding
indebtedness during the Note term. However, in the event that Lender shall
require a partial prepayment of the outstanding indebtedness after a default
under the Note, the Instrument or any of the other Loan Documents, by applying
funds held by Lender pursuant to any Collateral Agreement (as defined in Uniform
Covenant 2B of the Instrument) against the indebtedness secured by the
Instrument or, if Lender shall for any other reason accept a partial prepayment
by Borrower of the outstanding indebtedness, except as other wise provided in
paragraph A.4 of this Addendum, a prepayment premium shall be due and payable to
Lender as follows:
(a) After Yield Maintenance Period. If Lender shall require or accept a
partial repayment after the expiration of the Yield Maintenance Period, the
partial prepayment shall be made on the last Business Day before a
scheduled monthly payment date and a prepayment premium equal to 1% of the
partial principal prepayment amount shall be due and payable to Lender. No
prepayment premium shall be due for any partial prepayment made by Borrower
in accordance with the provisions of the preceding sentence within 90 days
of the maturity date of the Note.
(b) During Yield Maintenance Period. If Lender shall require or accept a
partial prepayment during the Yield Maintenance Period, the partial
prepayment shall be made on the last Business Day before a scheduled
monthly payment date and a prepayment premium shall be due and payable to
Lender equal to the greater of:
(i) 1% of the amount of principal being prepaid, or
(ii) the product obtained by multiplying (A) the amount of the
principal which is being prepaid, times (B) the difference obtained by
subtracting from the interest rate on the Note the yield rate (the
"Partial Prepayment Yield Rate") on the Specified U.S. Treasury
Security, as the Partial Prepayment Yield Rate is reported in the Wall
Street Journal on the fifth Business Day preceding (1) the day Lender
accelerates the loan (in accordance with any partial prepayment made
in connection with an acceleration of the loan), or (2) the day Lender
applies funds held under any Collateral Agreement (other than in
connection with an acceleration of the loan), times (C) the present
value factor calculated using the following formula:
1-(1+y)-n
---------
y
[y = Partial Prepayment Yield Rate
n = the number of years, and any fraction thereof, remaining between
the prepayment date and the expiration of the Yield Maintenance
Period]
When the total amount to be applied toward the unpaid principal balance of the
loan and the prepayment premium is known, but the amounts to be allocated toward
the unpaid principal balance of the loan and the prepayment premium,
respectively, are unknown, the Lender shall determine the allocation between the
prepaid principal amount and the prepayment premium as follows:
Given:a = total amount to be applied
b = prepaid principal amount
c = prepayment premium
N = note rate
F = present value factor = 1-(1+y)-n
---------
Y
["y" and "n" have the same meanings as set forth in subparagraphs (ii)
above]
Then: a = b + c
---------
b = a
---------
F(N-y) + 1
c = a - b
Except as provided in the next sentence, any partial prepayment of the
outstanding indebtedness shall not extend the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender shall
otherwise agree in writing. Upon any partial prepayment, Lender shall have the
option, in its sole and absolute discretion, to recast the monthly installments
due under the Note so that the maturity date of the Note shall remain the same.
1. Premium Due Whether Voluntary or Involuntary Prepayment; Insurance and
Condemnation Proceeds
Borrower shall pay the prepayment premium due under this paragraph A whether the
prepayment is voluntary or involuntary (in connection with the Lender's
acceleration of the unpaid principal balance of the Note) or the Instrument is
satisfied or released by foreclosure (whether by power of sale or judicial
proceedings), deed in lieu of foreclosure or by any other means.
Notwithstanding any other provision herein to the contrary, Borrower shall not
be required to pay any prepayment premium in connection with any prepayment
occurring as a result of the application of insurance proceeds or condemnation
awards under the Instrument.
2. Notice; Business Day
Any notice to Lender provided for in this Addendum shall be given in the manner
provided in the Instrument. The term "Business Day" means any day other than a
Saturday, a Sunday, or any other day on which Lender is not for business.
A. Borrower's Exculpation
Subject to the provisions of paragraph C and notwithstanding any other provision
in the Note or Instrument, the personal liability of Borrower, any general
partner of Borrower (if the Borrower is a partnership), and any "Key Principal"
(collectively, the individual(s) whose name(s) is (are) set forth at the foot of
this Addendum) to pay the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing Borrower's obligations under the Note
and the Instrument shall be limited by (1) the real and personal property
described as the "Property" in the Instrument, (2) the personal property
described in or pledged under any Collateral Agreement (as defined in Uniform
Covenant 2B of the Instrument) executed in connection with the loan evidenced by
the Note, (3) the rents, profits, issues, products and income of the Property
received or collected by or on behalf of Borrower (the "Rents and Profits") to
the extent such receipts are necessary first, to pay the reasonable expenses of
operating, managing, maintaining and repairing the Property, including but not
limited to real estate taxes, utilities, assessments, insurance premiums,
repairs, replacements and ground rents, if any (the "Operating Expenses") then
due and payable as of the time of receipt of such Rents and Profits, and then,
to pay the principal and interest due under the Note and any other sums due
under the Instrument or any other Loan Documents (including but not limited to
deposits or reserves due under any Collateral Agreements), except to the extent
that Borrower did not have the legal right, because of a bankruptcy,
receivership or similar judicial proceeding, to direct the disbursement of such
sums.
Except as provided in paragraph C, Lender shall not seek (a) any judgment for a
deficiency against Borrower, any general partner of Borrower (if Borrower is a
partnership) or any Key Principal, or Borrower's or any general partner's or Key
Principal's heirs, legal representatives, successors or assigns, in any action
to enforce any right or remedy under the Instrument, or (b) any judgment on the
Note except as may be necessary in any action brought under the Instrument to
enforce the lien against the Property or to exercise any remedies under any
Collateral Agreement.
B. Exceptions to Non-Recourse Liability
If, without obtaining the Lender's prior written consent, (I) a Transfer shall
occur which, pursuant to Uniform Covenant 19 of the Instrument, gives Lender the
right, at its option, to declare all sums secured by the Instrument immediately
due and payable, (ii) Borrower shall encumber the Property with the lien of any
subordinate instrument in connection with any financing by Borrower, or, (iii)
Borrower shall violate the single asset covenant of paragraph J of the Rider,
any of such events shall constitute a default by Borrower under the Note, the
Instrument and the other Loan Documents, and if such event shall continue for 30
days, paragraph B shall not apply from and after the date which is 30 days after
such event and the Borrower, any general partner of Borrower (if Borrower is a
partnership) and Key Principal (each individually on a joint or several basis if
more than one) shall be personally liable on a joint and several basis for full
recourse liability under the Note and the other Loan Documents.
Notwithstanding paragraph B, Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint and
several basis if more than one) shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys fees) resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants or other sums or payments received by or on behalf of the
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceedings, to direct disbursement of such sums or payments), (C) all
Rents and Profits, (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and any other sums due under the Instrument and all other Loan
Document (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due Lender under paragraph 19(c) of the Instrument, or (E) Borrower's failure
following a default under any of the Loan Documents to deliver to Lender on
demand all Rents and Profits, security deposits (except to the extent that
Borrower did not have the legal right, because of a bankruptcy, receivership or
similar judicial proceeding, to direct the disbursement of such sums), books and
records relating to the Property.
No provisions of paragraphs B or C shall (i) affect any guaranty or similar
agreement executed in connection with the debt evidenced by the Note, (ii)
release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument, or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
C. Business, Commercial or Investment Purpose
Borrower represents that the Loan evidenced by the Note is being made solely for
business, commercial or investment purposes.
D. Governing Law
1. Choice of Law
The validity of the Note, and the other Loan Documents, each of their terms and
provisions, and the rights and obligations of Borrower under the Note, and the
other Loan Documents shall be governed by, interpreted, construed, and enforced
pursuant to and in accordance with the laws of the Property Jurisdiction.
2. Consent of Jurisdiction
Borrower irrevocably consents to the exclusive jurisdiction of any and all state
and federal courts with jurisdiction in the Property Jurisdiction over Borrower
and Borrower's assets. Borrower agrees that such assets shall be used to first
satisfy all claims of creditors organized or domiciled in the United States of
America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the Note,
the Instrument or any of the other Loan Documents shall be litigated exclusively
in the Property Jurisdiction. The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over
all controversies which may arise under or in relation to the Note, including
without limitation those controversies relating to the execution,
interpretation, breach, enforcement, or compliance with the Note, the
Instrument, or any other issue arising under, related to, or in connection with
any of the Loan Documents. Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any litigation arising from the Note,
the Instrument or any of the other Loan Documents, and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence, or
otherwise.
A. Successors and Assigns
The provisions of the Note, the Instrument, and all the other Loan Documents
shall be binding on the successors and assigns, including, but not limited to,
any receiver, trustee, representative or other person appointed under foreign or
domestic bankruptcy, receivership, or similar proceedings of Borrower and any
person having an interest in Borrower.
B. No Third Party Beneficiary
Borrower acknowledges and agrees that (i) any loss sharing agreement or
agreement for interim advancement of funds that originally is made by the Lender
named in the Note to Federal Mortgage Association is made pursuant to a
contractual obligation of such Lender to Federal National Mortgage Association
that is independent of, and separate and distinct from the obligation of
Borrower for the full and prompt payment of the indebtedness evidenced by the
Note, (ii) Borrower shall not be deemed to be a third party beneficiary of such
loss sharing arrangement or agreement for interim advancement of funds, and
(iii) no such loss sharing or interim advancement arrangement shall constitute
any person or entity making such payment as a guarantor or surety of the
Borrower's obligations, notwithstanding the fact that the obligations under such
loss sharing or interim advancement arrangement may be calculated with reference
to amounts payable under the Note or other Loan Documents.
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements
contained in this Addendum.
SUMMERWALK NPI III, L.P.,
a South Carolina limited partnership
By: SUMMERWALK GP, INC.,
a South Carolina corporation
Its sole general partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
Acknowledgement and Agreement of Key Principal to Personal Liability for the
Exceptions to Non-Recourse
Key Principal (each for himself if more than one) hereby represents to Lender
that he has a direct or indirect ownership interest in the Borrower and that he
participates in the management of Borrower.
BY SIGNING BELOW, the undersigned Key Principal (each for himself if more than
one) understands, accepts and agrees to the provisions of paragraph C above. No
transfer of Key Principal's ownership interest in Borrower or in any other
entity which directly or indirectly has an ownership interest in Borrower shall
release Key Principal from liability hereunder, unless the Borrower and Key
Principal shall have complied with the provisions of Uniform Covenant 19 of the
Instrument and Lender shall have approved the transfer and the substituted Key
Principal. Key Principal shall have no right of subrogation against the
Borrower or any general partner of Borrower by reason of any payment by Key
Principal pursuant to paragraph C.
KEY PRINCIPAL:
NATIONAL PROPERTY INVESTORS III,
a California limited partnership
By: NPI Equity Investments, Inc.,
a Florida corporation
Its sole general partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
Address: One Insignia Financial Plaza
Greenville, South Carolina 29602
