March 29, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: National Property Investors 4
Form 10-KSB
File No. 0-10412
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
Managing General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
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 EXCHANGE ACT OF
1934
[No Fee Required]
For the fiscal year ended December 31, 1999
[ ] 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 0-10412
NATIONAL PROPERTY INVESTORS 4
(Name of small business issuer in its charter)
California 13-3031722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
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 X No___
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 the Partnership'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. [ ]
State issuer's revenues for its most recent fiscal year. $6,847,000
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 December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business
National Property Investors 4 (the "Partnership" or the "Registrant") was
organized in July 1980, as a limited partnership under the California Uniform
Limited Partnership Act. NPI Equity Investments, Inc. ("NPI Equity" or the
"Managing General Partner"), a Florida corporation, is the Managing General
Partner of the Partnership and is a wholly-owned subsidiary of Apartment
Investment and Management Company ("AIMCO"). (See "Transfer of Control".) The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2005, unless terminated prior to such date.
The principal business of the Partnership is to hold for investment and
ultimately sell income-producing multi-family residential properties. The
Partnership is a "closed" limited partnership real estate syndicate formed to
acquire multi-family residential properties. In 1981, the Partnership offered,
pursuant to a registration statement filed with the Securities Exchange
Commission, 70,000 Limited Partnership units (the "Units") and sold 60,005 units
aggregating $30,002,500. The net proceeds of the offering were used to acquire
seven income-producing residential properties. The Partnership's original
property portfolio was geographically diversified. The Partnership's acquisition
activities were completed in May 1982 and since then the principal activity of
the Partnership has been managing its portfolio. Six of the properties were sold
prior to 1997. The Partnership currently owns one residential property (see
"Item 2. Description of Property"). Since its initial offering the Partnership
has not received, nor are the Limited Partners required to make, additional
capital contributions.
The Registrant has no employees. Management and administrative services are
provided by the Managing General Partner and by agents retained by the Managing
General Partner. Property management services are provided by an affiliate of
the Managing General Partner.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's property. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Partnership's property and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates own and/or control a significant number of apartment units in the
United States such units represent an insignificant percentage of the total
apartment units in the United States and competition for the apartments is
local.
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 property
owned by the Partnership.
The Partnership monitors its property 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.
<PAGE>
Both the income and expenses of operating the property owned by the Partnership
are subject to factors outside of the Partnership's control, such as changes in
the supply and demand for similar properties resulting from various market
conditions, increases/decreases in unemployment or population shifts, changes in
the availability of permanent mortgage financing, changes in zoning laws, or
changes in patterns or needs of users. In addition, there are risks inherent in
owning and operating residential properties because such properties are
susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
A further description of the Partnership's business is included in "Item 6.
Management's Discussion and Analysis or Plan of Operation" included in this Form
10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the Managing General Partner. The Managing
General Partner does not believe that this transaction has had or will have a
material effect on the affairs and operations of the Partnership.
Item 2. Description of Property
The following table sets forth the Partnership's investment in property:
Date of
Property Purchase Type of Ownership Use
Village of Pennbrook Apartments 12/15/81 Fee simple, subject to Apartment
Falls Township, Pennsylvania first mortgage 722 units
Schedule of Property
Set forth below for the Partnership's property is the gross carrying value,
accumulated depreciation, depreciable life, method of depreciation, and Federal
tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
Village of Pennbrook
<S> <C> <C> <C> <C>
Apartments $27,234 $20,003 5-27.5 yrs S/L $ 4,419
</TABLE>
See "Item 7. Financial Statements, Notes A and J" for a description of the
Partnership's depreciation policy and change in accounting principle,
respectively.
<PAGE>
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loan
encumbering the Registrant's property.
<TABLE>
<CAPTION>
Principal Principal
Balance At Monthly Stated Balance
December 31, Payment Interest Period Maturity Due At
Property 1999 Interest Only Rate Amortized Date Maturity
(in thousands) (in thousands)
Village of Pennbrook
<S> <C> <C> <C> <C> <C> <C> <C>
Apartments $19,300 $ 118 7.33% (1) 11/01/03 $19,300
</TABLE>
(1) Interest only payments with principle due November 1, 2003.
See "Item 7. Financial Statements - Note E" for information with respect to the
Registrant's ability to repay this loan and other specific details about the
loan.
Rental Rates and Occupancy
Average annual rental rates and occupancy for 1999 and 1998 for the property:
Average Annual
Rental Rates Average
(per unit) Occupancy
Property 1999 1998 1999 1998
Village of Pennbrook
Apartments $9,684 $9,370 94% 94%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. The Partnership's property is subject to competition from
other residential apartment complexes in the area. The Managing General Partner
believes that the property is adequately insured. The property is an apartment
complex which leases units for terms of one year or less. No tenant leases 10%
or more of the available rental space. The property is in good physical
condition, subject to normal depreciation and deterioration as is typical for
assets of this type and age.
Real Estate Taxes and Rates
Real estate taxes and rates in 1999 for the property:
1999 1999
Billing Rate
Village of Pennbrook
Apartments $520 4.82%
<PAGE>
Capital Improvements
Village of Pennbrook Apartments
During the twelve months ended December 31, 1999, the Partnership completed
approximately $590,000 of capital improvements at Village of Pennbrook
consisting primarily of structural improvements, carpet and vinyl replacement,
appliances, parking lot improvements, and heating improvements. These capital
improvements were funded from replacement reserves and cash flow. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $216,600. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flows generated by the property.
Item 3. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 7. Financial Statements, Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs have filed an amended complaint. The Managing General Partner filed
demurrers to the amended complaint which were heard February 1999. Pending the
ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement, settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
Managing General Partner and its affiliates terminated the proposed settlement.
Certain plaintiffs have filed a motion to disqualify some of the plaintiffs'
counsel in the action. The Managing General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
Estate of Harry Schubert v. National Property Investors 4, Civil Action No.
97-09129, Court of Common Pleas of Bucks County, Pennsylvania. During 1998, the
Plaintiff brought action against the Partnership alleging that as the result of
carbon monoxide and methane poisoning due to a malfunctioning heating unit in
the deceased's apartment at the Partnership's property, the decedent lost
consciousness
<PAGE>
for several hours, suffered respiratory arrest and suffered other pains and
injuries. The Plaintiff alleges breach of contract, fraud, violations of the
Unfair Trade Practices and Consumer Protection Law and negligence. This matter
is currently in the preliminary stages of discovery. The Partnership intends to
vigorously defend this matter.
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matters were submitted to a vote
of the Unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters
The Partnership, a publicly-held limited partnership, offered and sold 60,005
limited partnership units aggregating $30,002,500. As of December 31, 1999, the
Partnership had 60,005 units outstanding held by 1,301 limited partners of
record. Affiliates of the Managing General Partner own 43,106 units or 71.84% at
December 31, 1999. No public trading market has developed for the Units, and it
is not anticipated that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999. All were distributions of cash from
operations (see "Item 6. Management's Discussion and Analysis or Plan of
Operation" for further details).
Distributions
Per Limited
Aggregate (2) Partnership Unit
01/01/98 - 12/31/98 $1,297,000 $21.40
01/01/99 - 12/31/99 4,398,000 (1) 72.56
(1) $551,000 was accrued at December 31, 1999, and paid in January 2000.
(2) Distributions were from operations.
Future cash distributions will depend on the levels of cash generated from
operations, the availability of cash reserves, and the timing of debt maturity,
refinancing, and/or property sale. The Partnership's distribution policy is
reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after required
capital expenditures to permit further distributions to its partners in 2000 or
subsequent periods.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently own 43,106
limited partnership units in the Partnership representing 71.84% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matter, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
The Partnership realized net income of approximately $841,000 and $1,158,000 for
the years ended December 31, 1999 and 1998, respectively. The decrease in net
income is attributable to an increase in total expenses which more than offset
an increase in total revenues. The increase in total revenues is the result of
increased average rental rates charged at the property. The increase in total
expenses is due to an increase in general and administrative expenses, operating
expenses, and depreciation expense. The increase in general and administrative
expenses is primarily due to the increase in Partnership management fees
associated with the increase in distributions from operations during 1999. The
increase in operating expense is due to increased legal expenses. The increase
in depreciation expense is the result of capital improvements at Pennbrook
during the past twelve months.
Included in general and administrative expenses for the year ended December 31,
1999 and 1998, are reimbursements to the Managing General Partner allowed under
the Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and is consistent with industry practice and the
policies of the Managing General Partner. The effect of this change in net
income for 1999 was not material. The cumulative effect, had this change been
applied to prior periods, is not material. The accounting principle change will
not have an effect on cash flow, funds available for distribution or fees
payable to the Managing General Partner and affiliates.
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 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, 1999, the Partnership had cash and cash equivalents of
approximately $1,618,000 compared to approximately $3,418,000 at December 31,
1998. Cash and cash equivalents decreased approximately $1,800,000 from the
Partnership's previous year ended December 31, 1998. The decrease is due to
approximately $3,847,000 of cash used in financing activities and approximately
$285,000 of cash used in investing activities which was partially offset by
approximately $2,332,000 of cash provided by operating activities. Cash used in
financing activities consisted of distributions to partners. Cash used in
investing activities consisted primarily of property improvements and
replacements partially offset by net withdrawals from restricted escrows
maintained by the mortgage lender. The Partnership invests its working capital
reserves in a money market account.
The Managing General Partner has made available 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 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 Registrant and to comply with Federal, state,
and local legal and regulatory requirements. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $216,600.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flows generated by the property. The capital improvements will be incurred only
if cash is available from operations or from partnership reserves. To the extent
that such budgeted capital improvements are completed, the Partnership's
distributable cash flow, if any, may be adversely affected at least in the short
term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $19,300,000 consists of interest only payments of
approximately $118,000 at a stated rate of 7.33%. The mortgage matures on
November 1, 2003, with the principal due on the maturity date. The Managing
General Partner will attempt to refinance such remaining indebtedness and/or
sell the property prior to such maturity date. If the property cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such property through foreclosure.
Cash distributions from operations of approximately $3,847,000 were paid during
the year ended December 31, 1999, of which approximately $3,809,000 was paid to
the limited partners ($63.48 per limited partnership unit). At December 31, 1999
a distribution payable of approximately $551,000 (approximately $545,000 to the
limited partners or $9.08 per limited partnership unit) was accrued and
subsequently paid in January 2000. In January 1998, the Partnership distributed
approximately $1,297,000 (approximately $1,284,000 to the limited partners,
$21.40 per limited partnership unit) to the partners from operations. Future
cash distributions will depend on the levels of cash generated from operations,
the availability of cash reserves and the timing of the debt maturity,
refinancing, and/or property sale. The Partnership's distribution policy is
reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after required
capital expenditures to permit further distributions to its partners in 2000 or
subsequent periods.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently own 43,106
units of limited partnership units in the Partnership representing 71.84% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
<PAGE>
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership has not
been materially adversely affected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely affected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
NATIONAL PROPERTY INVESTORS 4
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Balance Sheet - December 31, 1999
Statements of Operations - Years ended December 31, 1999 and 1998
Statements of Changes in Partners' Deficit - Years ended December 31, 1999 and
1998
Statements of Cash Flows - Years ended December 31, 1999 and 1998
Notes to Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
National Property Investors 4
We have audited the accompanying balance sheet of National Property Investors 4
as of December 31, 1999, and the related statements of operations, changes in
partners' deficit and cash flows for each of the two years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Property Investors 4
at December 31, 1999, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 21, 2000
<PAGE>
NATIONAL PROPERTY INVESTORS 4
BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets:
<S> <C>
Cash and cash equivalents $ 1,618
Receivables and deposits 653
Restricted escrows 173
Other assets 540
Investment property (Notes E and F):
Land $ 1,980
Buildings and related personal property 25,254
27,234
Less accumulated depreciation (20,003) 7,231
$ 10,215
Liabilities and Partners' Deficit
Liabilities:
Accounts payable $ 35
Tenant security deposit liabilities 362
Other liabilities 614
Distribution payable 551
Mortgage note payable (Note E) 19,300
Partners' Deficit:
General partner $ (353)
Limited partners (60,005 units issued and
outstanding) (10,294) (10,647)
$ 10,215
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 4
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Revenues:
<S> <C> <C>
Rental income $ 6,491 $ 6,361
Other income 356 351
Total revenues 6,847 6,712
Expenses:
Operating 2,417 2,224
General and administrative 530 365
Depreciation 1,064 993
Interest 1,489 1,489
Property taxes 506 483
Total expenses 6,006 5,554
Net income (Note G) $ 841 $ 1,158
Net income allocated to general partner (1%) $ 8 $ 12
Net income allocated to limited partners (99%) 833 1,146
$ 841 $ 1,158
Net income per limited partnership unit $ 13.88 $ 19.10
Distributions per limited partnership unit $ 72.56 $ 21.40
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 4
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 60,005 $ 1 $ 30,003 $ 30,004
Partners' deficit at
December 31, 1997 60,005 $ (316) $ (6,635) $ (6,951)
Distribution to partners -- (13) (1,284) (1,297)
Net income for the year ended
December 31, 1998 -- 12 1,146 1,158
Partners' deficit at
December 31, 1998 60,005 (317) (6,773) (7,090)
Distributions to partners -- (44) (4,354) (4,398)
Net income for the year ended
December 31, 1999 -- 8 833 841
Partners' deficit at
December 31, 1999 60,005 $ (353) $(10,294) $(10,647)
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 4
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $ 841 $ 1,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,064 993
Amortization of loan costs 75 75
Change in accounts:
Receivables and deposits (7) 17
Other assets (41) 4
Accounts payable 22 (57)
Tenant security deposit liabilities (73) 30
Other liabilities 451 (39)
Net cash provided by operating activities 2,332 2,181
Cash flows from investing activities:
Net withdrawals from restricted escrows 305 118
Property improvements and replacements (590) (597)
Net cash used in investing activities (285) (479)
Cash flows from financing activities:
Backup withholding paid to limited partners -- (35)
Distributions to partners (3,847) (1,297)
Net cash used in financing activities (3,847) (1,332)
Net (decrease) increase in cash and cash equivalents (1,800) 370
Cash and cash equivalents at beginning of year 3,418 3,048
Cash and cash equivalents at end of year $ 1,618 $ 3,418
Supplemental information:
Cash paid for interest $ 1,415 $ 1,415
Supplemental information of non-cash activity:
Distribution payable $ 551 $ --
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 4
Notes to Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization
National Property Investors 4, a California Limited Partnership (the
"Partnership" or "Registrant") was formed on July 1, 1980, to acquire, hold for
investment, and ultimately sell income producing real estate property. Capital
contributions of $30,002,500 ($500 per unit) were made by the limited partners.
In addition, the general partner contributed $1,000. The Partnership owns one
apartment complex located in Falls Township, Pennsylvania. The managing general
partner is NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General
Partner"). The Managing General Partner is a wholly-owned subsidiary of
Apartment Investment and Management Company ("AIMCO"). The Partnership Agreement
provides that the Partnership is to terminate on December 31, 2005, unless
terminated prior to such date.
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 financial statements and accompanying notes.
Actual results could differ from those estimates.
Investment Property
Investment property consists of one apartment complex and is 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. Costs of apartment
properties that have been permanently impaired have been written down to
appraised value. No adjustments for impairment of value were recorded in the
years ended December 31, 1999 and 1998.
Depreciation
Depreciation is provided by the straight-line method over the estimated lives of
the apartment property and related personal property. For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 15 years for additions prior to March 16, 1984, 18 years for additions
after March 15, 1984 and before May 9, 1985, and 19 years for additions after
May 8, 1985, and before January 1, 1987, and (2) for personal property over 5
years for additions prior to January 1, 1987. As a result of the Tax Reform Act
of 1986, for additions after December 31, 1986, the modified accelerated cost
recovery method is used for depreciation of (1) real property over 27 1/2 years
and (2) personal property additions over 5 years.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (see Note J).
<PAGE>
Cash and Cash Equivalents
Includes cash on hand and in banks and money market accounts. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Loan Costs
Loan costs of approximately $523,000 are included in other assets in the
accompanying balance sheet and are being amortized on a straight-line basis over
the life of the loan. At December 31, 1999, accumulated amortization is
approximately $231,000. Amortization of loan costs is included in interest
expense.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on rental payments.
Replacement Reserve Escrow
Village of Pennbrook Apartments maintains a replacement reserve escrow to fund
replacement, refurbishment or repair of improvements to the property pursuant to
the mortgage note documents. As of December 31, 1999, the balance in this
account is approximately $173,000.
Fair Value of Financial Statements
Statement of Financial Accounting Standards ("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.
Leases
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on leases. In addition, the Managing
General Partner's policy is to offer rental concessions during particularly slow
months or in response to heavy competition from similar complexes in the area.
Concessions are charged against rental income as incurred.
Allocation of Profits, Gains, and Losses
Profits, gains, and losses of the Partnership are allocated between general and
limited partners in accordance with the provisions of the Partnership Agreement.
<PAGE>
Segment Reporting
SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. See "Note H"
for required disclosure.
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 financial
statements of the Partnership.
Advertising Costs
The Partnership expenses the cost of advertising as incurred. Advertising costs
of approximately $89,000 in 1999 and $71,000 for 1998 are charged to expense as
incurred and are included in operating expenses.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the Managing General Partner. The Managing
General Partner does not believe that this transaction has had or will have a
material effect on the affairs and operations of the Partnership.
<PAGE>
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for property management services based on a percentage of revenue and
for reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
The following payments were made to affiliates of the Managing General Partner
during each of the years ended December 31, 1999 and 1998 (in thousands):
1999 1998
Property management fees (included in operating $ 343 $ 330
expenses)
Reimbursement for services of affiliates
(included in investment property and operating
and general and administrative expenses) 122 142
Partnership management fee (included in other
liabilities and general and administrative 232 26
expenses)
Non-accountable reimbursement (included in general
and administrative expenses) 100 100
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from the
Partnership's property as compensation for providing property management
services. The Partnership paid to such affiliates approximately $343,000 and
$330,000 for the years ended December 31, 1999 and 1998, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $122,000 and $142,000 for the
years ended December 31, 1999 and 1998, respectively, including approximately
$18,000 and $33,000 of construction services reimbursements in 1999 and 1998,
respectively.
For services relating to the administration of the Partnership and operation of
the Partnership's property, the Managing General Partner is entitled to receive
payment for the non-accountable expenses up to a maximum of $100,000 per year
based upon the number of Partnership units sold, subject to certain limitations.
The Managing General Partner was entitled to receive $100,000 in both years
ended December 31, 1999 and 1998.
In addition to the amounts discussed above, as compensation for services
rendered in managing the Partnership, the Managing General Partner is entitled
to receive a Partnership Management Fee in conjunction with a distribution of
cash from operations, subject to certain limitations. The fee in the amount of
$29,000, related to the December 1999 operating distribution was accrued at
December 31, 1999 and paid in January 2000. The fee in the amount of
approximately $203,000 was paid during 1999 in conjunction with the operating
distribution made during the year. The fee in the amount of approximately
$26,000 was paid January 1998 in conjunction with the operating distribution
made at that time.
<PAGE>
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently own 43,106
units of limited partnership units in the Partnership representing 71.84% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
The Managing General Partner has made available 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.
Note D - Distributions
Cash distributions from operations of approximately $3,847,000 were paid during
the year ended December 31, 1999, of which approximately $3,809,000 was paid to
the limited partners ($63.48 per limited partnership unit). At December 31, 1999
a distribution payable of approximately $551,000 (approximately $545,000 to the
limited partners or $9.08 per limited partnership unit) was accrued and
subsequently paid in January 2000. In January 1998, the Partnership distributed
approximately $1,297,000 (approximately $1,284,000 to the limited partners,
$21.40 per limited partnership unit) to the partners from operations.
Note E - Mortgage Note Payable
The principal terms of mortgage note payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
Village of Pennbrook
<S> <C> <C> <C> <C> <C> <C>
Apartments $19,300 $ 118 7.33% 11/01/03 $19,300
</TABLE>
The mortgage payable requires interest only payments with a balloon payment due
in 2003.
The mortgage note payable is non-recourse and is secured by pledge of the
Partnership's rental property and by pledge of revenues from the investment
property. Prepayment penalties are imposed if the mortgage note is repaid prior
to maturity. Further, the property may not be sold subject to existing
indebtedness.
<PAGE>
Note F - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
Village of Pennbrook Apartments
<S> <C> <C> <C> <C>
Falls Township, Pennsylvania $19,300 $ 1,972 $18,245 $ 7,017
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1999
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
(in thousands)
Village of Pennbrook
<S> <C> <C> <C> <C> <C> <C>
Apartments $ 1,980 $25,254 $27,234 $20,003 12/81 5-27.5 yrs
</TABLE>
<PAGE>
Reconciliation of "Real Estate and Accumulated Depreciation":
December 31,
1999 1998
(in thousands)
Investment Property
Balance at beginning of year $26,644 $26,047
Property improvements 590 597
Balance at end of year $27,234 $26,644
Accumulated Depreciation
Balance at beginning of year $18,939 $17,946
Additions charged to expense 1,064 993
Balance at end of year $20,003 $18,939
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $4,805,000 and $4,215,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $386,000 and $39,000,
respectively. Due to Insignia Properties, L.P. acquiring over 50% of the limited
partnership units during 1998, the Partnership was technically terminated for
tax purposes.
Note G - Income Taxes
The following is a reconciliation of reported net income and Federal taxable
income (in thousands, except unit data):
December 31,
1999 1998
Net income as reported $ 841 $ 1,158
Add (deduct):
Depreciation differences 717 762
Prepaid rent 49 90
Other 219 (8)
Federal taxable income $ 1,826 $ 2,002
Federal taxable income per limited
partnership unit $ 30.12 $ 33.03
<PAGE>
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of partners' deficit (in thousands):
1999
Partners' deficit as reported $(10,647)
Land and buildings (22,429)
Accumulated depreciation 19,617
Syndication and distribution costs 3,375
Other 407
Partners' deficit - Federal tax basis $ (9,677)
Note H - Segment Information
Description of the types of products and services from which the reportable
segment derives its revenues
The Partnership has one reportable segment: residential property. The
Partnership's residential property segment consists of one apartment complex in
Pennsylvania. The Partnership rents apartment units for terms that are typically
twelve months or less.
Measurement of segment profit or loss
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
Factors management used to identify the enterprise's reportable segment
Segment information for the years 1999 and 1998 is shown in the tables below (in
thousands). The "Other" column includes partnership administration related items
and income and expense not allocated to the reportable segment.
1999 Residential Other Totals
Rental income $ 6,491 $ -- $ 6,491
Other income 293 63 356
Interest expense 1,489 -- 1,489
Depreciation 1,064 -- 1,064
General and administrative expense -- 530 530
Segment profit (loss) 1,308 (467) 841
Total assets 9,578 637 10,215
Capital expenditures for investment
property 590 -- 590
<PAGE>
1998 Residential Other Totals
Rental income $ 6,361 $ -- $ 6,361
Other income 235 116 351
Interest expense 1,489 -- 1,489
Depreciation 993 -- 993
General and administrative expense -- 365 365
Segment profit (loss) 1,407 (249) 1,158
Total assets 9,732 3,089 12,821
Capital expenditures for investment
property 597 -- 597
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement, settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
Estate of Harry Schubert v. National Property Investors 4, Civil Action No.
97-09129, Court of Common Pleas of Bucks County, Pennsylvania. The Plaintiff
brought action against the Partnership alleging that as the result of carbon
monoxide and methane poisoning due to a malfunctioning heat unit in the
deceased's apartment at the Partnership's property, the decedent lost
consciousness for several hours, suffered respiratory arrest, and suffered other
pains and injuries. The Plaintiff alleges breach of contract, fraud, violations
of the Unfair Trade Practices and Consumer Protection Law and negligence. This
matter is currently in the preliminary stages of discovery. The Partnership
intends to vigorously defend this matter.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note J - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and is consistent with industry practice and the
policies of the Managing General Partner. The effect of this change on net
income for 1999 was not material. The cumulative effect, had this change been
applied to prior years, is not material. The accounting principle change will
not have an effect on cash flow, funds available for distribution or fees
payable to the Managing General Partner and affiliates.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
The Partnership has no officers or directors. NPI Equity, the Managing General
Partner, manages substantially all of the Partnership's affairs and has general
responsibility in all matters affecting its business. NPI Equity is a wholly
owned subsidiary of AIMCO.
The name of the directors and executive officers of the Managing General
Partner, their age and the nature of all positions with NPI Equity presently
held by them are set forth below. There are no family relationships between or
among any officers and directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the Managing
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Managing
General Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia Financial Group, Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO and its joint filers failed to timely file a Form 4 with respect to its
acquisition of Units.
Item 10. Executive Compensation
Neither the director nor the officers of the Managing General Partner received
any remuneration from the Registrant.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, as of December 31, 1999, no person or entity was known to
own of record or beneficially more than five percent of the Units of the
Partnership.
Number of Percent
Units of Total
Insignia Properties, L.P. 32,525 54.20%
(an affiliate of AIMCO)
IPLP Acquisition I, LLC 4,452 7.42%
(an affiliate of AIMCO)
AIMCO Properties, L.P. 6,129 10.22%
(an affiliate of AIMCO)
Insignia Properties, L.P. and IPLP Acquisition I, LLC are indirectly ultimately
owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC
29602.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its
business address is 2000 Colorado Boulevard, Denver, CO 80222.
No director or officer of the Managing General Partner owns any Units.
Item 12. Certain Relationships and Related Transactions
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 property management based on a percentage of revenue and for
reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
The following payments were made to affiliates of the Managing General Partner
during each of the years ended December 31, 1999 and 1998 (in thousands):
1999 1998
(in thousands)
Property management fees $343 $330
Reimbursement for services of affiliates 122 142
Partnership management fee 232 26
Non-accountable reimbursement 100 100
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from the
Partnership's residential property as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$343,000 and $330,000 for the years ended December 31, 1999 and 1998,
respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $122,000 and $142,000 for the
years ended December 31, 1999 and 1998, respectively, including approximately
$18,000 and $33,000 of construction services reimbursements in 1999 and 1998,
respectively.
<PAGE>
For services relating to the administration of the Partnership and operation of
the Partnership's property, the Managing General Partner is entitled to receive
payment for the non-accountable expenses up to a maximum of $100,000 per year
based upon the number of Partnership units sold, subject to certain limitations.
The Managing General Partner was entitled to receive $100,000 in 1999.
In addition to the amounts discussed above, as compensation for services
rendered in managing the Partnership, the Managing General Partner is entitled
to receive a Partnership Management Fee in conjunction with a distribution of
cash from operations, subject to certain limitations. The fee in the amount of
$29,000, related to the December 1999 operating distribution was accrued at
December 31, 1999 and paid in January 2000. The fee in the amount of
approximately $203,000 was paid during 1999 in conjunction with the operating
distribution made during the year. The fee in the amount of approximately
$26,000 was paid January 1998 in conjunction with the operating distribution
made at that time.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently own 43,106
units of limited partnership units in the Partnership representing 71.84% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
The Managing General Partner has made available 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.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for Change
in Accounting Principle, is filed as an exhibit to this report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of calendar year 1999:
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 4
By: NPI EQUITY INVESTMENTS, INC.
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Partnership and in the capacities and on the
dates indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President Date:
Martha L. Long and Controller
<PAGE>
EXHIBIT INDEX
Exhibit
2.1 NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995,
incorporated by reference to the Partnership's Current Report on Form 8-K
dated August 17, 1995.
2.2 Partnership Units Purchase Agreement dated as of August 17, 1995
incorporated by reference to Exhibit 2.1 to Form 8-K filed by Insignia
Financial Group, Inc. ("Insignia") with the Securities and Exchange
Commission on September 1, 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 Agreement and Plan of Merger, dated as of October 1, 1998, by and between
AIMCO and IPT shown as Exhibit 2.1 in 8-K dated as of October 1, 1988.
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 with the Securities
and Exchange Commission on September 1, 1995.
3.4 Agreement of Limited Partnership, incorporated by reference to Exhibit A to
the Prospectus of the Partnership dated September 20, 1983, as amended on
June 13 1989, and as thereafter supplemented contained in the Partnership's
Registration Statement on Form S-11 (Reg. No. 2-63733).
10.1 Agreement to Purchase Village of Pennbrook Apartments dated November 25,
1981 between the Partnership and SB Partners, incorporated by reference to
the Exhibits to the Partnership's Current Report on Form 8-K dated November
25, 1981.
10.4 Property Management Agreement dated June 21, 1991, by and between the
Partnership and NPI Management incorporated by reference to Exhibit 10.4 to
the Partnership's Annual Report on Form 10-K for the year ended December
31, 1991.
10.5 Multifamily Note dated September 30, 1996, by and between the Partnership
and Lehman Brothers Holding, Inc. for the Village of Pennbrook incorporated
by reference to Exhibit 10.5 to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1996.
10.6 Multifamily Note dated November 1, 1996, by and between the Partnership and
Lehman Brothers Holding, Inc. for the Village of Pennbrook incorporated by
reference to Exhibit 10.6 to the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1991.
<PAGE>
16 Letter dated December 8, 1997, from the Registrant's former independent
accountant regarding its concurrence with the statements made by the
Registrant in this Current Report.
18 Independent Accountants' Preferability Letter for Change in Accounting
Principle.
27 Financial Data Schedule.
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
NPI Equity Investments, Inc.
Managing General Partner of National Property Investors 4
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note J of Notes to the Financial Statements of National Property Investors 4
included in its Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. You have
advised us that you believe that the change is to a preferable method in your
circumstances because it provides a better matching of expenses with the related
benefit of the expenditures and is consistent with policies currently being used
by your industry and conforms to the policies of the Managing General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors 4 1999 Fourth Quarter 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000318508
<NAME> National Property Investors 4
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,618
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 27,234
<DEPRECIATION> 20,003
<TOTAL-ASSETS> 10,215
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 19,300
0
0
<COMMON> 0
<OTHER-SE> (10,647)
<TOTAL-LIABILITY-AND-EQUITY> 10,215
<SALES> 0
<TOTAL-REVENUES> 6,847
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,489
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 841
<EPS-BASIC> 13.88 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
