FORM 10-QSB --QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11095
NATIONAL PROPERTY INVESTORS 5
(Exact name of small business issuer as specified in its charter)
California 22-2385051
State or other jurisdiction of (IRS Employer
(incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
NATIONAL PROPERTY INVESTORS 5
BALANCE SHEET
(Unaudited)
March 31, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,323
Receivables and deposits 346
Restricted escrows 324
Other assets 255
Investment properties:
Land $ 2,145
Buildings and related personal property 26,828
28,973
Less accumulated depreciation (20,734) 8,239
$ 10,487
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 100
Tenant security deposits payable 101
Accrued property taxes 73
Other liabilities 196
Mortgage notes payable 11,658
Partners' Deficit:
Limited partners' (82,513 units issued and
outstanding) $ (391)
General partner's (1,250) (1,641)
$ 10,487
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $ 1,115 $ 1,063
Other income 88 112
Total revenues 1,203 1,175
Expenses:
Operating 568 642
Interest 271 276
Depreciation 294 283
General and administrative 58 42
Property taxes 62 64
Loss on disposal of property 64 --
Total expenses 1,317 1,307
Equity in net income of tenant-in-common
property 19 35
Net loss $ (95) $ (97)
Net loss allocated to general partner (3%) $ (3) $ (3)
Net loss allocated to limited partners (97%) (92) (94)
$ (95) $ (97)
Net loss per limited partnership unit $ (1.11) $ (1.14)
See Accompanying Notes to Financial Statements
c)
NATIONAL PROPERTY INVESTORS 5
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 82,513 $ 1 $ 41,257 $ 41,258
Partners' deficit at
December 31, 1997 82,513 $ (1,247) $ (299) $ (1,546)
Net loss for the three months
ended March 31, 1998 -- (3) (92) (95)
Partners' deficit at
March 31, 1998 82,513 $ (1,250) $ (391) $ (1,641)
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net loss $ (95) $ (97)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 294 283
Amortization of loan costs 16 16
Loss on disposal of property 64 --
Equity in net income of tenant-in-common
property (19) (35)
Change in accounts:
Receivables and deposits (79) (104)
Other assets 30 18
Accounts payable (59) (41)
Tenant security deposit payable 2 3
Accrued property taxes 62 65
Other liabilities (5) (17)
Net cash provided by operating activities 211 91
Cash flows from investing activities:
Property improvements and replacements (215) (108)
Net receipts from restricted escrows 23 17
Distributions from tenant-in-common property -- 240
Net cash (used in) provided by investing (192) 149
activities
Cash flows from financing activities:
Payments of mortgage notes payable (46) (43)
Net cash used in financing activities (46) (43)
Net (decrease) increase in cash and cash equivalents (27) 197
Cash and cash equivalents at beginning of period 1,350 1,421
Cash and cash equivalents at end of period $ 1,323 $ 1,618
Supplemental information:
Cash paid for interest $ 256 $ 259
See Accompanying Notes to Financial Statements
e)
NATIONAL PROPERTY INVESTORS 5
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of National Property Investors 5
(the "Partnership") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1998, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1998. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the year ended
December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation (see "Note B").
NOTE B - CHANGE IN METHOD OF REPORTING THE OWNERSHIP OF TENANT-IN-COMMON
PROPERTY
National Property Investors 5 owns a 24.028% interest in The Village Apartments
(the "Village") (see "Note D"). Through the third quarter of 1997, the
Partnership consolidated its pro rata share of assets, liabilities and
operations of the Village. During the fourth quarter of 1997, the Partnership
decided to reflect its interest in the Village utilizing the equity method due
to the inability of the Partnership to control the major operating and financial
policies of the Village. Under the equity method, the original investment is
increased by advances to the Village and the Partnership's share of the earnings
of the Village. The investment is decreased by distributions from the Village
and the Partnership's share of losses of the Village. At March 31, 1998, the
Partnership's investment account had a deficit balance of approximately $27,000,
which is included in other liabilities.
The statement of operations and cash flows for the period ending March 31, 1997
have been restated to reflect this change as a change in the reporting entity.
Additionally, certain reclassifications were made in the 1997 statement of
operations to conform to the current year presentation. These changes had no
effect on the net loss of the Partnership or on the net loss per limited
partnership unit.
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 Managing General Partner is wholly-owned by Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"). The Partnership Agreement provides for payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
The following transactions with affiliates of Insignia were incurred in the
three month periods ended March 31, 1998 and 1997 (in thousands):
For the Three Months Ended
March 31,
1998 1997
Property management fees (included in operating
expenses) $ 60 $ 58
Reimbursement for services of affiliates, including
$35,000 and $14,000 of construction services
reimbursements in 1998 and 1997, respectively
(included in general and administrative expenses,
operating expenses, and investment properties) 83 48
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an 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 which received payments on these obligations from the agent. The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
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.
NOTE D- TENANT-IN-COMMON PROPERTY
The Partnership currently owns the Village as a tenant-in-common with National
Property Investors 6 ("NPI 6"), an affiliated public limited partnership. NPI 6
acquired a 75.972% undivided interest with the Partnership owning the remaining
24.028%. Effective December 31, 1997, the property is accounted for under the
equity method of accounting (see "Note B"). At March 31, 1998, the
Partnership's investment account had a deficit balance of approximately $27,000,
which is included in other liabilities.
The condensed balance sheet of the Village at March 31, 1998, is summarized as
follows (in thousands):
March 31,
1998
Assets
Investment property, net $ 9,850
Other assets 1,397
Total $ 11,247
Liabilities and Partners' Capital
Mortgage note payable $ 10,869
Other liabilities 244
Partners capital 134
Total $ 11,247
Condensed statements of operations of the Village for the three month periods
ending March 31, 1998 and 1997 are as follows (in thousands):
Three Months Ended
March 31,
1998 1997
Total revenues $ 1,134 $ 1,125
Operating and other expenses 613 540
Depreciation 198 189
Mortgage interest 245 249
Total expenses 1,056 978
Net income $ 78 $ 147
NOTE E - SUBSEQUENT EVENT
Subsequent to March 31, 1998, the Partnership entered into an agreement with an
unaffiliated party to sell the Village, the Partnership's tenant-in-common
property. The potential purchaser is currently inspecting the property, pursuant
to the Contract to Purchase and Sell Property. The Managing General Partner
expects the sale to be completed by July 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Willow Park on Lake Adelaide
Altamonte Springs, Florida 96% 94%
Oakwood Village at Lake Nan Apartments
Winter Park, Florida 97% 97%
Palisades Apartments
Montgomery, Alabama 87% 84%
The Managing General Partner attributes the increase in occupancy at Palisades
to reduced rental rates.
The Partnership's net loss for the three months ended March 31, 1998 was
approximately $95,000 versus a net loss of $97,000 for the three months ended
March 31, 1997. The increase in income was offset by a slight increase in
expenses and a decrease in equity in net income of tenant-in-common property.
Included in operating expense for the three months ended March 31, 1998 is
approximately $13,000 of major repairs and maintenance comprised primarily of
exterior building repairs. Included in operating expense for the three months
ended March 31, 1997 is approximately $141,000 of major repairs and maintenance
comprised primarily of an exterior painting project of approximately $111,000 at
Willow Park and exterior building repairs. Rental income increased due to
increased rental rates at both Willow Park and Oakwood Village as well as
overall increased average occupancy. Partially offsetting the decrease in
operating expense and increased rental revenue were increased general and
administrative expenses, a loss on disposal of property, and decreased equity in
net income of the tenant-in-common property. General and administrative
expenses increased primarily due to increased expense reimbursements. The loss
on disposal of property relates to the write-off of the remaining basis of roofs
that were replaced at Palisades. Net income at the tenant-in-common property,
the Village, decreased primarily due to increased utility costs, in part due to
decreased occupancy, and maintenance expenses related to the completion of the
1997 exterior painting project.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Managing General Partner attempts to protect
the 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.
At March 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,323,000 compared to approximately $1,618,000 at March 31, 1997.
The net decrease in cash and cash equivalents for the period ended March 31,
1998 was $27,000 compared to a net increase of $197,000 for the period ended
March 31, 1997. Net cash provided by operating activities increased primarily
due to fewer major repair and maintenance items being performed in first quarter
of 1998. The increase in cash provided by operating activities can also be
partly attributed to the decrease in cash used for receivables and deposits due
to the timing of payments. Net cash used in investing activities increased in
the three months ended March 31, 1998 due to an increase in property
improvements and replacements. In the three months ended March 31, 1997,
investing activities provided cash due to a distribution from the tenant-in-
common property. Net cash provided by financing activities remained relatively
constant.
The Managing General Partner has extended 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, and 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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $11,658,000 matures at various times 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 net cash
generated from operations, property sales, refinancings and the availability of
cash reserves. No cash distributions were made during the first three months of
1998 or during 1997. Currently, the Managing General Partner does not
anticipate making any distributions during 1998.
Subsequent to March 31, 1998, the Partnership entered into an agreement with an
unaffiliated party to sell the Village, the Partnership's tenant-in-common
property. The potential purchaser is currently inspecting the property, pursuant
to the Contract to Purchase and Sell Property. The Managing General Partner
expects the sale to be completed by July 1998.
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 quarterly 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 of the Partnership 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 quarterly 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint 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 and its 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 as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The Managing General Partner
was only recently served with the complaint which it believes to be without
merit, and intends to vigorously defend the action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None filed during the quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 5
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: May 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
National Property Investors 5 1998 First Quarter 10-QSB and is qualified
in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000355637
<NAME> NATIONAL PROPERTY INVESTORS 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,323
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 28,973
<DEPRECIATION> 20,734
<TOTAL-ASSETS> 10,487
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,658
0
0
<COMMON> 0
<OTHER-SE> (1,641)
<TOTAL-LIABILITY-AND-EQUITY> 10,487
<SALES> 0
<TOTAL-REVENUES> 1,203
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 271
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95)
<EPS-PRIMARY> (1.11)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
