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 September 30, 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.)
55 Beattie Place, 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)
September 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,563
Receivables and deposits 441
Restricted escrows 175
Other assets 271
Investment in tenant-in-common property 204
Investment properties:
Land $ 2,145
Buildings and related personal property 27,105
29,250
Less accumulated depreciation (21,322) 7,928
$ 10,582
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 161
Tenant security deposit liabilities 111
Accrued property taxes 198
Other liabilities 464
Mortgage notes payable 11,562
Partners' Deficit:
General partner's $ (1,215)
Limited partners' (82,513 units issued and
outstanding) (699) (1,914)
$ 10,582
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $1,126 $1,082 $3,360 $3,247
Other income 98 96 264 291
Total revenues 1,224 1,178 3,624 3,538
Expenses:
Operating 619 643 1,828 1,941
Interest 271 273 812 824
Depreciation 294 295 882 866
General and administrative 71 69 187 199
Property taxes 61 65 185 195
Incentive compensation fee -- -- 290 --
Loss on disposal of property -- -- 64 --
Total expenses 1,316 1,345 4,248 4,025
Equity in net (loss) income of
tenant-in-common property (10) 4 4,695 60
Net (loss) income $ (102) $ (163) $4,071 $ (427)
Net (loss) income allocated to
general partner (3%) $ (3) $ (5) $ 122 $ (13)
Net (loss) income allocated to
limited partners (97%) (99) (158) 3,949 (414)
$ (102) $ (163) $4,071 $ (427)
Net (loss) income per limited
partnership unit $(1.20) $(1.91) $47.86 $(5.02)
Distributions per limited
partnership unit $52.71 $ -- $52.71 $ --
See Accompanying Notes to Financial Statements
c)
NATIONAL PROPERTY INVESTORS 5
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 82,513 $ 1 $41,257 $41,258
Partners' deficit at
December 31, 1997 82,513 $(1,247) $ (299) $(1,546)
Distribution to partners -- (90) (4,349) (4,439)
Net income for the nine months
ended September 30, 1998 -- 122 3,949 4,071
Partners' deficit at
September 30, 1998 82,513 $(1,215) $ (699) $(1,914)
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 4,071 $ (427)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 882 866
Amortization of loan costs 49 49
Loss on disposal of property 64 --
Equity in net income of tenant-in-common property (4,695) (60)
Change in accounts:
Receivables and deposits (174) (166)
Other assets (19) (26)
Accounts payable 2 14
Tenant security deposit liabilities 12 6
Accrued property taxes 187 196
Other liabilities 290 (14)
Net cash provided by operating activities 669 438
Cash flows from investing activities:
Property improvements and replacements (492) (390)
Net receipts from (deposits to)
restricted escrows 172 (19)
Distributions from tenant-in-common property 4,445 240
Net cash provided by (used in) investing activities 4,125 (169)
Cash flows from financing activities:
Payments of mortgage notes payable (142) (130)
Distribution paid (4,439) --
Net cash used in financing activities (4,581) (130)
Net increase in cash and cash equivalents 213 139
Cash and cash equivalents at beginning of period 1,350 1,421
Cash and cash equivalents at end of period $ 1,563 $ 1,560
Supplemental information:
Cash paid for interest $ 763 $ 775
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"), a wholly-owned subsidiary of Insignia Properties Trust ("IPT") (see
"Note F"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 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 owned a 24.028% interest in The Village Apartments
(the "Village") (see "Note D"). On June 30, 1998, the property was sold.
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. At September 30,
1998, the Partnership's investment account had a balance of approximately
$204,000, which primarily represented undistributed cash from the property sale.
The statements of operations and cash flows for the periods ended September 30,
1997 have been restated to reflect this change as a change in the reporting
entity. Additionally, certain reclassifications were made in the 1997 statements
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. Affiliates of the Managing General Partner provide
property management and asset management services to the Partnership. 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 nine
month periods ended September 30, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $181 $175
Reimbursement for services of affiliates including
$47,000 and $21,000 of construction services
reimbursements in 1998 and 1997, respectively
(included in investment properties, general and
administrative and operating expenses) 174 183
The Partnership also accrued an incentive compensation fee of approximately
$290,000 relating to the sale of the Partnership's tenant-in-common property,
the Village (see "Note D"). This fee will be paid to the Managing General
Partner at such time, if at all, as the limited partners have received
distributions equal to the Net Tangible Asset Value for each unit ($86.22 per
unit), plus a six percent cumulative, non-compounded return thereon, as defined
in and dictated by the partnership agreement. To date the limited partners have
received $52.71 per limited partner unit.
Also, for services relating to the administration of the Partnership and
operation of the partnership properties, the Managing General Partner is
entitled to receive payment for 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 earned and received
approximately $4,000 during the first nine months of 1998. No such
reimbursements were earned during the nine months ended September 30, 1997. In
addition, the Managing General Partner earns a Partnership Management Fee based
on 2% of adjusted cash distributed from operations. The Managing General
Partner earned and received approximately $2,000 during the first nine months of
1998. No such fees were earned in 1997.
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.
NOTE D - TENANT-IN-COMMON PROPERTY
The Partnership owned 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").
On June 30, 1998, the Village, located in Voorhees Township, New Jersey, was
sold to an unaffiliated party for an adjusted sales price of approximately
$30,102,000. After repayment of the mortgage note payable and closing expenses,
the net proceeds from the sale were approximately $18,098,000. For financial
statement purposes, the sale resulted in a gain of approximately $19,946,000.
An extraordinary loss on early extinguishment of debt of approximately $840,000,
representing prepayment penalties and the write off of the remaining unamortized
loan costs, was also recorded.
The condensed balance sheet of the Village at September 30, 1998, is summarized
as follows (in thousands):
September 30,
1998
Assets
Cash $868,000
Total $868,000
Liabilities and Partners' Capital
Accrued liabilities $ 20,000
Partners' capital 848,000
Total $868,000
Condensed statements of operations of the Village for the three and nine month
periods ended September 30, 1998 and 1997 are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ -- $ 1,114 $ 2,181 $ 3,272
Other income 21 74 139 196
Gain on sale of property -- -- 19,946 --
Total revenues 21 1,188 22,266 3,468
Expenses:
Operating and other expenses 63 725 1,255 1,892
Depreciation -- 199 395 581
Mortgage interest -- 247 485 743
Total expenses 63 1,171 2,135 3,216
(Loss) income before
extraordinary loss (42) 17 20,131 252
Extraordinary loss on early
extinguishment of debt -- -- (840) --
Net (loss) income $ (42) $ 17 $19,291 $ 252
NOTE E - DISTRIBUTIONS
In July 1998, the Partnership distributed approximately $4,439,000 to the
partners. Approximately $4,349,000 was paid to the limited partners ($52.71 per
limited partnership unit), and approximately $90,000 was paid to the Managing
General Partner. The distribution represents the Partnership's share of the
proceeds from the sale of the Village of approximately $4,349,000 and
approximately $90,000 from operations.
NOTE F - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of IPT, the entity
which controls the General Partner of the Partnership. Also, effective October
1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger pursuant to
which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT
Merger"). The IPT Merger requires the approval of the holders of a majority of
the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares
owned by it in favor of the IPT Merger and has granted an irrevocable limited
proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by
AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's
ownership and its agreement, the vote of no other holder of IPT is required to
approve the merger. The Managing General Partner does not believe that this
transaction will have a material effect on the affairs and operations of the
Partnership.
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
nine month periods ended September 30, 1998 and 1997:
Average Occupancy
Property 1998 1997
Willow Park on Lake Adelaide
Altamonte Springs, Florida 96% 96%
Oakwood Village at Lake Nan Apartments
Winter Park, Florida 96% 96%
Palisades Apartments
Montgomery, Alabama 88% 86%
The Managing General Partner attributes the increase in occupancy at Palisades
to property improvements and reduced rental rates.
The Partnership's net income for the nine months ended September 30, 1998 was
approximately $4,071,000 versus a net loss of approximately $427,000 for the
nine months ended September 30, 1997. The Partnership's net loss for the three
months ended September 30, 1998 was approximately $102,000 versus a net loss of
$163,000 for the three months ended September 30, 1997. The increase in net
income for the nine months ended September 30, 1998, as compared to the
corresponding period of 1997, is primarily attributable to the increase in the
Partnership's share of the net income of the tenant-in-common property, as a
result of the gain recognized on the sale of the Village, as discussed below.
On June 30, 1998, the Partnership's tenant-in-common property, the Village,
located in Voorhees Township, New Jersey, was sold to an unaffiliated party for
an adjusted sales price of approximately $30,102,000. After repayment of the
mortgage note payable and closing expenses, the net proceeds from the sale were
approximately $18,098,000. For financial statement purposes, the sale resulted
in a gain of approximately $19,946,000. An extraordinary loss on early
extinguishment of debt of approximately $840,000, representing prepayment
penalties and the write off of the remaining unamortized loan costs, was also
recorded. The Partnership's share of the net income of the tenant-in-common
property was approximately $4,695,000 for the nine month period ended September
30, 1998, with a net loss of approximately $10,000 for the three month period
ended September 30, 1998. The loss for the three month period ended September
30, 1998 represents trailing expenses incurred in the months prior to the sale
of the property.
Excluding the operations of the Village, the Partnership experienced a net loss
of approximately $624,000 for the nine months ended September, 30 1998 compared
to a net loss of approximately $487,000 for the nine months ended September, 30
1997. The increase in net loss is primarily attributable to the accrual of an
Incentive Compensation Fee of approximately $290,000, related to the sale of the
Village. This fee is subordinated to the limited partners receiving a certain
level of distributions (see "Item 1. Note C - Transactions with Affiliated
Parties"). Also contributing to this increased loss was the loss on disposal of
property relating to the write-off of the remaining basis of roofs that were
replaced at Palisades. Partially offsetting these increased expenses were an
increase in rental income and a decrease in operating expenses. Rental revenue
increased due to increased rental rates at Oakwood Village and Willow Park. This
increase was partially offset by decreased rental rates at Palisades. Operating
expenses decreased primarily as a result of a decrease in major repairs and
maintenance items. Included in operating expense for the nine months ended
September 30, 1998 was approximately $63,000 of major repairs and maintenance
items comprised primarily of exterior building and parking lot repairs.
Included in operating expense for the nine months ended September 30, 1997 was
approximately $193,000 of major repairs and maintenance comprised primarily of
an exterior painting project of approximately $111,000 at Willow Park, 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 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 September 30, 1998, the Partnership had cash and cash equivalents of
approximately $1,563,000 compared to approximately $1,560,000 at September 30,
1997. The net increase in cash and cash equivalents for the period ended
September 30, 1998 was $213,000 compared to a net increase of $139,000 for the
period ended September 30, 1997. Net cash provided by operating activities
increased primarily due to a decrease in cash used for other liabilities in 1998
due to the timing of payments. Net cash provided by investing activities
increased due to the distribution from the tenant-in-common property in July
1998, in addition to increased receipts from restricted escrows in 1998. Net
cash used in financing activities increased due to the distribution of proceeds
from the sale of the tenant-in-common property.
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 and to comply with
federal, state and local legal and regulatory requirements. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The General Partner is currently assessing the need for capital improvements at
each of the Partnership's properties. To the extent that additional capital
improvements are required, the Partnership's distributable cash flow, if any,
may be adversely affected, at least in the short term. The mortgage
indebtedness of $11,562,000 matures at various times with balloon payments due
at maturity. The General Partner will attempt to refinance such indebtedness or
sell the properties prior to such maturity date. If the properties cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure. Future cash distributions will depend on
the levels of net cash generated from operations, property sales, refinancings
and the availability of cash reserves. A distribution representing the
Partnership's share of the proceeds from the sale of the Village of
approximately $4,349,000 and approximately $90,000 from operations was paid to
the partners in July 1998. No cash distributions were made during the first
nine months of 1997. The Partnership's distribution policy will be reviewed on a
quarterly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations to permit further distributions to its
partners in 1998 or subsequent periods.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of Insignia
Properties Trust ("IPT"), the sole shareholder of the Managing General Partner
of the Partnership. Also, effective October 1, 1998, IPT and AIMCO entered into
an Agreement and plan of Merger pursuant to which IPT is to be merged with and
into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger
and has granted an irrevocable limited proxy to unaffiliated representatives of
IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of
the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of
no other holder of IPT is required to approve the merger. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Partnership.
Year 2000
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four 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 computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
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.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the Managing General Partner was to the security
systems, elevators, heating-ventilation-air-conditioning systems, telephone
systems and switches, and sprinkler systems. The Managing General Partner is
currently engaged in the identification of all non-compliant operational
systems, and is in the process of estimating the costs associated with any
potential modifications or replacements needed to such systems in order for them
to be Year 2000 compliant. It is not expected that such costs would have a
material adverse affect upon the operations of the Partnership.
Risk Associated with the Year 2000
The Managing General Partner believes that the Managing Agent has an effective
program in place to resolve the Year 2000 issue in a timely manner and has
appropriate contingency plans in place for critical applications that could
affect the Partnership's operations. To date, the Managing General Partner is
not aware of any external agent with a Year 2000 issue that would materially
impact the Partnership's results of operations, liquidity or capital resources.
However, the Managing General Partner has no means of ensuring that external
agents will be Year 2000 compliant. The Managing General Partner does not
believe that the inability of external agents to complete their Year 2000
resolution process in a timely manner will have a material impact on the
financial position or results of operations of the Partnership. However, the
affect of non-compliance by external agents is not readily determinable.
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 Financial Group, Inc. and
entities which were, at the 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, 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. 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 has filed demurrers to the amended complaint, which are
scheduled to be heard on January 8, 1999. The Managing General Partner believes
the action to be without merit, and intends to vigorously defend it.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties LLC. v.
Insignia Financial Group, Inc. in the Superior Court of the State of California,
County of Los Angeles. The action involves 44 real estate limited partnerships
(including the Partnership) in which the plaintiffs allegedly own interests and
which Insignia Affiliates allegedly manage or control (the "Subject
Partnerships"). The complaint names as defendants Insignia, several Insignia
Affiliates alleged to be managing partners of the defendant limited
partnerships, the Partnership and the Managing General Partner. Plaintiffs
allege that they have requested from, but have been denied by each of the
Subject Partnerships, lists of their respective limited partners for the purpose
of making tender offers to purchase up to 4.9% of the limited partner units of
each of the Subject Partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase limited partner units in many of
the Subject Partnerships, with the alleged result that plaintiffs have been
deprived of the benefits they would have realized from ownership of the
additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the Subject Partnerships are organized.
Plaintiffs seek compensatory, punitive and treble damages. The Managing General
Partner filed an answer to the complaint on September 15, 1998. The Managing
General Partner believes the claims to be without merit and intends to defend
the action vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner of the Partnership
believes that all such pending or outstanding litigation will be resolved
without a material adverse affect upon the business, financial condition or
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
A Form 8-K, dated June 30, 1998, was filed reporting the sale of The
Village Apartments.
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/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 13, 1998
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
National Property Investors 5 1998 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,563
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 29,250
<DEPRECIATION> 21,322
<TOTAL-ASSETS> 10,582
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,562
0
0
<COMMON> 0
<OTHER-SE> (1,914)
<TOTAL-LIABILITY-AND-EQUITY> 10,582
<SALES> 0
<TOTAL-REVENUES> 3,624
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 812
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,071
<EPS-PRIMARY> 47.86<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
