March 27, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: National Property Investors 5
Form 10-KSB
File No. 0-11095
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 0-11095
NATIONAL PROPERTY INVESTORS 5
(Name of small business issuer in its charter)
California 22-2385051
(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. $4,938,000
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 5 (the "Partnership" or the "Registrant") is a
California limited partnership organized under the Uniform Limited Partnership
laws of California as of July 15, 1981. The Partnership's managing general
partner is NPI Equity Investments, Inc. (the "Managing General Partner" or "NPI
Equity"), a Florida corporation. The Managing General Partner is a 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 Partnership, through its public offering of Limited Partnership Units, sold
82,513 units aggregating $41,256,500. The general partner contributed capital in
the amount of $1,000 for a 3% interest in the Partnership. Since its initial
offering, the Registrant has not received, nor are limited partners required to
make, additional capital contributions.
The Partnership was formed for the purpose of acquiring and operating income
producing residential real estate. The Partnership currently owns three
apartment complexes. See "Item 2. Description of Properties".
The Partnership has no full time employees. The Managing General Partner is
vested with full authority as to the general management and supervision of the
business and affairs of the Partnership. Limited Partners have no right to
participate in the management or conduct of such business and affairs.
Affiliates of the Managing General Partner provide day to day management
services to the Partnership's investment properties.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. 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 Registrant's properties 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 total
apartment units in the United States and competition for the apartments is
local.
Both the income and expenses of operating the properties 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
increases/decreases in unemployment or population shifts, changes in the
availability of permanent mortgage funds, 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.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of 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
ultimately 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 Properties
The following table sets forth the Partnership's investment in properties:
<TABLE>
<CAPTION>
Date of
Properties Purchase Type of Ownership Use
<S> <C> <C> <C>
Willow Park on Lake Adelaide 12/13/82 Fee ownership subject to Apartment
Altamonte Springs, Florida a first mortgage 185 units
Oakwood Village at Lake Nan 08/03/82 Fee ownership subject to Apartment
Apartments a first mortgage 278 units
Orlando, Florida
Palisades Apartments 06/22/83 Fee ownership subject to Apartment
Montgomery, Alabama a first mortgage 432 units
</TABLE>
<PAGE>
Schedule of Properties
Set forth below for each of the Partnership's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation, and
Federal tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Properties Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Willow Park $ 7,438 $ 5,391 5-27.5 yrs S/L $ 1,133
Oakwood Village 10,306 7,717 5-27.5 yrs S/L 1,467
Palidades 12,608 9,806 5-27.5 yrs S/L 2,248
Totals $30,352 $22,914 $ 4,848
</TABLE>
See "Note A" to the financial statements included in "Item 7. Financial
Statements" for a description of the Partnership's depreciation policy and "Note
K - Change in Accounting Principle".
Schedule of Properties Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Properties 1999 Rate Amortized Date Maturity (1)
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Willow Park $ 4,000 8.02% 20 yrs 01/01/20 $ --
Oakwood Village 3,884 8.56% 30 yrs 02/01/01 3,829
Palisades 4,547 9.00% 22 yrs 07/01/03 3,996
Totals $12,431 $ 7,825
</TABLE>
(1) See "Item 7. Financial Statements - Note C" for information with respect
to the Registrant's ability to prepay these loans and other specific
details about the loans.
On December 15, 1999, the Partnership refinanced the mortgage encumbering Willow
Park Apartments. The interest rate on the new mortgage is 8.02%, compared to
8.56% on the previous mortgage. The refinancing replaced indebtedness of
$2,873,000 with a new mortgage in the amount of $4,000,000. Payments of
approximately $34,000 are due on the first day of each month until the loan
matures on January 1, 2020. The prior note was scheduled to mature in February
2001. The loss on early extinguishment of debt for financial statement purposes
is approximately $52,000, consisting of the write-off of unamortized loan costs
and a prepayment penalty.
<PAGE>
Rental Rates and Occupancy
Average annual rental rates and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rates Occupancy
(per unit)
Properties 1999 1998 1999 1998
Willow Park $7,131 $6,854 97% 96%
Oakwood Village 6,723 6,360 95% 95%
Palisades 4,691 4,540 91% 88%
The Managing General Partner attributes the increased occupancy at the Palisades
Apartments to improved marketing efforts.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. The properties of the Partnership are subject to competition
from other residential apartment complexes in the area. The Managing General
Partner believes that the properties are adequately insured. The properties are
apartment complexes which lease units for terms of one year or less. No tenant
leases 10% or more of the available rental space. All of the properties are in
good physical condition subject to normal depreciation and deterioration as is
typical for assets of this type and age.
Capital Improvements
Willow Park on Lake Adelaide Apartments
The Partnership completed approximately $357,000 in capital expenditures at
Willow Park on Lake Adelaide Apartments as of December 31, 1999, consisting
primarily of structural improvements, roof replacements, floor covering
replacements, exterior painting, pool enhancements, recreation facilities,
stairwell replacements, and electrical improvements. These improvements were
funded from operating cash flow and replacement reserves. 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 $55,500. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Oakwood Village at Lake Nan Apartments
The Partnership completed approximately $418,000 in capital expenditures at
Oakwood Village at Lake Nan Apartments as of December 31, 1999, consisting
primarily of roof replacements, electrical upgrades, major landscaping, air
conditioning improvements, structural improvements, and floor covering
replacements. These improvements were funded from operating cash flow and
replacement reserves. 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 $83,400. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Palisades Apartments
The Partnership completed approximately $231,000 in capital expenditures at
Palisades Apartments as of December 31, 1999, consisting primarily of floor
covering replacements, roof replacements, exterior lighting upgrades, and air
conditioning replacements. These improvements were funded from operating cash
flow and replacement reserves. 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 $129,600. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Real Estate Taxes and Rates
1999 1999
Billing Rate
(in thousands)
Willow Park $ 92 1.96%
Oakwood Village 120 1.95%
Palisades 43 3.45%
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
The units holders of the Partnership did not vote on any matter during the
quarter ended December 31, 1999.
PART II
Item 5. Market for the Partnership's Equity and Related Partner
Matters
The Partnership, a publicly-held limited partnership, offered and sold 82,513
Limited Partnership Units aggregating $41,256,500. As of December 31, 1999, the
Partnership had 82,513 units outstanding held by 2,215 limited partners of
record. Affiliates of the Managing General Partner owned 48,032 units or 58.211%
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 (see "Item 6. Management's Discussion and
Analysis or Plan of Operation" for further details):
Distributions
Per Limited
Aggregate Partnership Unit
(in thousands)
01/01/98 - 12/31/98 $5,376 (1) $63.72
01/01/99 - 12/31/99 -- --
(1) Approximately $4,349,000 of proceeds from the sale of The Village
Apartments and approximately $1,027,000 from operating cash flow.
Future cash distributions will depend on the levels of cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. The Partnership's distribution
policy is reviewed on an annual basis. There can be no assurance, however, that
the Partnership will generate sufficient funds 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 and prior tender offers, AIMCO and its affiliates currently
own 48,032 limited partnership units in the Partnership representing 58.211% 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.
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 matters, 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's net loss for the year ended December 31, 1999, was
approximately $221,000 as compared to net income of approximately $3,971,000 for
the year ended December 31, 1998. The increase in net loss for the year ended
December 31, 1999, is due to the Partnership's 1998 share of the equity in net
income of the tenant-in-common property resulting from the gain recognized on
the sale of The Village (see "Item 7. Financial Statements, Note D -
Tenant-In-Common Property"), offset by the Partnership's share of the
extraordinary loss on the early extinguishment of tenant-in-common debt.
Partially offsetting the decrease in the equity in the net income of the
tenant-in-common property was the accrual of an incentive compensation fee
related to the sale of the Village. The fee is subordinated to the limited
partners receiving a certain level of distributions (see "Item 7. Financial
Statements, Note F - Transactions with Affiliated Parties").
At the Partnership's remaining properties, the loss before equity in net income
of tenant-in-common property and extraordinary items decreased from
approximately $724,000 to approximately $169,000 for the year ended December 31,
1998 and 1999, respectively. The decrease in loss is attributable to an increase
in total revenue and a decrease in total expenses. The increase in total
revenues is due to an increase in rental income partially offset by a decrease
in other income. Rental income increased due to increased rental rates at all of
the Partnership's properties. The decrease in other income is primarily due to a
decrease in application and late fees at the Palisades Apartments and a decrease
in interest income as a result of lower average cash balances held in
interest-bearing accounts. The decrease in total expenses is primarily due to a
decrease in operating expense and incentive compensation fee partially offset by
an increase in depreciation expense. The decrease in operating expenses resulted
from decreases in maintenance, property, and insurance expenses. The decrease in
maintenance expense is the result of insurance proceeds received in 1999 for
damages at Palisades resulting from storm damages which were incurred in 1998
and fire damage from 1999, and damages at Oakwood Village Apartments resulting
from water damage due to a water line breakage. The decrease in property
expenses is due to staffing changes at Oakwood Village causing a decrease in
payroll costs. The increase in depreciation expense is due to fixed asset
additions over the past two years. The Partnership also incurred a loss due to
the early extinguishment of debt of $52,000 as a result of the refinancing of
the mortgage encumbering Willow Park (see discussion below).
Included in general and administrative expenses at both December 31, 1999 and
1998, are management reimbursements to the Managing General Partner allowed
under the Partnership Agreement. 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 it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by approximately $86,000 ($1.01 per limited partnership
unit). 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 each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
Capital Resources and Liquidity
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $2,016,000 as compared to approximately $972,000 at December 31,
1998. For the year ended December 31, 1999, cash and cash equivalents increased
by approximately $1,044,000 from the Partnership's year ended December 31, 1998.
The increase in cash and cash equivalents is due to approximately $1,150,000 of
cash provided by operating activities and approximately $833,000 of cash
provided by financing activities partially offset by approximately $939,000 of
cash used in investing activities. Cash provided by financing activities
consisted of proceeds from the refinancing of Willow Park partially offset by
repayment of the existing mortgage and principal payments made on the mortgages
encumbering the Partnership's remaining properties as well as debt
extinguishment costs on the old debt and loan costs paid for the new debt. Cash
used in investing activities consisted of property improvements and replacements
and net withdrawals from restricted escrows.
On December 15, 1999, the Partnership refinanced the mortgage encumbering Willow
Park Apartments. The interest rate on the new mortgage is 8.02%, compared to
8.56% on the previous mortgage. The refinancing replaced indebtedness of
$2,873,000 with a new mortgage in the amount of $4,000,000. Payments of
approximately $34,000 are due on the first day of each month until the loan
matures on January 1, 2020. The prior note was scheduled to mature in February
2001. The loss on early extinguishment of debt for financial statement purposes
is approximately $52,000, consisting of the write-off of unamortized loan costs
and a prepayment penalty.
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 properties 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 all the properties for the upcoming
year. The minimum amount to be budgeted is expected to be $300 per unit or
$268,500. Additional improvements may be considered and will depend on the
physical condition of each of the properties as well as replacement reserves and
anticipated cash flow generated by each 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 $12,431,000 is being amortized over varying
periods with balloon payments due at maturity for Oakwood Village Apartments and
the Palisades Apartments. The Managing General Partner will attempt to refinance
such remaining indebtedness and/or sell the properties prior to such maturity
dates. If the properties cannot be refinanced or sold for a sufficient amount,
the Partnership will risk losing such properties through foreclosure.
During 1998, the Partnership distributed approximately $5,376,000 to the
partners (approximately $5,258,000 to the limited partners, $63.72 per limited
partnership unit). These distributions represented the Partnership's share of
the proceeds from the sale of The Village of approximately $4,349,000
(approximately $4,261,000 to the limited partners, $51.64 per limited
partnership unit) and approximately $1,027,000 (approximately $997,000 to the
limited partners, $12.08 per limited partnership unit) from operations. No cash
distributions were made in 1999. Future cash distributions will depend on the
levels of cash generated from operations, the availability of cash reserves, and
the timing of debt maturities, refinancings and/or property sales. The
Partnership's distribution policy is reviewed on an annual basis. There can be
no assurance, however, that the Partnership will generate sufficient funds 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 and prior tender offers, AIMCO and its affiliates currently
own 48,032 limited partnership units in the Partnership representing 58.211% 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.
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 have not
been materially adversely effected 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 effected 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 5
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 5
We have audited the accompanying balance sheet of National Property Investors 5
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 5
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.
As discussed in Note K to the financial statements, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping effective January 1, 1999.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 25, 2000
<PAGE>
NATIONAL PROPERTY INVESTORS 5
BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 2,016
Receivables and deposits 351
Restricted escrows 53
Other assets 221
Investment properties (Notes C & G):
Land $ 2,145
Buildings and related personal property 28,207
30,352
Less accumulated depreciation (22,914) 7,438
$ 10,079
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 145
Tenant security deposits payable 122
Accrued property taxes 57
Due to General Partner (Note D) 290
Other liabilities 206
Mortgage notes payable (Note C) 12,431
Partners' Deficit
General partner $ (1,253)
Limited partners (82,513 units issued and
outstanding) (1,919) (3,172)
$ 10,079
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Revenues:
<S> <C> <C>
Rental income $ 4,657 $ 4,503
Other income 281 343
Total revenues 4,938 4,846
Expenses:
Operating 2,221 2,468
General and administrative 269 285
Interest 1,092 1,080
Depreciation 1,276 1,198
Properties taxes 249 249
Incentive compensation fee -- 290
Total expenses 5,107 5,570
Loss before equity in net income of tenant-in-common
property and extraordinary items (169) (724)
Equity in net income of tenant-in-common
property (Note D) -- 4,899
(Loss) income before extraordinary items (169) 4,175
Extraordinary loss on early extinguishment of debt (52) --
(Note C)
Extraordinary loss on early extinguishment of debt
of tenant-in-common debt (Note D) -- (204)
Net (loss) income $ (221) $ 3,971
Net (loss) income allocated to general partner (3%) $ (7) $ 119
Net (loss) income allocated to limited partners (97%) (214) 3,852
$ (221) $ 3,971
Per limited partnership unit:
(Loss) income before extraordinary items $ (1.99) $ 49.08
Extraordinary loss on early extinguishment of debt (0.60) --
Extraordinary loss on early extinguishment of debt
of tenant-in-common debt -- (2.40)
Net (loss) income $ (2.59) $ 46.68
Distributions per limited partnership unit $ -- $ 63.72
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 5
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 82,513 $ 1 $41,257 $41,258
Partners' deficit at
December 31, 1997 82,513 $(1,247) $ (299) $(1,546)
Distribution to partners -- (118) (5,258) (5,376)
Net income for the year ended
December 31, 1998 -- 119 3,852 3,971
Partners' deficit at
December 31, 1998 82,513 (1,246) (1,705) (2,951)
Net loss for the year ended
December 31, 1999 -- (7) (214) (221)
Partners' deficit at
December 31, 1999 82,513 $(1,253) $(1,919) $(3,172)
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 5
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (221) $ 3,971
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Equity in net income from tenant-in-common property -- (4,899)
Extraordinary loss on early extinguishment of debt 52 --
Extraordinary loss on early extinguishment of tenant-
in-common debt -- 204
Depreciation 1,276 1,198
Amortization of loan costs 66 66
Loss on disposal of property -- 64
Change in accounts:
Receivables and deposits 48 (132)
Other assets (69) 40
Accounts payable 16 (30)
Tenant security deposit payable 8 15
Accrued property taxes (2) 48
Other liabilities (24) 550
Net cash provided by operating activities 1,150 1,095
Cash flows from investing activities:
Net withdrawals from restricted escrows 67 227
Property improvements and replacements (1,006) (588)
Distribution from tenant-in-common property -- 4,445
Net cash (used in) provided by investing
activities (939) 4,084
Cash flows from financing activities:
Payments of mortgage notes payable (219) (181)
Prepayment of mortgage note payable (2,873) --
Proceeds from mortgage note payable 4,000 --
Debt extinguishment costs (29) --
Loan costs paid (46) --
Distributions to partners -- (5,376)
Net cash provided by (used in) financing
activities 833 (5,557)
Net increase (decrease) in cash and cash equivalents 1,044 (378)
Cash and cash equivalents at beginning of year 972 1,350
Cash and cash equivalents at end of year $ 2,016 $ 972
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,083 $ 980
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 5
Notes to Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization
National Property Investors 5 (the "Partnership" or the "Registrant") was
organized under the Uniform Limited Partnership Laws of California as of July
15, 1981, for the purpose of acquiring and operating income producing
residential real estate. The Partnership currently owns two apartment complexes
located in Florida and one complex located in Alabama. The managing general
partner of the Partnership is NPI Equity Investments, Inc. ("NPI Equity" or the
"Managing General Partner"). The Managing General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"), (see "Note B - Transfer
of Control"). The officers and directors of the Managing General Partner also
serve as executive officers of AIMCO. The Partnership will terminate on December
31, 2005, unless previously terminated, in accordance with the terms of the
Agreement of Limited Partnership.
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.
Allocation of Income, Loss and Distributions
Income, loss and distributions of cash of the Partnership are allocated between
the general and limited partners in accordance with the provisions of the
Partnership Agreement.
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.
Cash and Cash Equivalents
Cash and cash equivalents include 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.
Replacement Reserve Escrow
Oakwood Village and Palisades Apartments maintain replacement reserve escrows to
fund replacement, refurbishment or repair of improvements to each property
pursuant to the mortgage note documents. As of December 31, 1999, the balance in
these accounts are approximately $53,000.
Depreciation
Depreciation is calculated by the straight-line method over the estimated lives
of the investment properties and related personal property ranging from 15 to
27.5 years for buildings and improvements and from five to seven years for
furnishings. 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 K).
Loan Costs
Loan costs of approximately $420,000, less accumulated amortization of
approximately $278,000, are included in other assets and are being amortized on
a straight-line basis over the life of the loans.
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.
Leases
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on leases. The Managing General
Partner's policy is to offer rental concessions during particularly slow months
or in response to heavy competition from other similar complexes in the area.
Concessions are charged to income as incurred.
Investment Properties
Investment properties consist of three apartment complexes and are stated at
cost. Acquisition fees are capitalized as a cost of real estate. In accordance
with 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.
No adjustments for impairment of value were recorded in the years ended December
31, 1999 and 1998.
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 I"
for required disclosure.
Advertising
Advertising costs of approximately $87,000 in 1999 and approximately $77,000 in
1998 were 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.
Note C - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Balance
December 31, Including Interest Maturity Due At
1999 Interest Rate Date Maturity
(in thousands) (in thousands)
Properties
<S> <C> <C> <C> <C> <C>
Willow Park $ 4,000 $ 34 8.02% 01/01/20 $ --
Oakwood Village 3,884 32 8.56% 02/01/01 3,829
Palisades 4,547 45 9.00% 07/01/03 3,996
Totals $12,431 $ 111 $7,825
</TABLE>
On December 15, 1999, the Partnership refinanced the mortgage encumbering Willow
Park Apartments. The interest rate on the new mortgage is 8.02%, compared to
8.56% on the previous mortgage. The refinancing replaced indebtedness of
$2,873,000 with a new mortgage in the amount of $4,000,000. Payments of
approximately $34,000 are due on the first day of each month until the loan
matures on January 1, 2020. The prior note was scheduled to mature in February
2001. The loss on early extinguishment of debt for financial statement purposes
is approximately $52,000, consisting of the write-off of unamortized loan costs
and a prepayment penalty.
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's rental properties and by pledge of revenues from the respective
rental properties. The mortgage notes payable include prepayment penalties if
repaid prior to maturity. Further, the properties may not be sold subject to
existing indebtedness.
Scheduled principal payments of the mortgage notes payable subsequent to
December 31, 1999 are as follows (in thousands):
2000 $ 275
2001 4,078
2002 267
2003 4,193
2004 116
Thereafter 3,502
$12,431
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%.
The property was accounted for under the equity method of accounting.
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 $18,211,000. The sale resulted
in a gain of approximately $19,946,000 for the tenant-in-common joint venture
and 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. The Partnership's equity in the net income of this
tenant-in-common property was approximately $4,899,000 for 1998. The
Partnership's equity in the extraordinary loss on early extinguishment of debt
was approximately $204,000 for 1998.
The Village tenant-in-common joint venture with NPI 6 was terminated in 1998
after the distribution of the proceeds from the sale.
Condensed statement of operations of the Village for the year ended December 31,
1998 is as follows (in thousands):
<PAGE>
For the Year Ended
December 31, 1998
Revenues:
Rental income $ 2,182
Other income 150
Gain on sale of property 19,946
Total revenues 22,278
Expenses:
Operating and other expenses 1,244
Depreciation 395
Mortgage interest 486
Total expenses 2,125
Income before extraordinary loss 20,153
Extraordinary loss on early
extinguishment of debt 840
Net income $19,313
Note E - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net (loss) income and Federal
taxable income (in thousands, except per unit data):
1999 1998
Net (loss) income per financial statements $ (221) $3,971
Gain on sale of The Village -- 1,550
Depreciation differences 795 758
Other 317 203
Net taxable income to partners $ 891 $6,482
Federal taxable income per limited
partnership unit $10.48 $76.20
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities at December 31, 1999 (in
thousands):
<PAGE>
Net liabilities as reported $(3,172)
Land and buildings (282)
Accumulated depreciation (2,308)
Syndication and distribution costs 4,485
Other 475
Net liabilities - Federal tax basis $ (802)
Note F - 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 or accrued to affiliates of the Managing
General Partner during each of the years ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $ 254 $ 242
Reimbursement for services of affiliates,
(included in operating, general and
administrative expenses, and investment
properties) 146 184
Partnership management fee (included in general
and administrative expenses) -- 21
Non-accountable reimbursement (included in general
and administrative expenses) -- 48
Incentive management fee -- 290
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $254,000 and
$242,000 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 $146,000 and $184,000 for the
years ended December 31, 1999 and 1998, respectively.
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 $48,000 during the
year ended December 31 1998. No such reimbursements were earned during the year
ended December 31, 1999. In addition, the Managing General Partner earned a
Partnership Management Fee based on 2% of adjusted cash distributed from
operations. The Managing General Partner earned and received approximately
$21,000 during 1998. No such fees were earned in 1999.
Upon the sale of the Partnership's properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized by
NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership at February 1,
1992. As of December 31, 1999, an incentive management fee of approximately
$290,000 has been accrued related to the sale of The Village in 1998 (see "Note
D").
NPI Equity has established a revolving credit facility (the "Partnership
Revolver") to be used to fund deferred maintenance and working capital needs of
the National Property Investors Partnership Series. The maximum draw available
to the Partnership under the Partnership Revolver is $300,000. Loans under the
Partnership Revolver will have a term of 365 days, be unsecured and bear
interest at the rate of 2% per annum in excess of the prime rate announced from
time to time by Chemical Bank, N.A. The maturity date of such borrowing will be
accelerated in the event of: (i) the removal of the Managing General Partner
(whether or not For Cause, as defined in the Partnership Agreement); (ii) the
sale or refinancing of a property by the Partnership, or; (iii) the liquidation
of the Partnership. The Partnership has not borrowed under the Partnership
Revolver, to date.
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 and prior tender offers, AIMCO and its affiliates currently
own 48,032 limited partnership units in the Partnership representing 58.211% 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>
Note G - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Properties Acquisition
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Willow Park $ 4,000 $ 567 $ 5,218 $ 1,653
Oakwood Village 3,884 589 7,181 2,536
Palisades 4,547 970 8,448 3,190
Totals $12,431 $ 2,126 $20,847 $ 7,379
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Properties Total Depreciation Construction Acquired Life-Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Willow Park $ 574 $ 6,864 $ 7,438 $ 5,391 1973 12/82 5-27.5 yrs
Oakwood Village 595 9,711 10,306 7,717 1973 08/82 5-27.5 yrs
Palisades 976 11,632 12,608 9,806 1968-1972 06/83 5-27.5 yrs
Totals $ 2,145 $28,207 $30,352 $22,914
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation":
December 31,
1999 1998
(in thousands)
Investment Properties
Balance at beginning of year $29,346 $29,093
Property improvements and replacements 1,006 588
Disposal of property -- (335)
Balance at end of year $30,352 $29,346
Accumulated Depreciation
Balance at beginning of year $21,638 $20,711
Additions charged to expense 1,276 1,198
Disposal of property -- (271)
Balance at end of year $22,914 $21,638
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $30,070,000 and $29,063,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $25,222,000 and $24,768,000,
respectively.
Note H - Distributions
During 1998, the Partnership distributed approximately $5,376,000 to the
partners (approximately $5,258,000 to the limited partners, $63.72 per limited
partnership unit). These distributions represented the Partnership's share of
the proceeds from the sale of The Village of approximately $4,349,000
(approximately $4,261,000 to the limited partners, $51.64 per limited
partnership unit) and approximately $1,027,000 (approximately $997,000 to the
limited partners, $12.08 per limited partnership unit) from operations. No cash
distributions were made in 1999.
Note I - Disclosures about Segments of an Enterprise and Related
Information
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential properties segment consists of three apartment
complexes located in Florida (2) and Alabama. The Partnership rents apartment
units to people 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:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
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.
<PAGE>
1999 Residential Other Totals
Rental income $ 4,657 $ -- $ 4,657
Other income 260 21 281
Interest expense 1,092 -- 1,092
Depreciation 1,276 -- 1,276
General and administrative expense -- 269 269
Extraordinary loss on early
extinguishment of debt 52 -- 52
Segment profit (loss) 27 (248) (221)
Total assets 8,606 1,473 10,079
Capital expenditures for investment
properties 1,006 -- 1,006
1998 Residential Other Totals
Rental income $ 4,503 $ -- $ 4,503
Other income 274 69 343
Interest expense 1,080 -- 1,080
Depreciation 1,198 -- 1,198
General and administrative expense -- 285 285
Incentive compensation fee -- 290 290
Equity in income of tenant-in-common -- 4,899 4,899
Extraordinary loss on early
extinguishment of tenant-in-
common debt -- 204 204
Segment (loss) profit (218) 4,189 3,971
Total assets 8,618 776 9,394
Capital expenditures for investment
properties 588 -- 588
Note J - 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.
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 K - 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 it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by approximately $86,000 ($1.01 per limited partnership
unit). 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.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
National Property Investors 5 (the "Partnership" or the "Registrant") has no
officers or directors. The names and ages of, as well as the positions and
offices held by, the present executive officers and directors of NPI Equity
Investments, Inc. ("NPI Equity" or "Managing General Partner") are set forth
below. There are no family relationships between or among any officers or
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 Form 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 Properties, L.P. and its joint filers failed to timely file a Form 3 with
respect to its acquisition of Units and 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 officers received any remuneration from the Managing
General Partner during the year ended December 31, 1999.
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 Units Percentage
Insignia Properties, LP 37,149 45.022%
(an affiliate of AIMCO)
AIMCO Properties, LP 10,883 13.189%
(an affiliate of AIMCO)
Insignia Properties LP is indirectly ultimately owned by AIMCO. Its business
address is 55 Beattie Place, Greenville, South Carolina 29602.
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Boulevard, Denver, Colorado 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 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 or accrued to affiliates of the Managing
General Partner during each of the years ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees $ 254 $ 242
Reimbursement for services of affiliates 146 184
Partnership management fee -- 21
Non-accountable reimbursement -- 48
Incentive management fee -- 290
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $254,000 and
$242,000 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 $146,000 and $184,000 for the
years ended December 31, 1999 and 1998, respectively.
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 $48,000 during the
year ended December 31 1998. No such reimbursements were earned during the year
ended December 31, 1999. In addition, the Managing General Partner earned a
Partnership Management Fee based on 2% of adjusted cash distributed from
operations. The Managing General Partner earned and received approximately
$21,000 during 1998. No such fees were earned in 1999.
Upon the sale of the Partnership properties, NPI Equity will be entitled to an
Incentive Compensation Fee equal to a declining percentage of the difference
between the total amount distributed to limited partners and the appraised value
of their investment at February 1, 1992. The percentage amount to be realized by
NPI Equity, if any, will be dependent upon the year in which the property is
sold. Payment of the Incentive compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital transaction proceeds
of an amount equal to their appraised investment in the Partnership at February
1, 1992, and (b) distributions from all sources (capital transactions as well as
cash flow) of an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership at February 1,
1992. As of December 31, 1999, an incentive management fee of approximately
$290,000 has been accrued related to the sale of The Village in 1998.
NPI Equity has established a revolving credit facility (the "Partnership
Revolver") to be used to fund deferred maintenance and working capital needs of
the National Property Investors Partnership Series. The maximum draw available
to the Partnership under the Partnership Revolver is $300,000. Loans under the
Partnership Revolver will have a term of 365 days, be unsecured and bear
interest at the rate of 2% per annum in excess of the prime rate announced from
time to time by Chemical Bank, N.A. The maturity date of such borrowing will be
accelerated in the event of: (i) the removal of the Managing General Partner
(whether or not For Cause, as defined in the Partnership Agreement); (ii) the
sale or refinancing of a property by the Partnership, or; (iii) the liquidation
of the Partnership. The Partnership has not borrowed under the Partnership
Revolver, to date.
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 and prior tender offers, AIMCO and its affiliates currently
own 48,032 limited partnership units in the Partnership representing 58.211% 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.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.17, Multifamily Note between the Registrant and GMAC
Commercial Mortgage Corporation, dated December 15, 1999, as it
pertains to Willow Park on Lake Adelaide Apartments.
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 5
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 Exhibit 2 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.
2.5 Master Indemnity Agreement dated as of August 17,
1995, incorporated by reference to Exhibit 2.5 to Form
8-K filed by Insignia Financial Group, Inc. with the
Securities and Exchange Commission on September 1,
1995.
2.6 Agreement and Plan of Merger, dated as of October 1,
1998, by and between AIMCO and IPT incorporated by
reference to Exhibit 2.1 in the Registrant's Current
Report on Form 8-K dated as of October 16, 1998.
3.4 (a) Agreement of Limited Partnership incorporated by
reference to Exhibit A to the Prospectus of the
Partnership dated January 4, 1982, included in the
Partnership's Registration Statement on Form S-11
(Reg. No. 2-74143).
(b) Amendments to Agreement of Limited Partnership incorporated by
reference to the Definitive Proxy Statement of the Partnership
dated April 3, 1991.
(c) Amendments to the Partnership Agreement, incorporated by
reference to the Statement Furnished in Connection with the
Solicitation of the Registrant dated August 28, 1992.
10.3 Form of Property Management Agreement dated June 21, 1991, by
and between the Partnership and NPI Management with respect to
each of the Partnership's properties, incorporated by
reference to Exhibit 10.6 to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1991.
10.5 Mortgage Note dated June 29, 1993, made by the Partnership for
the benefit of Collateral Mortgage, Ltd., as it pertains to
Palisades Apartments incorporated by reference to the
Partnership's Quarterly Report on Form 10-Q for the period
ended June 30, 1993.
<PAGE>
10.6 Loan Agreement, dated June 29, 1993, between the
Partnership and Collateral Mortgage, Ltd., as it
pertains to Palisades Apartments incorporated by
reference to the Partnership's Quarterly Report on
Form 10-Q for the period ended June 30, 1993.
10.7 Mortgage and Security Agreement dated June 29, 1993, between
the Partnership and Collateral Mortgage, Ltd., as it pertains
to Palisades Apartments incorporated by reference to the
Partnership's Quarterly Report on Form 10-Q for the period
ended June 30, 1993.
10.8 Amended and Restated First Mortgage Note, dated September 30,
1993, made by the Partnership for the benefit of The Travelers
Insurance Company, as it pertains to The Village Apartments
incorporated by reference to the Partnership's Quarterly
Report on Form 10-Q for the period ended September 30, 1993.
10.9 Amended and Restated First Mortgage Note, dated
September 30, 1993, between the Partnership and The
Travelers Insurance Company, as it pertains to The
Village Apartments incorporated by reference to the
Partnership's Quarterly Report on Form 10-Q for the
period ended September 30, 1993.
10.10 Multifamily Note and Addendum dated January 3, 1994, made by
the Partnership for the benefit of Hanover Capital Mortgage
Corporation, as it pertains to Willow Park Apartments
incorporated by reference to the Partnership's Annual Report
on Form 10-K for the period ended December 31, 1993.
10.11 Multifamily Mortgage, Assignment of Rents and Security
Agreement and Rider, dated January 3, 1994, between
the Partnership and Hanover Capital Mortgage
Corporation, as it pertains to Willow Park Apartments
incorporated by reference to the Partnership's Annual
Report on Form 10-K for the period ended December 31,
1993.
10.12 Multifamily Note and Addendum dated January 7, 1994, made by
the Partnership for the benefit of Hanover Capital Mortgage
Corporation, as it pertains to Oakwood Village at Lake Nan
Apartments incorporated by reference to the Partnership's
Annual Report on Form 10-K for the period ended December 31,
1993.
10.13 Multifamily Mortgage, Assignment of Rents and Security
Agreement and Rider, dated January 7, 1994, made by the
Partnership and Hanover Capital Mortgage Corporation, as it
pertains to Oakwood Village at Lake Nan Apartments
incorporated by reference to the Partnership's Annual Report
on Form 10-K for the period ended December 31, 1993.
10.14 Contract of Sale between Registrant and Hometown
America, L.L.C. incorporated by reference to exhibit
(10.21; 10.22; 10.23) to the Registrant's current
report on Form 8-K dated July 15, 1998.
<PAGE>
10.15 Amendment to Contract of Sale between Registrant and Hometown
America, L.L.C. incorporated by reference to exhibit (10.21;
10.22; 10.23) to the Registrant's current report on Form 8-K
dated July 15, 1998.
10.16 Second Amendment to Contract of Sale between
Registrant and Hometown America, L.L.C. incorporated
by reference to exhibit (10.21; 10.22; 10.23) to the
Registrant's current report on Form 8-K dated July 15,
1998.
10.17 Multifamily Note between the Registrant and GMAC Commercial
Mortgage Corporation, dated December 15, 1999, as it pertains
to Willow Park on Lake Adelaide Apartments. Filed with Form
10-KSB for the period ended December 31, 1999.
16 Letter dated November 24, 1998, from the Registrant's former
independent accounts regarding its concurrence with the
statements made by the Registrant; incorporated by reference
to the Registrant's Current Report on Form 8-K dated November
10, 1998.
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 5
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note K of Notes to the Financial Statements of National Property Investors 5
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
Exhibit 10.17
FHLMC Loan No. 002682516
MULTIFAMILY NOTE
(MULTISTATE)
US $4,000,000.00 As of December 15, 1999
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Four Million and
00/100 Dollars (US $4,000,000.00), with interest on the unpaid principal balance
at the annual rate of eight and twenty thousandths percent (8.020%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 650
Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044-8015, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of Thirty Three Thousand Five Hundred Seven and 41/100 (US $33,507.41),
shall be payable on the first day of each month beginning on February 1, 2000,
until the entire unpaid principal balance evidenced by this Note is fully paid.
Any accrued interest remaining past due for 30 days or more shall be added to
and become part of the unpaid principal balance and shall bear interest at the
rate or rates specified in this Note, and any reference below to "accrued
interest" shall refer to accrued interest which has not become part of the
unpaid principal balance. Any remaining principal and interest shall be due and
payable on January 1, 2020 or on any earlier date on which the unpaid principal
balance of this Note becomes due and payable, by acceleration or otherwise (the
"Maturity Date"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to five percent (5%) of such
amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for 30 days or more, or (b) any other Event of Default has occurred and
is continuing, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable, at a rate (the
"Default Rate") equal to the lesser of 4 percentage points above the rate stated
in the first paragraph of this Note or the maximum interest rate which may be
collected from Borrower under applicable law. If the unpaid principal balance
and all accrued interest are not paid in full on the Maturity Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate. Borrower also acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment under
this Note is delinquent for more than 30 days, Lender will incur additional
costs and expenses arising from its loss of the use of the money due and from
the adverse impact on Lender's ability to meet its other obligations and to take
advantage of other investment opportunities, and that it is extremely difficult
and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note
is delinquent for more than 30 days or any other Event of Default has occurred
and is continuing, Lender's risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on the last Business Day of a calendar month if Borrower has given Lender
at least 30 days prior notice of its intention to make such prepayment. Such
prepayment shall be made by paying (A) the amount of principal being prepaid,
(B) all accrued interest, (C) all other sums due Lender at the time of such
prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.
For all purposes including the accrual of interest, any prepayment received by
Lender on any day other than the last calendar day of the month shall be deemed
to have been received on the last calendar day of such month. For purposes of
this Note, a "Business Day" means any day other than a Saturday, Sunday or any
other day on which Lender is not open for business. Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made no more than 180 days
before the Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of
investigation, incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to
enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower in connection with the Loan is
interpreted so that any interest or other charge provided for in any Loan
Document, whether considered separately or together with other charges provided
for in any other Loan Document, violates that law, and Borrower is entitled to
the benefit of that law, that interest or charge is hereby reduced to the extent
necessary to eliminate that violation. The amounts, if any, previously paid to
Lender in excess of the permitted amounts shall be applied by Lender to reduce
the unpaid principal balance of this Note. For the purpose of determining
whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness that
constitutes interest, as well as all other charges made in connection with the
Indebtedness that constitute interest, shall be deemed to be allocated and
spread ratably over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of
the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
<PAGE>
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
X Schedule A Prepayment Premium (required)
X Schedule B Modifications to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
NATIONAL PROPERTY INVESTORS 5, a California
limited partnership, doing business in
Florida as National Property Investors 5,
Ltd.
By: NPI Equity Investments, Inc., a Florida
corporation, its general partner
By: Patti K. Fielding
Vice President
22-2385051
Borrower's Social Security/Employer ID Number
<PAGE>
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE
CORPORATION, WITHOUT RECOURSE, THIS 15 DAY OF
DECEMBER, 1999
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be
computed as follows:
(a) If the prepayment is made between the date of this Note and the date that is
180 months after the first day of the first calendar month following the date of
this Note (the "Yield Maintenance Period"), the prepayment premium shall be the
greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment
Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in any other case, the date on which
Lender accelerates the unpaid principal balance of the Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as of
the date 5 Business Days before the Prepayment Date, on the 9.250%
U.S. Treasury Security due February 1, 2016, as reported in The Wall
Street Journal, expressed as a decimal calculated to five digits. In
the event that no yield is published on the applicable date for the
Treasury Security used to determine the Assumed Reinvestment Rate,
Lender, in its discretion, shall select the non-callable Treasury
Security maturing in the same year as the Treasury Security specified
above with the lowest yield published in The Wall Street Journal as of
the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, Lender shall
select a security with a comparable rate and term to the Treasury
Security used to determine the Assumed Reinvestment Rate. The
selection of an alternate security pursuant to this Paragraph shall be
made in Lender's discretion.
<PAGE>
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during
the months remaining in the Yield Maintenance Period, using the
Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield Maintenance
Period but more than 180 days before the Maturity Date, the prepayment premium
shall be 1.0% of the unpaid principal balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of 8 of the Note ("Default Rate") is hereby deleted and
replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents in accordance with the terms of the Security Instrument.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors 5 1999 Fourth Quarter 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000355637
<NAME> National Property Investors 5
<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> 2,016
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 30,352
<DEPRECIATION> 22,914
<TOTAL-ASSETS> 10,079
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 12,431
0
0
<COMMON> 0
<OTHER-SE> (3,172)
<TOTAL-LIABILITY-AND-EQUITY> 10,079
<SALES> 0
<TOTAL-REVENUES> 4,938
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,092
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (52)
<CHANGES> 0
<NET-INCOME> (221)
<EPS-BASIC> (2.59)<F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
