FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________to _________
Commission file number 0-14554
NATIONAL PROPERTY INVESTORS 8
(Exact name of small business issuer as specified in its charter)
California 13-3254885
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
NATIONAL PROPERTY INVESTORS 8
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 715
Receivables and deposits 337
Restricted escrows 555
Other assets 352
Investment properties:
Land $ 1,970
Buildings and related personal property 29,154
31,124
Less accumulated depreciation (18,163) 12,961
$ 14,920
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 83
Tenant security deposit liabilities 67
Accrued property taxes 484
Other liabilities 286
Mortgage notes payable 14,772
Partners' Deficit
General partner $ (231)
Limited partners (44,882 units
issued and outstanding) (541) (772)
$ 14,920
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
b)
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 1,092 $ 1,116 $ 2,214 $ 2,246
Other income 90 77 164 151
Total revenues 1,182 1,193 2,378 2,397
Expenses:
Operating 458 408 842 805
General and administrative 66 40 177 80
Interest 266 229 498 459
Depreciation 326 307 646 608
Property taxes 127 128 249 241
Total expenses 1,243 1,112 2,412 2,193
(Loss) income before
extraordinary item (61) 81 (34) 204
Extraordinary loss on early
extinguishment of debt (181) -- (181) --
Net (loss) income $ (242) $ 81 $ (215) $ 204
Net (loss) income allocated to
general partner (1%) (2) 1 (2) 2
Net (loss) income allocated to
limited partners (99%) (240) 80 (213) 202
$ (242) $ 81 $ (215) $ 204
Per limited partnership unit:
(Loss) income before
extraordinary item $ (1.36) $ 1.78 $ (0.76) $ 4.50
Extraordinary loss on the
early extinguishment of debt (3.99) -- (3.99) --
Net (loss) income $ (5.35) $ 1.78 $ (4.75) $ 4.50
Distributions per limited
partnership unit $ 73.37 $ -- $ 96.05 $ 18.76
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
c)
NATIONAL PROPERTY INVESTORS 8
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 44,882 $ 1 $22,441 $22,442
Partners' (deficit) capital at
December 31, 1999 44,882 $ (185) $ 3,983 $ 3,798
Distributions to partners -- (44) (4,311) (4,355)
Net loss for the six months
ended June 30, 2000 -- (2) (213) (215)
Partners' deficit at
June 30, 2000 44,882 $ (231) $ (541) $ (772)
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (215) $ 204
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 646 608
Amortization of loan costs 18 19
Extraordinary loss on early extinguishment of debt 181 --
Change in accounts:
Receivables and deposits (230) 37
Other assets (43) (29)
Accounts payable 16 11
Tenant security deposit liabilities (5) 2
Accrued property taxes (10) (43)
Other liabilities 63 16
Net cash provided by operating activities 421 825
Cash flows from investing activities:
Property improvements and replacements (283) (164)
Net (deposits to) withdrawals from restricted escrows (454) 726
Net cash (used in) provided by investing activities (737) 562
Cash flows from financing activities:
Payments on mortgage note payable (22) (35)
Payoff of mortgage note payable (3,364) --
Proceeds from mortgage note payable 7,372 --
Prepayment penalty (168) --
Loan costs paid (175) --
Distributions to partners (4,355) (850)
Net cash used in financing activities (712) (885)
Net (decrease) increase in cash and cash equivalents (1,028) 502
Cash and cash equivalents at beginning of period 1,743 1,746
Cash and cash equivalents at end of period $ 715 $ 2,248
Supplemental disclosure of cash flow information:
Cash paid for interest $ 458 $ 441
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
e)
NATIONAL PROPERTY INVESTORS 8
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 8
(the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing
General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the year ended December 31, 1999.
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 Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, 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 - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to the
Managing General Partner and affiliates during the six months ended June 30,
2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $120 $122
Reimbursement for services of affiliates (included in
investment properties and operating and general and
administrative expenses) 64 50
Non-accountable partnership reimbursement (included in
general and administrative expense) 91 --
Loan costs (included in other assets) 74 --
During the six months ended June 30, 2000 and 1999, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $120,000 and $122,000 for the
six months ended June 30, 2000 and 1999, respectively.
<PAGE>
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $64,000 and
$50,000 for the six months ended June 30, 2000 and 1999, respectively.
For services relating to the administration of the Partnership and operation of
its properties, the Managing General Partner is entitled to receive payment for
non-accountable expenses up to a maximum of $150,000 per year of distributions
from operations based upon the number of Partnership units sold, subject to
certain limitations. The Managing General Partner received approximately $91,000
for the six months ended June 30, 2000 for non-accountable expense
reimbursements. The Managing General Partner was not entitled to receive a
similar reimbursement during the six months ended June 30, 1999 because there
were no distributions from operations.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $74,000 for loan costs related to
the refinancing of one of the Partnership's properties during the six months
ended June 30, 2000. These costs were capitalized and are included in other
assets on the consolidated balance sheet.
The Managing General Partner has established a revolving credit facility (the
"Partnership Revolver") to be used to fund deferred maintenance and working
capital needs of the Partnership. The maximum draw available to the Partnership
under the Partnership Revolver is $500,000. Loans under the Partnership Revolver
will have a term of 365 days, be unsecured and bear interest at the rate of 2%
per annum in excess of the prime rate announced from time to time by Chase
Manhattan Bank. 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); (ii) the sale or refinancing of a property by the Partnership (whether
or not a borrowing under the Partnership Revolver was made with respect to such
property); or (iii) the liquidation of the Partnership. The Partnership has not
borrowed under the Partnership Revolver to date.
AIMCO and its affiliates currently own 25,057 limited partnership units in the
Partnership representing 55.83% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates or
affiliates of the Managing General Partner. 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. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. As a result of its ownership of 55.83% of the outstanding
units, AIMCO is in a position to influence all voting decisions with respect to
the Registrant. 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. However,
DeForest Ventures II L.P., from whom AIMCO, through its merger with Insignia,
acquired 16,352 units, had agreed for the benefit of non-tendering unitholders,
that it would vote these units: (i) against any increase in compensation payable
to the Managing General Partner or to affiliates; and (ii) on all other matters
submitted by it or its affiliates, in proportion to the votes cast by non
tendering unit holders. Except for the foregoing, no other limitations are
imposed on AIMCO and its affiliates right to vote each Unit acquired.
<PAGE>
Note D - Distributions
During the six months ended June 30, 2000, the Registrant declared and paid
distributions of approximately $4,355,000 (approximately $4,311,000 to the
limited partners or $96.05 per limited partnership unit) consisting of
approximately $1,177,000 (approximately $1,165,000 to the limited partners or
$25.96 per limited partnership unit) from operations and approximately
$3,178,000 (approximately $3,146,000 to the limited partners or $70.09 per
limited partnership unit) from the refinancing proceeds of Huntington Athletic
Club Apartments. Subsequent to June 30, 2000, the Registrant declared and paid a
distribution of approximately $69,000 (approximately $68,000 to the limited
partners or $1.52 per limited partnership unit) from operations. During the six
months ended June 30, 1999, the Registrant made a distribution of approximately
$850,000 (approximately $842,000 to the limited partners or $18.76 per limited
partnership unit) from refinancing and property sale proceeds from prior years.
Note E - Extraordinary Loss on Early Extinguishment
On May 11, 2000, the Partnership refinanced the mortgage encumbering Huntington
Athletic Club Apartments. The refinancing replaced indebtedness of approximately
$3,364,000 with a new mortgage in the amount of $7,372,000. The new mortgage
carries a stated interest rate of 8.15% as compared to the 9.85% interest rate
on the old mortgage. Payments on the mortgage loan are due monthly until the
loan matures on June 1, 2020. In addition, the Partnership was required to
establish a repair escrow of approximately $454,000 with the lender for certain
capital replacements. Total capitalized loan costs were approximately $175,000
at June 30, 2000. The Partnership recognized an extraordinary loss on the early
extinguishment of debt of approximately $181,000 due to the write-off of
unamortized loan costs and a prepayment penalty.
Note F - Segment Reporting
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 property segment consists
of two apartment complexes one located in each of Indianapolis, Indiana and
Morrisville, North Carolina. The Partnership rents apartment units to tenants
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 of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
Factors management used to identify the enterprise's reportable segments: 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.
<PAGE>
Segment information for the three and six month periods ended June 30, 2000 and
1999, 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.
<TABLE>
<CAPTION>
Three months ended June 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 1,092 $ -- $ 1,092
Other income 79 11 90
Interest expense 266 -- 266
Depreciation 326 -- 326
General and administrative expense -- 66 66
Extraordinary loss on early extinguishment
of debt (181) -- (181)
Segment loss (187) (55) (242)
Six months ended June 30, 2000 Residential Other Totals
Rental income $ 2,214 $ -- $ 2,214
Other income 152 12 164
Interest expense 498 -- 498
Depreciation 646 -- 646
General and administrative expense -- 177 177
Extraordinary loss on early extinguishment
of debt (181) -- (181)
Segment loss (50) (165) (215)
Total assets 14,589 331 14,920
Capital expenditures for investment
properties 283 -- 283
Three months ended June 30, 1999 Residential Other Totals
Rental income $ 1,116 $ -- $ 1,116
Other income 71 6 77
Interest expense 229 -- 229
Depreciation 307 -- 307
General and administrative expense -- 40 40
Segment profit (loss) 115 (34) 81
Six months ended June 30, 1999 Residential Other Totals
Rental income $ 2,246 $ -- $ 2,246
Other income 134 17 151
Interest expense 459 -- 459
Depreciation 608 -- 608
General and administrative expense -- 80 80
Segment profit (loss) 267 (63) 204
Total assets 15,754 682 16,436
Capital expenditures for investment
properties 164 -- 164
</TABLE>
Note G - 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB 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
operations. 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.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Williamsburg on the Lake Apartments 93% 94%
Indianapolis, Indiana
Huntington Athletic Club Apartments 88% 92%
Morrisville, North Carolina
The Managing General Partner attributes the decrease in occupancy at Huntington
Athletic Club Apartments to increased competition in the area from six new
apartment complexes and a plumbing project which causes several units at a time
to be vacant as the work is being completed.
Results of Operations
The Registrant's net loss for the six months ended June 30, 2000 was
approximately $215,000 as compared to net income of approximately $204,000 for
the six months ended June 30, 1999. The Registrant's net loss for the three
month period ended June 30, 2000 was approximately $242,000 as compared to net
income of approximately $81,000 for the three month period ended June 30, 1999.
The increase in net loss for the three and six month periods ended June 30, 2000
was due to the recognition in 2000 of an extraordinary loss on early
extinguishment of debt, as well as an increase in total expenses, and a decrease
in total revenues. The extraordinary loss on early extinguishment of debt
relates to the refinancing of the mortgage at Huntington Athletic Club
Apartments (see discussion below).
The Partnership experienced losses of approximately $61,000 and $34,000,
respectively, for the three and six months ended June 30, 2000 before the
extraordinary item as compared to net income of approximately $81,000 and
$204,000, respectively, for the comparable periods in 1999 due to decreases in
revenues and increases in expenses. Total revenues decreased for the three and
six month periods ended June 30, 2000 due to decreased rental income which was
partially offset by an increase in other income. Rental income decreased due to
decreased occupancy at both of the Partnership's properties and increased
concessions at Williamsburg on the Lake Apartments which was partially offset by
increased average rental rates at Williamsburg on the Lake Apartments and
decreased concessions at Huntington Athletic Club Apartments. Other income
increased due to an increase in tenant charges at Williamsburg on the Lake
Apartments, increased corporate housing revenue at Huntington Athletic Club
Apartments and increased local telephone commissions at both properties.
Total expenses increased for the three and six month periods ended June 30, 2000
due to an increase in operating, interest, depreciation, and general and
administrative expenses. Operating expenses increased primarily due to an
increase in payroll expenses, utility costs, and collection costs at both the
Partnership's properties. Interest expense increased due to the refinancing of
Huntington Athletic Club Apartments, as discussed below. Depreciation expense
increased due to property additions during the past twelve months. General and
administrative expenses increased over the comparable period due to an increase
in the non-accountable partnership reimbursement paid to the Managing General
Partner from distributions from operations as provided in the Partnership
Agreement, and increased professional fees necessary to manage the Partnership.
Included in general and administrative expenses at both June 30, 2000 and 1999
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.
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 Registrant from increases in
expenses. As part of this plan, the Managing General Partner attempts to protect
the Registrant 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.
Liquidity and Capital Resources
At June 30, 2000, the Partnership held cash and cash equivalents of
approximately $715,000 compared to approximately $2,248,000 at June 30, 1999.
The decrease of approximately $1,028,000 in cash and cash equivalents since
December 31, 1999 is due to approximately $712,000 of cash used in financing
activities and approximately $737,000 of cash used in investing activities which
was partially offset by approximately $421,000 of cash provided by operating
activities. Cash used in financing activities consisted of distributions to the
partners, the payoff of the previous debt encumbering Huntington Athletic Club
Apartments, payments of principal made on the mortgage encumbering Huntington
Athletic Club Apartments, the payment of loan costs, and a prepayment penalty
relating to the refinance of Huntington Athletic Club Apartments partially
offset by proceeds from the refinancing of the mortgage encumbering Huntington
Athletic Club Apartments. Cash used in investing activities consisted of
property improvements and replacements and net deposits to escrow accounts
maintained by the mortgage lender. The Partnership invests its working capital
reserves in money market accounts.
On May 11, 2000, the Partnership refinanced the mortgage encumbering Huntington
Athletic Club Apartments. The refinancing replaced indebtedness of approximately
$3,364,000 with a new mortgage in the amount of $7,372,000. The new mortgage
carries a stated interest rate of 8.15% as compared to the 9.85% interest rate
on the old mortgage. Payments on the mortgage loan are due monthly until the
loan matures on June 1, 2020. In addition, the Partnership was required to
establish a repair escrow of approximately $454,000 with the lender for certain
capital replacements. Total capitalized loan costs were approximately $175,000
at June 30, 2000. The Partnership recognized an extraordinary loss on early
extinguishment of debt of approximately $181,000 due to the write-off of
unamortized loan costs and a prepayment penalty.
The Managing General Partner has extended to the Partnership a $500,000 line of
credit. 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 against the line of credit in the near future. Other than
unrestricted cash and cash equivalents, the line of credit is the Partnership's
only unused source of liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state and local legal and regulatory requirements. Capital improvements
for each of the Registrant's properties are detailed below.
Williamsburg on the Lake Apartments
During the six months ended June 30, 2000, the Partnership completed
approximately $173,000 of capital expenditures at Williamsburg on the Lake
Apartments consisting primarily of carpet and vinyl replacements, submetering
improvements, and appliances. These improvements were funded from operating cash
flow and the Partnership's reserves. The Partnership has evaluated the capital
improvement needs of the property for the year 2000. The amount budgeted is
approximately $328,000, consisting primarily of parking area improvements, air
conditioning unit replacement, appliances, carpet replacements, major
landscaping, and structural improvements. 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.
Huntington Athletic Club Apartments
During the six months ended June 30, 2000, the Partnership completed
approximately $110,000 of capital expenditures at Huntington Athletic Club
Apartments consisting primarily of swimming pool upgrades, carpet replacement,
lighting upgrades, and structural improvements. These improvements were funded
from operating cash flow. The Partnership has evaluated the capital improvement
needs of the property for the year 2000. The amount budgeted is approximately
$158,000, consisting primarily of appliances, carpet replacement, and structural
improvements. 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.
The additional capital expenditures 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 Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. Huntington Athletic
Club Apartment's mortgage indebtedness of approximately $7,372,000 is amortized
over 20 years and matures June 1, 2020. The mortgage encumbering the
Williamsburg on the Lake Apartments requires interest only payments with the
principal balance of $7,400,000 due in November 2003. The Managing General
Partner will attempt to refinance such indebtedness and/or sell the properties
prior to such maturity dates. If the properties cannot be refinanced or sold for
a sufficient amount, the Registrant may risk losing such properties through
foreclosure.
During the six months ended June 30, 2000, the Registrant declared and paid
distributions of approximately $4,355,000 (approximately $4,311,000 to the
limited partners or $96.05 per limited partnership unit) consisting of
approximately $1,177,000 (approximately $1,165,000 to the limited partners or
$25.96 per limited partnership unit) from operations and approximately
$3,178,000 (approximately $3,146,000 to the limited partners or $70.09 per
limited partnership unit) from the refinancing proceeds of Huntington Athletic
Club Apartments. Subsequent to June 30, 2000, the Registrant declared and paid a
distribution of approximately $69,000 (approximately $68,000 to the limited
partners or $1.52 per limited partnership unit) from operations. During the six
months ended June 30, 1999, the Registrant made a distribution of approximately
$850,000 (approximately $842,000 to the limited partners or $18.76 per limited
partnership unit) from refinancing and property sale proceeds from prior years.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. The Registrant's distribution
policy is reviewed on a semi-annual basis. There can be no assurance, however,
that the Registrant will generate sufficient funds from operations after
required capital improvements to permit further distributions to its partners
during the remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.26, Multifamily Note dated May 8, 2000, by and
between National Property Investors 8, a California limited
partnership, and GMAC Commercial Mortgage Corporation, a
California Corporation.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the quarter ended June 30, 2000:
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 8
By: NPI EQUITY INVESTMENTS, INC.
Its 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:
<PAGE>
Exhibit 10.26
FHLMC Loan No. 002682478
MULTIFAMILY NOTE
(NORTH CAROLINA)
US $7,372,000.00 As of May 8, 2000
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 Seven Million Three
Hundred Seventy-Two Thousand and 00/100 Dollars (US $7,372,000.00), with
interest on the unpaid principal balance at the annual rate of eight and one
hundred fifty thousandths percent (8.150%).
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 Sixty Two Thousand Three Hundred Fifty Two and 34/100 Dollars (US
$62,352.34), shall be payable on the first day of each month beginning on July
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 June 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
15 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 unpaid 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 reasonable attorneys' fees and
expenses, fees and out-of-pocket expenses of 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
reasonable attorneys' fees and expenses, fees and out-of-pocket expenses of
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.
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, as a sealed instrument.
NATIONAL PROPERTY INVESTORS 8, A CALIFORNIA
LIMITED PARTNERSHIP, a California limited
partnership
By: NPI Equity Investments, Inc., a Florida
corporation, its general partner
By:
Harry Alcock
Executive Vice President
13-3254885
Borrower's Social Security/Employer ID Number
<PAGE>
PAY TO THE ORDER OF FEDERAL HOME LOAN
MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS 8TH DAY OF MAY, 2000.
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.
