March 20, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: National Property Investors 8
Form 10-KSB
File No. 0-14554
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
(MarkOne)
[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 _________to _________
Commission file number 0-14554
NATIONAL PROPERTY INVESTORS 8
(Name of small business issuer 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
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(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 of 1934 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 Registrant'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. $4,751,000
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 8 (the "Partnership" or "Registrant") is a
California limited partnership formed on June 26, 1984. The Partnership is
engaged in the business of operating and holding real estate properties for
investment. NPI Equity Investments, Inc., a Florida corporation, became the
Registrant's managing general partner (the "Managing General Partner" or "NPI
Equity") on June 21, 1991. The Managing General Partner was a subsidiary of
National Property Investors, Inc. ("NPI") until December 31, 1996, at which time
Insignia Properties Trust ("IPT") acquired the stock of NPI Equity. On October
1, 1998, IPT merged into Apartment Investment and Management Company ("AIMCO").
Therefore, the Managing General Partner is a wholly-owned subsidiary of AIMCO
(see "Transfer of Control" below). The partnership agreement provides that the
Partnership is to terminate on December 31, 2008, unless terminated prior to
such date.
Commencing May 13, 1985, the Registrant offered pursuant to a Registration
Statement filed with the Securities and Exchange Commission up to 150,000 Units
of Limited Partnership Interest (the "Units") at a purchase price of $500 per
Unit with a minimum purchase of 5 Units. Upon termination of the offering, the
Registrant had accepted subscriptions for 44,882 Units for an aggregate of
$22,441,000. In addition, the Managing General Partner contributed a total of
$1,000 to the Partnership. Since its initial offering, the Registrant has not
received, nor are limited partners required to make, additional capital
contributions. All the net proceeds of the offering were invested in three
properties, of which two continue to be held by the Partnership. See "Item 2.
Description of Properties" below for a description of the Partnership's
remaining 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. An
affiliate of the Managing General Partner provided day-to-day management
services for the Partnership's investment properties for the years ended
December 31, 1999 and 1998.
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.
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 various
market conditions, 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.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's 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 Partnership'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.
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. ("Insignia") and IPT merged
into AIMCO, a publicly traded real estate investment trust, with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100%
ownership interest in the Managing General Partner. The Managing General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Item 2. Description of Properties:
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Williamsburg on the Lake 03/12/86 Fee ownership subject to Apartment
Apartments first mortgage 460 units
Indianapolis, Indiana
Huntington Apartments 02/11/88 Fee ownership subject to Apartment
Morrisville, North Carolina first mortgage 212 units
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation, and
Federal tax basis.
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
Williamsburg on the $19,048 $12,666 5-27 S/L $ 5,081
Lake Apartments
Huntington Apartments 11,793 4,851 5-29 S/L 6,441
$30,841 $17,517 $11,522
See "Note A" of the financial statements included in "Item 7. Financial
Statements" for a description of the Partnership's depreciation policy and "Note
J - Change in Accounting Principle".
Schedule of Property Indebtedness:
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Williamsburg on the $ 7,400 7.33% (1) 11/03 $ 7,400
Lake Apartments
Huntington Apartments 3,386 9.85% 25 yrs. 02/02 3,211
$10,786 $10,611
</TABLE>
(1) Loan requires payments of interest only.
(2) See "Item 7. Financial Statements - Note C" for information with respect
to the Registrant's ability to prepay the loans and other specific details
about the loans.
Rental Rates and Occupancy:
Average annual rental rate and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rate Occupancy
(per unit)
Property 1999 1998 1999 1998
Williamsburg on the Lake $6,487 $6,278 94% 96%
Apartments
Huntington Apartments 9,410 9,288 90% 93%
The Managing General Partner attributes the decrease in occupancy at Huntington
Apartments to increased competition in the area from six new apartment
complexes.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other apartment complexes in the area. The Managing General
Partner believes that all of the properties are adequately insured. Each
property is an apartment complex which leases units for one year or less. No
residential 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.
Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 for each property were:
1999 1999
Billing Rate
(in thousands)
Williamsburg on the Lake Apartments $363 10.38%
Huntington Apartments 105 1.38%
Capital Improvements:
Williamsburg on the Lake Apartments
During the year ended December 31, 1999, the Partnership completed approximately
$314,000 on capital expenditures at Williamsburg on the Lake Apartments
consisting primarily of carpet and vinyl replacement, appliances, electrical
upgrades, air conditioning unit replacements, fencing, major landscaping,
structural improvements, and parking lot improvements. These improvements were
funded from Partnership 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 $138,000. 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 year ended December 31, 1999, the Partnership completed approximately
$98,000 on capital expenditures at Huntington Athletic Club Apartments
consisting primarily of carpet and vinyl replacement, structural improvements,
and appliances. These improvements were funded from operating cash flow. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $63,600. 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.
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
During the quarter ended December 31, 1999, no matter was submitted to the vote
of unit holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Partnership's Common Equity and Related Security Holder
Matters:
The Partnership sold 44,882 Limited Partnership Units aggregating $22,441,000.
In addition, the Managing General Partner contributed a total of $1,000 to the
Partnership. The Partnership currently has 1,011 holders of record owning an
aggregate of 44,882 Units. Affiliates of the Managing General Partner owned
24,905 Units or 55.49% 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, as well as for the subsequent period
from January 1, 2000 to February 29, 2000:
Distributions
Aggregate Per Limited
(in thousands) Partnership Unit
01/01/98 - 12/31/98 $1,000 (1) $22.06
01/01/99 - 12/31/99 $1,874 (2) $41.33
01/01/00 - 02/29/00 $1,028 (1) $22.68
(1) Distribution was made from cash from operations (see "Item 6" for further
details).
(2) Consists of $266,000 of cash from operations and $1,608,000 of cash from
previously undistributed proceeds from refinancings and property sales
from prior years (see "Item 6" for further details).
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 Partnership's distribution
policy is reviewed on a semi-annual basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures, to permit any additional distributions to its
partners in 2000 or subsequent periods. See "Item 2. Description of Properties -
Capital Improvements" for information relating to anticipated capital
expenditures at the properties.
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 24,905 limited partnership units in the Partnership representing 55.49% 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
disclosures 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
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.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
The Registrant's net income for the year ended December 31, 1999 was
approximately $156,000 as compared to approximately $288,000 for the year ended
December 31, 1998. The decrease in net income for the year ended December 31,
1999 was due to a decrease in total revenues which was partially offset by a
decrease in total expenses.
Total revenues decreased for the year ended December 31, 1999 primarily due to
decreased other income and to a lesser extent to decreased rental income. Rental
income decreased due to decreased occupancy and increased concessions at both of
the Partnership's properties which were partially offset by increased average
annual rental rates at both of the Partnership's properties. Other income
decreased due to the receipt during 1998 of litigation proceeds in settlement of
an action against a vendor for installation of defective piping at the
Huntington Athletic Club Apartments. In addition, interest income decreased due
to lower average cash balances in interest-bearing accounts, a decrease in
income associated with renting fully furnished units to corporations at
Huntington Athletic Club, and a decrease in tenant charges at both of the
Partnership's properties.
Total expenses decreased due to a decrease in operating expenses which was
partially offset by an increase in depreciation expense and property tax
expense. Operating expenses decreased primarily due to decreased salary expenses
at Huntington Athletic Club, decreased expenses associated with fully furnished
units leased to corporations at Huntington Athletic Club and reduced maintenance
costs. In addition, insurance expense decreased at both of the Partnership's
properties due to lower rates received from a new insurance carrier late in
1998. Depreciation expense increased due to property additions during the past
twelve months which are now being depreciated. Property tax expense increased
due to an increase in the real estate tax assessment for both of the
Partnership's properties.
General and administrative expenses remained stable over the comparable periods.
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 $58,000 ($1.27 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 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 December 31, 1999, the Partnership held cash and cash equivalents of
approximately $1,743,000 compared to approximately $1,746,000 at December 31,
1998. The decrease of approximately $3,000 in cash and cash equivalents since
December 31, 1998 is due to approximately $1,946,000 of cash used in financing
activities, which was partially offset by approximately $1,670,000 of cash
provided by operating activities and approximately $273,000 of cash provided by
investing activities. Cash used in financing activities consisted of
distributions to the partners, and to a lessor extent, payments of principal
made on the mortgage encumbering Huntington Athletic Club Apartments. Cash
provided by investing activities consisted of net withdrawals from escrow
accounts maintained by the mortgage lender which was partially offset by
property improvements and replacements.
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. The Partnership is
currently evaluating the capital improvement needs of the properties for the
upcoming year. The minimum amount to be budgeted will be $300 per unit or
$201,600. 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. The additional 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 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 $3,386,000 is amortized
over 300 months with a balloon payment of approximately $3,211,000 due in
February 2002. 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 Partnership
will risk losing such properties through foreclosure.
During the year ended December 31, 1999, the Registrant made distributions of
approximately $266,000 (approximately $263,000 to the limited partners or $5.86
per limited partnership unit) from operations and approximately $1,608,000
(approximately $1,592,000 to the limited partners or $35.47 per limited
partnership unit) from refinancing and property sale proceeds from prior years.
During the year ended December 31, 1998, the Registrant made distributions of
approximately $1,000,000 (approximately $990,000 to the limited partners or
$22.06 per limited partnership unit) from operations. Subsequent to December 31,
1999, the Registrant declared and paid a distribution of approximately
$1,028,000 (approximately $1,018,000 to the limited partners or $22.68 per
limited partnership unit) from operations. 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 any additional
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 24,905 limited partnership units in the Partnership representing 55.49% 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.
Item 7. FINANCIAL STATEMENTS:
NATIONAL PROPERTY INVESTORS 8
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) Capital - 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 8
We have audited the accompanying balance sheet of National Property Investors 8
as of December 31, 1999, and the related statements of operations, changes in
partners' (deficit) capital 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 8
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 J 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 8
BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
Assets
Cash and cash equivalents $ 1,743
Receivables and deposits 107
Restricted escrows 101
Other assets 165
Investment properties (Notes C and F):
Land $ 1,970
Buildings and related personal property 28,871
30,841
Less accumulated depreciation (17,517) 13,324
$ 15,440
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 67
Tenant security deposit liabilities 72
Accrued property taxes 494
Other liabilities 223
Mortgage notes payable (Note C) 10,786
Partners' (Deficit) Capital
General partner $ (185)
Limited partners (44,882 units issued and
outstanding) 3,983 3,798
$ 15,440
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1999 1998
Revenues:
Rental income $ 4,437 $ 4,490
Other income 314 444
Total revenues 4,751 4,934
Expenses:
Operating 1,738 1,828
General and administrative 220 226
Depreciation 1,229 1,204
Interest 917 924
Property taxes 491 464
Total expenses 4,595 4,646
Net income (Note D) $ 156 $ 288
Net income allocated to general partner (1%) $ 2 $ 3
Net income allocated to limited partners (99%) 154 285
$ 156 $ 288
Net income per limited partnership unit $ 3.43 $ 6.35
Distributions per limited partnership unit $ 41.33 $ 22.06
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 44,882 $ 1 $22,441 $22,442
Partners' (deficit) capital at
December 31, 1997 44,882 $ (161) $ 6,389 $ 6,228
Distribution to partners -- (10) (990) (1,000)
Net income for the year ended
December 31, 1998 -- 3 285 288
Partners' (deficit) capital at
December 31, 1998 44,882 (168) 5,684 5,516
Distribution to partners -- (19) (1,855) (1,874)
Net income for the year ended
December 31, 1999 -- 2 154 156
Partners' (deficit) capital at
December 31, 1999 44,882 $ (185) $ 3,983 $ 3,798
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998
Cash flows from operating activities:
Net income $ 156 $ 288
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of loan costs 38 38
Depreciation 1,229 1,204
Change in accounts:
Receivables and deposits 174 3
Other assets (26) 13
Accounts payable 13 33
Tenant security deposit liabilities 6 (1)
Accrued property taxes 24 1
Other liabilities 56 7
Net cash provided by operating activities 1,670 1,586
Cash flows from investing activities:
Property improvements and replacements (412) (393)
Net withdrawals from (deposits to) restricted escrows 685 (158)
Net cash provided by (used in) investing
activities 273 (551)
Cash flows from financing activities:
Payments on mortgage notes payable (72) (66)
Distributions to partners (1,874) (1,000)
Net cash used in financing activities (1,946) (1,066)
Net decrease in cash and cash equivalents (3) (31)
Cash and cash equivalents at beginning of year 1,746 1,777
Cash and cash equivalents at end of year $ 1,743 $ 1,746
Supplemental disclosure of cash flow information:
Cash paid for interest $ 880 $ 887
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL PROPERTY INVESTORS 8
Notes to Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: National Property Investors 8, a California Limited Partnership
(the "Partnership" or "Registrant"), was organized under the Uniform Limited
Partnership Laws of California on June 26, 1984. NPI Equity Investments, Inc. is
the managing general partner (the "Managing General Partner") of the
Partnership. The Managing General Partner is a subsidiary of Apartment
Investment and Management Company ("AIMCO"). See "Note B - Transfer of Control".
The directors and officers of the Managing General Partner also serve as
executive officers of AIMCO. The Partnership Agreement provides that the
Partnership is to terminate on December 31, 2008, unless terminated prior to
such date. The Partnership operates two properties, one located in Indianapolis,
Indiana, and one located in Morrisville, North Carolina.
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 Profits, Gains, and Losses: Profits, gains, and losses of the
Partnership are allocated between the general and limited partners in accordance
with the provisions of the Partnership Agreement.
Profits, not including gains from property dispositions, are allocated as if
they were distributions of net cash from operations.
Any gain from property dispositions attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property over the Partnership's adjusted basis in the property shall be
allocated to each partner having a negative capital account balance, to the
extent of such negative balance. The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and shall be allocated to the general partner to the extent that the
general partner would have received distributable net proceeds in connection
therewith; the balance shall be allocated to the limited partners. However, the
interest of the general partner will be equal to at least 1% of each gain at all
times during the existence of the Partnership.
Net income, other than that arising from the occurrence of a sale or
disposition, and all losses, including losses attributable to property
dispositions, are allocated 99% to the limited partners and 1% to the general
partner. Accordingly, net income as shown in the statements of operations and
changes in partner's (deficit) capital for 1999 and 1998 were allocated 99% to
the limited partners and 1% to the general partner. Net income per limited
partnership unit for each such year was computed as 99% of net income divided by
44,882 units outstanding.
Upon the sale of all properties and termination of the Partnership, the general
partner may be required to contribute certain funds to the Partnership in
accordance with 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: Includes cash on hand and in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984 and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of the
Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
over 27 1/2 years and (2) personal property additions over 5 years.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note J).
Loan Costs: Loan costs of approximately $286,000, less accumulated amortization
of approximately $155,000, 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 all
apartment 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. In addition, the
Managing General Partner's policy is to offer rental concessions during periods
of declining occupancy or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Restricted Escrows:
Reserve Account: A general reserve account was established in 1996 with
the refinancing proceeds for Williamsburg on the Lake Apartments. These
funds were established to cover necessary repairs and replacements of
existing improvements. The balance at December 31, 1999 is approximately
$85,000 which includes interest.
Investment Properties: Investment properties consist of two 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. Costs of apartment properties that have
been permanently impaired have been written down to appraised value. No
adjustments for impairment of value were recorded in the years ended December
31, 1999 or 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 H" for required disclosure.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $79,000 and $87,000 for the years ended
December 31, 1999 and 1998, respectively, were charged to operating expense as
incurred.
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. ("Insignia") 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 Stated Balance
December 31, Including Interest Maturity Due At
1999
Property Interest Rate Date Maturity
(in thousands) (in thousands)
Williamsburg on the Lake
<S> <C> <C> <C> <C> <C>
Apartments $ 7,400 $ 45(1) 7.33% 11/03 $ 7,400
Huntington Apartments 3,386 34 9.85% 02/02 3,211
Totals $10,786 $ 79 $10,611
</TABLE>
(1) Interest only payments.
The mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. The notes require prepayment penalties if repaid prior to
maturity. Further, the properties may not be sold subject to existing
indebtedness.
Scheduled principal payments on mortgage notes payable subsequent to December
31, 1999 are as follows (in thousands):
2000 $ 79
2001 88
2002 3,219
2003 7,400
$10,786
Note D - 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 income and Federal taxable
income (in thousands, except per unit data):
1999 1998
Net income as reported $ 156 $ 288
Add (deduct):
Depreciation differences 90 103
Miscellaneous 35 102
Federal taxable income $ 281 $ 493
Federal taxable income per limited
partnership unit $ 6.21 $10.88
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
1999
Net assets as reported $ 3,798
Land and buildings (1,234)
Accumulated depreciation (568)
Syndication and distribution costs 2,637
Other 115
Net assets - Federal tax basis $ 4,748
Note E - 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 years ended December 31, 1999
and 1998:
1999 1998
(in thousands)
Property management fees (included in operating $243 $245
expenses)
Reimbursement for services of affiliates
(included in operating, and general and
administrative expenses and investment
properties) 107 108
Non-accountable partnership reimbursement (included
in general and administrative expense) 26 67
During the years ended December 31, 1999 and 1998, 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 $243,000 and $245,000 for the
years ended December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $107,000 and
$108,000 for the years ended December 31, 1999 and 1998, 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 out of
distributions from operations based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $26,000 and $67,000 for the years ended December 31, 1999 and
1998, respectively, for non-accountable expense reimbursements.
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 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);
(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.
Upon sale of Partnership properties, the Managing General Partner 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 the Managing General Partner, 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
present 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, noncompounded, on their
present appraised investment in the Partnership at February 1, 1992.
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 24,905 limited partnership units in the Partnership representing 55.49% 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.
Note F - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
Williamsburg on the Lake
<S> <C> <C> <C> <C>
Apartments $ 7,400 $ 590 $14,822 $ 3,636
Huntington Apartments 3,386 1,368 9,233 1,192
Total $10,786 $ 1,958 $24,055 $ 4,828
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And Related
Personal Accumulated Year of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
(in thousands)
Williamsburg
on the Lake
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apartments $ 594 $18,454 $19,048 $12,666 1974-1976 03/86 5-27 yrs
Huntington
Apartments 1,376 10,417 11,793 4,851 1986 02/88 5-29 yrs
Total $ 1,970 $28,871 $30,841 $17,517
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998
(in thousands)
Real Estate
Balance at beginning of year $30,429 $30,036
Property improvements 412 393
Balance at end of year $30,841 $30,429
Accumulated Depreciation
Balance at beginning of year $16,288 $15,084
Additions charged to expense 1,229 1,204
Balance at end of year $17,517 $16,288
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $29,607,000 and $29,161,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $18,085,000 and $16,948,000,
respectively.
Note G - Distributions
During the year ended December 31, 1999, the Registrant made distributions of
approximately $266,000 (approximately $263,000 to the limited partners or $5.86
per limited partnership unit) from operations and approximately $1,608,000
(approximately $1,592,000 to the limited partners or $35.47 per limited
partnership unit) from refinancing and property sale proceeds from prior years.
During the year ended December 31 1998, the Registrant made distributions of
approximately $1,000,000 (approximately $990,000 to the limited partners or
$22.06 per limited partnership unit) from operations. Subsequent to December 31,
1999, the Registrant declared and paid a distribution of approximately
$1,028,000 (approximately $1,018,000 to the limited partners or $22.68 per
limited partnership unit) from operations.
Note H - Segment Reporting
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of two apartment complexes,
one in Indianapolis, Indiana and the other in Morrisville, North Carolina. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less.
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.
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 ended December 31, 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.
<TABLE>
<CAPTION>
1999 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 4,437 $ -- $ 4,437
Other income 289 25 314
Interest expense 917 -- 917
Depreciation 1,229 -- 1,229
General and administrative expense -- 220 220
Segment profit (loss) 351 (195) 156
Total assets 15,354 86 15,440
Capital expenditures for investment
properties 412 -- 412
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 4,490 $ -- $ 4,490
Other income 335 109 444
Interest expense 924 -- 924
Depreciation 1,204 -- 1,204
General and administrative expense -- 226 226
Segment profit (loss) 405 (117) 288
Total assets 15,636 1,495 17,131
Capital expenditures for investment
properties 393 -- 393
</TABLE>
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement, settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note J - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and 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 $58,000 ($1.27 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.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
National Property Investors 8 (the "Partnership" or the "Registrant") has no
officers or directors. The managing general partner of the Partnership is NPI
Equity Investments, Inc. ("NPI Equity" or the "Managing General Partner").
The names and ages of, as well as the positions and offices held by, the
executive officers and directors of the 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 Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO 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
The following table sets forth certain information regarding limited partnership
units of the Registrant owned by each person who is known by the Registrant to
own beneficially or exercise voting or dispositive control over more than 5% of
the Registrant's limited partnership units, by each of the directors and by all
directors and executive officers of the Managing General Partner as a group as
of December 31, 1999.
Amount and Nature
Name of Beneficial Owner of Beneficial Owner % of Class
Insignia Properties, L.P. 17,072 38.04%
(an affiliate of AIMCO)
AIMCO Properties, L.P. 7,833 17.45%
(an affiliate of AIMCO)
Insignia Properties, L.P. is indirectly ultimately owned by AIMCO. Its business
address is 55 Beattie Place, Greenville, South Carolina 29602.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its
business address is 2000 South Colorado Boulevard, Denver, Colorado 80222.
As a result of its ownership of 24,905 units, AIMCO could be in a position to
influence all voting decisions with respect to the Partnership. 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 its affiliation with
the Managing General Partner. However, DeForest Ventures II L.P., from whom
Insignia Properties, L.P. acquired its units, had agreed for the benefit of
non-tendering unitholders, that it would vote its 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 Insignia Properties, L.P.'s right
to vote each Unit acquired.
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 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 years ended December 31, 1999
and 1998:
1999 1998
(in thousands)
Properties management fees $243 $245
Reimbursement for services of affiliates 107 108
Non-accountable Partnership reimbursement 26 67
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
Registrant's properties for providing property management services. The
Registrant paid to such affiliates $243,000 and $245,000 for the years ended
December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $107,000 and
$108,000 for the years ended December 31, 1999 and 1998, 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 out of
distributions from operations based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $26,000 and $67,000 for the years ended December 31, 1999 and
1998, respectively, for non-accountable expense reimbursements.
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 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);
(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.
Upon sale of Partnership properties, the Managing General Partner 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 the Managing General Partner, 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
present 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, noncompounded, on their
present appraised investment in the Partnership at February 1, 1992.
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 24,905 limited partnership units in the Partnership representing 55.49% 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 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 8
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 Registrant 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>
NATIONAL PROPERTY INVESTORS 8
Exhibit Index
Exhibit Number Description of Exhibit
2.5 Master Indemnity Agreement (1)
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
filed with Registrant's Current Report on Form 8-K dated October
1, 1998).
3.4 Agreement of Limited Partnership (2)
Amendments to Agreement of Limited Partnership (3)
Amendments to Agreement of Limited Partnership (4)
Amendments to Agreement of Limited Partnership (5)
10.18Property Management Agreement dated June 21, 1991, by and between
the Registrant and NPI Management with respect to the
Registrant's properties (6)
10.19Deed of Trust and Security Agreement among the Registrant and
Morgan Guaranty Trust Company of New York, as Trustee, as Lender
as it pertains to Huntington Apartments (7)
10.25Multifamily Mortgage dated November 1, 1996, between National
Property Investors 8, a California Limited Partnership and Lehman
Brothers Holdings, Inc., relating to Williamsburg I & II (8)
16 Letter dated November 10, 1998, from the Registrant's former
independent accountant regarding its concurrence with the
statements made by the Registrant (9)
18 Independent Accountants' Preferability Letter for Change in
Accounting Principle.
27 Financial Data Schedule.
<PAGE>
(1) 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) Incorporated by reference to Exhibit A to the Prospectus of the Registrant
dated May 13, 1985 contained in the Registrant's Registration Statement on
Form S-11 (Reg. No. 2-95864).
(3) Incorporated by reference to Exhibits 3, 4(b) to the Registrant's Form 10-K
for the fiscal year ended December 31, 1985.
(4) Incorporated by reference to the definitive Proxy Statement of the
Registrant dated April 3, 1991.
(5) Incorporated by reference to the Statement Furnished in Connection with the
Solicitation Of Consents of the Registrant dated August 28, 1992.
(6) Incorporated by reference to the Registrant's Annual Report of Form 10-K
for the year ended December 31, 1991. Identical agreements have been
entered into for each of the Registrant's properties. The only difference
in the agreements is that the applicable property name has been inserted
into the agreement.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.
(8) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.
(9) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 10, 1998.
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
NPI Equity Investments, Inc.
Managing General Partner of National Property Investors 8
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note J of Notes to the Financial Statements of National Property Investors 8
included in its Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. You have
advised us that you believe that the change is to a preferable method in your
circumstances because it provides a better matching of expenses with the related
benefit of the expenditures and is consistent with policies currently being used
by your industry and conforms to the policies of the Managing General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors 8 1999 Fourth Quarter 10-KSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000763701
<NAME> NATIONAL PROPERTY INVESTORS 8
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 1743
<SECURITIES> 0
<RECEIVABLES> 107
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 30,841
<DEPRECIATION> (17,517)
<TOTAL-ASSETS> 15,440
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 10,786
0
0
<COMMON> 0
<OTHER-SE> 3,798
<TOTAL-LIABILITY-AND-EQUITY> 15,440
<SALES> 0
<TOTAL-REVENUES> 4,751
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 917
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156
<EPS-BASIC> 3.43 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet.
<F2> Multiplier is 1.
</FN>
</TABLE>
