FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 683
Receivables and deposits 302
Restricted escrows 543
Other assets 340
Investment properties:
Land $ 1,970
Buildings and related personal property 29,557
31,527
Less accumulated depreciation (18,499) 13,028
$ 14,896
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 219
Tenant security deposit liabilities 73
Accrued property taxes 594
Other liabilities 280
Mortgage notes payable 14,735
Partners' Deficit
General partner $ (233)
Limited partners (44,882 units
issued and outstanding) (772) (1,005)
$ 14,896
</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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 1,100 $ 1,080 $ 3,314 $ 3,326
Other income 105 83 269 234
Total revenues 1,205 1,163 3,583 3,560
Expenses:
Operating 540 434 1,382 1,239
General and administrative 88 62 265 142
Interest 296 229 794 688
Depreciation 336 311 982 919
Property taxes 110 123 359 364
Total expenses 1,370 1,159 3,782 3,352
(Loss) income before
extraordinary item (165) 4 (199) 208
Extraordinary loss on early
extinguishment of debt -- -- (181) --
Net (loss) income $ (165) $ 4 $ (380) $ 208
Net (loss) income allocated to
general partner (1%) (2) -- (4) 2
Net (loss) income allocated to
limited partners (99%) (163) 4 (376) 206
$ (165) $ 4 $ (380) $ 208
Per limited partnership unit:
(Loss) income before
extraordinary item $ (3.63) $ 0.09 $ (4.39) $ 4.59
Extraordinary loss on the
early extinguishment of debt -- -- (3.99) --
Net (loss) income $ (3.63) $ 0.09 $ (8.38) $ 4.59
Distributions per limited
partnership unit $ 1.52 $ 22.57 $ 97.57 $ 41.33
</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) (4,379) (4,423)
Net loss for the nine months
ended September 30, 2000 -- (4) (376) (380)
Partners' deficit at
September 30, 2000 44,882 $ (233) $ (772) $(1,005)
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
NATIONAL PROPERTY INVESTORS 8
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (380) $ 208
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 982 919
Amortization of loan costs 28 28
Extraordinary loss on early extinguishment of debt 181 --
Change in accounts:
Receivables and deposits (195) (95)
Other assets (59) (44)
Accounts payable 7 (25)
Tenant security deposit liabilities 1 4
Accrued property taxes 100 89
Other liabilities 57 15
Net cash provided by operating activities 722 1,099
Cash flows from investing activities:
Property improvements and replacements (541) (264)
Net (deposits to) withdrawals from restricted escrows (442) 693
Net cash (used in) provided by investing activities (983) 429
Cash flows from financing activities:
Payments on mortgage note payable (59) (53)
Payoff of mortgage note payable (3,364) --
Proceeds from mortgage note payable 7,372 --
Prepayment penalty (168) --
Loan costs paid (157) --
Distributions to partners (4,423) (1,874)
Net cash used in financing activities (799) (1,927)
Net decrease in cash and cash equivalents (1,060) (399)
Cash and cash equivalents at beginning of period 1,743 1,746
Cash and cash equivalents at end of period $ 683 $ 1,347
Supplemental disclosure of cash flow information:
Cash paid for interest $ 744 $ 661
At September 30, 2000, approximately $145,000 of property improvements and
replacements were included in accounts payable.
</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"), the general partner of the Partnership, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 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 expenditures were paid or
accrued to the Managing General Partner and affiliates during the nine months
ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $180 $181
Reimbursement for services of affiliates (included in
investment properties and operating and general and
administrative expenses) 133 81
Non-accountable partnership reimbursement (included in
general and administrative expense) 67 26
Partnership management fee (included in general and
administrative expense) 25 --
Loan costs (included in other assets) 74 --
During the nine months ended September 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 $180,000 and $181,000 for the
nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $133,000 and
$81,000 for the nine months ended September 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 $67,000
and $26,000 for the nine months ended September 30, 2000 and 1999, respectively,
for non-accountable expense reimbursements.
For managing the affairs of the Partnership, the Managing General Partner of the
Partnership is entitled to receive a partnership management fee. The fee is
equal to 4% of the Partnership's adjusted cash from operations, as defined in
the Partnership Agreement, in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited partners adjusted
cash from operations in such year which is equal to 5% of the limited partners'
adjusted invested capital, as defined, on a non-cumulative basis. In addition,
50% of the fee shall not be paid until the Partnership has distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners' adjusted invested capital on a non-cumulative basis.
The fee shall be paid when adjusted cash from operations is distributed to the
limited partners. The Managing General Partner was paid approximately $25,000
during the nine months ended September 30, 2000 for such fees. The Managing
General Partner was not entitled to receive a similar reimbursement during the
nine months ended September 30, 1999.
In addition to reimbursement for services of affiliates, the Partnership was
charged by an affiliate of the Managing General Partner approximately $74,000
for loan costs related to the refinancing of one of the Partnership's properties
during the nine months ended September 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.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 25,391 limited partnership
units in the Partnership representing 56.57% 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, which would include without
limitation, voting on certain amendments to the Partnership Agreement and voting
to remove the Managing General Partner. As a result of its ownership of 56.57%
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.
Note D - Distributions
During the nine months ended September 30, 2000, the Registrant declared and
paid distributions of approximately $4,423,000 (approximately $4,379,000 to the
limited partners or $97.57 per limited partnership unit) consisting of
approximately $1,245,000 (approximately $1,233,000 to the limited partners or
$27.48 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. During the nine months ended September 30, 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.
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 at which time the loan will be fully amortized. 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 $157,000 at September 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.
Note F - Segment Reporting (continued)
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.
Segment information for the three and nine month periods ended September 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 September 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 1,100 $ -- $ 1,100
Other income 96 9 105
Interest expense 296 -- 296
Depreciation 336 -- 336
General and administrative expense -- 88 88
Segment loss (86) (79) (165)
Nine Months Ended September 30, 2000 Residential Other Totals
Rental income $ 3,314 $ -- $ 3,314
Other income 248 21 269
Interest expense 794 -- 794
Depreciation 982 -- 982
General and administrative expense -- 265 265
Extraordinary loss on early extinguishment
of debt (181) -- (181)
Segment loss (136) (244) (380)
Total assets 14,551 345 14,896
Capital expenditures for investment
properties 686 -- 686
Three Months Ended September 30, 1999 Residential Other Totals
Rental income $ 1,080 $ -- $ 1,080
Other income 78 5 83
Interest expense 229 -- 229
Depreciation 311 -- 311
General and administrative expense -- 62 62
Segment profit (loss) 61 (57) 4
Nine Months Ended September 30, 1999 Residential Other Totals
Rental income $ 3,326 $ -- $ 3,326
Other income 212 22 234
Interest expense 688 -- 688
Depreciation 919 -- 919
General and administrative expense -- 142 142
Segment profit (loss) 328 (120) 208
Total assets 15,387 108 15,495
Capital expenditures for investment
properties 264 -- 264
</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 is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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 nine
months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Williamsburg on the Lake Apartments 93% 93%
Indianapolis, Indiana
Huntington Athletic Club Apartments 89% 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 nine months ended September 30, 2000 was
approximately $380,000 as compared to net income of approximately $208,000 for
the nine months ended September 30, 1999. The Registrant's net loss for the
three month period ended September 30, 2000 was approximately $165,000 as
compared to net income of approximately $4,000 for the three month period ended
September 30, 1999. The increase in net loss for the nine month period ended
September 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,
partially offset by an increase 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 increase in net
loss for the three month period ended September 30, 2000 was due to an increase
in total expenses partially offset by an increase in total revenues.
Total revenues increased for the nine month period ended September 30, 2000 due
to an increase in other income which was partially offset by a decrease in
rental income. Total revenues increased for the three month period ended
September 30, 2000 due to an increase in other income and rental income. Other
income increased for the three and nine month periods ended September 30, 2000
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. Rental income
decreased for the nine months ended September 30, 2000 due to decreased
occupancy at Huntington Athletic Club Apartments and increased concessions and
bad debt expenses 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. Rental income
increased for the three month period ended September 30, 2000 due to increased
average rental rates at Williamsburg on the Lake Apartments and decreased
concessions at Huntington Athletic Club Apartments, partially offset by
increased bad debt expense at Williamsburg on the Lake Apartments.
Total expenses increased for the three and nine month periods ended September
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, collection costs, and interior painting at both of
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 and partnership management fees
paid to the Managing General Partner from distributions from operations as
provided in the Partnership Agreement, an increase in the cost of services
included in the management reimbursements to the Managing General Partner
as allowed under the Partnership Agreement, and increased professional fees
necessary to manage the Partnership. Included in general and administrative
expenses at both September 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 September 30, 2000, the Partnership held cash and cash equivalents of
approximately $683,000 compared to approximately $1,347,000 at September 30,
1999. The decrease of approximately $1,060,000 in cash and cash equivalents
since December 31, 1999 is due to approximately $799,000 of cash used in
financing activities and approximately $983,000 of cash used in investing
activities which was partially offset by approximately $722,000 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 at which time the loan will be fully amortized. 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 $157,000 at September 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
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 nine months ended September 30, 2000, the Partnership completed
approximately $381,000 of capital expenditures at Williamsburg on the Lake
Apartments consisting primarily of carpet and vinyl replacements, submetering
improvements, structural improvements, appliances, and major landscaping. 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 $512,000,
consisting primarily of parking area improvements, air conditioning unit
replacement, appliances, carpet replacements, major landscaping, submetering
improvements, 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 nine months ended September 30, 2000, the Partnership completed
approximately $305,000 of capital expenditures at Huntington Athletic Club
Apartments consisting primarily of swimming pool upgrades, floor covering
replacements, appliances, 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 $611,000, 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 $7,335,000 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 nine months ended September 30, 2000, the Registrant
declared and paid distributions of approximately $4,423,000 (approximately
$4,379,000 to the limited partners or $97.57 per limited partnership unit)
consisting of approximately $1,245,000 (approximately $1,233,000 to the limited
partners or $27.48 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. During the nine months ended September 30, 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. 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 quarterly 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 is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the quarter ended September
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:
