-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K65ChKhp6dseWPUemzm3eujIo0XIyrTRV9k3WMB35sxuzxT73RQ48fM6TxAgfWag krwrPKdyOLG4ZJVPJkLnLQ== 0000355804-97-000007.txt : 19971105 0000355804-97-000007.hdr.sgml : 19971105 ACCESSION NUMBER: 0000355804-97-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971104 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL PROPERTY INVESTORS 4 CENTRAL INDEX KEY: 0000318508 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133031722 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10412 FILM NUMBER: 97707429 BUSINESS ADDRESS: STREET 1: ONE INSIGNA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 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, 1997 [ ] 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 0-10412 NATIONAL PROPERTY INVESTORS 4 (Exact name of small business issuer as specified in its charter) California 13-3031722 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's phone number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) NATIONAL PROPERTY INVESTORS 4 BALANCE SHEET (in thousands, except unit data) (Unaudited) September 30, 1997 Assets Cash and cash equivalents $ 2,848 Receivable and deposits 1,097 Other assets 796 Investment property: Land $ 1,980 Buildings and related personal property 23,913 25,893 Less accumulated depreciation (17,733) 8,160 $ 12,901 Liabilities and Partners' Deficit Liabilities Accounts payable $ 28 Tenant security deposits payable 413 Other liabilities 199 Mortgage note payable 19,300 Partners' Deficit Limited partners' (60,005 units issued and outstanding) $ (6,722) General partner's (317) (7,039) $ 12,901 See Accompanying Notes to Financial Statements b) NATIONAL PROPERTY INVESTORS 4 STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 1,596 $ 1,504 $ 4,676 $ 4,512 Other income 116 85 265 221 Total revenues 1,712 1,589 4,941 4,733 Expenses: Operating 770 713 2,087 2,181 Interest 370 376 1,114 1,132 Depreciation 238 236 707 702 General and administrative 50 36 249 151 Total expenses 1,428 1,361 4,157 4,166 Income before extraordinary loss 284 228 784 567 Extraordinary loss on early extinguishment of debt -- (370) -- (370) Net income (loss) $ 284 $ (142) $ 784 $ 197 Net income (loss) allocated to general partner (1%) $ 3 $ (1) $ 8 $ 2 Net income (loss) allocated to limited partners (99%) 281 (141) 776 195 $ 284 $ (142) $ 784 $ 197 Net income (loss) for limited partnership unit: Income before extraordinary loss 4.68 $ 3.75 $ 12.93 $ 9.35 Extraordinary loss -- (6.10) -- (6.10) Net income (loss) income per limited partnership unit $ 4.68 $ (2.35) $ 12.93 $ 3.25 Distribution per limited partnership unit $ -- $ -- $ 47.90 $ -- See Accompanying Notes to Financial Statements
c) NATIONAL PROPERTY INVESTORS 4 STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 60,005 $ 1 $ 30,003 $ 30,004 Partners' deficit at December 31, 1996 60,005 $ (315) $ (4,624) $ (4,939) Net income for the nine months ended September 30, 1997 -- 8 776 784 Distribution to partners -- (10) (2,874) (2,884) Partners' deficit at September 30, 1997 60,005 $ (317) $ (6,722) $ (7,039) See Accompanying Notes to Financial Statements
d) NATIONAL PROPERTY INVESTORS 4 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 784 $ 197 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 707 702 Amortization of loan costs 53 35 Extraordinary loss on early extinguishment of debt -- 370 Change in accounts: Receivables and deposits (11) 125 Other assets (119) (93) Accounts payable (60) (36) Tenant security deposits payable 4 43 Other liabilities 20 38 Net cash provided by operating activities 1,378 1,381 Cash flows from investing activities: Deposits to restricted escrows (157) (317) Withdrawals from restricted escrows 27 -- Property improvements and replacements (171) (216) Net cash used in investing activities (301) (533) Cash flows from financing activities: Mortgage principal payments -- (294) Repayment of mortgage note payable -- (16,582) Proceeds from refinancing of debt -- 19,300 Loan costs (19) (476) Debt extinguishment costs -- (332) Distribution to partners (2,884) -- Net cash (used in) provided by financing activities (2,903) 1,616 Net (decrease) increase in cash and cash equivalents (1,826) 2,464 Cash and cash equivalents at beginning of period 4,674 2,326 Cash and cash equivalents at end of period $ 2,848 $ 4,790 Supplemental information: Cash paid for interest $ 1,061 $ 1,216 See Accompanying Notes to Financial Statements
e) NATIONAL PROPERTY INVESTORS 4 NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of National Property Investors 4 (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General Partner"), 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, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. 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, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - 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. Pursuant to a series of transactions which closed during 1996, affiliates of Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and outstanding shares of NPI Equity and National Property Investors, Inc. ("NPI"), the sole stockholder of NPI Equity. In connection with these transactions, affiliates of Insignia appointed new officers and directors of NPI Equity and NPI. The following transactions with affiliates of Insignia, NPI, and affiliates of NPI were incurred during the nine month periods ended September 30, 1997 and 1996 (in thousands):
For the Nine Months Ended September 30, 1997 1996 Property management fees (included in operating expenses) $240 $233 Reimbursement for services of affiliates, including $34,000 and $5,000 in construction services reimbursements in 1997 and 1996, respectively (included in investment property and operating and general and administrative expenses) 235 129
For services relating to the administration of the Partnership and operation of the Partnership property, the Managing General Partner is entitled to receive payment for the non-accountable expenses up to a maximum of $100,000 per year, based upon the number of Partnership units sold, subject to certain limitations. The Managing General Partner is entitled to receive $100,000 in 1997. This reimbursement was paid in January 1997, and is included in reimbursement for services of affiliates for the nine months ended September 30, 1997. For the period from January 19, 1996 to August 31, 1997, the Partnership insured its property under a master policy through an agency and insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner, acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the Managing General Partner, who received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. On August 28, 1997, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partnership interests in six real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 16,000 of the outstanding units of limited partnership interest in the Partnership, at $180.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 28, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on August 28, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the Managing General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. NOTE C - DISTRIBUTION TO PARTNERS In January 1997, the Partnership distributed approximately $2,874,000 ($47.90 per limited partnership unit) to the limited partners and approximately $10,000 to the Managing General Partner from the proceeds from the refinancing of the Village of Pennbrook and from operations. NOTE D - REFINANCING AND EXTRAORDINARY LOSS On September 30, 1996, the Partnership refinanced the mortgage encumbering the Village of Pennbrook on an interim basis. The mortgage was refinanced into a short-term temporary loan at 8% interest. During the fourth quarter of 1996, the Partnership entered into permanent financing effective November 1, 1996, with an interest rate equal to 7.33%. Interest on the old mortgage was 8.25%. The refinancing replaced indebtedness of $16,691,000, including accrued interest, with a new mortgage in the amount of $19,300,000. Payments of interest only are due on the first day of each month until the loan matures on November 1, 2003. Total capitalized loan costs were approximately $476,000 at September 30, 1996. The Partnership paid approximately $332,000 in prepayment premiums and wrote off approximately $38,000 in unamortized loan costs, resulting in an extraordinary loss on early extinguishment of debt in the amount of approximately $370,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment property consists of one apartment complex, Village of Pennbrook Apartments, located in Falls Township, Pennsylvania. The average occupancy for the nine month periods ended September 30, 1997 and 1996, was 95% and 93%, respectively. The Partnership's net income for the nine months ended September 30, 1997, was approximately $784,000, of which $284,000 was for the three months ended September 30, 1997. The Partnership's net income for the nine months ended September 30, 1996, was approximately $197,000 which included a net loss of $142,000 for the three months ended September 30, 1996. The increase in net income for the three and nine month periods is primarily attributable to the 1996 extraordinary loss on early extinguishment of debt of approximately $370,000 as discussed in "Item 1, Note D - Refinancing and Extraordinary Loss." In addition, net income increased due to increases in rental and other income. The increase in rental income is due to an increase in average rental rates and occupancy at the Village of Pennbrook in 1997. The increase in other income is primarily due to an increase in corporate units, lease cancellation fees, and interest income on restricted escrows. The increase in general and administrative expenses for the nine month period is primarily due to a $100,000 reimbursement that was paid to the Managing General Partner in accordance with the partnership agreement at the time of the distribution to partners, as discussed in "Item 1. Note B - Transactions with Affiliated Parties." Included in operating expense for the nine month period ended September 30, 1997, was approximately $113,000 for major repairs and maintenance comprised primarily of major landscaping and exterior painting. For the nine month period ended September 30, 1996, the amount expended for major repairs and maintenance was approximately $134,000 used primarily for the repair of heaters. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. At September 30, 1997, the Partnership had unrestricted cash of approximately $2,848,000 as compared to approximately $4,790,000 at September 30, 1996. Net cash provided by operating activities remained relatively stable. Net cash used in investing activities decreased due to a decrease in deposits made into restricted escrows, which were established in the third quarter of 1996, and a decrease in property improvements and replacements. Net cash used in financing activities increased due to a distribution of approximately $2,884,000 made to the partners as discussed in "Item 1. Note C - Distribution to Partners". Also contributing to the change in the net cash used in financing activities was net proceeds received from the mortgage refinancing in 1996. The Managing General Partner has made available to the Partnership a $300,000 line of credit. At the present time, the Partnership has no outstanding amounts due under this line of credit. Based on present plans, the Managing General partner does not anticipate the need to borrow in the near future. Other than cash and cash equivalents, the line of credit is the Partnership's only unused source of liquidity. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $19,300,000 consists of interest only payments of approximately $118,000, at a stated interest rate of 7.33%. The mortgage matures on November 1, 2003, with the principal balance due at the maturity date. Future cash distributions will depend on the levels of cash generated from operations, a property sale, a property refinancing and the availability of cash reserves. In January 1997, the Partnership distributed approximately $2,874,000 ($47.90 per limited partnership unit) to the limited partners and approximately $10,000 to the general partner from the proceeds from the refinancing of the Village of Pennbrook and from operations. No cash distributions were paid in 1996. On August 28, 1997, an Insignia affiliate commenced tender offers for limited partnership interests in six real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 16,000 of the outstanding units of limited partnership interest in the Partnership, at $180.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 28, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on August 28, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In August 1997, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partner interests in six real estate limited partnerships including the Partnership (collectively, the "Tender Partnerships"), in which various Insignia affiliates act as general partner. On September 5, 1997, a partnership claiming to be a holder of limited partnership units in one of the Tender Partnerships, filed a complaint with respect to a putative class action in the Court of Chancery in the State of Delaware in and for New Castle County (the "City Partnerships complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates) in connection with the tender offers. Neither the Partnership nor the Managing General Partner were named as defendants in the action. The City Partnerships complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and coerced the limited partners into selling their units pursuant to the tender offers for substantially lower prices than the units are worth. The plaintiffs also allege that the defendants breached an alleged duty to provide an independent analysis of the fair market value of the limited partnership units, failed to appoint a disinterested committee to review the tender offer and did not adequately consider other alternatives available to the limited partners. On September 8, 1997, persons claiming to be holders of limited partnership units in the Tender Partnerships filed a complaint with respect to a putative class action and derivative suit in the Superior Court for the State of California for the County of San Mateo (the "Kline complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates and the Tender Partnerships) in connection with the tender offers. The Kline complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and that, as a result of the tender offers, the Purchaser will acquire effective voting control over the Tender Partnerships at substantially lower prices than the units are worth. On September 24, 1997, the court denied the plaintiffs' application for a temporary restraining order and their request for preliminary injunctive relief preventing the completion of the tender offers. On September 10, 1997, persons claiming to be holders of limited partnership units in the Tender Partnerships filed a complaint with respect to a putative class action and derivative suit in the Superior Court for the State of California for the County of Alameda (the "Heller complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates and the Tender Partnerships) in connection with the tender offers. The Heller complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and that, as a result of the tender offers, the Purchaser will acquire effective voting control of the Tender Partnerships at substantially lower prices than the units are worth. The Plaintiffs also allege that the defendants breached an alleged duty to retain an independent advisor to consider alternatives to the tender offers. The Managing General Partner believes that the allegations contained in the City Partnerships, Kline and Heller complaints are without merit and intends to vigorously contest each of those complaints to which it and the Partnership have been named as defendants. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL PROPERTY INVESTORS 4 By: NPI EQUITY INVESTMENTS, INC. Its Managing General Partner /s/William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director /s/Ronald Uretta Ronald Uretta Vice President and Treasurer Date: November 4, 1997 EX-27 2
5 This schedule contains summary financial information extracted from National Property Investors 4 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000318508 NATIONAL PROPERTY INVESTORS 4 1,000 9-MOS DEC-31-1997 SEP-30-1997 2,848 0 0 0 0 0 25,893 (17,733) 12,901 0 19,300 0 0 0 (7,039) 12,901 0 4,941 0 0 4,157 0 1,114 0 0 0 0 0 0 784 12.93 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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