** **

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

**FORM 10-Q**

 

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE****ACT OF 1934

 

For the quarterly period ended June 30, 2011

 

or

 

[ ]   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 0-12438

 

**REAL ESTATE ASSOCIATES LIMITED V**

(Exact name of registrant as specified in its charter)

 
| California                      | 95-3768810          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

 

55 Beattie Place, PO Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)

 

(864) 239-1000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.  

[X] Yes  [ ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes  [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
| Large accelerated filer [ ]                                               | Accelerated filer [ ]         |
|---------------------------------------------------------------------------|-------------------------------|
| Non-accelerated filer [ ] 

(Do not check if a smaller reporting company) | Smaller reporting company [X] |

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes  [X] No

 

 

 

**PART I - FINANCIAL INFORMATION**
 

 

**ITEM 1.     FINANCIAL STATEMENTS**

 

 

REAL ESTATE ASSOCIATES LIMITED V

Balance Sheets

(Unaudited)

(In thousands)

 

 

 

June 30,

2011

December 31,

2010

ASSETS

 

 

Cash and cash equivalents

$   121

  $   146

Investments in and advances to Local Limited

  Partnerships

 

     --

 

       --

Total assets

$   121

  $   146

 

 

 

LIABILITIES AND PARTNERS' (DEFICIENCY) CAPITAL

 

 

 

 

 

Liabilities

 

 

  Accounts payable and accrued expenses

$    14

  $    19

 

 

 

Contingencies 

     --

    --

 

 

 

Partners' (deficiency) capital

 

 

  General partners

    (143)

     (143)

  Limited partners

    250

      270

Total partners’ (deficiency) capital

    107

      127

Total liabilities and partners' (deficiency) capital

$   121

  $   146

 

 

 

 

See Accompanying Notes to Financial Statements

 
REAL ESTATE ASSOCIATES LIMITED V 

Statements of Operations

(Unaudited)

(In thousands, except per interest data)

 

 

 

 

 

Three Months Ended

June 30,

2011

Three Months Ended

June 30,

2010

Six Months Ended

June 30,

2011

Six Months Ended

June 30,

2010

 

 

 

 

 

 Revenues

$   --

$   --

$   --

$   --

 

 

 

 

 

 Operating expenses:

 

 

 

 

   Legal and accounting

    12

    51

    22

    60

   Management fees – Corporate

    General Partner

 

    --

 

     1

 

     1

 

     2

   Administrative 

     3

     2

     5

     4

 Total operating expenses

    15

    54

    28

    66

 

 

 

 

 

 Loss from partnership operations

    (15)

    (54)

    (28)

    (66)

 Distributions in excess of

   investment in Local Limited

   Partnerships

 

 

     8

 

 

   510

 

 

     8

 

 

   510

 Net income (loss) 

 $   (7)

$  456

 $  (20)

$  444

 

 

 

 

 

 Net income (loss) allocated to 

   general partners (1%)

 

$   --

 

$    4

 

$   --

 

$    4

 Net income (loss) allocated to 

   limited partners (99%)

 

 $   (7)

 

$  452

 

 $  (20)

 

$  440

 

 

 

 

 

 Net income (loss) per limited 

   partnership interest

 

 $ (.90)

 

$58.21

 

 $(2.58)

 

$56.66

 

See Accompanying Notes to Financial Statements

 
 

REAL ESTATE ASSOCIATES LIMITED V

Statement of Changes in Partners' (Deficiency) Capital

(Unaudited)

(In thousands)

 

 

 

 

 

 

General

Partners

Limited

Partners

 

Total

 

 

 

 

Partners' (deficiency) capital

  at December 31, 2010

 

$ (143)

 

$  270

 

$  127

 

 

 

 

Net loss for the six months

  ended June 30, 2011

 

   --

 

    (20)

 

    (20)

 

 

 

 

Partners' (deficiency) capital

  at June 30, 2011

 

$ (143)

 

$  250

 

$  107

 

See Accompanying Notes to Financial Statements

 
 

REAL ESTATE ASSOCIATES LIMITED V

Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended

June 30,

2011

Six Months Ended

June 30,

2010

Cash flows from operating activities:

 

 

Net income (loss)

 $  (20)

$  444

Adjustments to reconcile net income (loss) to net cash

used in operating activities:

 

 

Distribution received in excess of investment from

  sale of Local Limited Partnership property

 

     (4)

 

   (500)

Changes in accounts:

 

 

   Accounts payable and accrued expenses

     (5)

    10

   Accrued fees due to Corporate General Partner

    --

     2

Net cash used in operating activities 

    (29)

    (44)

 

 

 

Cash flows provided by investing activities:

 

 

Distribution received from sale of Local Limited

  Partnership property

 

     4

 

   500

 

 

 

Net increase (decrease) in cash and cash equivalents

    (25)

   456

 

 

 

Cash and cash equivalents, beginning of period

   146

    44

 

 

 

Cash and cash equivalents, end of period

$  121

$  500

 

See Accompanying Notes to Financial Statements

REAL ESTATE ASSOCIATES LIMITED V
Notes To Financial Statements

(Unaudited)

 

 

**NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

General

 

The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2010 prepared by Real Estate Associates Limited V (the "Partnership"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim period presented are not necessarily indicative of the results for the entire year.

 

In the opinion of the Partnership’s management, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) necessary to present fairly the financial position as of June 30, 2011, and the results of operations and changes in cash flows for the six months ended June 30, 2011 and 2010, respectively. The balance sheet at December 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.

 

The general partners share a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest which is allocated in proportion to their respective investments.  The general partners of the Partnership are National Partnership Investments Corp. (“NAPICO” or the “Corporate General Partner”) and National Partnership Investment Associates II.  The Corporate General Partner is a subsidiary of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust.

 

At June 30, 2011 and December 31, 2010, the Partnership had outstanding 7,765 limited partnership interests.

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. 

 

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

 

Certain reclassifications have been made to the 2010 balances to conform to the 2011 presentation.

 

Method of Accounting for Investments in and Advances to Local Limited Partnership

 

The investment in local limited partnership (the “Local Limited Partnership”) is accounted for under the equity method. 

 
Net Income (Loss) Per Limited Partnership Interest
 

Net income (loss) per limited partnership interest was computed by dividing the limited partners' share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 7,765 for both the three and six months ended June 30, 2011 and 2010.
 

Variable Interest Entities

 

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

 

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. 

 

At June 30, 2011 and December 31, 2010, the Partnership holds a variable interest in one VIE for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Limited Partnership, that the general partner of the Local Limited Partnership is the primary beneficiary of the Local Limited Partnership.  In making this determination, the Partnership considered the following factors:

 

·         the general partner conducts and manages the business of the Local Limited Partnership;

·         the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnership’s underlying real estate property;

·         the general partner is responsible for approving operating and capital budgets for the property owned by the Local Limited Partnership;

·         the general partner is obligated to fund any recourse obligations of the Local Limited Partnership; 

·         the general partner is authorized to borrow funds on behalf of the Local Limited Partnership; and

·         the Partnership, as a limited partner in the Local Limited Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnership that most significantly impact such entity’s economic performance.

 

The one VIE at June 30, 2011 consists of a Local Limited Partnership that is directly engaged in the ownership and management of one apartment property with a total of 48 units. The Partnership is involved with this VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investment in and receivable from this VIE, which was zero at June 30, 2011 and December 31, 2010. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future**.**
** **

**NOTE 2 - INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS**

 

As of June 30, 2011and December 31, 2010, the Partnership holds a limited partnership interest in one Local Limited Partnership. The Local Limited Partnership owns one residential low-income rental project consisting of 48 apartment units.  The mortgage loans of this project are payable to or insured by a governmental agency.

 

The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnership based upon its ownership percentage of 99%. Distributions of surplus cash from operations from the Local Limited Partnership are not restricted. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnership’s partnership agreement. This agreement usually limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership.  

 

The individual investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Limited Partnership and is not otherwise committed to provide additional support to the Local Limited Partnership. Therefore, it does not recognize losses once its investment in the Local Limited Partnership reaches zero.  Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. During the three and six months ended June 30, 2011 and 2010, the Partnership received operating distributions of approximately $4,000 and $10,000, respectively, from Local Limited Partnerships in which it does not have an investment balance.

 

For those investments where the Partnership has determined that the carrying value of its investment approximates the estimated fair value of the investment, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

 

As of June 30, 2011 and December 31, 2010, the investment balance in the Local Limited Partnership had been reduced to zero. 

 

The following are unaudited condensed estimated statements of operations for the three and six months ended June 30, 2011 and 2010 of the Local Limited Partnership in which the Partnership has invested (in thousands). The 2010 amounts exclude Three Rivers due to the sale of its investment property in June 2010.
 
UNAUDITED CONDENSED ESTIMATED STATEMENTS OF OPERATIONS
 

 

Three Months Ended

June 30,

2011

Three Months Ended

June 30,

2010

 

Six Months Ended

June 30,

2011

 

Six Months Ended

June 30,

2010

Revenues:

 

 

 

 

  Rental income

$   89

$   96

$  187

$  192

Expenses:

 

 

 

 

  Depreciation and amortization

    14

    15

    29

    29

  Financial expenses

    21

    21

    42

    42

  Operating expenses

    71

    64

   138

   128

Total expenses

   106

   100

   209

   199

Loss from continuing operations

 $  (17)

 $   (4)

 $  (22)

 $   (7)

 

On June 25, 2010, the Local Operating General Partner of Three Rivers sold its investment property to a third party for a total sales price of $1,800,000. During the three and six months ended June 30, 2011 and 2010, the Partnership received distributions from the sale of approximately $4,000 and $500,000, respectively. The Partnership had no remaining investment balance in the Partnership at June 30, 2011 and December 31, 2010.

 

Subsequent to June 30, 2011, the Partnershipassigned its limited partnership interest in Grandview Place Limited Partnership to a third party for $25,000.  The Partnership had no remaining investment balance in the Local Limited Partnership at June 30, 2011 and December 31, 2010. Grandview Place was the Partnership’s sole remaining investment. The Partnership anticipates liquidating by December 31, 2011.

 

**NOTE 3 - TRANSACTIONS WITH AFFILIATED PARTIES**

** **

Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee equal to 0.4 percent of the Partnership’s original remaining invested assets of the Local Limited Partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership’s interests in the capital accounts of the respective partnerships.  The fee was approximately $1,000 and $2,000 for the six months ended June 30, 2011 and 2010, respectively. 

** **

**NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

Financial Accounting Standards Board Accounting Standards Codification Topic 825, “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 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. At June 30, 2011, the Partnership believes that the carrying amount of other assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments.

 

**NOTE 5 – CONTINGENCIES**

 

The Corporate General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the Corporate General Partner, the claims will not result in any material liability to the Partnership.****
**ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking within the meaning of the federal securities laws. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest;  national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect the Partnership and its investment in local limited partnerships and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets;  litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the local limited partnerships in which the Partnership has invested. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.
** **

The Corporate General Partner monitors developments in the area of legal and regulatory compliance.  

 
Liquidity and Capital Resources
 

The Partnership’s primary source of funds consists of the receipt of distributions from Local Limited Partnerships in which the Partnership has invested.  It is not expected that the Local Limited Partnership in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership’s limited partners in any material amount. An infrequent source of funds would be funds received by the Partnership as its share of any proceeds from the sale of a property owned by a Local Limited Partnership or the Partnership’s sale of its interest in a Local Limited Partnership. There were no distributions made by the Partnership to its limited partners during the six months ended June 30, 2011 and 2010.

 

The property in which the Partnership has invested, through its investment in the Local Limited Partnership, receives one or more forms of assistance from the Federal Government.  As a result, the Local Limited Partnership’s ability to transfer funds to the Partnership in the form of distributions, loans or advances is generally restricted by the government assistance programs. These restrictions, however, are not expected to impact the Partnership’s ability to meet its cash obligations. 

 

Distributions received from Local Limited Partnerships are recognized as a return of capital until the investment balance has been reduced to zero. Subsequent distributions received are recognized as income. During the three and six months ended June 30, 2011 and 2010, the Partnership received operating distributions of approximately $4,000 and $10,000, respectively, from Local Limited Partnerships in which it does not have an investment balance.

 

On June 25, 2010, the Local Operating General Partner of Three Rivers sold its investment property to a third party for a total sales price of $1,800,000. During the three and six months ended June 30, 2011 and 2010, the Partnership received distributions from the sale of approximately $4,000 and $500,000, respectively. The Partnership had no remaining investment balance in the Partnership at June 30, 2011 and December 31, 2010.
 

As of June 30, 2011 and December 31, 2010, the Partnership had cash and cash equivalents of approximately $121,000 and $146,000, respectively. The decrease in cash and cash equivalents of approximately $25,000 is due to approximately $29,000 of cash used in operating activities, partially offset by approximately $4,000 of cash provided by investing activities.
 Results of Operations
 

At June 30, 2011, the Partnership has an investment in one Local Limited Partnership, which owns a housing project that was substantially all rented. The Partnership, as a limited partner, is entitled to 99% of the profits and losses of the Local Limited Partnership. The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions of the Local Limited Partnership that would require or allow for consolidation.  Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. Thus the investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges.  However, since the Partnership is not legally liable for the obligations of the Local Limited Partnership, or is not otherwise committed to provide additional support to them, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. Subsequent distributions received are recognized as income in the statements of operations. For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

 

During the three and six months ended June 30, 2011 and 2010, the Partnership received operating distributions of approximately $4,000 and $10,000, respectively, from Local Limited Partnerships in which it does not have an investment balance.

 

On June 25, 2010, the Local Operating General Partner of Three Rivers sold its investment property to a third party for a total sales price of $1,800,000. During the three and six months ended June 30, 2011 and 2010, the Partnership received distributions from the sale of approximately $4,000 and $500,000, respectively. The Partnership had no remaining investment balance in the Partnership at June 30, 2011 and December 31, 2010.

 

Subsequent to June 30, 2011, the Partnership assigned its limited partnership interest in Grandview Place Limited Partnership to a third party for $25,000.  The Partnership had no remaining investment balance in the Local Limited Partnership at June 30, 2011 and December 31, 2010. Grandview Place was the Partnership’s sole remaining investment. The Partnership anticipates liquidating by December 31, 2011.

 

Operating expenses, other than management fees, consist of legal and accounting fees for services rendered to the Partnership and administrative expenses.  Legal and accounting fees were approximately $22,000 and $60,000 for the six months ended June 30, 2011 and 2010, respectively, and approximately $12,000 and $51,000 for the three months ended June 30, 2011 and 2010, respectively.  The decrease in legal and accounting fees for both the three and six months ended June 30, 2011 is due primarily to legal costs incurred during the three and six months ended June 30, 2010 related to the solicitation of the consent of the limited partners for the sale of Three Rivers.
 

Administrative expenses were approximately $5,000 and $4,000 for the six months ended June 30, 2011 and 2010, respectively, and approximately $3,000 and $2,000 for the three months ended June 30, 2011 and 2010, respectively. 

 

A recurring partnership expense is the annual management fee. The fee is payable to the Corporate General Partner of the Partnership and is calculated at 0.4 percent of the Partnership's original remaining invested assets of the Local Limited Partnerships at the beginning of each year. The management fee is paid to the Corporate General Partner for its continuing management of partnership affairs. Management fees were less than $1,000 and approximately $1,000 for the three months ended June 30, 2011 and 2010, respectively, and approximately $1,000 and $2,000 for the six months ended June 30, 2011 and 2010, respectively.

 

The Partnership, as a limited partner in the Local Limited Partnership in which it has invested, is subject to the risks incident to the management and ownership of improved real estate. The Partnership investment is also subject to adverse general economic conditions, and, accordingly, the status of the national legislation which could increase vacancy levels, rental payment defaults, and operating expenses, which in turn could substantially increase the risk of operating losses for the project. 

 

Off-Balance Sheet Arrangements

 

The Partnership owns a limited partnership interest in an unconsolidated Local Limited Partnership, in which the Partnership’s ownership percentage is 99%.  However, based on the provisions of the relevant partnership agreement, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Limited Partnership that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and Summary of Significant Accounting Policies” of the financial statements in “Item 1. Financial Statements”).  There are no lines of credit, side agreements or any other derivative financial instruments between the Local Limited Partnership and the Partnership. Accordingly the Partnership’s maximum risk of loss related to the unconsolidated Local Limited Partnership is limited to the recorded investment in and receivable from the Local Limited Partnership. See “Note 2 – Investments In and Advances to Local Limited Partnerships” of the financial statements in “Item 1. Financial Statements” for additional information about the Partnership’s investment in the unconsolidated Local Limited Partnership.

 

Other

 

Aimco and its affiliates owned 876.60 Units ("the Units") (or 1,753.20 limited partnership interests) in the Partnership representing 22.58% of the outstanding Units as of June 30, 2011. A Unit consists of two limited partnership interests. A number of these Units were acquired pursuant to tender offers made by Aimco or its affiliates. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General Partner also owes fiduciary duties to Aimco as its sole stockholder.  As a result, the duties of the Corporate General Partner, as corporate general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to Aimco as its sole stockholder.
 

Variable Interest Entities

 

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

 

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. 

 

At June 30, 2011 and December 31, 2010, the Partnership holds a variable interest in one VIE for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Limited Partnership, that the general partner of the Local Limited Partnership is the primary beneficiary of the Local Limited Partnership.  In making this determination, the Partnership considered the following factors:

 

·         the general partner conducts and manages the business of the Local Limited Partnership;

·         the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnership’s underlying real estate property;

·         the general partner is responsible for approving operating and capital budgets for the property owned by the Local Limited Partnership;

·         the general partner is obligated to fund any recourse obligations of the Local Limited Partnership; 

·         the general partner is authorized to borrow funds on behalf of the Local Limited Partnership; and

·         the Partnership, as a limited partner in the Local Limited Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnership that most significantly impact such entity’s economic performance.

 

The one VIE at June 30, 2011 consists of a Local Limited Partnership that is directly engaged in the ownership and management of one apartment property with a total of 48 units.  The Partnership is involved with this VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investment in and receivable from this VIE, which was zero at June 30, 2011 and December 31, 2010. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future**.  ** Critical Accounting Policies and Estimates
 

The financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its critical accounting policies, the following may involve a higher degree of judgment and complexity.

 
Method of Accounting for Investments in Local Limited Partnerships
 

The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnership based upon its ownership percentage of 99%. Distributions of surplus cash from operations from the Local Limited Partnership are not restricted. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnership’s partnership agreement. This agreement usually limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership.  

 

The individual investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Limited Partnership and is not otherwise committed to provide additional support to the Local Limited Partnership. Therefore, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the statements of operations.  

 

For those investments where the Partnership has determined that the carrying value of its investment approximates the estimated fair value of the investment, the Partnership’s policy is to recognize equity in income of the Local Limited Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Limited Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

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**ITEM 4.**     **CONTROLS AND PROCEDURES**

 

**(a)   Disclosure Controls and Procedures.**

 

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
 

**(b)   Changes in Internal Control Over Financial Reporting**. 

 

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
****PART II - OTHER INFORMATION
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**ITEM 6.     EXHIBITS**

 

See Exhibit Index.

 

The agreements included as exhibits to this Form 10-Q contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

 
- should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; 

 
- have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; 

 
- may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and 

 
- were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. 

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.  

 
****SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) 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.

 

 

REAL ESTATE ASSOCIATES LIMITED V

 

 

 

By:   National Partnership Investments Corp.

 

      Corporate General Partner

 

 

Date: August 12, 2011

By:   /s/John McGrath

 

      John McGrath

 

      Senior Vice President, equivalent of the

 

chief executive officer of the Partnership

 

 

Date: August 12, 2011

By:   /s/Stephen B. Waters

 

      Stephen B. Waters

 

      Senior Director of Partnership Accounting,

 

equivalent of the chief financial officer of the Partnership

 

 

**REAL ESTATE ASSOCIATES LIMITED PARTNERSHIP V**
**EXHIBIT INDEX**

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**Exhibit****     Description of Exhibit**

 

 

3         Articles of incorporation and bylaws: The registrant is not incorporated. The Partnership Agreement was filed with Form S-11 #266171 which is hereby incorporated by reference.

 

4         First Amendment to Restated Certificate and Agreement of Limited Partnership dated June 15, 2010 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30 2010).

 

10        Material contracts: The registrant is a party to the following material contracts, the Restated Certificate and Agreement of Limited Partnership dated May 7, 1982, and the nineteen contracts representing the Partnership's Investment in Local Limited Partnerships as previously filed at the Securities Exchange Commission, File #277645 which is hereby incorporated by reference.

 

10.2      Assignment and Assumption Agreement by and between Real Estate Associates Limited V, a California limited partnership (“Assignor”), Randal Corporation, a Nevada corporation (“Assignee”); Dennis D. Curran, an individual (the “Operating General Partner”), and GVP, Inc., a Montana corporation (the “General Partner”) effective February 16, 2011. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 18, 2011.

 

10.3      Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Grandview Place Limited Partnership, dated July 11, 2011, by and between Real Estate Associates Limited V, a California limited partnership, Randel Corporation, a Nevada corporation; Dennis D. Curran, an individual, and GVP, Inc. a Montana corporation. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 11, 2011.

 

31.1      Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2      Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1      Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.