NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP - FORM 10-Q - November 16, 2009

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EX-31.2 - NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIPv165837_ex31-2.htm
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EX-32.3 - NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIPv165837_ex32-3.htm
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EX-31.1 - NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIPv165837_ex31-1.htm
EX-32.1 - NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIPv165837_ex32-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended                 September 30, 2009             
OR

o
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:                   000-24816                            
 
National Property Analysts Master Limited Partnership
(Exact name of registrant as specified in its charter)

Delaware
  
23-2610414
   (State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
230 South Broad Street, Mezzanine
    
Philadelphia, Pennsylvania
  
19102
(Address of principal executive offices)
  
(Zip Code)
 
(215) 790-4700
(Registrant’s telephone number, including area code)
 
[None]
(Former name, former address and former fiscal year, if changed since last report)

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.
Yes               þ               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 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
þ

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
  
Outstanding at November 12, 2009
Units of Limited Partnership Interest
  
97,752 units

 
 
 

NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP

INDEX

     
Page No.
PART I.  FINANCIAL INFORMATION
      
         
Item 1.
Combined Condensed Financial Statements (Unaudited)
      
         
 
Combined Condensed Balance Sheets  - September 30, 2009 and December 31, 2008
  
1
  
         
 
Combined Condensed Statements of Operations and Changes in Partners’ Deficit
      
 
- Three and nine months ended September 30, 2009 and 2008
  
2
  
         
 
Combined Condensed Statements of Cash Flows
      
 
- Nine months ended September 30, 2009 and 2008
  
3
  
         
 
Notes to Combined Condensed Financial Statements
  
4
  
         
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
  
 9
 
         
Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
  
11
  
         
Item 4 T.
Controls and Procedures.
  
11
  
         
PART II.  OTHER INFORMATION
      
         
Item 1.
Legal Proceedings.
  
12
  
         
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
  
12
  
         
Item 3.
Defaults Upon Senior Securities.
  
12
  
         
Item 4.
Submission of Matters to a Vote of Security Holders.
  
12
  
         
Item 5.
Other Information.
  
12
  
         
Item 6.
Exhibits.
  
12
  
         
SIGNATURES
      
       
Signatures
  
13
  

 
 
 

NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Combined Condensed Balance Sheets
(in thousands)

   
September 30,
    
December 31,
  
   
2009
    
2008
  
 
 
(Unaudited)
        
Assets 
            
Rental property, at cost:
            
Land
   $ 7,582     $ 7,582  
Buildings
     107,139       107,066  
Tenant-in-common property
     22,662       22,662  
      137,383       137,310  
Less: accumulated depreciation
     72,997       69,978  
Rental property, net
     64,386       67,332  
                 
Cash and cash equivalents
     1,407       1,272  
Restricted cash
     127       63  
Investment securities available for sale, at market
     2,958       2,783  
Tenant accounts receivable, net of allowance of $30 as of September 30, 2009 and December 31, 2008, respectively
     26       55  
Unbilled rent receivable
     1,189       1,115  
Accounts receivable and other assets (1)
     535       924  
                 
Total assets
   $ 70,628     $ 73,544  
                 
Liabilities and Partners' Deficit
                
Wraparound mortgages payable (1)
   $ 158,685     $ 164,738  
Less: unamortized discount based on imputed interest rate of 12% (1)
     51,573       59,561  
                 
Wraparound mortgages payable less unamortized discount (1)
     107,112       105,177  
                 
Due to NPAEP (1)
     3,248       3,248  
Other borrowings (1)
     194       194  
Accounts payable and other liabilities (1)
     3,206       2,784  
Deferred revenue
     133       213  
Finance lease obligation
     1,750       1,750  
                 
Total liabilities
     115,643       113,366  
                 
Partners' deficit
     (45,015 )     (39,822 )
                 
Total liabilities and partners' deficit
   $ 70,628     $ 73,544  

 
(1) See Note 3:  Related Party Transactions.
See accompanying notes to Combined Condensed Financial Statements.

 
1
 

NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Combined Condensed Statements of Operations and Changes in Partners' Deficit (unaudited)
(in thousands, except per-unit data)

   
Three months ended
 September 30,
    
Nine months ended
 September 30,
  
   
 2009
    
 2008
    
 2009
      2008  
Income:
                        
Rental income
   $ 3,221     $ 3,148     $ 9,768     $ 9,625  
Other charges to tenants
     799       596       2,486       2,434  
Interest and dividend income
     48       12       174       77  
Total income
     4,068       3,756       12,428       12,136  
                                 
Operating expenses:
                                
Interest expense (1)
     3,204       3,075       9,517       9,010  
Real estate taxes
     746       729       2,231       2,176  
Management fees (1)
     133       89       435       422  
Common area maintenance expenses
     338       325       1,244       1,210  
Ground rent (1)
     432       192       819       575  
Repairs and maintenance
     125       83       305       293  
General and administrative (1)
     109       146       427       445  
Depreciation
     1,008       1,014       3,019       3,017  
Amortization
     19       19       56       83  
Total operating expenses
     6,114       5,672       18,053       17,231  
Operating loss
     (2,046 )     (1,916 )     (5,625 )     (5,095 )
                                 
Other loss:
                                
Realized gain (loss) on investment securities
     286       (76 )     310       (102 )
Loss from continuing operations
     (1,760 )     (1,992 )     (5,315 )     (5,197 )
                                 
Discontinued operations:
                                
Loss from operations of discontinued components
     -       (128 )     -       (334 )
Gain on disposition of properties
     -       -       -       1,474  
Net loss
     (1,760 )     (2,120 )     (5,315 )     (4,057 )
                                 
Partners' deficit:
                                
Beginning of period
     (43,195 )     (36,005 )     (39,822 )     (33,870 )
Net change in unrealized gain (loss) on investment securities
     (60 )     (352 )     122       (550 )
                                 
End of period
   $ (45,015 )   $ (38,477 )   $ (45,015 )   $ (38,477 )
                                 
Net loss per unit
   $ (18.00 )   $ (21.69 )   $ (54.37 )   $ (41.51 )
Weighted average units outstanding
     97,752       97,752       97,752       97,752  

(1) See Note 3:  Related Party Transactions.
See accompanying notes to Combined Condensed Financial Statements.

 
2
 

NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Combined Condensed Statements of Cash Flows (unaudited)
(in thousands, except per-unit data)

   
Nine months ended September 30,
  
   
2009
    
2008
  
Cash flows from operating activities:
            
Net loss
   $ (5,315 )   $ (4,057 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                
Depreciation and amortization
     3,075       3,112  
Amortization of discount (1)
     7,988       7,675  
Net gain on disposition of properties
     -       (1,474 )
Realized (gain) loss on investment securities
     (310 )     102  
Change in assets and liabilities
                
Decrease in tenant accounts receivable
     29       59  
Increase in unbilled rent receivable
     (74 )     (82 )
Decrease in accounts receivable and other assets (1)
     333       881  
Increase in accounts payable and other liabilities (1)
     422       10  
Decrease in deferred revenue
     (80 )     (200 )
Net cash provided by operating activities
     6,068       6,026  
                 
Cash flows from investing activities:
                
Disposition of properties
     -       2,099  
Improvements to rental property
     (73 )     (951 )
(Increase) decrease in restricted cash
     (64 )     109  
Purchase of investment securities
     (3,840 )     (2,596 )
Sale of investment securities
     4,097       1,523  
Net cash provided by investing activities
     120       184  
                 
Cash flows from financing activities:
                
Payments on wraparound mortgages (1)
     (6,053 )     (7,753 )
Increase in wraparound mortgages (1)
     -       407  
Increase in due to NPAEP (1)
     -       56  
Net cash used in financing activities
     (6,053 )     (7,290 )
                 
Increase (decrease) in cash and cash equivalents
     135       (1,080 )
                 
Cash and cash equivalents:
                
Beginning of period
     1,272       2,128  
                 
End of period
   $ 1,407     $ 1,048  
                 
Supplemental disclosure of cash flow information:
                
Cash paid during the period for interest
   $ 1,346     $ 1,544  
Supplemental disclosure of non-cash investing and financing activities:
                
Note receivable arising from property sale transactions
   $ -     $ 300  

(1) See Note 3:  Related Party Transactions.
See accompanying notes to Combined Condensed Financial Statements.
 
3
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Notes to Combined Condensed Financial Statements (Unaudited)
September 30, 2009
(dollars in thousands)
 
Note 1:  Basis of Presentation
 
The accompanying unaudited Combined Condensed Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q.  Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such instructions, although NPAMLP believes that the included disclosures are adequate for a fair presentation.  The information furnished reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations and cash flows for the interim periods presented.  These Combined Condensed Financial Statements should be read in conjunction with the Combined Condensed Financial Statements and notes thereto filed with Form 10-K for the year ended December 31, 2008. Pursuant to FASB’s authoritative guidance,  subsequent events have been evaluated through November 10, 2009, the date these financial statements were available to be issued, and there were no subsequent events to be reported.

Note 2:  Formation and Description of Business

National Property Analysts Master Limited Partnership (NPAMLP), a limited partnership, was formed effective January 1, 1990.  NPAMLP is owned 99% by the limited partners and 1% collectively by EBL&S, Inc., the managing general partner, and Feldman International, Inc. (“FII”), the equity general partner.

The properties included in NPAMLP consist primarily of regional shopping centers or malls with national retailers as anchor tenants.  The ownership and operations of these properties have been combined in NPAMLP.

The financial statements include the accounts of partnerships that contributed their interests to NPAMLP and certain partnerships whose partnership interests were not contributed as of the effective date of NPAMLP’s formation on January 1, 1990, but were allocated their interests in NPAMLP as if their partnership interests had been contributed on January 1, 1990.

Note 3:  Related Party Transactions

Management fees, leasing commissions and certain administrative services, including legal fees are paid to EBL&S Property Management, Inc (EBL&S), which is owned entirely by E&H Properties, Inc (E&H), a corporation owned and controlled by Edward B. Lipkin (Lipkin), a related party.  Management fees are paid exclusively to EBL&S and are included in the Combined Condensed Statements of Operations.  Leasing commissions are deferred over the life of their respective leases and are included in Accounts receivable and other assets on the Combined Condensed Balance Sheet at September 30, 2009. Certain administrative services, including legal fees, are reimbursed to EBL&S and are included in General and administrative expense on the Combined Condensed Statements of Operations. National Property Analysts Employee Partnership (NPAEP) holds the Wraparound mortgages payable.  Lipkin controls NPAEP, which owns 100% of the outstanding balance of the Wraparound mortgages payable.  Due to NPAEP, unamortized discount and interest expense are all financial statement accounts that relate directly to the Wraparound mortgages payable.  Other borrowings represent amounts due to E&H Properties of Delaware, Inc, (“EHD”), an affiliate of E&H.  Included within Accounts payable and other liabilities is $2,397 and $2,221 due to EBL&S at September 30, 2009 and December 31, 2008, respectively.
 
As of September 30, 2009, NPAMLP had an outstanding line of credit (the NPAMLP Line) with EHD, under which EHD has agreed to advance up to $2,500 to NPAMLP for the purposes of making capital and tenant improvements to the properties.  The line bears interest at a variable rate, based on the prime rate (3.25% at September 30, 2009), and has no expiration date. Any amounts advanced to NPAMLP are not directly secured by any collateral. Pursuant to the terms of the NPAMLP Line, the obligation of EHD to make advances to NPAMLP is at all times in the sole and absolute discretion of EHD.  As of September 30, 2009, there were $194 of advances and $125 of related accrued interest due under the NPAMLP Line.
 
4
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Notes to Combined Condensed Financial Statements (Unaudited)
September 30, 2009
(dollars in thousands)
 
In October 2007, NPAEP acquired from the unrelated third party owners, approximately 82% of the undivided interest in one of the parcels in Marquette, Michigan that is ground leased by NPAMLP. The terms of the ground lease were unchanged. As a result of the purchase, NPAEP receives $18 annually in ground rental payments from NPAMLP.

Note 4:  Major Tenants

NPAMLP’s primary anchor tenants are Sun Microsystems (the tenant at the tenant-in-common property), Sears Holdings Corporation and its subsidiaries (“Sears”) and CVS Corporation (“CVS”).  The number of locations, gross leaseable area (“GLA”) and percentage of minimum rent for these tenants for the nine-month period ended September 30, 2009 and 2008 are detailed in the table below.  As of September 30, 2009, Sears owed NPAMLP approximately $11 under its leases with NPAMLP.  Sun Microsystems and CVS had no outstanding balances due under its leases with NPAMLP at September 30, 2009.
 
   
As of September 30, 2009
    
As of September 30, 2008
  
Tenant
  
No.
Locations
    
GLA
    
% of Minimum Rent
    
No.
Locations
    
GLA
    
% of Minimum Rent
  
Sun Microsystems
    
1
       249,832       23 %    
1
       249,832       23 %
Sears
    
7
       703,300       18 %    
7
       703,300       19 %
CVS
    
5
       56,770       14 %    
5
       56,770       14 %

Note 5:  Future Interest Agreement

In March 2003, NPAMLP, NPAEP and PVPG, entered into an Agreement, effective as of January 1, 2003 (the “2003 Agreement”), in which NPAEP and PVPG agreed with NPAMLP to modify the terms of Wrap Mortgages held by NPAEP and PVPG.  The terms of the 2003 Agreement provided that NPAEP and PVPG: (a) reduce to 4.1% per year the annual interest rate payable on any NPAEP Wrap Note or PVPG Wrap Note that bears a stated annual interest rate in excess of that amount (the reduction in the interest rate was evaluated by NPAMLP in accordance with FASB’s authoritative guidance, and was determined not to be a substantial modification of terms as defined therein); (b) remove certain of the properties secured by the NPAEP and PVPG Wrap Mortgages from the burden of the cross-default and cross-collateralization provisions currently contemplated by the Restructuring Agreement effective as of January 1, 1990 by and among MLPG, NPAMLP, National Property Analysts, Inc. and others; and (c) agree to release the lien of the Wrap Mortgages from the Properties upon a sale of or the agreement of a leasehold estate in any Property prior to the maturity of the applicable Wrap Note.  In consideration for the above, NPAMLP will modify the NPAEP Wrap Mortgages and the PVPG Wrap Mortgages to provide that (i) there is an event of default under the applicable NPAEP Wrap Mortgages or PVPG Wrap Mortgages, as the case may be, if a judgment or other lien is entered against the title or lease-holding entity thereby entitling NPAEP or PVPG, as the case may be, to avail itself of the post-default rights or remedies under the relevant security document; and (ii) for cross-default and cross-collateralization among the Unaudited Partnerships and, separately, among the Audited Partnerships.  In addition NPAMLP shall execute and deliver to NPAEP or PVPG, as the case may be, a currently recordable deed of future interest (or assignment of future leasehold interest) sufficient to convey to NPAEP or PVPG, as the case may be, all of NPAMLP’s right, title, interest and estate in and to its fee or leasehold interest in the encumbered properties effective upon the maturity on December 31, 2013 of the NPAEP Wrap Mortgages and the PVPG Wrap Mortgages unless the Wrap Mortgages have previously been paid in full.
 
5
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Notes to Combined Condensed Financial Statements (Unaudited)
September 30, 2009
(dollars in thousands)
 
The Managing General Partner believes that the execution and delivery of the 2003 Agreement will have the following effects for NPAMLP as a result of the reduction in the annual interest rate on the NPAEP Wrap Notes and The PVPG Wrap Notes (i) NPAMLP has realized reductions in interest that it otherwise would have been obligated to pay during the period between January 1, 2003 and December 31, 2013 when these loans mature and (ii) NPAMLP will be able to allocate a greater portion of its available cash flow to principal repayments.  As a result of the faster repayment of principal, the Limited Partners will recognize additional taxable income (or smaller tax losses) in each year from 2003 until the maturity of the NPAEP Wrap Mortgages and the PVPG Wrap Mortgages.  In addition, the anticipated date of dissolution of NPAMLP will now occur in 2013 rather than 2015.  Further, because the reduced interest rate is below the Applicable Federal Rate (“AFR”) prescribed under Section 1274, Internal Revenue Code of 1986, as amended, investors in Unaudited Partnerships have recognized non-recurring ordinary income (forgiveness of indebtedness) in 2003.  The tax impact of this recognition depended upon numerous factors related to each investor’s particular tax situation, including his marginal tax rate and his suspended passive losses from prior years.

Under the terms of the Restructuring Agreement, all Wrap Mortgages owned by NPAEP or PVPG are due and payable in substantial “balloon” amounts on December 31, 2013.  Assuming no sales of Properties by NPAMLP in the interim period (2009 through 2013) the projected balance due for all of the Wrap Mortgages at December 31, 2013 is expected to approximate $118,000.  As described above, in return for the reduction in interest rate and other consideration set forth above, including the satisfaction of the Wrap Mortgages due on December 31, 2013, NPAMLP’s Managing General Partner agreed to deliver deeds of future interest and assignments of leasehold interest, to be recorded currently, effective December 31, 2013, to NPAEP and PVPG.  NPAMLP’s Managing General Partner determined that it is in the best interests of NPAMLP and its partners to do so.  The effect of these deeds and assignments is to facilitate a transfer of fee and leasehold ownership to the holders of the Wrap Mortgages at maturity (unless the Wrap Mortgages have been previously paid in full).  Notwithstanding the foregoing, NPAEP and PVPG have agreed in the 2003 Agreement to (a) release the liens of the Wrap Mortgages and (b) deliver such deeds of future interest, assignments of leasehold interests, or other documents or instruments as are necessary to facilitate or effect such sales of the Properties prior to December 31, 2013 as the Managing General Partner shall otherwise deem desirable.  The costs incurred arising from the recordation of any of the documents described in the 2003 Agreement shall be borne by NPAEP or PVPG, as the case may be.  The Managing General Partner believes that the result of the forgoing actions taken pursuant to the 2003 Agreement will preserve all rights of the Limited Partners under the Restructuring Agreement, including their right to share in certain sales proceeds or cash flows prior to maturity of the Wrap Mortgages.

Neither NPAMLP, NPAEP nor PVPG were represented by independent counsel or retained other independent advisers or consultants in connection with the negotiation, execution or delivery of the 2003 Agreement.  Nonetheless, the Managing General Partner believes that the transactions permitted or contemplated by the 2003 Agreement are fair and equitable to NPAMLP and the other parties involved.

Note 6: Commitments and Contingencies

In June 2006, NPAMLP and a limited liability company controlled by Lipkin (“ARJAX”) entered into an agreement with an anchor tenant (the “Agreement”), whereby the lease with the anchor tenant would be assigned to NPAMLP or ARJAX effective February 2009 (the “Effective Date”).  In consideration for the assignment, the anchor tenant would receive payments totaling $2,550 during the period from June 2006 through the Effective Date.  To date, ARJAX has remitted $1,400 to the anchor tenant in accordance with the terms of the Agreement. In addition, the anchor tenant will be obligated to complete, by the Effective Date, $500 in repairs or improvements which would otherwise be the responsibility of NPAMLP to six other stores leased from NPAMLP. Under the Agreement, the commitment to the anchor tenant is borne by ARJAX and NPAMLP, however it is anticipated that ARJAX shall fund all of the consideration due. In September 2006, NPAMLP sold the property encumbered by the affected anchor tenant lease to ARJAX.  NPAMLP would be liable for the payments required under the Agreement should ARJAX fail to do so.  Lipkin has personally guaranteed the obligations to the anchor tenant under the Agreement. In June 2008, the Agreement was amended extending the Effective Date to January 31, 2011.

 
6
 
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Notes to Combined Condensed Financial Statements (Unaudited)
September 30, 2009
(dollars in thousands)
 
In September 2009, the anchor tenant at the property in Kalamazoo, Michigan elected not to exercise a five year option to extend its lease, and accordingly the anchor tenant space will become vacant effective March 1, 2010.  Although there is no third party underlying indebtedness on the property, if NPAMLP is unable to find a new tenant NPAMLP may be unable to meet its obligations under the ground lease and the property may be lost due to a termination of the ground lease.

At September 30, 2009, cash was held in multiple accounts maintained at three separate financial institutions. At September 30, 2009 the total cash balance held at these institutions was approximately $1,457. These balances exceeded federally insured limits by approximately $853.

Note 7: Disposition of Property
 
In January 2008, NPAMLP sold the property in Yazoo City, Mississippi. As a result of this transaction, NPAMLP recognized a net gain on sale in the amount of $1,515. The sale generated $2,072 in net proceeds (excluding a 7% promissory note of $300 due in January 2013. This note was paid off by the buyer in March 2009), of which $2,000 was remitted to NPAEP and applied as a principal reduction on the balance of the wraparound mortgage.  The principal balance of the wraparound mortgage on the Yazoo City property, in the amount of $1,019, remains a liability of NPAMLP.  In March 2008, NPAMLP sold the remaining property in Wheelersburg, Ohio. As a result of this transaction, NPAMLP recognized a net loss on sale of $41.  The net proceeds from this transaction in the amount of $27 were retained by NPAMLP.  The principal balance of the wraparound mortgage on the Wheelersburg property, in the amount of $1,094, remains a liability of NPAMLP.

Note 8: Recent Accounting Pronouncements

In April 2009, the FASB issued authoritative guidance about Fair Value of Financial Instruments to require disclosures about the fair value of financial instruments for interim reporting periods. The guidance was effective for interim reporting periods ending after June 15, 2009. NPAMLP has adopted the FASB guidance, which did not have a significant impact on its combined condensed financial statements. See Note 9 for additional disclosures about fair value measurements.

In April 2009, the FASB issued authoritative guidance, which amended the other-than-temporary impairment guidance for debt and equity securities. The guidance was effective for interim and annual reporting periods ending after June 15, 2009. NPAMLP has adopted the FASB guidance, which did not have a significant impact on its combined condensed financial statements.

In April 2009, the FASB issued authoritative guidance for Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This guidance is effective for interim reporting periods ending after June 15, 2009, and NPAMLP adopted it as of April 1, 2009. This guidance did not change NPAMLP’s fair value measurement techniques.

In May 2009, the FASB issued authoritative guidance, which sets forth principles and requirements for subsequent events, specifically (1) the period during which management should evaluate events or transactions that may occur for potential recognition and disclosure, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date, and (3) the disclosures that an entity should make about events and transactions occurring after the balance sheet date. The guidance is effective for interim reporting periods ending after June 15, 2009. NPAMLP has adopted the provisions of the guidance, which did not have a material impact on its combined condensed financial statements.

In June 2009, the FASB issued authoritative guidance to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about (1) a transfer of its financial assets, (2) the effects of such a transfer on its financial position, financial performance, and cash flows, and (3) a reporting entity’s continuing involvement, if any, in the transferred financial assets. The guidance is effective for annual reporting periods beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, with early adoption prohibited. NPAMLP is currently evaluating the potential impact of the adoption of the guidance, but does not believe that it will have a material impact on its combined condensed financial statements.
 
7
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

Notes to Combined Condensed Financial Statements (Unaudited)
September 30, 2009
(dollars in thousands)
 
In June 2009, the FASB issued authoritative guidance to improve financial reporting disclosure by companies involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. The guidance is effective for annual reporting periods beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, with early adoption prohibited. NPAMLP is currently evaluating the potential impact of the adoption of the guidance on its combined partnerships, but does not believe that it will have a material impact on its combined condensed financial statements.

In the third quarter of 2009, NPAMLP adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).  The ASC is now the single official source of authoritative, nongovernmental generally accepted accounting principles (“GAAP”), other than guidance issued by the SEC.  The adoption of the ASC did not have any impact on NPAMLP’s combined condensed financial statements included herein.

In August 2009, the FASB issued Accounting Standards Update No 2009-05 (“ASC Update 2009-05”), an update to FASB ASC 820, Fair Value Measurements and Disclosures.  This update provides amendments to reduce potential ambiguity in financial reporting when measuring the fair value of liabilities.  Among other provisions, this update provides clarification that in circumstances, in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the valuation techniques described in ASC Update 2009-05.  ASC Update 2009-05 will become effective for NPAMLP’s annual combined condensed financial statements for the year ended December 31, 2009.  NPAMLP has not determined the impact that this update may have on its combined condensed financial statements.

Note 9. Disclosure of Fair Value of Financial Instruments

Effective April 2009, NPAMLP adopted the provisions of FASB’s authoritative guidance to require disclosures about fair value of financial instruments in both interim and annual financial statements. This guidance also requires those disclosures in summarized financial information at interim reporting periods.

The following disclosure of estimated fair value was determined by NPAMLP using available market information and appropriate valuation methodologies.  However, considerable judgment is necessary to interpret market data and develop estimated fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts NPAMLP could realize on disposition of the financial instruments at September 30, 2009 and December 31, 2008.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash equivalents, marketable securities, receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of September 30, 2009 and December 31, 2008.

The fair value of the NPAMLP’s wraparound mortgages aggregate approximately $106 million and $105 million as of September 30, 2009 and December 31, 2008, respectively.  Management estimates that the carrying value approximates the estimated fair value of the wraparound mortgages at September 30, 2009 and December 31, 2008.  In accordance with the guidance, NPAMLP has determined the estimated fair value of its wraparound mortgages based on discounted future cash flows at a current market rate.  

Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2009 and December 31, 2008.  Although NPAMLP is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2009 and current estimates of fair value may differ significantly from the amounts presented herein.

 
8
 
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

September 30, 2009
(dollars in thousands)
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

Net cash provided by operating and investing activities for the nine-month period ended September 30, 2009 was $6,068 and $120, respectively.  Net cash used in financing activities was ($6,053).  As a result of the above, there was a $135 increase in cash and cash equivalents for the nine months ended September 30, 2009.  The increase in cash was primarily due to decreases in accounts receivable over the nine-month period.

At September 30, 2009, cash was held in multiple accounts maintained at three separate financial institutions. At September 30, 2009 the total cash balance held at these institutions was approximately $1,457. These balances exceeded federally insured limits by approximately $853.

As of September 30, 2009, NPAMLP had an outstanding line of credit (the NPAMLP Line) with EHD, a related party, under which EHD has agreed to advance up to $2,500 to NPAMLP for the purposes of making capital and tenant improvements to the properties.  The line bears interest at a variable rate, based on the prime rate (3.25% at September 30, 2009), and has no expiration date. Any amounts advanced to NPAMLP are not directly secured by any collateral. Pursuant to the terms of the NPAMLP Line, the obligation of EHD to make advances to NPAMLP is at all times in the sole and absolute discretion of EHD.  As of September 30, 2009, there were $194 of advances and $125 of related accrued interest under the NPAMLP Line.

In April 2008, the third party underlying mortgage on the Marquette, Michigan property was refinanced.  As a result of this transaction, the balance of the wrap mortgage indebtedness was increased by $407 and proceeds in the amount of $407 will be used for capital improvements to the property.

As of September 30, 2009, the third party underlying mortgages were current for all the properties.

As of September 30, 2009, NPAMLP had no obligations for capital commitments.

Critical Accounting Policies

Other than the disclosure detailed in Note 9, there were no significant changes to NPAMLP’s critical accounting policies and estimates during the nine-month period ended September 30, 2009.

Results of Operations

NPAMLP owned 24 properties at September 30, 2009 and September 30, 2008.
 
Loss from continuing operations increased for the nine-month period ended September 30, 2009 versus September 30, 2008 by $118.  The increase in the loss from continuing operations was primarily due to higher ground rent expense and interest expense. The increase in ground rent is due to the settlement of ground rent participation. The increase in interest expense was primarily due to the interest expense recognized on the balance of the wraparound mortgages on properties sold in prior years, as noted below. The increase in interest expense is net of a reduction in interest expense arising from changes in amortization of the discount on the wraparound mortgages due to changes in projected future cash flows on the wraparound mortgages.

In January 2008, NPAMLP sold the property in Yazoo City, Mississippi. As a result of this transaction, NPAMLP recognized a net gain on sale in the amount of $1,515. The sale generated $2,072 in net proceeds (excluding a 7% promissory note of $300 due in January 2013. This note was paid off by the buyer in March 2009), of which $2,000 was remitted to NPAEP and applied as a principal reduction on the balance of the wraparound mortgage. The principal balance of the wraparound mortgage on the Yazoo City property, in the amount of $1,019, remains a liability of NPAMLP. In March 2008, NPAMLP sold the remaining property in Wheelersburg, Ohio that was not sold in December 2007. As a result of this transaction, NPAMLP recognized a net loss on sale of $41. The net proceeds from this transaction in the amount of $27 were retained by NPAMLP. The principal balance of the wraparound mortgage on the Wheelersburg property, in the amount of $1,094, remains a liability of NPAMLP.

 
9
 
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

September 30, 2009
(dollars in thousands)
 
Factors That May Influence Future Results of Operations

Economic Conditions.     In the United States, recent market and economic conditions have resulted in tighter credit conditions and limited growth through the first nine months of 2009.  As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets. Concern about the stability of the markets has led many lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers. Since there are no balloon payments due on the third party underlying mortgages until 2012, NPAMLP has less exposure to these credit conditions. Continued turbulence in the U.S. and international markets and economies may adversely affect the liquidity and financial condition of our tenants and consequently, NPAMLP’s liquidity. If these market conditions continue, they may limit the ability of our tenants, to timely refinance maturing liabilities and access the capital markets to meet liquidity needs.

Real Estate Asset Valuation.    General economic conditions and the resulting impact on market conditions or a downturn in tenants’ businesses may adversely affect the value of NPAMLP’s assets. Periods of economic slowdown or recession in the U.S., a decrease in market rental rates and/or market values of real estate assets, could have a negative impact on the value of NPAMLP properties and related tenant improvements.  If NPAMLP was required under Generally Accepted Accounting Pronouncements to write down the carrying value of any properties to the lower of cost or market due to impairment, or if as a result of an early lease termination we were required to remove and dispose of material amounts of tenant improvements that are not reusable to another tenant, NPAMLP’s results of operations would be negatively affected.

Leasing Activity and Rental Rates.     During the next twelve months 15 leases (excluding the anchor tenant lease in Kalamazoo noted below), representing 7% of the net leasable square footage of all NPAMLP properties, are scheduled to expire. The amount of net rental income generated by NPAMLP properties depends principally on the ability to maintain the occupancy rates of currently leased space and to lease currently available space, and space available from unscheduled lease terminations. The amount of rental income generated also depends on the ability to maintain or increase rental rates at the properties. Negative trends in one or more of these factors could adversely affect rental income in future periods.

In September 2009, the anchor tenant at the property in Kalamazoo, Michigan elected not to exercise a five year option to extend its lease, and accordingly the anchor tenant space will become vacant effective March 1, 2010.  Although there is no third party underlying indebtedness on the property, if NPAMLP is unable to find a new tenant NPAMLP may be unable to meet its obligations under the ground lease and the property may be lost due to a termination of the ground lease.

Tenant Credit Risk. In the event of a tenant default, NPAMLP may experience delays in enforcing its rights as a landlord and may incur substantial costs in protecting its investment. NPAMLP management regularly evaluates its accounts receivable reserve policy in light of its tenant base and general and local economic conditions. If economic conditions persist or deteriorate further, NPAMLP may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. This condition would negatively affect NPAMLP’s future net income and cash flows and could have a material adverse effect on NPAMLP’s financial condition.

Forward Looking Statements
 
From time to time, management may provide information, whether orally or in writing, including certain statements in this Quarterly Report on Form 10-Q, which are deemed to be “forward-looking” within the meaning of the federal securities laws.  These forward-looking statements reflect management’s current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside management’s control that may cause actual results to differ materially from those projected.
 
10
 
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)

September 30, 2009
(dollars in thousands)
 
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect management’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended or using other similar expressions. Management does not intend to update these forward-looking statements, except as required by law. In accordance with the provisions of the federal securities laws, we are making the limited partners aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K and any exhibits hereto or thereto. Such factors include, but are not limited to: the outcome of litigation and regulatory proceedings to which NPAMLP may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; the ability to attract and retain tenants at market rates; interest rates and cost of borrowing; management’s ability to maintain and improve cost efficiency of operations; changes in economic conditions, political conditions, and other factors that are set forth in the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q, as well as in our Annual Report on Form 10-K and Current Reports on Form 8-K.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4 T.  Controls and Procedures

NPAMLP’s managing general partner, equity general partner and its agent’s chief financial officer, after evaluating the effectiveness of NPAMLP’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report, have concluded, based on the evaluation of these controls and procedures required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15, that NPAMLP’s disclosure controls and procedures were adequate and designed to ensure that material information relating to NPAMLP would be made known to them by others within NPAMLP or agents of NPAMLP.

There were no changes in NPAMLP’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during NPAMLP’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, NPAMLP’s internal control over financial reporting.

 
11
 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings
NPAMLP is involved in various claims and legal actions arising in the ordinary course of property operations.  In the opinion of the General Partners, the ultimate disposition of these matters will not have a material adverse effect on NPAMLP's financial position, results of operations or liquidity.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

None.

Item 6.  Exhibits

Exhibit No.
  
Description
     
31.1
  
Certification Pursuant To Section 302 of Sarbanes-Oxley Act of 2002.
31.2
  
Certification Pursuant To Section 302 of Sarbanes-Oxley Act of 2002.
31.3
  
Certification Pursuant To Section 302 of Sarbanes-Oxley Act of 2002.
32.1
  
Certification Pursuant To Section 906 of Sarbanes-Oxley Act of 2002.
32.2
  
Certification Pursuant To Section 906 of Sarbanes-Oxley Act of 2002.
32.3
  
Certification Pursuant To Section 906 of Sarbanes-Oxley Act of 2002.

 
12
 

SIGNATURES

Pursuant to the requirements of the Securities and 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 Analysts Master Limited Partnership
 
(Registrant)
     
 
Date:
November 12, 2009
     
 
By:
EBL&S, Inc., its managing general partner
     
 
By:
/s/ Edward B. Lipkin
 
Name:
Edward B. Lipkin
 
Title:
President
     
 
By:
Feldman International, Inc., its equity general partner
     
 
By:
/s/ Robert McKinney
 
Name:
Robert McKinney
 
Title:
President

 
13
 

NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP Reports