FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of small business issuer as specified in its charter)
California 94-2382571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) 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 X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
June 30, 1996
Assets
Cash:
Unrestricted $ 3,042
Restricted--tenant security deposits 326
Accounts receivable 26
Escrow for taxes 374
Restricted escrows 833
Other assets 561
Investment properties:
Land $ 4,610
Buildings and related personal property 35,738
40,348
Less accumulated depreciation (19,711) 20,637
$25,799
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 255
Tenant security deposits 324
Accrued taxes 337
Other liabilities 504
Mortgage notes payable 24,690
Partners' Capital (Deficit)
General partner $ (3,277)
Limited partners (49,196 units
issued and outstanding) 2,966 (311)
$25,799
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $2,631 $2,471 $5,225 $5,166
Other income 181 422 351 716
Total revenues 2,812 2,893 5,576 5,882
Expenses:
Operating 885 799 1,685 2,013
General and administrative 123 105 218 185
Partnership management fees -- -- 123 490
Maintenance 436 328 743 613
Depreciation 466 432 921 930
Interest 441 163 939 374
Property taxes 175 202 350 389
Total expenses 2,526 2,029 4,979 4,994
Gain on sale of
investment property -- -- -- 3,693
Income before extraordinary item 286 864 597 4,581
Extraordinary (loss) gain on early
extinguishment of debt -- -- (119) 121
Net income $ 286 $ 864 $ 478 $4,702
Net income allocated
to general partner (1%) $ 3 $ 9 $ 5 $ 47
Net income allocated
to limited partners (99%) 283 855 473 4,655
$ 286 $ 864 $ 478 $4,702
Per limited partnership unit:
Income before extraordinary item $ 5.75 $17.38 $12.01 $92.18
Extraordinary item -- -- (2.40) 2.44
Net income per limited
partnership unit $ 5.75 $17.38 $ 9.61 $94.62
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except for unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 49,196 $ 1 $ 49,196 $ 49,197
Partners' capital (deficit)
at December 31, 1995 49,196 $ (3,267) $ 4,057 $ 790
Distributions to partners (15) (1,564) (1,579)
Net income for the six months
ended June 30, 1996 5 473 478
Partners' capital (deficit)
at June 30, 1996 49,196 $ (3,277) $ 2,966 $ (311)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) CONSOLIDATED CAPTIAL GROWTH FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 478 $ 4,702
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 921 930
Amortization of loan costs 25 16
Gain on sale of investment property -- (3,693)
Loss (gain) on early extinguishment of debt 96 (121)
Loss on disposal of property -- 67
Change in accounts:
Restricted cash (15) 79
Accounts receivable 10 53
Escrows for taxes (247) (410)
Other assets 25 124
Accounts payable (53) 89
Tenant security deposit liabilities 15 (37)
Accrued taxes 337 7
Other liabilities 85 (11)
Net cash provided by operating activities 1,677 1,795
Cash flows from investing activities:
Property improvements and replacements (544) (589)
Cash received from sale of securities
available for sale -- 4,441
Proceeds from sale of investment property -- 7,966
Receipts from restricted escrows 96 411
Deposits to restricted escrows (11) --
Net cash (used in) provided by
investing activities (459) 12,229
Cash flows from financing activities:
Payments on mortgage notes payable (32) (223)
Repayment of mortgage notes payable (1,282) (4,850)
Distributions to partners (1,579) (5,623)
Net cash used in financing activities (2,893) (10,696)
Net (decrease) increase in cash and cash equivalents (1,675) 3,328
Cash and cash equivalents at beginning of period 4,717 2,358
Cash and cash equivalents at end of period $ 3,042 $ 5,686
Supplemental disclosure of cash flow information:
Cash paid for interest $ 810 $ 334
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Growth Fund (the "Partnership) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended June 30,
1996, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership paid property management fees based upon collected gross rental
revenues for property management services as noted below for the six month
period ended June 30, 1996 and 1995, respectively. Such fees are included in
operating expense on the consolidated statement of operations and are reflected
in the following table. The Limited Partnership Agreement ("Agreement")
provides for reimbursement to the General Partner and its affiliates for costs
incurred in connection with the administration of Partnership activities. Such
reimbursements are included in general and administrative expense on the
consolidated statement of operations. The General Partner and its current and
former affiliates received reimbursements and fees as reflected in the following
table:
For the Six Months Ended
June 30,
1996 1995
(in thousands)
Property management fees $ 274 $ 270
Reimbursement for services of affiliates 116 147
Partnership management fees (1) 123 490
(1) The Agreement provides for a fee equal to 9% of the total distributions
made to the limited partners from "cash available for distribution" to the
limited partners (as defined in the Agreement) to be paid to the General
Partner for executive and administrative management services.
On July 1, 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner who
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
Note C - Disposition of Real Estate
On February 10, 1995, the General Partner, on behalf of the Partnership,
executed a contract for the sale of Forest Hills Apartments for a gross sales
price of $8.25 million. The Partnership realized a net gain of approximately
$3.7 million on the sale after repayment of the related mortgage debt and other
closing costs.
The following table sets forth the statement of operations for Forest Hills
Apartments at June 30, 1995:
Six Months Ended
June 30, 1995
Revenues:
Rental income $ 234
Other income 77
Total revenues 311
Expenses:
Operating 272
Maintenance 57
Depreciation 45
Interest 39
Property taxes 70
Total expenses 483
Gain on sale of real estate 3,693
Income before extraordinary item 3,521
Extraordinary gain on early
extinguishment of debt 121
Net income $3,642
Note D - Early Extinguishment of Debt
In March 1996, the Partnership paid off the first and second mortgages of Tahoe
Springs totaling approximately $1,282,000, with a portion of the refinancing
proceeds received in December 1995 from the refinancing of Breckinridge Square,
Churchill Park and The Lakes. An extraordinary gain on early extinguishment of
debt in the amount of approximately $119,000 was recorded upon payoff of the
mortgage notes. Of this amount, approximately $96,000 was recorded due to the
write off of the remaining mortgage note discount and approximately $23,000 was
recorded due to prepayment penalties incurred.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consists of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Breckinridge Square
Louisville, Kentucky 94% 92%
Churchill Park
Louisville, Kentucky 92% 92%
The Lakes
Raleigh, North Carolina 95% 92%
Tahoe Springs
Miami, Florida 95% 93%
Results of Operations
The Partnership's net income as shown in the financial statements for the six
months ended June 30, 1996, was approximately $478,000 versus net income of
approximately $4,702,000 for the corresponding period of 1995. The
Partnership's net income for the three months ended June 30, 1996, was
approximately $286,000 compared to approximately $864,000 for the same period in
1995. The decrease in net income for the six months ended June 30, 1996, is
primarily due to the recognition of a $3,693,000 gain on the sale of Forest
Hills Apartment complex in February 1995. Also, in 1995 the Partnership
recognized a $121,000 extraordinary gain on early extinguishment of debt as a
result of a partial forgiveness of debt by the mortgage holder upon the sale of
Forest Hills Apartments. In the six months ended June 30, 1996, a $119,000
extraordinary loss on the early extinguishment of debt at Tahoe Springs was
recognized as a result of the write off of the related mortgage note discounts
and prepayment penalties paid in connection with the early payoff of the
mortgage notes. The decrease in net income for the three month period ended
June 30, 1996, is primarily due to the increase in total expenses as explained
below. Contributing to the decrease in net income during the three and six
month periods ended June 30, 1996, was a decrease in other income, which
resulted from lower interest income due to a decrease in securities available
for sale. During the six months ended June 30, 1995, the securities available
for sale were liquidated to facilitate the $5,509,000 distribution paid to the
partners in March 1995.
The decrease in net income during the three and six month periods ended June 30,
1996, was also caused by an increase in total expenses. The increase in total
expenses was primarily attributable to an increase in interest expense, which
resulted from the mortgage refinancing at Breckinridge Square and new mortgage
financing at The Lakes and Churchill Park, all of which closed in December 1995.
Maintenance expenses increased due to major landscaping to deter water retention
at The Lakes and significant HVAC repairs incurred at Tahoe Springs. General
and administrative expense increased due to the payment of approximately $36,000
to Louisville-Jefferson Revenue Commission for Partnership occupational license
fees for Breckinridge Square and Churchill Park, which are located in
Louisville, Kentucky. The decrease in operating expense for the six months
ended June 30, 1996, is attributable to the sale of Forest Hills Apartments in
February 1995. The increase in operating expenses for the three months ended
June 30, 1996, is primarily due to increases in utilities and personnel costs.
Utilities have increased due to the extraordinarily cold spring experienced in
the South. Personnel costs have increased due to the hiring of additional
employees to fill vacancies in both full and part-time positions. Offsetting
this increase in expenses was a decrease in partnership management fees for the
six months ended June 30, 1996, due to the decrease in distributions made to the
limited partners from "cash available for distribution" (as defined in the
agreement). Property tax expense decreased during the three and six month
periods ended June 30, 1996, due to the fact that the current expense is being
accrued based on the assumption that the Partnership will take advantage of
early payment discounts available from most of the taxing authorities. These
discounts were not known to have existed at the time the tax expense was accrued
at June 30, 1995.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 1996, the Partnership had unrestricted cash of approximately
$3,042,000 versus approximately $5,686,000 at June 30, 1995. Net cash provided
by operating activities decreased primarily due to a decrease in accounts
payable. Offsetting the decrease in accounts payable was an increase in accrued
taxes due to the timing of payments to the taxing authorities. Net cash used in
investing activities increased due to cash received in 1995 from securities
available for sale and the proceeds received in 1995 from the sale of Forest
Hills Apartments. Net cash used in financing activities decreased due to the
repayment of the mortgage note payable on Forest Hills in 1995 and a decrease in
cash distributions paid in the first six months of 1996.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $24,690,000 requires monthly interest only payments.
These notes require balloon payments on December 1, 2005, at which time the
properties will either be refinanced or sold. During March 1996, the
Partnership distributed approximately $1,363,000 or $27.71 per Unit, to the
limited partners. The General Partner received a matching distribution of
approximately $14,000. Also, during the first quarter of 1996, the Partnership
paid approximately $137,000 to the Georgia Department of Revenue for withholding
taxes related to income generated by Forest Hills, located in Georgia. During
the second quarter of 1996, the Partnership paid approximately $65,000 to the
North Carolina Department of Revenue for withholding taxes related to income
generated by The Lakes, located in North Carolina. These taxes have been
treated as a distribution to the partners and have been allocated approximately
$201,000 to the limited partners and approximately $1,000 to the General
Partner. A distribution of approximately $5,449,000 or $110.77 per unit was
made to the limited partners with a matching distribution of $60,000 to the
General Partner in March 1995. Also, as of June 30, 1995, the Partnership owed
approximately $114,000 to the North Carolina Department of Revenue for
withholding taxes related to income generated by the Partnership's investment
property located in North Carolina. These taxes have been treated as a
distribution to the limited partners. Future cash distributions will depend on
the levels of cash generated from operations, capital expenditure requirements,
property sales, refinancings and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL GROWTH FUND
By: CONCAP EQUITIES, INC.
the General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: July 31, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Growth Fund 1996 Second Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000201529
<NAME> CONSOLIDATED CAPITAL GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,042
<SECURITIES> 0
<RECEIVABLES> 26
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 40,348
<DEPRECIATION> 19,711
<TOTAL-ASSETS> 25,799
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 24,690
0
0
<COMMON> 0
<OTHER-SE> (311)
<TOTAL-LIABILITY-AND-EQUITY> 25,799
<SALES> 0
<TOTAL-REVENUES> 5,576
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,979
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 939
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (119)
<CHANGES> 0
<NET-INCOME> 478
<EPS-PRIMARY> 9.61
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
