FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
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 September 30, 1997
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
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
September 30, 1997
Assets
Cash:
Unrestricted $ 2,118
Restricted--tenant security deposits 309
Accounts receivable 51
Escrows for taxes 581
Restricted escrows 611
Other assets 662
Investment properties:
Land $ 4,610
Buildings and related personal property 37,438
42,048
Less accumulated depreciation (22,143) 19,905
$24,237
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 151
Tenant security deposit liabilities 309
Accrued taxes 448
Other liabilities 455
Mortgage notes payable 30,690
Partners' Deficit
General partner $ (4,263)
Limited partners (49,196 units
issued and outstanding) (3,553) (7,816)
$24,237
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $2,736 $2,680 $8,061 $7,905
Other income 210 242 559 593
Total revenues 2,946 2,922 8,620 8,498
Expenses:
Operating 985 914 2,816 2,598
General and administrative 36 131 192 349
Partnership management fees -- 90 82 213
Maintenance 374 483 1,028 1,226
Depreciation 501 479 1,476 1,401
Interest 559 442 1,678 1,381
Property taxes 158 114 466 464
Total expenses 2,613 2,653 7,738 7,632
Income before extraordinary item 333 269 882 866
Extraordinary loss on early
extinguishment of debt -- -- -- (119)
Net income $ 333 $ 269 $ 882 $ 747
Net income allocated
to general partner (1%) $ 3 $ 2 $ 9 $ 7
Net income allocated
to limited partners (99%) 330 267 873 740
Net income $ 333 $ 269 $ 882 $ 747
Per limited partnership unit:
Income before extraordinary item $ 6.70 $ 5.41 $17.75 $17.42
Extraordinary item -- -- -- (2.40)
Net income per limited
partnership unit $ 6.70 $ 5.41 $17.75 $15.02
See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except for unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $49,196 $49,197
Partners' capital (deficit)
at December 31, 1996 49,196 $(3,339) $ 2,131 $(1,208)
Distributions to partners -- (933) (6,557) (7,490)
Net income for the nine months
ended September 30, 1997 -- 9 873 882
Partners' deficit at
September 30, 1997 49,196 $(4,263) $(3,553) $(7,816)
See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income $ 882 $ 747
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,476 1,401
Amortization of loan costs 61 38
Extraordinary loss on early extinguishment of debt -- 119
Change in accounts:
Restricted cash 37 (26)
Accounts receivable (5) (1)
Escrows for taxes (358) (448)
Other assets (4) 47
Accounts payable (76) (215)
Tenant security deposit liabilities (37) 26
Accrued taxes 448 451
Other liabilities 4 34
Net cash provided by operating activities 2,428 2,173
Cash flows from investing activities:
Property improvements and replacements (971) (851)
Receipts from restricted escrows 619 118
Deposits to restricted escrows (315) (24)
Net cash used in investing activities (667) (757)
Cash flows from financing activities:
Payments on mortgage notes payable -- (32)
Repayment of mortgage notes payable -- (1,282)
Loan costs paid -- (28)
Prepayment penalties -- (23)
Distributions to partners (7,406) (2,990)
Net cash used in financing activities (7,406) (4,355)
Net decrease in cash and cash equivalents (5,645) (2,939)
Cash and cash equivalents at beginning of period 7,763 4,717
Cash and cash equivalents at end of period $ 2,118 $ 1,778
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,796 $ 1,239
See Accompanying Notes to Consolidated Financial Statements
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 ConCap Equities, Inc. ("General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1997, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the year
ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the 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 nine month
periods ended September 30, 1997 and 1996, 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. The General Partner and its affiliates received
reimbursements and fees as reflected in the following table:
For the Nine Months Ended
September 30,
1997 1996
(in thousands)
Property management fees $423 $414
Reimbursement for services of affiliates 141 144
Partnership management fees (1) 82 213
(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.
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
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 - 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 loss 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.
On November 13, 1996, the Partnership financed Tahoe Springs. The Partnership
received $6 million in gross proceeds from the financing. The mortgage note
requires monthly interest only payments at a stated interest rate of 7.33% and
has a balloon payment due November 1, 2003.
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
nine months ended September 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Breckinridge Square
Louisville, Kentucky 94% 94%
Churchill Park
Louisville, Kentucky 93% 93%
The Lakes
Raleigh, North Carolina 92% 95%
Tahoe Springs
Miami, Florida 93% 95%
The General Partner attributes the decrease in occupancy at The Lakes to the
large number of units constructed in the Raleigh area. The General Partner is
offering incentives to prospective tenants in an effort to increase occupancy.
The Partnership's net income for the nine months ended September 30, 1997, was
approximately $882,000 versus net income of approximately $747,000 for the nine
months ended September 30, 1996. The Partnership's net income for the three
months ended September 30, 1997 was approximately $333,000 versus net income of
approximately $269,000 for the three months ended September 30, 1996. The
increase in net income for the three and nine months ended September 30, 1997,
is primarily attributed to an increase in rental income and decreases in general
and administrative expenses, partnership management fees, maintenance and
extraordinary loss on early extinguishment of debt. The increase in rental
income is due to increases in rental rates at all of the Partnerships investment
properties. General and administrative expenses decreased as the result of a
decrease in occupational license fees and audit expense. During the nine months
ended September 30, 1996, the Partnership paid approximately $36,000 for
occupational license fees for Breckinridge Square and Churchill Park. During
August 1997, the Partnership was notified that its request for a refund of
$26,000 of the amount incurred during 1996 would be received. Approximately
$12,000 of this refund has been transferred to pay the 1997 occupational tax
expense, and the remaining $14,000 is included in accounts receivable. Audit
expense has decreased as a result of an under accrual of audit and tax expense
at December 31, 1995. Additional fees related to the 1995 audit were billed and
paid in 1996, thereby increasing the 1996 audit expense. Partnership management
fees decreased due to the decrease in the distribution of funds "available from
operations" as defined in the Partnership Agreement. During the nine months
ended September 30, 1997, approximately $6,573,000 was distributed from surplus
funds. As noted in "Note B - Transactions with Affiliated Parties," the
Partnership 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 management services. Maintenance expense decreased due to
major landscaping performed during the nine months ended September 30, 1996 at
The Lakes to deter water retention. Included in maintenance expense for the nine
months ended September 30, 1997 and 1996, is approximately $179,000 and
$427,000, respectively, of major repairs and maintenance comprised primarily of
office equipment, exterior painting, major landscaping and exterior building
improvements. Finally, an extraordinary loss of approximately $119,000 was
recognized by the Partnership in 1996, due to the early extinguishment of debt
at Tahoe Springs (See Note C to the Notes to Consolidated Financial Statements).
These decreases in expenses were offset by a decrease in interest income and an
increase in interest expense. The decrease in interest income is the result of
decreased cash balances invested in interest bearing accounts. The increase in
interest expense is due to the financing of Tahoe Springs in November 1996, as
discussed in Note C to the Notes to Consolidated Financial Statements.
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.
At September 30, 1997, the Partnership had unrestricted cash of approximately
$2,118,000 versus approximately $1,778,000 at September 30, 1996. Net cash
provided by operating activities increased as a result of a decrease in escrows
for taxes. Net cash used in investing activities decreased primarily due to an
increase in receipts from restricted escrows. This increase was partially offset
by increases in the purchases of property improvements and replacements and
deposits to restricted escrows. Net cash used in financing activities increased
primarily due to an increase in distributions made to the partners in 1997.
Major capital programs completed in 1997 include a chiller replacement at
Churchill Park and an HVAC replacement at The Lakes. The Partnership has no
other material capital programs scheduled to be performed in 1997, 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.
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 loss 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.
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 approximately $30,690,000 requires monthly interest
only payments. These notes require balloon payments on November 1, 2003, and
December 1, 2005, at which time the properties will either be refinanced or
sold. During the nine months ended September 30, 1997, the Partnership
distributed approximately $6,557,000 to the limited partners and approximately
$933,000 to the General Partner. During the nine months ended September 30,
1996, a distribution of approximately $2,908,000 was made to the limited
partners and a distribution of approximately $82,000 was made to the General
Partner. Also, during the nine months ended September 30, 1996, the Partnership
paid $137,000 and $65,000, respectively, to the Georgia Department of Revenue
and the North Carolina Department of Revenue for withholding taxes on behalf of
the partners related to income generated by properties located in those states.
These taxes were treated as distributions to the partners and were allocated
$201,000 to the limited partners and $1,000 to the General Partner. 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 September 30, 1997.
`
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/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: November 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Growth Fund 1997 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,118
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,048
<DEPRECIATION> (22,143)
<TOTAL-ASSETS> 24,237
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,690
0
0
<COMMON> 0
<OTHER-SE> (7,816)
<TOTAL-LIABILITY-AND-EQUITY> 24,237
<SALES> 0
<TOTAL-REVENUES> 8,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,678
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 882
<EPS-PRIMARY> 17.75<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
