FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO 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)
(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 Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1998
Assets
Cash and cash equivalents $ 2,326
Receivables and deposits 758
Restricted escrows 668
Other assets 564
Investment properties:
Land $ 4,610
Buildings and related personal property 37,769
42,379
Less accumulated depreciation (23,139) 19,240
$ 23,556
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 118
Tenant security deposit liabilities 283
Accrued property taxes 147
Other liabilities 387
Mortgage notes payable 30,690
Partners' Deficit
General partner $ (4,382)
Limited partners (49,196 units
issued and outstanding) (3,687) (8,069)
$ 23,556
See Accompanying Notes to Financial Statements
b)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $ 2,603 $ 2,531
Other income 156 171
Total revenues 2,759 2,702
Expenses:
Operating 1,151 1,207
General and administrative 96 161
Depreciation 509 481
Interest 558 558
Property taxes 154 154
Total expenses 2,468 2,561
Net income $ 291 $ 141
Net income allocated to general partner (1%) $ 3 $ 1
Net income allocated to limited partners (99%) 288 140
$ 291 $ 141
Net income per limited partnership unit $ 5.85 $ 2.84
See Accompanying Notes to Financial Statements
c)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except 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' deficit
at December 31, 1997 49,196 $ (4,260) $ (3,205) $ (7,465)
Distributions -- (125) (770) (895)
Net income for the three months
ended March 31, 1998 -- 3 288 291
Partners' deficit
at March 31, 1998 49,196 $ (4,382) $ (3,687) $ (8,069)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income $ 291 $ 141
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 509 481
Amortization of loan costs 19 19
Change in accounts:
Receivables and deposits 37 (108)
Other assets 53 12
Accounts payable (12) 2
Tenant security deposit liabilities (8) --
Accrued property taxes (12) 148
Other liabilities 37 (13)
Net cash provided by operating activities 914 682
Cash flows from investing activities:
Property improvements and replacements (121) (453)
Net (deposits to) receipts from restricted escrows (65) 343
Net cash used in investing activities (186) (110)
Cash flows used in financing activities:
Distributions paid (895) (6,892)
Net decrease in cash and cash equivalents (167) (6,320)
Cash and cash equivalents at beginning of period 2,493 7,763
Cash and cash equivalents at end of period $ 2,326 $ 1,443
Supplemental disclosure of cash flow information:
Cash paid for interest $ 539 $ 539
See Accompanying Notes to Financial Statements
e)
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited 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. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1998, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1998. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 General Partner is wholly-owned by Insignia Properties Trust ("IPT"), an
affiliate of Insignia Financial Group, Inc. ("Insignia"). The Partnership paid
property management fees based upon collected gross rental revenues for property
management services as noted below for the three month periods ended March 31,
1998 and 1997, respectively. 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 Three Months Ended
March 31,
1998 1997
(in thousands)
Property management fees (included in $140 $137
operating expense)
Reimbursement for services of affiliates
(included in operating and general and
administrative expenses and investment
property) (1) 53 49
Partnership management fees (included in
general and administrative expenses) (2) -- 82
(1) Included in "reimbursement for services of affiliates" is approximately
$4,000 in reimbursements for construction oversight costs for the period
ended March 31, 1997.
(2) 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, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an 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 master policy. The agent assumed the financial
obligations to the affiliate of the General Partner, which 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 was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 15,000 of the outstanding
units of limited partnership interest in the Partnership, at $300 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 19, 1997 (the "Offer to Purchase") and the
related Assignment of Partnership Interest attached as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally
filed with the Securities and Exchange Commission on December 19, 1997. Because
of the existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the Managing General Partner
expressed any opinion as to the Offer to Purchase and made no recommendation as
to whether unit holders should tender their units in response to the Offer to
Purchase. In addition, because of these conflicts of interest, including as a
result of the Purchaser's affiliation with various Insignia affiliates that
provide property management services to the Partnership's properties, the manner
in which the Purchaser votes its limited partner interest in the Partnership may
not always be consistent with the best interests of the other limited partners.
During February 1998, the tender offers were completed and an affiliate of
Insignia tendered 2,690 units of limited partnership interest in the
Partnership.
NOTE C - DISTRIBUTIONS
During the three months ended March 31, 1998, the Partnership distributed
approximately $770,000 to the limited partners and approximately $125,000 to the
General Partner. Subsequent to March 31, 1998, payments were made by the
Partnership to the Georgia Department of Revenue and the North Carolina
Department of Revenue for withholding taxes related to income generated by the
Partnership's investment properties located in these states. These payments
were treated as distributions to the partners and are included in the
distribution amounts above. During the three months ended March 31, 1997, a
distribution of approximately $6,723,000 was made to the limited partners and a
distribution of approximately $169,000 was made to the General Partner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Breckinridge Square (1)
Louisville, Kentucky 89% 89%
Churchill Park (2)
Louisville, Kentucky 92% 88%
The Lakes (1)
Raleigh, North Carolina 88% 91%
Tahoe Springs
Miami, Florida 94% 96%
(1) The low occupancy at Breckenridge Square and The Lakes is due to
softening real estate markets and increased competition from new
complexes in the Louisville and Raleigh areas. The General Partner
is offering incentives to prospective tenants in an effort to increase
occupancy.
(2) The General Partner attributes the increase in occupancy at Churchill
Park to increased marketing efforts and the composition of its resident
profile which has not been affected by the increase in competition
affecting Breckenridge Square.
Results of Operations
The Partnership's net income for the three months ended March 31, 1998, was
approximately $291,000 versus net income of approximately $141,000 for the three
months ended March 31, 1997. The increase in net income is primarily the result
of an increase in rental income and a decrease in operating and general and
administrative expenses. Rental income increased due to an increase in average
annual rental rates at all of the investment properties, despite decreases in
occupancy at The Lakes and Tahoe Springs. General and administrative expenses
decreased due to the decrease in the distribution of funds "available from
operations" as defined in the Partnership Agreement. During the period ended
March 31, 1998, approximately $895,000 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 Partnership Agreement) to be paid to the General Partner for
executive and management services. Operating expense decreased due to a decrease
in interior building repairs at Breckinridge Square. Also, maintenance expense
decreased at Churchill Park as a result of exterior painting and office
enhancements, which were both done during the three months ended March 31, 1997.
Included in operating expenses for the period ended March 31, 1998, is
approximately $29,000 of major repairs and maintenance mainly comprised of
exterior building improvements, exterior painting and window coverings. Included
in operating expenses for the period ended March 31, 1997, is approximately
$91,000 of major repairs and maintenance mainly comprised of exterior building
repairs, exterior painting and office equipment.
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 March 31, 1998, the Partnership had cash and cash equivalents of
approximately $2,326,000 versus approximately $1,443,000 at March 31, 1997. The
net decrease in cash and cash equivalents for the periods ended March 31, 1998
and 1997 is approximately $167,000 and $6,320,000, respectively. Net cash
provided by operating activities increased as a result of the increase in net
income, as described above, along with a decrease in receivables and deposits,
offset partially by a decrease in accrued property taxes. These changes were
due to the timing of tax payments from escrow funds. Net cash used in investing
activities increased primarily due to the net increase in deposits to restricted
escrows. This was partially offset by a smaller increase in property
improvements and replacements due to a chiller replacement project at Churchill
Park and an HVAC replacement project at The Lakes, during the three months ended
March 31, 1997. Net cash used in financing activities decreased due to a
decrease in distributions made to the partners.
The Partnership has no material capital programs scheduled to be performed in
1998, 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 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 three months ended March 31, 1998, the Partnership distributed
approximately $770,000 to the limited partners and approximately $125,000 to the
General Partner. Subsequent to March 31, 1998, payments were made by the
Partnership to the Georgia Department of Revenue and the North Carolina
Department of Revenue for withholding taxes related to income generated by the
Partnership's investment properties located in these states. These payments
were treated as distributions to the partners and are included in the
distribution amounts above. During the three months ended March 31, 1997, a
distribution of approximately $6,723,000 was made to the limited partners and a
distribution of approximately $169,000 was made to the General Partner. The
General Partner is planning on making a distribution in the third quarter of
1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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 March 31, 1998.
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/Director
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Capital Growth Fund 1998 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,326
<SECURITIES> 0
<RECEIVABLES> 758
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,379
<DEPRECIATION> (23,139)
<TOTAL-ASSETS> 23,556
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,690
0
0
<COMMON> 0
<OTHER-SE> (8,069)
<TOTAL-LIABILITY-AND-EQUITY> 23,556
<SALES> 0
<TOTAL-REVENUES> 2,759
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 558
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291
<EPS-PRIMARY> 5.85<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
