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 September 30, 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.)
55 Beattie Place, 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)
September 30, 1998
Assets
Cash and cash equivalents $ 4,012
Receivables and deposits 928
Restricted escrows 478
Other assets 552
Investment properties:
Land $ 4,610
Buildings and related personal property 38,251
42,861
Less accumulated depreciation (24,164) 18,697
$ 24,667
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 159
Tenant security deposit liabilities 314
Accrued property taxes 449
Other liabilities 369
Distribution payable 1,351
Mortgage notes payable 30,690
Partners' Deficit
General partner $ (4,564)
Limited partners (49,196 units
issued and outstanding) (4,101) (8,665)
$ 24,667
See Accompanying Notes to Financial Statements
b)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 2,684 $ 2,697 $ 7,923 $ 7,882
Other income 199 210 548 559
Total revenues 2,883 2,907 8,471 8,441
Expenses:
Operating 1,256 1,320 3,500 3,665
General and administrative 62 36 238 274
Depreciation 534 501 1,557 1,476
Interest 558 559 1,675 1,678
Property taxes 147 158 455 466
Total expenses 2,557 2,574 7,425 7,559
Net income $ 326 $ 333 $ 1,046 $ 882
Net income allocated to
general partner (1%) $ 3 $ 3 $ 10 $ 9
Net income allocated to
limited partners (99%) 323 330 1,036 873
$ 326 $ 333 $ 1,046 $ 882
Net income per Limited
Partnership Unit $ 6.57 $ 6.70 $ 21.06 $ 17.75
Operating distributions per Limited
Partnership Unit $ -- $ -- $ -- $ 18.45
Surplus distributions per Limited
Partnership Unit 23.62 10.45 39.27 114.90
Distributions per Limited
Partnership Unit $ 23.62 $ 10.45 $ 39.27 $133.35
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 -- (314) (1,932) (2,246)
Net income for the nine months
ended September 30, 1998 -- 10 1,036 1,046
Partners' deficit
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income $ 1,046 $ 882
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,557 1,476
Amortization of loan costs 58 61
Change in accounts:
Receivables and deposits (133) (326)
Other assets 44 (4)
Accounts payable 29 (76)
Tenant security deposit liabilities 23 (37)
Accrued property taxes 290 448
Other liabilities 19 4
Net cash provided by operating activities 2,933 2,428
Cash flows from investing activities:
Property improvements and replacements (644) (971)
Net receipts from restricted escrows 125 304
Net cash used in investing activities (519) (667)
Cash flows used in financing activities:
Distributions paid (895) (7,406)
Net decrease in cash and cash equivalents 1,519 (5,645)
Cash and cash equivalents at beginning of period 2,493 7,763
Cash and cash equivalents at end of period $ 4,012 $ 2,118
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,617 $ 1,796
Supplemental disclosure of non-cash activity
Distribution payable $ 1,351 $ 84
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 and nine month
periods ended September 30, 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 Partnership paid property management fees to an affiliate of the General
Partner based upon collected gross rental revenues for property management
services as noted below for the nine month periods ended September 30, 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 Nine Months Ended
September 30,
1998 1997
(in thousands)
Property management fees (included in $428 $423
operating expense)
Reimbursement for services of affiliates
(included in general and administrative
expenses) 149 142
Partnership management fees (included in
general and administrative expenses) (1) -- 82
(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.
Reimbursements for construction oversight costs, included in operating expense
for the periods ended September 30, 1998 and 1997, were approximately $2,000 and
$4,000, respectively.
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.
During December 1997, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
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. During February 1998, the tender offer was completed and the
Purchaser acquired 2,690 units of limited partnership interest in the
Partnership.
NOTE C - DISTRIBUTIONS
During the nine months ended September 30, 1998, the Partnership distributed
approximately $1,932,000 to the limited partners and approximately $314,000 to
the General Partner. Payments 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 were treated as distributions to the partners and are included
in the distribution amounts above. During the nine months ended September 30,
1997, distributions of approximately $6,557,000 were made to the limited
partners and approximately $933,000 were made to the General Partner.
NOTE D - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders
of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of
the IPT Shares owned by it in favor of the IPT Merger and has granted an
irrevocable limited proxy to unaffiliated representatives of IPT to vote the
IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger.
As a result of AIMCO's ownership and its agreement, the vote of no other
holder of IPT is required to approve the merger. The General Partner does not
believe that this transaction will have a material effect on the affairs and
operations of the Partnership.
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
nine months ended September 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Breckinridge Square
Louisville, Kentucky 92% 94%
Churchill Park
Louisville, Kentucky 92% 93%
The Lakes
Raleigh, North Carolina 91% 92%
Tahoe Springs
Miami, Florida 93% 93%
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
1998, was approximately $326,000 and $1,046,000, respectively, versus net income
of approximately $333,000 and $882,000, respectively, for the three and nine
months ended September 30, 1997. The increase in net income for the corporate
nine month periods is primarily the result of an increase in rental income and a
decrease in operating and general and administrative expenses, partially offset
by an increase in depreciation expense. Rental income increased due to an
increase in average annual rental rates at all of the investment properties,
despite slight decreases in occupancy at all but one of the investment
properties. 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 September 30, 1998,
approximately $2,246,000 was distributed from surplus funds as compared to
approximately $6,573,000 from surplus funds and $917,000 from operations during
the period ended September 30, 1997. 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 primarily at Churchill Park as a result of exterior
painting and parking lot repairs completed during 1997. During the same period,
major landscaping projects were done at Tahoe Springs and The Lakes. At the
same time, office enhancement projects were undertaken during 1997 at Churchill
Park and The Lakes. The increase in depreciation expense results from increases
at all of the investment properties as a result of capital improvements made
over the past two years.
Net income decreased for the three months ended September 30, 1998 partially due
to a decrease in rental income at Breckinridge Square. The property had to
offer increased rental rate concessions due to extremely competitive market
conditions for residential housing. In addition, other income declined due to a
decrease in corporate unit rentals at all of the properties. The decrease in
total revenue is partially offset by a decrease in operating expenses primarily
at Breckinridge Square due to interior and exterior building improvements
undertaken during the third quarter of 1997.
Included in operating expenses for the period ended September 30, 1998, is
approximately $70,000 of major repairs and maintenance mainly comprised of
exterior building repairs, gutter repairs and window covering replacements.
Included in operating expenses for the period ended September 30, 1997, is
approximately $179,000 of major repairs and maintenance mainly comprised of
exterior building repairs, exterior painting, office equipment, gutter repairs,
major landscaping, parking lot repairs, and window covering replacements.
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 September 30, 1998, the Partnership had cash and cash equivalents of
approximately $4,012,000 versus approximately $2,118,000 at September 30, 1997.
The net increase in cash and cash equivalents for the period ended September 30,
1998 is approximately $1,519,000 versus a net decrease in cash and cash
equivalents of $5,645,000 for the period ended September 30, 1997. Net cash
provided by operating activities increased as a result of the increase in net
income, as described above, along with a smaller increase in receivables and
deposits offset partially by a lesser increase in accrued property taxes as
compared to the same period last year. Net cash used for receivables and
deposits decreased due to the receipt of a reimbursement for expended funds
covered by the replacement reserve at The Lakes Apartments which was accrued at
December 31, 1997. The change in accrued taxes is due to the timing of tax
payments. Net cash used in investing activities decreased as a result of 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 nine months ended September 30, 1997. This was partially
offset by a decrease in net receipts from restricted escrows. 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 and to comply with federal,
state and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The General
Partner is currently assessing the need for capital improvements at each of the
Partnership's properties. To the extent that additional capital improvements
are required, the Partnership's distributable cash flow, if any, may be
adversely effected. 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. The General Partner will attempt to
refinance such indebtedness or sell the properties prior to such maturity date.
If the properties cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such properties through foreclosure. During the
nine months ended September 30, 1998, the Partnership distributed approximately
$1,932,000 to the limited partners and approximately $314,000 to the General
Partner. Payments 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 were treated as distributions to the partners and are included in the
distribution amounts above. During the nine months ended September 30, 1997,
distributions of approximately $6,557,000 were made to the limited partners and
distributions of approximately $933,000 were made to the General Partner. The
Partnership's distribution policy will be reviewed on a quarterly basis. There
can be no assurance, however, that the Partnership will generate sufficient
funds from operations to permit distributions to its partners in 1998 or
subsequent periods.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders
of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of
the IPT Shares owned by it in favor of the IPT Merger and has granted an
irrevocable limited proxy to unaffiliated representatives of IPT to vote the
IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger.
As a result of AIMCO's ownership and its agreement, the vote of no other
holder of IPT is required to approve the merger. The General Partner does not
believe that this transaction will have a material effect on the affairs and
operations of the Partnership.
Year 2000
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any computer programs or hardware
that have date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the General Partner was to the security systems,
elevators, heating-ventilation-air-conditioning systems, telephone systems and
switches, and sprinkler systems. The General Partner is currently engaged in the
identification of all non-compliant operational systems, and is in the process
of estimating the costs associated with any potential modifications or
replacements needed to such systems in order for them to be Year 2000 compliant.
It is not expected that such costs would have a material adverse affect upon
the operations of the Partnership.
RISK ASSOCIATED WITH THE YEAR 2000
The General Partner believes that the Managing Agent has an effective program in
place to resolve the Year 2000 issue in a timely manner and has appropriate
contingency plans in place for critical applications that could affect the
Partnership's operations. To date, the General Partner is not aware of any
external agent with a Year 2000 issue that would materially impact the
Partnership's results of operations, liquidity or capital resources. However,
the General Partner has no means of ensuring that external agents will be Year
2000 compliant. The General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or results of
operations of the Partnership. However, the effect of non-compliance by
external agents is not readily determinable.
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 as 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 September 30, 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/ Patrick Foye
Patrick Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Capital Growth Fund 1998 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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,012
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,861
<DEPRECIATION> (24,164)
<TOTAL-ASSETS> 24,667
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,690
0
0
<COMMON> 0
<OTHER-SE> (8,665)
<TOTAL-LIABILITY-AND-EQUITY> 24,667
<SALES> 0
<TOTAL-REVENUES> 8,471
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,675
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,046
<EPS-PRIMARY> 21.06<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
