<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1994
....................................................
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 0-10831
.....................................................
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
................................................................................
(Exact name of registrant as specified in its charter)
California 94-2744492
................................................................................
(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) (Zip code)
(803) 239-1000
................................................................................
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
- ----------------------------------------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
- ----------------------------------------------------------
Limited Partnership Units
Indicate by check mark whether the partnership, (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
partnership was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
156,202 of partnership's 199,045 Limited Partnership Units ("Units") are held by
non-affiliates. The aggregate market value of Units held by non-affiliates is
not determinable since there is no public trading market for Units and transfers
of Units are subject to certain restrictions.
Exhibit Index: See Page 47
Total Pages: 50
-1-
<PAGE>
PART I
ITEM 1. BUSINESS
------------------
History of the Partnership
Consolidated Capital Institutional Properties (the "Partnership") was
organized on April 28, 1981, as a limited partnership under the California
Uniform Limited Partnership Act. On July 23, 1981, the Partnership registered
with the Securities and Exchange Commission ("SEC") under the Securities Act
of 1933 (File No. 2-72384) and commenced a public offering for the sale of
$200 million of Units. The Units represent equity interests in the
Partnership and entitle the holders thereof (the "Limited Partners") to
participate in certain allocations and distributions of the Partnership. The
sale of Units terminated on July 21, 1983 with 200,342 Units sold for $1,000
each, or gross proceeds of approximately $200 million to the Partnership. The
Partnership subsequently filed a Form 8-A Registration Statement with the SEC
and registered its Units under the Securities Exchange Act of 1934 (File No.
0-10831) on January 3, 1982. In accordance with its partnership agreement
(the original partnership agreement of the Partnership together with all
amendments thereto shall be referred to as the "Partnership Agreement"), the
Partnership has repurchased and retired a total of 1,297 Units for a total
purchase price of $1 million. The Partnership may repurchase any Units, in
its absolute discretion, but is under no obligation to do so.
General Partner of the Partnership
The General Partner of the Partnership is ConCap Equities, Inc. ("CEI" or the
"General Partner"), a Delaware corporation. The principal place of business
for the Partnership and for the General Partner is One Insignia Financial
Plaza, Greenville, South Carolina 29602. See "History of the General
Partner."
Business of the Partnership
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership was formed for the benefit of its Limited
Partners (herein so called and together with the General Partner shall be
called the "Partners"), to lend funds to Consolidated Capital Equity Partners
("EP"), a California general partnership in which certain of the partners were
former shareholders and former management of Consolidated Capital Equities
Corporation ("CCEC"), the former corporate general partner of the Partnership.
See "Status of the Master Loan" for a description of the loan and settlement
of EP's bankruptcy.
Through December 31, 1994, the Partnership had made 22 specific loans pursuant
to the Master Loan (as defined in "Status of the Master Loan") and advanced a
total of approximately $176.1 million. As of December 31, 1994, the balance
of the Master Loan, net of the allowance for possible losses, was
approximately $91.8 million. EP used the proceeds from these loans to acquire
eighteen (18) apartment buildings and four (4) office complexes, which served
as collateral for the Master Loan. EP's successor in bankruptcy (as more
fully described in "Status of the Master Loan") currently has twelve (12)
apartment buildings, three (3) office complexes and one (1) note receivable
which currently secure the Master Loan. The Partnership owns directly one (1)
apartment building which it acquired pursuant to a foreclosure in 1990. For a
brief description of the properties refer to Item 2 - Description of Property.
As of December 31, 1994, the Partnership's working capital reserves are
greater than the 5% of Net Invested Capital required by the Partnership
Agreement. See "Current Operating Plan" below and Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations, for
a discussion of Partnership liquidity and capital resources. Also, see Item 8
- Financial Statements and Supplementary Data, for the amounts of revenues and
operating profit or losses generated by the Partnership's operations for its
last three years. The Partnership does not directly employ any persons. The
General Partner and its affiliates employ persons in the operation and
management of the Partnership, whose costs are reimbursed by the Partnership.
Status of the Master Loan
Prior to 1989, the Partnership had loaned funds totaling $170.4 million to EP
subject to a nonrecourse note with a participation interest (the "Master
Loan"), pursuant to the Master Loan Agreement dated July 22, 1981, between the
Partnership and EP. The Partnership secured the Master Loan with deeds of
trust or mortgages on real property purchased with the funds advanced, as well
as by the assignment and pledge of promissory notes from the partners of EP.
-2-
<PAGE>
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the bankruptcy court approved EP's
consensual plan of reorganization (the "Plan"). In November 1990, EP and the
Partnership consummated a closing under the Plan pursuant to which, among
other things, the Partnership and EP executed an amended and restated loan
agreement (the "New Master Loan Agreement"), EP was converted from a
California general partnership to a California limited partnership,
Consolidated Capital Equity Partners, L.P. ("CCEP"), and CCEP renewed the
deeds of trust on all the collateral to secure the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole general partner of CCEP and an affiliate of the
Partnership. The general partners of EP became limited partners in CCEP. CHI
has full discretion with respect to conducting CCEP's business, including
managing CCEP's properties and initiating and approving capital expenditures
and asset dispositions and refinancings.
Under the terms of the New Master Loan Agreement (as adopted in November
1990), interest accrues at a fluctuating rate per annum adjusted annually on
July 15 by the percentage change in the U.S. Department of Commerce Implicit
Price Deflator for the Gross National Product subject to an interest rate
ceiling of 12.5%. Interest payments are currently payable quarterly in an
amount equal to "Excess Cash Flow." If such Excess Cash Flow payments are
less than the current accrued interest during the quarterly period, the unpaid
interest is added to principal, compounded annually, and is payable at the
loan's maturity. If such Excess Cash Flow payments are greater than the
current accrued interest, the excess amount is applied to the principal
balance of the loan. Any net proceeds from the sale or refinancing of any of
CCEP's properties are paid to the Partnership under the terms of the New
Master Loan Agreement. The New Master Loan Agreement matures in November
2000.
For 1992, Excess Cash Flow was generally defined in the New Master Loan
Agreement as net cash flow from operations after third-party debt service.
Effective January 1, 1993, the Partnership and CCEP amended the New Master
Loan Agreement to stipulate that Excess Cash Flow would be computed net of
capital improvements. Such expenditures were formerly funded from advances on
the Master Loan from the Partnership to CCEP. This amendment and change in
the definition of Excess Cash Flow will have the effect of reducing income on
the investment in Master Loan by the amount of CCEP's capital expenditures
since such amounts were previously excluded from Excess Cash Flow.
Current Operating Plan
The Partnership owns one 19 year-old apartment complex (The Loft Apartments),
located in North Carolina. The Partnership's investment in the Master Loan is
collateralized by 12 apartment complexes and 3 office buildings comprising the
CCEP Properties, which range in age from 17 to 44 years old and are located
principally in Southern, Midwestern and Western states. CCEP also holds a
note receivable (the "Carlton House Note") secured by the Carlton House
Apartment and Office Building ("Carlton House") which serves as additional
collateral for the Master Loan. At December 31, 1994, the Carlton House Note
is in default and has a balance due of $35.3 million including accrued
interest. Management intends to foreclose on the Carlton House Note after the
term of forbearance (which terminates in April 1995) has elapsed, in
accordance with the terms of the Restructure Agreement.
The Master Loan payments attributable to Excess Cash Flow from the CCEP
Properties continue to be the Partnership's primary source of cash flow.
Income received on the Partnership's property and interest-earning investments
are secondary sources of cash flow to the Partnership. The Partnership will
continue to hold cash reserves in low risk interest earning investments.
Net income from operations for the Loft Apartments increased significantly in
1994 because of the completion of the rehabilitation begun in 1992. The focus
of management for 1995 will be to maximize the property's cash flow.
Management's emphasis for the CCEP Properties in 1995 will be to maximize the
properties' cash flow to remit to the Partnership as Master Loan payments.
During 1994, CCEP invested $1.4 million in the CCEP Properties for selected
capital improvements and replacements which were all funded from cash flow.
Prior to 1993, such capital improvements and replacements were funded from
advances on the Master Loan. Total capital expenditures of approximately $2.4
million, are budgeted for 1995 and will be funded out of operating cash flow.
Excess cash flow from the CCEP Properties, net of debt service and
administrative expenses, provided approximately $2.4 million for payments on
the Master Loan in 1994.
CCEP did not receive any cash flow payments on the Carlton House Note in 1994.
Cash provided by property operations in 1994 was reinvested in the property.
Renovations to date have included modernizing the residential and commercial
lobbies and renovating certain apartment units and hallways. Management
expects all available cash flow generated from the Carlton House in 1995 will
be reinvested into the property operations to continue updating interiors,
repairing the roof
-3-
<PAGE>
and the buildings' major mechanical systems, and will not be available to be
remitted to the Partnership as payments on the Master Loan. In February 1994,
CCEP advanced approximately $589,000 to New Carlton House Partners, as an
advance on the Carlton House Note, to pay Carlton House's 1994 property taxes.
The Carlton House property secures a first lien mortgage note receivable with
a carrying value of $25.1 million (principal and interest of $34.7 million at
September 30, 1993) held by CCEP. The note receivable held by CCEP secures a
portion of the Master Loan obligation between CCEP and the Partnership. In
September 1993, a wholly-owned subsidiary of the Partnership purchased from an
unaffiliated third party a $20.4 million second lien mortgage note (principal
and interest of $29.4 million at September 30, 1993) secured by the Carlton
House for a cash payment of $100,000. As a result of 1801 Tower, Inc. gaining
the general partner interest in NCHP in 1993, and the Partnership's purchase
of the second lien mortgage note secured by the Carlton House, CCEP has
acquired control of the property. Accordingly, CCEP has deemed the Carlton
House note in-substance foreclosed as of December 31, 1993. The
collectibility of the note is uncertain, and the Partnership recorded a
provision for possible losses to fully reserve its $100,000 investment in the
third quarter of 1993.
History of the General Partner
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC") was the corporate general partner. In 1988, through a
series of transactions Southmark Corporation ("Southmark") acquired control of
CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the
United States Bankruptcy Code. In 1990, as part of CCEC's reorganization
plan, CEI acquired CCEC's general partner interests in the Partnership and in
15 other affiliated public limited partnerships (the "Affiliated
Partnerships") and CEI replaced CCEC as managing general partner in all 16
partnerships. The selection of CEI as the sole managing General Partner was
approved by a majority of the Limited Partners in the Partnership and in each
of the Affiliated Partnerships pursuant to a solicitation of the Limited
Partners dated August 10, 1990. As part of this solicitation, the Limited
Partners also approved an amendment to the Partnership Agreement to limit
changes of control of the Partnership.
All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994,
the parent of GII Realty, Inc., entered into a transaction (the "Insignia
Transaction") in which among other things, MAE-ICC, Inc., a wholly owned
subsidiary of Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of
Insignia Financial Group, Inc. ("Insignia") acquired an option (exercisable in
whole or in part from time to time) to purchase all of the stock of GII
Realty, Inc. and, pursuant to a partial exercise of such option, acquired
50.5% of that stock. As a part of the Insignia Transaction, MAE-ICC, Inc.
also acquired all of the outstanding stock of Partnership Services, Inc., an
asset manager and a subsidiary of Insignia acquired all of the outstanding
stock of Coventry Properties, Inc., a property manager. In addition,
confidentiality, non-competition, and standstill arrangements were entered
into between certain of the parties. Those arrangements, among other things,
prohibit GII Realty's former sole shareholder from purchasing Partnership
Units for a period of three years.
ITEM 2. DESCRIPTION OF PROPERTY
---------------------------------
As of December 31, 1994, the Partnership's primary asset is the Master Loan,
as described in Item 1 - Business - Status of the Master Loan. The Master
Loan is collateralized, in part, by deeds of trust on real property owned by
CCEP. CCEP owns these properties in fee, unless otherwise indicated. The
deeds of trust securing the Master Loan are first lien deeds of trust, except
where other mortgage debt is shown. Additional property information is
discussed in Item 8 -Financial Statements and Supplementary Data, Note 3 - Net
investment in Master Loan and Schedule III - Real Estate and Accumulated
Depreciation. The Partnership owns one property in fee directly. As of
December 31, 1994, the investment in real estate and the real estate securing
the Master Loan are as follows (dollar amounts are in thousands, except for
average rent per square foot):
INVESTMENTS IN REAL ESTATE:
---------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
---------------------------------------------------
PROPERTY
AT NET AVERAGE
CARRYING MORTGAGE RENT PER
PROPERTY OCCUPANCY(a) VALUE DEBT SQ.FT.(b)
-------- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
The Loft Apartments
Apartments - 188 units
Raleigh, North Carolina 93% $ 4,750 $- $ 6.50
======= =======
</TABLE>
-4-
<PAGE>
INVESTMENT IN MASTER LOAN:
- ---------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
-------------------------------------------------------------------
ORIGINAL AVERAGE
PURCHASE MASTER LOAN THIRD PARTY RENT PER
COLLATERAL PROPERTY PRICE OCCUPANCY(a) BALANCE MORTGAGE DEBT SQ.FT.(b)
- ------------------- -------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Granada
Apartments-104 units
Fern Park, Florida $ 3,044 92% $ 2,672 $ - $ 5.73
Indian Creek Village
Apartments-274 units
Overland Park, Kansas 7,215 93% 8,906 - 6.42
The Knolls
Apartments-262 units
Colorado Springs,
Colorado and 6,673 98% 7,494 - 6.67
1620 West Uintah Street (c)
Single-family unit dwelling
Colorado Springs, Colorado
Lakeview Office Tower (d)
Office complex-41,691
sq.ft.
Cincinnati, Ohio 3,256 92% 2,327 1,383 12.99
Northlake Quadrangle
Office complex-78,357
sq.ft.
Atlanta, Georgia 3,676 68% 4,918 - 11.41
Palm Lake
Apartments-150 units
Tampa, Florida 4,250 99% 4,989 - 6.11
Plantation Gardens
Apartments-373 units
Plantation, Florida 14,274 88% 15,957 - 8.96
Regency (d)
Apartments-239 units
Fern Park, Florida 7,445 86% 5,818 714 5.55
Sherwood Square
Apartments-246 units
Baton Rouge, Louisiana 6,451 88% 7,361 - 5.32
Shirewood Townhouses
Apartments-228 units
Shreveport, Louisiana 6,799 93% 8,324 - 4.85
Silverado
Apartments-248 units
El Paso, Texas 4,825 94% 5,710 - 7.93
Society Park (d)
Apartments-324 units
Tampa, Florida 9,383 96% 7,422 1,843 5.72
</TABLE>
-5-
<PAGE>
INVESTMENT IN MASTER LOAN:
- ---------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
-------------------------------------------------------------------
ORIGINAL AVERAGE
PURCHASE MASTER LOAN THIRD PARTY RENT PER
COLLATERAL PROPERTY PRICE OCCUPANCY(a) BALANCE MORTGAGE DEBT SQ.FT.(b)
- ------------------- -------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Society Park East
Apartments-200 units
Indian Harbour Beach,
Florida 5,428 97% 5,564 - 6.76
Tates Creek Village (d)
Apartments-205 units
Lexington, Kentucky 6,350 89% 4,628 744 7.16
Western Can Building (e)
Office complex-111,683
sq.ft.
San Francisco, California 3,904 86% 15,075 - 12.37
--------- --------
$ 107,165 $ 4,684
========= ========
</TABLE>
- ----------------------
Total: Apartments - 2,853 units
Office Buildings - 231,731 net leasable sq. ft.
Notes:
(a) Occupancy percentage represents number of occupied units divided by total
units for residential properties and square footage leased divided by total
square footage available for commercial properties.
(b) Average Rent per Square Foot represents gross annual rents, less
concessions and lease adjustments, divided by the net leasable square
footage of the property. Gross annual rents include an increment for
utilities for those properties where all utility costs are paid by the
property.
(c) This property was a single family dwelling located adjacent to The Knolls
Apartments. It was purchased for conversion to a clubhouse for the
residents of The Knolls Apartments and is additional collateral for the
Master Loan.
(d) These properties securing the Master Loan are encumbered by deeds of trust
aggregating approximately $4.7 million which are senior to the
Partnership's liens on such properties. Indebtedness related to such
senior deed of trust liens is scheduled to mature between 1998 and 2007,
and has stated interest rates ranging from 8% to 10.5%.
(e) This property is owned by a limited partnership between CCEP as general
partner and The Woods Company (the developer of the property) as the
limited partner.
Note Receivable
- ---------------
CCEP holds one note receivable received in connection with the sale of a
property it had purchased with funds loaned by the Partnership pursuant to the
Master Loan. Such note receivable has been pledged by CCEP as collateral for
the Master Loan. See Item 1 - Business - Current Operating Plan for the current
status of the note receivable described below:
<TABLE>
<CAPTION>
NAME AND DESCRIPTION OF COLLATERAL MASTER LOAN
LOCATION OF COLLATERAL AND PURCHASE DATE AT DECEMBER 31, 1994
- --------------------------- ----------------------------- --------------------
<S> <C> <C>
(in thousands)
Carlton House Philadelphia, Note receivable pertaining
Pennsylvania Apartment/ to the sale of apartment/
Office Building 537 units/ office building on October
114,576 net leasable square 31, 1984. Outstanding balance
feet including accrued interest
at December 31, 1994, is
$35.3 million. $ 16,951
===========
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENT IN MASTER LOAN AS OF DECEMBER 31, 1994
- ------------------------------------ -----------------------
<S> <C>
Balance secured by real property owned by CCEP............ $ 107,165
Balance secured by note receivable on property sold
by CCEP................................................. 16,951
----------
124,116
Deferred basic interest................................... 5,289
Accrued additional interest............................... 4,829
Collections reserve (b)................................... (6,548)
---------
127,686 (a)
Less allowance for possible losses (b).................... (35,900)
---------
Net investment in Master Loan............................. $ 91,786
=========
</TABLE>
(a) This amount does not include approximately $110.8 million of accrued and
unpaid interest which has not been recognized as income by the
Partnership pursuant to accounting guidelines, as it relates to
acquisition, development or construction ("ADC") lending arrangements.
(b) See Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations and Item 8 - Financial Statements and
Supplementary Data, Note 3 - Net Investment in Master Loan, for
descriptions of the collections reserve and the allowance for possible
losses.
ITEM 3. LEGAL PROCEEDINGS
---------------------------
The Partnership is not a party to, nor is the Partnership's property the
subject of, any material pending legal proceedings, other than ordinary
litigation routine to the Partnership's and CCEP's business at December 31,
1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
None.
-7-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND RELATED
------- --------------------------------------------------------------------
SECURITY HOLDER MATTERS
-----------------------
(A) No established public trading market for Units exists nor is one expected
to develop.
(B) Title or Class Number of Record Unit Holders
Limited Partnership Units 24,501 as of February 16, 1995
(C) The following table sets forth a summary of distributions to the Limited
Partners during 1994 and 1993:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------
1994 1993
--------- --------
<S> <C> <C>
(in thousands)
From distributable cash flow from operations:
Regular distributions........................ $2,962 $5,673
From Partners' equity:
Surplus distributions........................ 724 -
------ --------
$3,686 $5,673
====== ========
</TABLE>
In both March and September 1993, the General Partner distributed
approximately $2.8 million or $14.25 per Unit, all of which represented
distributable cash flow from operations, and paid a matching General Partner
distribution of approximately $29,000.
In March 1994, the General Partner distributed approximately $2.3 million or
$11.75 per Unit and paid a matching General Partner distribution of
approximately $23,000. Approximately $1.6 million or $8.11 per Unit
represented distributable cash flow from operations. The remaining
approximately $700,000 or $3.64 per Unit represented return of investment. In
September 1994, the General Partner distributed approximately $1.4 million or
$6.77 per Unit, all of which represented distributable cash flow from
operations. The matching General Partner distribution of approximately
$14,000 was paid in the fourth quarter of 1994.
In March 1995, the General Partner declared distributions attributable to cash
flow from operations totaling approximately $1.5 million or $7.46 per unit to
Limited Partners and a matching General Partner distribution of approximately
$15,000.
Cumulative distributions since inception of the Partnership as of December 31,
1994, have totaled approximately $146.4 million to the Limited Partners and
approximately $1.1 million to the General Partner.
ITEM 6. SELECTED FINANCIAL DATA
---------------------------------
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the
Partnership's financial statements and notes thereto appearing in Item 8 -
Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
STATEMENTS OF OPERATIONS 1994 1993 1992 1991 1990
- ------------------------ -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(in thousands, except unit data)
Revenues..................... $ 4,434 $ 6,180 $ 8,189 $ 7,692 $10,787
Costs and expenses........... (1,496) (1,849) (1,892) (1,953) (2,041)
Provision for possible losses - (11,100) (9,000) - -
------- -------- ------- ------- -------
Income from operations....... 2,938 (6,769) (2,703) 5,739 8,746
Gain (loss) on sale of
securities available for
sale........................ - 20 - 188 (67)
Other income................. 56 - - - -
------- -------- ------- ------- -------
Net income (loss) $ 2,994 $ (6,749) $(2,703) $ 5,927 $ 8,679
======= ======== ======= ======= =======
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
STATEMENTS OF OPERATIONS 1994 1993 1992 1991 1990
- ------------------------ -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
(in thousands, except unit data)
Net income (loss) per Weighted
Average Limited Partnership Unit:
Income from operations................ $ 14.62 $ (33.67) $ (13.44) $ 28.54 $ 43.50
Other income.......................... .28 - - - -
Gain (loss) on sale of securities
available for sale................... - .10 - .93 (.33)
-------- -------- -------- -------- --------
Net income (loss)..................... $ 14.90 $ (33.57) $ (13.44) $ 29.47 $ 43.17
======== ======== ======== ======== ========
Distributions per Weighted Average
Limited Partnership Unit............. $ 18.52 $ 28.50 $ 26.25 $ 42.61 $ 47.58
======== ======== ======== ======== ========
Weighted Average Limited Partnership
Units outstanding.................... 199,045 199,051 199,051 199,051 199,051
======== ======== ======== ======== ========
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------
BALANCE SHEETS 1994 1993 1992 1991 1990
- -------------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $107,630 $108,442 $120,876 $129,003 $131,529
======== ======== ======== ======== ========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
INTRODUCTION
------------
The operations of the Partnership primarily include mortgage servicing and
collection. Consequently, the following discussion will focus on these
activities and the underlying properties that secure the Master Loan and
should be read in conjunction with Item 8 - Financial Statements and
Supplementary Data of the Partnership and notes related thereto included
elsewhere in this report.
RESULTS OF OPERATIONS
---------------------
1994 Compared with 1993
-----------------------
Property Operations:
Rental revenues for the year ended December 31, 1994 increased $117,000 or 10%
over 1993 primarily because of increased rental charges at the Lofts
Apartments. Property operations expenses for the year ended December 31, 1994
decreased $127,000 or 17% as compared to 1993 primarily due to decreases in
non-capital refurbishments and replacements and lower personnel and property
administrative expenses.
Income on Investment in Master Loan:
See separate discussion for "Income on Investment in Master Loan" below.
Administrative Expenses:
Administrative expenses for the year ended December 31, 1994, decreased
$232,000 or 33% primarily because of a decrease in overhead expenses allocated
to the Partnership and decreases in direct costs, such as data processing,
insurance and communication expenses.
Investment Income:
Investment income for the year ended December 31, 1994 decreased $322,000 or
32% from 1993 because lower average cash balances were available for
investment, as excess cash was distributed to the Partners in 1994, combined
with the effect of lower market yields available during 1994.
-9-
<PAGE>
1993 Compared with 1992
-----------------------
Property Operations:
For the year ended December 31, 1993, rental revenues increased $201,000 or
21% over 1992 because of increased rent charges and improved occupancy at The
Loft Apartments. Approximately $83,000 of the increase is attributable to
rental rate escalations, and the remaining $118,000 increase is the result of
higher average occupancy rates.
For the year ended December 31, 1993, property operations expenses decreased
$63,000 or 8% from 1992 because of decreases in noncapital refurbishments,
replacements and service expenses. Depreciation expense for 1993 was
comparable with 1992.
Income on Investment in Master Loan:
See separate discussion for "Income on Investment in Master Loan" below.
Administrative Expenses:
For the year ended December 31, 1993, administrative expenses remained
comparable to 1992. The Partnership experienced decreases of approximately
$133,000 in administrative, legal and communication costs which were almost
fully offset by an increase of approximately $129,000 in the Partnership's
insurance costs.
Income on Investment in Master Loan
-----------------------------------
The following table summarizes the sources of income and principal receipts on
the investment in Master Loan with respect to CCEP's operations during the
years ended December 31, 1994, 1993, and 1992, respectively:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
(in thousands)
Funds provided by property operations... $ 18,128 $ 18,008 $ 17,253
Funds used for property operations
(includes administrative expenses)..... (14,212) (12,968) (11,643)
Proceeds from sale of property.......... 130 - -
Debt service payments on underlying
notes payable.......................... (1,064) (1,223) (1,359)
-------- -------- --------
Net funds from property operations...... 2,982 3,817 4,251
Collection of note receivable........... - 150 1,941
-------- -------- --------
Total funds from operations............. 2,982 3,967 6,192
Advance on Carlton House note receivable (589) - -
Net investing activity.................. 55 22 18
-------- -------- --------
Net funds provided...................... $ 2,448 $ 3,989 $ 6,210
======== ======== ========
Income from the investment in Master
Loan................................... $ 2,448 $ 3,989 $ 6,210
======== ======== ========
</TABLE>
1994 Compared with 1993:
-----------------------
For the year ended December 31, 1994, income from the investment in Master
Loan decreased $1.5 million or 39% from 1993. Net funds provided by CCEP for
Master Loan payments decreased as a result of several factors, as hereinafter
described. Funds used for CCEP property operations increased $1.2 million or
10% because of increases in replacements and refurbishments and an increase in
service and utility expenses. Debt service payments to CCEP third party lien
holders decreased $159,000 or 13% from 1993, as a result of the maturity and
payoff of a note payable and the modification of a note payable to eliminate
mortgage interest participation which occurred during the third quarter of
1993. In August, 1994, CCEP sold a tract of land and the related improvements
adjacent to one of the Partnership's properties and received proceeds of
approximately $130,000. In March 1994, CCEP advanced $589,000 to New Carlton
House Partners, as an advance on the Carlton House Note, to pay Carlton
House's 1994 property taxes in an effort to protect CCEP's interest in the
property. In February 1994, the Partnership advanced $40,000 to CCEP as an
advance on the Master Loan. CCEP then advanced $40,000 to NCHP as an advance
on the Carlton House Note to pay the remaining balance of 1993 property taxes.
As discussed in the 1993 Annual Report, all cash flows generated by Carlton
House are being reinvested in the property.
-10-
<PAGE>
1993 Compared with 1992:
-----------------------
For the year ended December 31, 1993, income from the investment in Master
Loan decreased $2.2 million or 36% from 1992, primarily because Master Loan
payments attributable to Carlton House decreased $1.8 million or 93%. As
described more fully under "Liquidity and Capital Resources - The Carlton
House," debt service payments on the Carlton House Note held by CCEP were
reduced to only the amount of net cash flow. No cash flow was available for
debt service in 1993, as all cash flows generated by Carlton House were
reinvested into the property. A payment of $150,000 from the previous general
partner of the owner of Carlton House was made to CCEP in January 1993 and
remitted to the Partnership as a Master Loan payment. CCEP acquired control
of the Carlton House in the first quarter of 1993 and the property is
considered in-substance foreclosed as of December 31, 1993. Pursuant to
accounting guidelines, a property that is in-substance foreclosed shall be
included in an entity's financial statements as if the property had been
legally foreclosed. However, any cash flow generated from the Carlton House is
not considered in CCEP's Master Loan payment until the cash flow is first
remitted to CCEP as a note receivable payment. The presentation of the
Carlton House as in-substance foreclosed pursuant to accounting guidelines
does not affect the calculation of CCEP's cash flows for Master Loan payments.
Funds provided by operations of the CCEP Properties increased $755,000 or 5%
in 1993. The $605,000 increase in rental rates and the $276,000 increase due
to improved occupancies at the residential properties and increased other
income more than offset rental losses of $126,000 at the 444 DeHaro Office
Building ("444 DeHaro"). Historically, the 444 DeHaro tenant base has been a
mix of retail and commercial tenants. 444 DeHaro has experienced a decline in
its retail tenant base because the tenant mix in the area surrounding the
property is shifting from retail clientele to commercial. As a result of this
market trend, the property manager has shifted its focus for new leases to
commercial tenants.
Funds used for property operations of the CCEP Properties increased $1.3
million or 12% in 1993. Replacements and improvements funded from property
cash flow contributed $700,000 to the increase. During 1992, replacement and
improvement expenditures were funded from the Partnership as advances on the
Master Loan. The remaining $626,000 increase consists of increased operating
expenses at the CCEP Properties, primarily noncapital replacements, utilities
and service costs.
Debt service payments to third-party lien holders decreased $136,000 or 10% in
1993 because an excess cash flow payment was remitted to a lien holder in
January 1992.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Year Ended December 31, 1994
----------------------------
The Partnership's net cash inflows, which totaled approximately $8.5 million
for the year ended December 31, 1994 were from two primary sources: proceeds
from the sale of securities available for sale of $5.4 million and net cash
provided by operating activities of approximately $3.1 million. The primary
uses of cash during the same period, which totaled approximately $7.1 million,
were approximately $3.7 million for distributions to Partners, and
approximately $3.4 million for the purchase of a United States Treasury Bills.
The Partnership's property is budgeted to generate sufficient revenues in 1995
to meet the Partnership's short term working capital needs. The sufficiency
of existing liquid assets to meet future liquidity and capital expenditure
requirements is directly related to the operating performance of the
collateral properties which secure the Master Loan. Future cash distributions
will depend on the levels of net cash provided by the Master Loan.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested
Capital, as defined by the Partnership Agreement. Reserves, including cash
and cash equivalents and securities available for sale (at market), totaling
approximately $9.9 million, were greater than the reserve requirement of $8.0
million as of December 31, 1994.
CCEP Property Operations
------------------------
Approximately $3.2 million has been invested in the CCEP Properties over the
last three years for selected improvements, upgrades and rehabilitation
programs, of which $1.1 million was funded by the Partnership with advances on
the Master Loan. Capital expenditures, totaling $2.4 million which are
budgeted at the CCEP Properties in 1995, are expected to be funded from the
properties' operating cash flows.
For the year ended December 31, 1994, CCEP's net loss totaled $27.4 million on
total revenues of $23.1 million. CCEP recognizes interest expense on the New
Master Loan Agreement obligation according to the note terms, although
payments
-11-
<PAGE>
to the Partnership are required only to the extent of Excess Cash Flow, as
defined therein. During 1994, CCEP's statement of operations includes total
interest expense attributable to the Master Loan of $27.1 million, of which
approximately $24.6 million represents interest accrued in excess of required
payments. CCEP is expected to continue to generate operating losses as a
result of such interest accruals and noncash charges for depreciation.
However, CCEP's operations are expected to provide cash flow during 1995 which
will be available to be utilized as Master Loan debt service.
The Carlton House
-----------------
CCEP holds a note receivable of $35.3 million (including accrued interest)
secured by the Carlton House which serves as additional collateral for the
Master Loan. The note receivable is considered in-substance foreclosed as of
December 31, 1994.
The borrower on the note defaulted on its regular mortgage payment to CCEP in
March 1991, and in September 1992, CCEP entered into a Restructure Agreement
with the borrower. Pursuant to the Restructure Agreement, 1801 Tower, Inc.,
an affiliate of CCEP and the Partnership, was substituted as the new general
partner of New Carlton House Partners ("NCHP"), the partnership which owns the
Carlton House. The Restructure Agreement also provides that payments to CCEP
under the Carlton House Note will be in an amount equal to the property's net
cash flow and precludes CCEP from foreclosing on the property until April
1995. Management intends to foreclose on the Carlton House Note after the
term of forbearance (which terminates in April 1995) has elapsed in accordance
with the terms of the Restructure Agreement.
Prior to the Restructure Agreement, limited information was provided by the
borrower. Information obtained subsequent to execution of the Restructure
Agreement indicates that the property's deferred maintenance is significantly
higher than the borrower's estimate of $5 million. The substantial amount of
deferred maintenance which was, in some cases, endangering the continued
operations of the property, and the value of the property which collateralizes
the Carlton House Note, is currently being addressed.
In September 1993, a wholly-owned subsidiary of the Partnership purchased from
an unaffiliated third party a $20.4 million second lien mortgage note
(principal and interest of $29.4 million at September 30, 1993) secured by the
Carlton House for a cash payment of $100,000. As a result of 1801 Tower, Inc.
gaining the general partner interest in NCHP in 1993, and the Partnership's
purchase of the second lien mortgage note secured by the Carlton House, CCEP
has acquired control of the property. Accordingly, CCEP has deemed the
Carlton House Note in-substance foreclosed as of December 31, 1993. The
collectibility of the note is uncertain and the Partnership recorded a
provision for possible losses to fully reserve its $100,000 investment in the
third quarter of 1993.
In December 1993, the Partnership advanced approximately $2.1 million to CCEP
as an advance on the Master Loan. CCEP then advanced approximately $2.1
million to New Carlton House Partners, as an advance on the Carlton House
Note, to pay Carlton House's delinquent property taxes. Both advances are in
accordance with the respective loan agreements. In February 1994, CCEP
advanced approximately $589,000 to New Carlton House Partners, as an advance
on the Carlton House Note, to pay Carlton House's 1994 property taxes that
were due.
Distributions
-------------
In March 1994, the General Partner distributed approximately $2.3 million or
$11.75 per Unit and paid a matching General Partner distribution of
approximately $23,000, all of which represented distributable cash flows from
operations. In September 1994, the General Partner distributed approximately
$1.4 million or $6.77 per Unit, all of which represented distributable cash
flow from operations. The matching General Partner distribution of
approximately $14,000 was paid in the fourth quarter of 1994.
Other Income
------------
In 1991, the Partnership (and simultaneously 15 Affiliated Partnerships)
entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding.
These claims related to Southmark Corporation's activities while it exercised
control (directly, or indirectly through its affiliates) over the Partnership.
The Bankruptcy Court set the Partnership's and the Affiliated Partnership's
allowed claim at $11 million, in aggregate. In March 1994, the Partnership
received 909 shares of Southmark Corporation Redeemable Series A Preferred
Stock and 6,651 shares of Southmark Corporation New Common Stock with an
aggregate market value on the date of receipt of $6,690 and $49,847 in cash
representing the Partnership's share of the recovery, based on its pro rata
share of the claims filed.
-12-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
- ---------------------------------------------
PAGE
INDEX NUMBER
- ----- ------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................... 14
BALANCE SHEETS as of December 31, 1994 and 1993................ 15
STATEMENTS OF OPERATIONS for the Years Ended
December 31, 1994, 1993 and 1992.............................. 16
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) for the
Years Ended December 31, 1994, 1993 and 1992.................. 17
STATEMENTS OF CASH FLOWS for the Years Ended
December 31, 1994, 1993 and 1992.............................. 18
NOTES TO FINANCIAL STATEMENTS.................................. 20
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION........ 26
FINANCIAL STATEMENTS FOR CONSOLIDATED CAPITAL
EQUITY PARTNERS L.P. as of December 31, 1994 and 1993......... 28
</TABLE>
All other schedules are omitted as they are not required, are not applicable or
the financial information required is included in the financial statements or
the notes thereto.
-13-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Consolidated Capital Institutional Properties:
We have audited the accompanying balance sheets of Consolidated Capital
Institutional Properties (a California limited partnership) as of December 31,
1994 and 1993, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements and the schedule referred to
below are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Capital
Institutional Properties as of December 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Supplemental Schedule III is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
March 23, 1995
-14-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
ASSETS 1994 1993
- ------ --------- ----------
<S> <C> <C>
Real estate:
Land.......................................... $ 1,053 $ 1,053
Buildings and improvements.................... 5,202 5,175
-------- --------
6,255 6,228
Less: Accumulated depreciation............... (1,505) (1,088)
-------- --------
4,750 5,140
-------- --------
Net investment in Master Loan.................. 91,786 91,746
Cash and cash equivalents...................... 1,554 222
Securities available for sale.................. 8,329 10,391
Due from affiliates............................ 935 559
Other assets................................... 276 384
-------- --------
$107,630 $108,442
======== ========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Accounts payable and accrued expenses.......... $ 55 $ 124
Tenant security deposits....................... 47 53
Distributions payable.......................... 324 332
-------- --------
426 509
-------- --------
Commitment and Contingencies (Note 5)..........
Partners' equity (deficit):
Limited Partners - 199,045 and 199,046 units
outstanding in 1994 and 1993, respectively... 107,498 108,220
General Partner............................... (294) (287)
-------- --------
107,204 107,933
-------- --------
$107,630 $108,442
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-15-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
--------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Rental income.......................... $1,312 $ 1,195 $ 994
Income on investment in Master Loan to
affiliate............................. 2,448 3,989 6,210
Investment income...................... 674 996 985
------ ------- -------
Total revenues....................... 4,434 6,180 8,189
------ ------- -------
Costs and expenses:
Property operations.................... 599 726 790
Provision for possible losses.......... - 11,100 9,000
Depreciation........................... 417 411 399
Administrative......................... 480 712 703
------ ------- -------
Total costs and expenses (a)......... 1,496 12,949 10,892
------ ------- -------
Income (loss) from operations............ 2,938 (6,769) (2,703)
Gain on sale of securities available for
sale.................................... - 20 -
Other income (Note 4).................... 56 - -
------ ------- -------
Net income (loss)........................ $2,994 $(6,749) $(2,703)
====== ======= =======
Net Income (loss) per Weighted Average
Limited
Partnership Unit:
Income (loss) from operations.......... $14.62 $(33.67) $(13.44)
Gain on sale of investments............ - .10 -
Other income........................... .28 - -
------ ------- -------
Net income (loss)........................ $14.90 $(33.57) $(13.44)
====== ======= =======
Distributions per Weighted Average
Limited
Partnership Unit....................... $18.52 $ 28.50 $ 26.25
====== ======= =======
</TABLE>
(a) Costs and expenses include approximately $421,000, $402,000 and $350,000
to related parties for the years ended December 31, 1994, 1993 and 1992,
respectively.
The accompanying notes are an integral part of the financial statements.
-16-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS EQUITY (DEFICIT)
------- -------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1991... $ (83) $ 128,476 $ 128,393
Net loss....................... (27) (2,676) (2,703)
Distributions.................. (53) (5,225) (5,278)
---- ------- -------
Balance at December 31, 1992... (163) 120,575 120,412
Net loss....................... (67) (6,682) (6,749)
Distributions.................. (57) (5,673) (5,730)
---- ------- -------
Balance at December 31, 1993... (287) 108,220 107,933
Net income..................... 30 2,964 2,994
Distributions.................. (37) (3,686) (3,723)
---- ------- -------
Balance at December 31, 1994... $ (294) $ 107,498 $ 107,204
==== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-17-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants............. $ 1,312 $ 1,199 $ 1,008
Cash paid to suppliers (a)............. (1,075) (1,144) (1,630)
Investment income received (b)......... 2,834 4,973 7,330
Property taxes paid.................... (68) (61) (66)
Other income........................... 50 - -
------- ------- -------
Net cash provided by operating
activities............................. 3,053 4,967 6,642
------- ------- -------
Cash flows from investing activities:
Additions to real estate............... (27) (19) (181)
Proceeds from sale of securities
available for sale.................... 5,461 1,765 -
Purchase of securities available for
sale.................................. (3,392) (140) -
Purchase of mortgage loan.............. - (100) -
Advances on Master Loan................ (40) (2,390) (999)
------- ------- -------
Net cash provided by (used in)
investing activities................... 2,002 (884) (1,180)
------- ------- -------
Cash flows from financing activities:
Principal payments on note payable..... - - (14)
Distributions to partners.............. (3,723) (5,738) (5,278)
------- ------- -------
Net cash used in financing activities... (3,723) (5,738) (5,292)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents....................... 1,332 (1,655) 170
Cash and cash equivalents, at beginning
of year................................ 222 1,877 1,707
------- ------- -------
Cash and cash equivalents, at end of
year................................... $ 1,554 $ 222 $ 1,877
======= ======= =======
</TABLE>
(a) Payments to related parties totaling approximately $421,000, $406,000 and
$350,000 for the years ended December 31, 1994, 1993 and 1992,
respectively, are included in cash paid to suppliers.
(b) Payments from related parties totaling approximately $2.4 million, $4.0
million and $6.2 million for the years ended December 31, 1994, 1993 and
1992, respectively, are included in interest received.
The accompanying notes are an integral part of the financial statements.
-18-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Net income (loss)................................. $2,994 $(6,749) $(2,703)
------ ------- -------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation................................... 417 411 399
Amortization of discount on securities
available for sale........................... 2 (2) -
Gain on sale of investments.................... - (20) -
Receipt of Southmark stock..................... (7) - -
Provision for possible losses.................. - 11,100 9,000
Changes in assets and liabilities:
Due from affiliates.......................... (376) (41) 138
Other assets................................. 108 215 (60)
Accounts payable and accrued
expenses.................................... (68) 53 (132)
Distributions payable........................ (8) - -
------ ------- -------
Total adjustments.......................... 68 11,716 9,345
------ ------- -------
Net cash provided by operating
activities....................................... $3,062 $ 4,967 $ 6,642
====== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-19-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
Organization
------------
Consolidated Capital Institutional Properties (the "Partnership"), a
California limited partnership, was formed on April 28, 1981, to lend funds
through nonrecourse notes with participation interests (the "Master Loan").
The loans were made to, and the real properties that secure the Master Loan
were purchased and owned by, Consolidated Capital Equity Partners, ("EP"), a
California general partnership in which certain of the partners were former
shareholders and former management of Consolidated Capital Equities
Corporation ("CCEC"), the former corporate general partner. Through December
31, 1994, the Partnership had made 22 specific loans totaling approximately
$176.1 million under the Master Loan.
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the Bankruptcy Court approved EP's
consensual plan of reorganization (the "Plan"). In November 1990, EP and the
Partnership consummated a closing under the Plan pursuant to which, among
other things, the Partnership and EP executed an amended and restated loan
agreement (the "New Master Loan Agreement"), EP was converted from a
California general partnership to a California limited partnership,
Consolidated Capital Equity Partners, L.P. ("CCEP"), and CCEP renewed the
deeds of trust on all the collateral to secure the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole general partner of CCEP and an affiliate of the
Partnership. The general partners of EP became limited partners in CCEP. CHI
has full discretion with respect to conducting CCEP's business, including
managing CCEP's properties and initiating and approving capital expenditures
and asset dispositions and refinancings.
Upon the Partnership's formation in 1981, CCEC, a Colorado corporation, was
the corporate general partner. In December 1988, CCEC filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. In
1990, as part of CCEC's reorganization plan, ConCap Equities, Inc., a Delaware
corporation (the "General Partner" or "CEI") acquired CCEC's general partner
interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships") and replaced CCEC as managing
general partner in all 16 partnerships.
All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994,
the parent of GII Realty, Inc., entered into a transaction (the "Insignia
Transaction") in which, among other things, MAE-ICC, Inc., a wholly owned
subsidiary of Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of
Insignia Financial Group, Inc. ("Insignia") acquired an option (exercisable in
whole or in part from time to time) to purchase all of the stock of GII
Realty, Inc. and, pursuant to a partial exercise of such option, acquired
50.5% of that stock. As a part of the Insignia Transaction, MAE-ICC, Inc.
also acquired all of the outstanding stock of Partnership Services, Inc., an
asset manager and a subsidiary of Insignia acquired all of the outstanding
stock of Coventry Properties, Inc., a property manager. In addition,
confidentiality, non-competition, and standstill arrangements were entered
into between certain of the parties. Those arrangements, among other things,
prohibit GII Realty's former sole shareholder from purchasing Partnership
Units for a period of three years.
The principal place of business for the Partnership and for the General
Partner is One Insignia Financial Plaza, Greenville, South Carolina 29602.
Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, demand deposits, money market funds and investments in commercial
paper with original maturities of three months or less.
Restricted Cash
---------------
The Partnership maintains security deposits in Cash and Cash Equivalents of
approximately $34,000 and $8,000 at December 31, 1994 and 1993, respectively.
-20-
<PAGE>
The Partnership maintains tax and insurance escrows in Other Assets of
approximately $94,000 and $113,000 at December 31, 1994 and 1993,
respectively.
Investment in Real Estate
-------------------------
The investment in real estate is recorded at the lower of carrying value of
the portion of the Master Loan (net of the allowance for possible losses)
which, prior to foreclosure by the Partnership in 1990, was attributable to
The Loft Apartments or estimated fair value. Estimated fair value is
determined using net operating income of the property capitalized at a rate
deemed reasonable for the type of property, adjusted for market conditions,
physical condition of the property and other factors to assess whether any
permanent impairment in value has occurred.
Depreciation
------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 20 years.
Investment in Master Loan
-------------------------
The Master Loan and New Master Loan agreements are considered investments in
acquisition, development, and construction ("ADC") loans, primarily because
the Partnership is entitled to receive, according to the provisions of the
Master Loan and New Master Loan agreements, in excess of 50% of the residual
profits from the sale or refinancing of the properties securing the
agreements. The investment in Master Loan is accounted for by the cost
method, whereby income from the investment is recognized as interest income to
the extent of payments received and losses in the estimated net realizable
value of the investment are recognized in the period they are identified.
Interest income contractually due according to the terms of the Master Loan
and New Master Loan agreements in excess of payments received is deferred. As
of December 31, 1994, and 1993, such cumulative deferred interest, which is
not included in the balance of the net investment in Master Loan, totaled
$110.8 million and $86.2 million, respectively.
Allowances for Possible Losses
------------------------------
Allowances to reduce the carrying cost of the Master Loan and real estate
investments are provided when it is probable that reasonably estimable net
realizable values are less than the recorded carrying cost of such
investments. Losses that result from the ongoing periodic evaluation of the
net realizable value of the collateral securing the Master Loan and real
estate investments are charged to expense in the period in which they are
identified.
Securities Available For Sale
-----------------------------
In 1994, the Partnership adopted Statements of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
As the fair value of securities' available for sale ("Securities") approximate
their cost, any unrealized gains or losses are immaterial and therefore, have
not been recorded in the accompanying financial statements. Any such
adjustment would be recorded directly to Partners' Equity (Deficit) and would
not be reflected in the Statement of Operations. The cost of Securities sold
is determined using the specific identification method.
Unamortized discounts or premiums, resulting from the stated rates on
Securities investments differing from the prevailing interest rates at the
time the investments were acquired, are amortized using the effective interest
method over the term of the investments.
The Securities mature as follows:
<TABLE>
<CAPTION>
DESCRIPTION COST MATURITY
- ----------- ---- --------
<S> <C> <C>
U.S. Treasury Note $1,999,439 April 15, 1995
U.S. Treasury Note 2,591,211 May 15, 1996
U.S. Treasury Note 2,659,577 July 15, 1996
U.S. Treasury Bill 584,924 February 16, 1995
U.S. Treasury Bill 486,865 March 30, 1995
Equity Securities 6,690 N/A
----------
$8,328,706
=========
</TABLE>
-21-
<PAGE>
Rental Income
-------------
The Partnership leases its residential property under short-term operating
leases. Lease terms are generally one year or less in duration. The
Partnership expects that in the normal course of business these leases will be
renewed or replaced by other leases.
Income Taxes
------------
No provision has been made in the financial statements for Federal income
taxes because under current law, no Federal income taxes are paid directly by
the Partnership. The partners are responsible for their respective shares of
Partnership net income or loss. The Partnership reports certain transactions
differently for tax than for financial statement purposes.
The tax basis of the Partnership's assets and liabilities is approximately
$74.4 million greater than the assets and liabilities as reported in the
financial statements at December 31, 1994.
Allocation of Net Income and Net Loss
-------------------------------------
The Partnership Agreement provides for net income and net losses for both
financial and tax reporting purposes to be allocated 99% to the Limited
Partners and 1% to the General Partner.
Net Income (Loss) Per Weighted Average Limited Partnership Unit
---------------------------------------------------------------
Net income (loss) per Weighted Average Limited Partnership Unit ("Unit") is
computed by dividing net income (loss) allocated to the Limited Partners by
the number of weighted average Units outstanding. Per Unit information has
been computed based on 199,045, 199,051 and 199,051 weighted average Units
outstanding in 1994, 1993 and 1992, respectively.
Presentation of Accounts
------------------------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current presentation.
Due from Affiliates
-------------------
Due from affiliates primarily represents cash flow payments owed to CCIP from
CCEP in accordance with the terms of the Master Loan.
NOTE 2 - RELATED PARTY TRANSACTIONS
-----------------------------------
The Partnership has paid property management fees equal to 5% of collected
gross rental revenues ("Rental Revenues") for property management services in
each of the three years in the period ended December 31, 1994. A portion of
such property management fees equal to 4% of Rental Revenues has been paid to
the property management company performing day-to-day property management
services and the portion equal to 1% of Rental Revenues has been paid to
Partnership Services, Inc. ("PSI") or its predecessor for advisory services
related to day-to-day property operations. During 1992 and 1993, property
management services were provided by an unaffiliated management company. In
July 1993, Coventry Properties, Inc. ("Coventry"), an affiliate of Insignia,
assumed day-to-day property management responsibilities for the Partnership's
property under the same management fee arrangement. An affiliate of Insignia
assumed day-to-day property management responsibilities of the property in
late December, 1994. Fees paid to PSI and Coventry have been reflected in the
following table as compensation to related parties in the applicable periods.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
COMPENSATION 1994 1993 1992
------------ -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Charged to property operations
expenses:
Property management fees $ 65 $ 38 $ 10
------- ------- -------
</TABLE>
-22-
<PAGE>
In addition to the compensation paid in connection with property operations,
the Partnership Agreement provides for reimbursement to the property
management companies for their expenses related to property operations
(primarily salaries and related costs for on-site property personnel). The
Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with administration of
Partnership activities. The General Partner and its current and former
affiliates received reimbursements as reflected in the following table:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
REIMBURSEMENTS 1994 1993 1992
- -------------- ----- ----- -----
(in thousands)
<S> <C> <C> <C>
Charged to real estate:
Reimbursement of direct property expense..... $ - $ 4 $ -
----- ----- -----
Charged to property operations expenses:
Reimbursement of direct property expense..... 130 64 -
----- ----- -----
Charged to administrative expenses (including
computer and payroll reimbursement).......... 226 300 340
----- ----- -----
$ 356 $ 368 $ 340
===== ===== =====
</TABLE>
On October 16, 1992, an affiliate of the General Partner, LP Acceptance
Corporation, distributed an offer to purchase Units (the "Tender Offer") for a
cash price of $225.00 per Unit to Limited Partners of record as of October 1,
1992. Approximately 7,539 Limited Partners holding 42,843 Units (22% of total
Units) accepted the Tender Offer and sold their Units to LP Acceptance
Corporation effective December 1, 1992, for an aggregate sales price of
approximately $9.6 million. Effective with the "Insignia Transaction" on
December 8, 1994, Insignia Financial Group, Inc., an affiliate of the General
Partner, acquired the 42,843 units previously held by LP Acceptance
Corporation.
NOTE 3 - NET INVESTMENT IN MASTER LOAN
--------------------------------------
The net investment in Master Loan consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
(in thousands)
Master Loan funds advanced.......... $124,116 $124,076
Accrued deferred basic interest..... 5,289 5,289
Accrued additional interest......... 4,829 4,829
Collections reserve (a)............. (6,548) (6,548)
-------- --------
127,686 127,646
Less allowance for possible losses.. (35,900) (35,900)
-------- --------
Net investment in Master Loan....... $ 91,786 $ 91,746
======== ========
</TABLE>
(a) The collections reserve represents funds collected by the Partnership
related to the Master Loan but which are not attributable to a specific
property. The funds represent collections in connection with properties
sold by CCEP for which the representative portion of the Master Loan has
been repaid.
At December 31, 1994 and 1993, cumulative deferred interest totaling
approximately $110.8 million and $86.2 million, respectively, was not included
in the balance of the net investment in Master Loan.
Terms of the New Master Loan Agreement
--------------------------------------
Under the terms of the New Master Loan Agreement (as adopted in November
1990), interest accrues at a fluctuating rate per annum adjusted annually on
July 15 by the percentage change in the U.S. Department of Commerce Implicit
Price Deflator for the Gross National Product subject to an interest rate
ceiling of 12.5%. The interest rates for each of the years ended December 31,
1994, 1993, and 1992, was 12.5%. Interest payments are currently payable
quarterly in an amount equal to "Excess Cash Flow." If such Excess Cash Flow
payments are less than the current accrued interest during the quarterly
period, the unpaid interest is added to principal, compounded annually, and is
payable at the loan's maturity. If such Excess Cash Flow payments are greater
than the current accrued interest, the excess amount is applied to the
principal balance of the loan. Any net proceeds from the sale or refinancing
of any of CCEP's properties are paid to the Partnership under the terms of the
New Master Loan Agreement. The New Master Loan Agreement matures in November
2000.
-23-
<PAGE>
For 1992, Excess Cash Flow was generally defined in the New Master Loan
Agreement as net cash flow from operations after third-party debt service.
Effective January 1, 1993, the Partnership and CCEP amended the New Master
Loan Agreement to stipulate that Excess Cash Flow would be computed net of
capital improvements. Such expenditures were formerly funded from advances on
the Master Loan from the Partnership to CCEP. This amendment and change in
the definition of Excess Cash Flow will have the effect of reducing income on
the investment in Master Loan by the amount of CCEP's capital expenditures,
since such amounts were previously excluded from Excess Cash Flow.
The Carlton House property secures a first lien mortgage note receivable with
a carrying value of $25.1 million (principal and interest of $35.3 million at
December 31, 1994) held by CCEP. The note receivable held by CCEP secures a
portion of the Master Loan obligation between CCEP and the Partnership. In
September 1993, a wholly-owned subsidiary of the Partnership purchased from an
unaffiliated third party a $20.4 million second lien mortgage note (principal
and interest of $29.4 million at September 30, 1993) secured by Carlton House
Apartments and Office Building ("Carlton House") for $100,000. The
collectibility of the second lien note secured by the Carlton House is
uncertain, and the Partnership recorded a provision for possible losses to
fully reserve its $100,000 investment in the third quarter of 1993.
In December 1993, the Partnership advanced approximately $2.1 million to CCEP
as an advance on the Master Loan. CCEP then advanced approximately $2.1
million to New Carlton House Partners, as an advance on the Carlton House
Note, to pay Carlton House's delinquent property taxes. Both advances are in
accordance with the respective note agreements. In February 1994, CCEP
advanced approximately $589,000 to New Carlton House Partners, as an advance
on the Carlton House Note, to pay Carlton House's 1994 property taxes that
were due. In February 1994, the Partnership advanced $40,000 to CCEP as an
advance on the Master Loan. CCEP then advanced $40,000 to NCHP as an advance
on the Carlton House Note to pay the remaining balance of 1993 property taxes.
Summary of Operations of CCEP
-----------------------------
Sources of income and principal receipts on the Partnership's investment in
Master Loan related to CCEP and EP totaled approximately $2.4 million, $4
million and $6.2 million, respectively, during the years ended December 31,
1994, 1993, and 1992. Following is a summary of operations of CCEP for the
years then ended:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
(in thousands)
Funds provided by property operations... $ 18,128 $ 18,008 $ 17,253
Funds used for property operations
(includes administrative expenses)..... (14,212) (12,968) (11,643)
Proceeds from sale of property.......... 130 - -
Debt service payments on underlying
notes payable.......................... (1,064) (1,223) (1,359)
-------- -------- --------
Net funds from property operations...... 2,982 3,817 4,251
Collection of note receivable........... - 150 1,941
-------- -------- --------
Total funds from property operations.... 2,982 3,967 6,192
Advance on Carlton House note receivable (589) - -
Net investing activity.................. 55 22 18
-------- -------- --------
Net funds provided...................... $ 2,448 $ 3,989 $ 6,210
======== ======== ========
Income from the investment in Master
Loan................................... $ 2,448 $ 3,989 $ 6,210
======== ======== ========
</TABLE>
For the year ended December 31, 1993, the Partnership recorded a provision for
possible losses of approximately $11.1 million, primarily because of a decline
in value of the 444 DeHaro Building ("444 DeHaro"), a building located in San
Francisco, California, that secures the Master Loan. 444 DeHaro has
experienced a decline in its tenant base because of the economic hardships
experienced by its tenants, and because the target market for 444 DeHaro's
commercial space is limited due to the industrial nature of the surrounding
area. Additionally, the property currently has several tenants under leases
which expired in 1994. Lease rates in the area have declined substantially
since their leases were signed and management expects that if tenants renew
their leases, the lease rates will be significantly lower than the rates in
effect in the existing leases.
NOTE 4 - OTHER INCOME
---------------------
In 1991, the Partnership (and simultaneously 15 Affiliated Partnerships)
entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding.
These claims related to Southmark Corporation's activities while it exercised
control (directly, or indirectly through its affiliates) over the Partnership.
The Bankruptcy Court set the Partnership's and the
-24-
<PAGE>
Affiliated Partnership's allowed claim at $11 million, in aggregate. In March
1994, the Partnership received 909 shares of Southmark Corporation Redeemable
Series A Preferred Stock and 6,651 shares of Southmark Corporation New Common
Stock with an aggregate market value on the date of receipt of $6,690 and
$49,847 in cash representing the Partnership's share of the recovery, based on
its pro rata share of the claims filed.
NOTE 5 - COMMITMENT
-------------------
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested
Capital, as defined in the Partnership Agreement. Reserves, including cash
and cash equivalents and Securities available for sale (at market), totaling
approximately $9.9 million, were greater than the reserve requirement of $8
million at December 31, 1994.
NOTE 6 - PARTNERS' EQUITY (DEFICIT)
-----------------------------------
The sources of distributions per Unit for the years ended December 31, 1994,
1993 and 1992, are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
From distributable cash from operations:
Regular distributions $ 18.52 $ 28.50 $ 26.25
======= ======= =======
</TABLE>
-25-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994
(dollars in thousands)
<TABLE>
<CAPTION>
GREAT AMOUNT AT
INITIAL COST COSTS WHICH CARRIED AT CLOSE OF PERIOD
-------------------------------------- CAPITALIZED ----------------------------------
RELATED BUILDINGS AND SUBSEQUENT BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL
- ----------- ------------ ------- ------------- -------------- ------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
The Lofts
Raleigh, NC $ - $ 1,053 $ 4,147 $ 1,055 $ 1,053 $ 5,202 $ 6,255
=========== ====== ============ ============= ====== ======= =======
<CAPTION>
DEPRE-
CIABLE
ACCUMULATED DATE OF DATE LIVES
DESCRIPTION DEPRECIATION CONSTURCTION ACQUIRED (YEARS)
- ----------- ------------ ------------ -------- -------
<S> <C> <C> <C> <C>
The Lofts
Raleigh, NC $ 1,505 1975 11/19/90 5-20
=======
</TABLE>
-26-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
Notes to Schedule III
Real Estate and Accumulated Depreciation
Changes in real estate and accumulated depreciation are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
REAL ESTATE: 1994 1993 1992
- ----------- ------ ------- ------
(in thousands)
<S> <C> <C> <C>
Balance, real estate at beginning of
year.................................. $6,228 $6,209 $6,028
Additions............................. 27 19 181
------ ------ ------
Balance, real estate at end of year.... $6,255 (1) $6,228 (1) $6,209 (1)
====== ====== ======
ACCUMULATED DEPRECIATION:
- ------------------------
Balance, depreciation of real estate
at beginning of year.................. $1,088 $ 677 $ 278
Depreciation of real estate........... 417 411 399
------ ------ ------
Balance, depreciation of real estate
at end of year........................ $1,505 $1,088 $ 677
====== ====== ======
</TABLE>
(1) The aggregate cost for federal income tax purposes is (in thousands):
<TABLE>
<S> <C>
1994 $6,392
1993 $6,365
1992 $6,345
</TABLE>
-27-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 and 1993
-28-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
TABLE OF CONTENTS
December 31, 1994
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS................................ 30
CONSOLIDATED BALANCE SHEETS as of December 31, 1994 and 1993............ 31
CONSOLIDATED STATEMENTS OF OPERATIONS for the Years Ended December 31,
1994, 1993 and 1992.................................................... 32
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT for the Years Ended
December 31, 1994, 1993 and 1992....................................... 33
CONSOLIDATED STATEMENTS OF CASH FLOWS for the Years Ended December 31,
1994, 1993 and 1992.................................................... 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................. 36
</TABLE>
-29-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Consolidated Capital Equity Partners L.P.:
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Equity Partners L.P. (a California limited partnership) as of December
31, 1994 and 1993, and the related consolidated statements of operations,
partners' deficit and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Capital Equity
Partners L.P. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
March 23, 1995
-30-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
ASSETS 1994 1993
- ------ ---------- ----------
<S> <C> <C>
Real estate, at cost:
Land.............................................. $ 10,831 $ 10,953
Land improvements................................. 7,221 7,221
Buildings......................................... 80,850 79,962
Building improvements............................. 5,589 5,145
--------- -----------
104,491 103,281
Less: Accumulated depreciation................... (63,288) (58,141)
--------- -----------
41,203 45,140
Real estate assets of property in-substance
foreclosed........................................ 20,722 20,010
Less: Accumulated depreciation................... (1,122) (202)
--------- -----------
19,600 19,808
--------- -----------
60,803 64,948
--------- -----------
Cash and cash equivalents.......................... 3,393 2,429
Securities available for sale...................... 195 -
Investments in limited partnerships................ 2,508 2,508
Other assets....................................... 1,254 1,083
--------- -----------
$ 68,153 $ 70,968
========= ===========
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Master Loan and interest payable................... $ 238,486 $ 213,798
Notes and interest payable......................... 4,700 5,338
Due to affiliates.................................. 969 620
Other liabilities.................................. 2,038 1,897
--------- -----------
246,193 221,653
--------- -----------
Partners' deficit:
Limited Partners.................................. (176,260) (149,178)
General Partner................................... (1,780) (1,507)
--------- -----------
(178,040) (150,685)
--------- -----------
$ 68,153 $ 70,968
========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-31-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental.................................. $ 22,987 $ 19,161 $ 17,214
Investment income....................... 77 173 1,959
-------- -------- --------
Total revenues........................ 23,064 19,334 19,173
-------- -------- --------
Costs and expenses:
Interest (a)............................ 27,573 24,852 22,759
Property operations..................... 15,903 12,831 10,680
Depreciation............................ 6,132 5,410 5,412
Loss on sale of real estate............. 31 - -
Administrative.......................... 780 756 831
Loss on real estate in-substance
foreclosed............................. - 4,795 -
Total costs and expenses (b).......... 50,419 48,644 39,682
-------- -------- --------
Loss from operations.................... (27,355) (29,310) (20,509)
Gain on real estate tax settlement...... - 1,108 -
-------- -------- --------
Net loss.................................. $(27,355) $(28,202) $(20,509)
======== ======== ========
</TABLE>
(a) Interest expense includes approximately $27.1 million, $24.3 million and
$22.1 million to related parties for the years ended December 31, 1994, 1993
and 1992, respectively.
(b) Costs and expenses include approximately $2.4 million, $1.2 million and
$705,000 to related parties for the years ended December 31, 1994, 1993 and
1992, respectively. See supplemental information with respect to related
party transactions in Note 2 of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial
statements.
-32-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS DEFICIT
----------- ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1991.. $ (1,020) $ (100,954) $ (101,974)
Net loss...................... (205) (20,304) (20,509)
------ -------- --------
Balance at December 31, 1992.. (1,225) (121,258) (122,483)
Net loss...................... (282) (27,920) (28,202)
------ -------- --------
Balance at December 31, 1993.. (1,507) (149,178) (150,685)
Net loss...................... (273) (27,082) (27,355)
------ -------- --------
Balance at December 31, 1994.. $ (1,780) $ (176,260) $ (178,040)
====== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-33-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants............... $ 23,017 $ 19,117 $ 17,253
Cash paid to suppliers (b)............... (14,827) (12,078) (10,243)
Investment income received............... 77 173 1,959
Interest paid (a)........................ (2,550) (4,577) (7,131)
Property taxes paid...................... (1,941) (3,032) (1,218)
Cash received from property in-substance
foreclosed.............................. - 800 -
-------- -------- --------
Net cash provided by operating activities. 3,776 403 620
-------- -------- --------
Cash flows from investing activities:
Additions to real estate................. (2,149) (710) (1,106)
Purchase of Securities available for sale (195) - -
Net proceeds from sale of real estate.... 130 - -
-------- -------- --------
Net cash used in investing activities:.... (2,214) (710) (1,106)
-------- -------- --------
Cash flows from financing activities:
Advances on Master Loan.................. 40 2,390 999
Principal payments on notes payable...... (638) (652) (576)
-------- -------- --------
Net cash provided by (used in) financing
activities............................... (598) 1,738 423
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 964 1,431 (63)
Cash and cash equivalents, at beginning
of year.................................. 2,429 998 1,061
-------- -------- --------
Cash and cash equivalents, at end of year. $ 3,393 $ 2,429 $ 998
======== ======== ========
</TABLE>
(a) Payments to related parties totaling approximately $2.4 million, $4.0
million and $6.2 million for the years ended December 31, 1994, 1993 and
1992, respectively are included in interest paid.
(b) Payments to related parties totaling approximately $2.4 million, $1.2
million and $705,000 for the years ended December 31, 1994, 1993 and 1992,
respectively, are included in cash paid to suppliers. See supplemental
information with respect to related party transactions in Note 2 of the
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial
statements.
-34-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Net loss.................................. $(27,355) $(28,202) $(20,509)
-------- -------- --------
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Loss on real estate in-substance
foreclosed............................ - 4,795 -
Gain on real estate tax statement...... - (1,108) -
Depreciation........................... 6,132 5,410 5,412
Loss on sale of real estate............ 31 - -
Cash received from property
in-substance foreclosed............... 800 -
Changes in assets and liabilities:
Other assets......................... (170) 7 (21)
Interest payable..................... 24,648 20,270 15,765
Payable to affiliates................ 349 (52) (160)
Other liabilities.................... 141 (1,517) 133
-------- -------- --------
Total adjustments.................. 31,131 28,605 21,129
-------- -------- --------
Net cash provided by operating activities. $ 3,776 $ 403 $ 620
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-35-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
Consolidated Capital Equity Partners ("EP"), a California general partnership,
was formed on June 24, 1981, to engage in the business of acquiring, operating
and holding equity investments in income-producing real properties. The
operations of EP were financed substantially through nonrecourse notes with
participation interests (the "Master Loan") from Consolidated Capital
Institutional Properties ("CCIP"), a California limited partnership. These
notes are secured by the real properties owned by and notes receivable on sold
properties owed to CCEP. The sole General Partner of CCIP is ConCap Equities,
Inc. ("CEI"), a Delaware corporation. In November 1990, EP's general partners
executed a new partnership agreement (the "New Partnership Agreement") in
conjunction with the bankruptcy settlement discussed below whereby EP converted
from a general partnership to a California limited partnership, Consolidated
Capital Equity Partners L.P. ("CCEP"). Pursuant to the New Partnership
Agreement, ConCap Holding, Inc. ("CHI"), a Texas corporation, a wholly-owned
subsidiary of CEI, became the sole general partner of CCEP, and the former
general partners of EP became limited partners of CCEP. CHI has full discretion
with respect to conducting CCEP's business, including managing CCEP's properties
and initiating and approving capital expenditures and asset dispositions and
refinancings.
All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994,
the parent of GII Realty, Inc., entered into a transaction (the "Insignia
Transaction") in which, among other things, MAE-ICC, Inc., a wholly owned
subsidiary of Metropolitan Asset Enhancement, L.P., an affiliate of Insignia
Financial Group, Inc. ("Insignia") acquired an option (exercisable in whole or
in part from time to time) to purchase all of the stock of GII Realty, Inc. and,
pursuant to a partial exercise of such option, acquired 50.5% of that stock. As
a part of the Insignia Transaction, MAE-ICC, Inc. also acquired all of the
outstanding stock of Partnership Services, Inc., an asset manager and Insignia
acquired all of the outstanding stock of Coventry Properties, Inc., a property
manager. In addition, confidentiality, non-competition, and standstill
arrangements were entered into between certain of the parties. Those
arrangements, among other things, prohibit GII Realty's former sole shareholder
from purchasing Partnership Units for a period of three years.
The principal place of business for the Partnership and for the General Partner
is One Insignia Financial Plaza, Greenville, South Carolina 29602.
Consolidation
- -------------
CCEP owns a 75% interest in a limited partnership ("Western Can, Ltd.") which
owns 444 De Haro, an office building in San Francisco, California. CCEP's
investment in Western Can, Ltd. is consolidated in CCEP's financial statements.
No minority interest liability has been reflected for the 25% minority interest
because Western Can Ltd. has a net capital deficit and no minority liability
exists with respect to CCEP.
The assets and liabilities of December 31, 1994, and operations from September
30, 1993 through December 31, 1994, of the Carlton House are consolidated in
CCEP's financial statements pursuant to accounting guidelines regarding notes
receivable in-substance foreclosed.
Statements of Cash Flows
- ------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, demand deposits, money market funds and investments in commercial paper
with original maturities of three months or less.
-36-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
Restricted Cash
- ---------------
The Partnership maintains the following restricted cash balances in Cash and
Cash Equivalents at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Security Deposits.................................. $617,493 $722,961
Replacement Reserve Escrow Accounts................ $197,741 $197,741
Commercial Paper................................... $133,333 $300,000
The Partnership maintains the following restricted
cash balances in Other Assets at December 31:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Tax and Insurance Escrows.......................... $208,396 $ 90,336
Repair and Maintenance............................. $ - $ 5,000
</TABLE>
Securities Available For Sale
- -----------------------------
In 1994, the Partnership adopted Statements of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." As
the fair value of securities' available for sale ("Securities") approximate
their cost, any unrealized gains or losses are immaterial and therefore, have
not been recorded in the accompanying financial statements. Any such adjustment
would be recorded directly to Partners' Equity (Deficit) and would not be
reflected in the Statement of Operations. The cost of Securities sold is
determined using the specific identification method.
The Securities mature as follows:
<TABLE>
<CAPTION>
DESCRIPTION COST MATURITY
----------- ---- --------
<S> <C> <C>
Treasury Bill $ 194,783 March 23, 1995
=========
</TABLE>
Note Receivable In-Substance Foreclosed
- ---------------------------------------
The note receivable secured by the Carlton House Apartment and Office Building
("Carlton House") was deemed in-substance foreclosed as of September 30, 1993.
The Carlton House note receivable is deemed in-substance foreclosed because
control of the property effectively rests with an affiliate of CCEP and the
debtor is unable to pay debt service according to the note terms. The note
receivable in-substance foreclosed is recorded at the estimated fair value of
the collateral property. See Note 4.
Investments in Limited Partnerships
- -----------------------------------
The investments in limited partnerships represent certain general partner
interests in seven affiliated limited partnerships that were contributed by EP's
general partners to CCEP. These investments are stated at the lower of
estimated fair value of the interests at the time of contribution to CCEP or the
current estimated fair value of the interests.
Depreciation
- ------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 18 years.
Deferred Loan Fees
- ------------------
Deferred loan fees are amortized using the effective interest method over the
lives of the related notes and are included in Other Assets.
-37-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
Interest Recognition on Note Receivable
- ---------------------------------------
CCEP's policy is to cease accruing interest on notes receivable that have been
delinquent for 60 days or more. In addition, interest income is only accrued to
the extent collateralized by the net realizable value of the subject property.
Rental Income
- -------------
CCEP leases its residential properties under short-term operating leases. Lease
terms are generally one year or less in duration. CCEP expects that in the
normal course of business these leases will be renewed or replaced by other
leases. Commercial office property leases vary from 1 to 10 years. Rental
income is recognized on a straight-line basis over the life of the applicable
leases. Minimum future rental income for the commercial properties subject to
noncancellable operating leases is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1995 $ 2,328
1996 1,797
1997 1,066
1998 816
1999 639
Thereafter 1,478
---------
Total $ 8,124
=========
</TABLE>
There is no assurance that this rental income will continue at the same level
when the current leases expire.
Income Taxes
- ------------
No provision has been made in the financial statements for Federal income taxes
because, under current law, no Federal income taxes are paid directly by CCEP.
The Partners are responsible for their respective shares of CCEP's net income or
loss. CCEP reports certain transactions differently for tax than for financial
statement purposes.
The tax basis of the Partnership's assets and liabilities is approximately $99.5
million greater than the assets and liabilities as reported in the financial
statements at December 31, 1994.
Allocation of Net Income
- ------------------------
Pursuant to the Partnership Agreement, net income and net losses for both
financial and tax reporting purposes are allocated 99% to the Limited Partners
and 1% to CHI.
Due to Affiliates
- -----------------
Due from affiliates primarily represents cash flow payments owed by CCEP to CCIP
in accordance with the terms of the Master Loan.
NOTE 2 - RELATED PARTY TRANSACTIONS
- -----------------------------------
CCEP has paid property management fees equal to 5% of collected gross rental
revenues ("Rental Revenues") for property management services in each of the
three years in the period ended December 31, 1994. A portion of such property
management fees equal to 4% of Rental Revenues has been paid to the property
management company performing day-to-day property management services and the
portion equal to 1% of Rental Revenues has been paid to Partnership Services,
Inc. ("PSI") or its predecessor for advisory services related to day-to-day
property operations. During 1992 and 1993, property management services were
provided by unaffiliated management companies. In July 1993, Coventry
Properties, Inc. ("Coventry"), an affiliate of Insignia , assumed day-to-day
property management responsibilities for two of CCEP's properties under the same
management fee arrangement as the prior unaffiliated management companies.
Additionally,
-38-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
since February 1993, Coventry has managed the Carlton House. An affiliate of
Insignia assumed day-to-day property management responsibilities of all of the
properties in late December, 1994. Fees paid to PSI and Coventry have been
reflected in the following table as compensation to related parties in the
applicable periods.
CCEP is subject to an Investment Advisory Agreement between CCEP and an
affiliate of CHI effective January 1991. This agreement provides for an annual
fee, payable in monthly installments, to an affiliate of CHI for providing
advising and consulting services for CCEP's properties. The fee is computed as
a .24% annual charge on the fair market value of CCEP's assets, excluding cash
and cash equivalents. The agreement automatically renews for successive renewal
terms of 90 days each, unless either party terminates the agreement.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
COMPENSATION 1994 1993 1992
- ------------ --------- -------- ---------
(in thousands)
<S> <C> <C> <C>
Charged to property operations expenses:
Property management fees................. $ 740 $ 292 $ 172
-------- ------- --------
Charged to administrative expenses:
Investment advisory fees................. 257 257 281
-------- ------- --------
$ 997 $ 549 $ 453
======== ======= ========
</TABLE>
In addition to the compensation paid in connection with property operations,
CCEP's Partnership Agreement provides for reimbursement to the property
management companies for their expenses related to property operations
(primarily salaries and related costs for on-site property personnel). The
Partnership Agreement also provides for reimbursement to the General Partner and
its affiliates for costs incurred in connection with administration of
Partnership activities. CHI, CEI, and their current and former affiliates
received reimbursements as reflected in the following table:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
REIMBURSEMENTS 1994 1993 1992
- -------------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C>
Charged to real estate:
Reimbursement of direct property expense.. $ - $ 9 $ -
-------- ------- --------
Charged to other assets:
Lease commissions......................... 110 - -
-------- ------- --------
Charged to property operations expenses:
Reimbursement of direct property expense.. 973 317 -
-------- ------- --------
Charged to administrative expenses:
Reimbursement of administrative expenses
(including computer and payroll
reimbursements)......................... 319 322 252
-------- ------- --------
$ 1,402 $ 648 $ 252
======== ======= ========
</TABLE>
NOTE 3 - DISPOSITION OF REAL ESTATE
- -----------------------------------
During 1994, the Partnership sold a building and the related parcel of land
which was adjacent to the Plantation Gardens Apartments. The Partnership
recognized a $31 loss on the sale.
NOTE 4 - NOTE RECEIVABLE DEEMED IN-SUBSTANCE FORECLOSED
- -------------------------------------------------------
CCEP holds a note receivable (the "Carlton House Note") which is secured by a
deed of trust on the Carlton House Apartment and Office Building ("Carlton
House") with a scheduled maturity in 1995. According to the note terms,
interest accrues at 10% and compounds monthly on principal plus accrued but
unpaid interest. The note receivable has been in
-39-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
default since 1991. As described more fully below the required debt service
payments were reduced to only the amount of net cash flow from the Carlton
House. CCEP recognized $150,000 and $1.9 million of interest income related to
the note receivable in the statements of operations for the years ended December
31, 1993 and 1992, respectively. However, in 1994, no interest income was
recognized as no cash related to the note receivable was received by CCEP.
Interest contractually due to CCEP under payment terms of the note, but not
recognized in the statements of operations due to the note's delinquent status,
totaled approximately $4.4 million, $3.6 million and $1.5 million for the years
ended December 31, 1994, 1993 and 1991, respectively. CCEP intends to foreclose
on the Carlton House note after the term of forbearance (which terminates in
April 1995) has elapsed, in accordance with the terms of the Restructure
Agreement.
The Carlton House was originally owned by CCEP. In 1984, CCEP sold the Carlton
House and received back a $28 million purchase money note secured by a first
lien on the property. CCEP assigned this purchase money note to CCIP as
additional collateral for the Master Loan. In 1986, the buyer defaulted on this
purchase money note and filed for bankruptcy when CCEP attempted to foreclose on
the Carlton House. Pursuant to a reorganization plan, a successor (New Carlton
House Partners, "NCHP") to the buyer executed a new promissory note in the
amount of $31.5 million (the Carlton House Note). As of December 31, 1994,
principal and accrued interest owed on the Carlton House Note is $35.3 million.
In early 1991, NCHP defaulted on the Carlton House Note. Since the default,
CCEP and NCHP have negotiated a restructuring of the Carlton House Note. During
the negotiating process, the owner made interim payments of $150,000 per month.
In 1992, CCEP and NCHP entered into a Restructure Agreement (herein so called).
Pursuant to the Restructure Agreement, 1801 Tower, Inc., an affiliate of CCEP
and CCIP was substituted as the new general partner of NCHP in February 1993.
The Restructure Agreement provides that payments to CCEP under the Carlton House
Note will be in an amount equal to the property's net cash flow and includes
CCEP's agreement not to foreclose on the property until April 1995, provided
that NCHP remains in compliance with the Restructure Agreement and various other
conditions are satisfied.
Prior to the Restructure Agreement, limited information was provided by the
borrower. Information obtained subsequent to execution of the Restructure
Agreement indicate that the property's deferred maintenance is significantly
higher than the borrower's estimate of $5 million. The substantial amount of
deferred maintenance which was, in some cases, endangering the continued
operations of the property, and the value of the property which collateralizes
the Carlton House Note, is currently being addressed.
In September 1993, a wholly-owned subsidiary of CCIP purchased the $20.4 million
second lien mortgage note (principal and interest of $31.8 million at December
31, 1994) secured by the Carlton House from an unaffiliated third party. This
mortgage note, which is subordinate to CCEP's Master Loan debt secured by
Carlton House, remains the obligation of NCHP. As a result of the facts that
(1) NCHP has no equity in the Carlton House, considering the current fair value
of the Carlton House; (2) proceeds for repayment of the Carlton House Note can
be expected to come only from the operations or sale of the Carlton House; and
(3) NCHP effectively abandoned control of the Carlton House to CCEP when 1801
Tower, Inc. gained the general partner interest in NCHP in 1993, CCEP has deemed
the Carlton House Note in-substance foreclosed as of December 31, 1993.
Accordingly, the net note receivable secured by Carlton House is presented as
"Note Receivable in-substance foreclosed" in accompanying financial statements.
Summarized below are the assets, liabilities, equity and the results of
operations of the Carlton House that are included in CCEP's financial statements
for the year ended December 31, 1994, prepared on the same basis as CCEP's
financial statements. Any intercompany balances between CCEP and the Carlton
House have been eliminated in CCEP's consolidated financial statements and the
summarized financial statements set forth below:
-40-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1994 1993
- ------ -------- --------
(in thousands)
<S> <C> <C>
Real estate:
Land.............................. $ 3,805 $ 3,805
Buildings and improvements........ 16,917 16,205
------- -------
20,722 20,010
Less: Accumulated depreciation... (1,122) (202)
------- -------
19,600 19,808
Cash and cash equivalents.......... 1,519 997
Securities available for sale...... 195 -
Prepaid expenses and other assets.. 103 149
------- -------
Total assets...................... $21,417 $20,954
======= =======
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Notes and interest payable......... $ 16 $ 58
Due to affiliates.................. 763 -
Other liabilities.................. 467 474
------- -------
Total liabilities.................. 1,246 532
------- -------
Partners' equity................... 20,171 20,422
------- -------
Total liabilities and partners'
equity............................ $21,417 $20,954
======= =======
</TABLE>
-41-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
FOR THE FOR THE THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
(in thousands)
<S> <C> <C>
Rental revenue............. $ 4,831 $ 1,164
Investment income.......... 27 -
--------- ---------
Total Revenues............. 4,858 1,164
Costs and expenses:
Property operations....... 4,108 1,371
Depreciation.............. 920 202
Administrative............ 78 -
Interest.................. 3 3
--------- ---------
Total costs and expenses... 5,109 1,576
--------- ---------
Loss from operations....... (251) (412)
Gain on real estate tax
settlement................ - 1,108
--------- ---------
Net income................. $ (251) $ 696
========= =========
</TABLE>
NOTE 5 - MASTER LOAN AND ACCRUED INTEREST PAYABLE
- -------------------------------------------------
The Master Loan and accrued interest payable balances at December 31, 1994, and
1993, are $238.5 million and $213.8 million, respectively.
Terms of the New Master Loan Agreement
- --------------------------------------
Under the terms of the New Master Loan Agreement, interest accrues at a
fluctuating rate per annum adjusted annually on July 15 by the percentage change
in the U.S. Department of Commerce Implicit Price Deflator for the Gross
National Product subject to an interest rate ceiling of 12.5%. The interest
rates for each of the years ended as of December 31, 1994, 1993, and 1992 was
12.5%. Interest payments are currently payable quarterly in an amount equal to
"Excess Cash Flow", generally defined in the New Master Loan Agreement as net
cash flow from operations after third-party debt service. If such Excess Cash
Flow payments are less than the current accrued interest during the quarterly
period, the unpaid interest is added to principal, compounded annually, and is
payable at the loan's maturity. If such Excess Cash Flow payments are greater
than the currently payable interest, the excess amount is applied to the
principal balance of the loan. Any net proceeds from sale or refinancing of any
of CCEP's properties are paid to CCIP under the terms of the New Master Loan
Agreement. The New Master Loan Agreement matures in November 2000.
Effective January 1, 1993, CCEP and CCIP amended the New Master Loan Agreement
to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the
Master Loan from CCIP to CCEP. This amendment and change in the definition of
Excess Cash Flow will have the effect of reducing Master Loan payments to CCIP
by the amount of CCEP's capital expenditures since such amounts were previously
excluded from Excess Cash Flow. The amendment will have no effect on the
computation of interest expense on the Master Loan for CCEP.
In December 1993, the Partnership advanced approximately $2.1 million to CCEP as
an advance on the Master Loan. CCEP then advanced approximately $2.1 million to
New Carlton House Partners, as an advance on the Carlton House Note, to pay
Carlton House's delinquent property taxes. Both advances are in accordance with
the respective note agreements. In February 1994, CCEP advanced approximately
$589,000 to New Carlton House Partners, as an advance on the Carlton House Note,
to pay Carlton House's 1994 property taxes. In February 1994, the Partnership
advanced $40,000 to CCEP as an advance on the Master Loan. CCEP then advanced
$40,000 to NCHP as an advance on the Carlton House Note to pay the remaining
balance of 1993 property taxes.
-42-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 6 - NOTES AND INTEREST PAYABLE
- -----------------------------------
<TABLE>
<CAPTION>
NOTES PAYABLE
AS OF DECEMBER 31,
------------------
1994 1993
-------- -----
(in thousands)
<S> <C> <C>
Notes on real estate owned.. $ 4,700 $ 5,280
Other notes payable........ - 58
----- -----
4,700 5,338
===== =====
</TABLE>
The notes payable are all nonrecourse, collateralized by deeds of trust on the
real property. The notes payable bear interest at rates ranging from 8.0% to
10.5% per annum and mature between 1998 and 2007.
CCEP was obligated on a note payable of $1.1 million at December 31, 1992,
secured by Tates Creek Village, which had a provision requiring additional
interest payments contingent upon the outcome of property operations. The
provision entitles the lender to 15% of net revenues in excess of a floor of
$520,000. Such additional interest totaled $56,000 for the year ended December
31, 1993. In the third quarter of 1993, CCEP negotiated a modification of terms
on the mortgage secured by the Tates Creek Apartments, and as a result, the
participation interest requirement has been eliminated from the note terms.
Summary of Maturities
- ---------------------
Principal payments on notes payable are due as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, NOTES PAYABLE
------------ -------------
<S> <C>
1995 $ 664
1996 711
1997 777
1998 407
1999 342
Thereafter 1,799
--------
Total $ 4,700
========
</TABLE>
-43-
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER OF
- --------------------------------------------------------------------
THE PARTNERSHIP.
---------------
The names of the directors and executive officers of ConCap Equities, Inc.
("CEI"), the Partnership's Managing General Partner as of December 31, 1994,
their age and the nature of all positions with CEI presently held by them are as
follows:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL POSITION IN CEI AGE
------------------ --------------- ---
<S> <C> <C>
Carroll D. Vinson President 53
William H. Jarrard, Jr. Vice President 48
John K. Lines Vice President/Secretary 35
Kelley M. Buechler Assistant Secretary 37
Robert D. Long, Jr. Chief Accounting Officer/ 27
Controller
</TABLE>
Carroll D. Vinson has been President of CEI since December of 1994 and President
of the MAE subsidiaries since August 1994. Prior to that, during 1993 to August
1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (a regional CPA firm)
and engaged in various other investment and consulting activities. Briefly, in
early 1993, Mr. Vinson served as President and Chief Executive Officer of
Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr.
Vinson was employed by Insignia in various capacities including Managing
Director-President during 1991. From 1986 to 1990, Mr. Vinson was President and
a Director of U.S. Shelter Corporation, a real estate services company which
sold substantially all of its assets to Insignia in December 1990.
William H. Jarrard, Jr. has been Vice President of CEI since December of 1994,
Vice President of the MAE subsidiaries since January 1992 and Managing Director
- - Asset Management and Partnership Administration of Insignia since January
1991. During the five years prior to joining Insignia in 1991, he served in a
similar capacity for U.S. Shelter. He was previously associated with the
accounting firm of Ernst & Whinney for eleven years. Mr. Jarrard is a graduate
of the University of South Carolina and a certified public accountant.
John K. Lines has been Vice President and Secretary of CEI since December of
1994, Secretary of the MAE subsidiaries since August 1994, General Counsel of
Insignia since June 1994, and General Counsel and Secretary of Insignia since
July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General
Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach,
Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney
with Banc One Corporation in Columbus, Ohio. From May 1990 until October 1991,
Mr. Lines was employed as an associate with Squire Sanders & Dempsey in
Columbus, Ohio.
Robert D. Long, Jr. has been Controller and Chief Accounting Officer of CEI
since December 1994 and Chief Accounting Officer and Controller of the MAE
subsidiaries since February 1994. Prior to joining MAE, he was an auditor for
the State of Tennessee and was associated with the accounting firm of Harshman
Lewis and Associates. He is a graduate of the University of Memphis.
Kelley M. Buechler has been Assistant Secretary of CEI since December 1994,
Assistant Secretary of the MAE subsidiaries since January 1992, and Assistant
Secretary of Insignia since January 1991. During the five years prior to
joining Insignia in 1991, she served in a similar capacity for U.S. Shelter.
Ms. Buechler is a graduate of the University of North Carolina.
CEI is the general partner of the Partnership and 13 other Affiliated
Partnerships as of December 31, 1992. One of the Affiliated Partnerships,
Consolidated Capital Properties II, filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code on October 15, 1991, and was subsequently liquidated
pursuant to a reorganization plan approved by
-44-
<PAGE>
the Bankruptcy Court in the year ended December 31, 1992. Another Affiliated
Partnership, Consolidated Capital Properties, filed for Chapter 11 protection on
February 19, 1992, and was liquidated in 1994 pursuant to a reorganization plan
approved by the Bankruptcy Court. These Chapter 11 filings were made due to the
Partnerships' liquidity problems and maturities on certain mortgage debt secured
by the Partnerships' real estate investments.
No family relationship exists between any of the directors and officers of CEI.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1994, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the General Partner for the year ended
December 31, 1994. The Partnership has no plans to pay any such remuneration to
any directors or officers of the General Partner in the future.
See Item 8 - Financial Statements and Supplementary Data, Note 2 - Related Party
Transactions, for amounts of compensation and reimbursement of salaries paid by
the Partnership to the General Partner and its affiliates and the former
corporate general partner and former affiliates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
Except as provided below, as of February 16, 1995, no person was known to
CEI to own of record or beneficially more than 5 percent (5%) of the Units
of the Partnership:
NUMBER OF PERCENT
NAME AND ADDRESS UNITS OF TOTAL
---------------- --------- --------
Insignia Financial Group, Inc. 42,843 22%
The Units reflected above were acquired by LP Acceptance Corporation, an
affiliate of the Partnership and CEI, pursuant to its offer dated October
16, 1992, to purchase Units for a purchase price of $225.00 per Unit (the
"Tender Offer").
(b) Beneficial Owners of Management
-------------------------------
Except as described in Item 12(a) above, neither CEI nor any of the
directors, officers or associates of CEI own any Units of the Partnership of
record or beneficially.
(c) Changes in Control
------------------
Beneficial Owners of CEI
------------------------
As of February 16, 1995, the following persons were known to CEI to be the
beneficial owners of more than 5 percent (5%) of its common stock:
NUMBER OF PERCENT
NAME AND ADDRESS CEI SHARES OF TOTAL
---------------- ---------- --------
GII Realty, Inc. 100,000 100%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
Transactions with Current Management and Others
- -----------------------------------------------
Except for the transactions described below, neither CEI nor any of its
directors, officers or associates, or any associates of any of them, has had any
interest in any other transaction to which the Partnership is a party. Please
refer to Item 8 - Financial Statements and Supplementary Data, Note 2 - Related
Party Transactions, for the amounts and items of permissible compensation and
fees paid to the General Partner and its affiliates and other related parties
for the last three years.
-45-
<PAGE>
The Partnership has paid property management fees equal to 5% of collected gross
rental revenues ("Rental Revenues") for property management services for each of
the three years in the period ended December 31, 1994. A portion of such
property management fees equal to 4% of Rental Revenues has been paid to the
management company performing day-to-day property management services and the
portion equal to 1% of Rental Revenues has been paid to PSI or its predecessor,
ConCap Capital Company, for advisory services related to day-to-day property
operations. During 1992 and 1993, property management services were provided by
an unaffiliated management company. In July 1993, Coventry Properties, Inc.
("Coventry"), an affiliate of Insignia, assumed day-to-day property management
responsibilities for the Partnership's property under the same management fee
arrangement. Affiliates of Insignia assumed day-to-day property management
responsibilities of the property in December, 1994.
All of the above-referenced agreements with affiliates of CEI and related
parties of the Partnership are subject to the conditions and limitations imposed
by the Partnership Agreement.
Litigation with Former Related Parties
- --------------------------------------
In 1991, the Partnership (and simultaneously 15 Affiliated Partnerships) entered
claims in Southmark Corporation's Chapter 11 bankruptcy proceeding. These
claims related to Southmark Corporation's activities while it exercised control
(directly, or indirectly through its affiliates) over the Partnership. The
Bankruptcy Court set the Partnership's and the Affiliated Partnership's allowed
claim at $11 million, in aggregate. In March 1994, the Partnership received 909
shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,651
shares of Southmark Corporation New Common Stock with an aggregate market value
on the date of receipt of $6,690 and $49,847 in cash representing the
Partnership's share of the recovery, based on its pro rata share of the claims
filed.
-46-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- ----------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements
--------------------
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the Years Ended December 31,
1994, 1993 and 1992
Statements of Partners' Equity (Deficit) for the Years Ended
December 31, 1994, 1993 and 1992
Statements of Cash Flows for the Years Ended December 31, 1994,
1993 and 1992
Notes to Financial Statements
2. Schedules
---------
Schedule III - Real Estate and Accumulated Depreciation
Audited Financial Statements of Consolidated Capital Equity Partners
L.P. for the Years Ended December 31, 1994 and 1993
All other schedules are omitted because they are not required, are not
applicable or the financial information is included in the financial
statements or notes thereto
3. Exhibits
--------
<TABLE>
<CAPTION>
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
------------- -------------------- -----------
<S> <C> <C>
3 Certificates of Limited Partnership, as N/A
amended to date. (Incorporated by refer-
ence to the Annual Report on Form 10-K
for the year ended December 31, 1991
("1991 Annual Report").
10.1 Amended Loan Agreement dated November N/A
15, 1990 (the "Effective Date"), by and
between the Partnership and EP (Incorpora-
ted by reference to the Annual Report on
Form 10-K for the year ended December 31,
1990 ("1990Annual Report").
10.2 Assumption Agreement as of the Effective N/A
Date, by and between EP and CCEP (Incor-
porated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective N/A
Effective Date, by and between the Partner-
ship and EP (Incorporated by reference to
the 1990 Annual Report).
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
------------- -------------------- -----------
<S> <C> <C>
10.4 Assignment of Partnership Interests N/A
in Western Can, Ltd., by and between
EP and CCEP (Incorporated by reference
to the 1990 Annual Report).
10.5 Bill of Sale and Assignment dated N/A
October 23, 1990, by and between
CCEC and ConCap Services Company
(Incorporated by reference to the
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.6 Assignment and Assumption Agreement N/A
dated dated October 23, 1990, by and
between CCMLP and Metro ConCap, Inc.
(300 series of Property Management
contracts). (Incorporated by
reference to the 1990 Annual Report).
10.7 Construction Management Cost N/A
Reimbursement Agreement dated January 1,
1991, by and between the Partnership and
Metro ConCap, Inc. (Incorporated by
reference to the 1991 Annual Report).
10.8 Investor Services Agreement dated N/A
October 23, 1990, by and between the
Partnership and CCEC (Incorporated by
reference to the Quarterly Report on Form
10-Q for the quarter ended September 30,
1990).
10.9 Assignment and Assumption Agreement N/A
(Investor Services Agreement) dated
October 23, 1990 by and between CCEC and
ConCap Services Company (Incorporated by
reference to the 1990 Annual Report).
10.10 Letter of Notice dated December 20,1991, N/A
from Partnership Services, Inc. ("PSI") to
the Partnership regarding the change in
ownership and dissolution of ConCap Services
Company whereby PSI assumed the Investor
Services Agreement. (Incorporated by
reference to the 1991 Annual Report).
10.11 Financial Services Agreement dated N/A
October 23, 1990, by and between the
Partnership and CCEC (Incorporated by
reference to the Quarterly Report on
Form 10-Q for the quarter ended September 30,
1990).
10.12 Assignment and Assumption Agreement N/A
(Financial Services Agreement) dated
October 23, 1990, by and between CCEC and
ConCap Capital Company (Incorporated by
reference to the Quarterly Report on Form
10-Q for the quarter ended September 30,
1990).
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
------------- -------------------- -----------
<S> <C> <C>
10.13 Letter of Notice dated December 20, N/A
1991, from PSI to the Partnership
regarding the change in ownership and
dissolution of ConCap Capital Company
whereby PSI assumed the Financial
Services Agreement. (Incorporated
by reference to the 1991 Annual Report).
10.14 Property Management Agreement No. 503 N/A
dated February 16, 1993, by and between the
Partnership, New Carlton House Partners, Ltd.
and Coventry Properties, Inc. (Incorporated
by reference to the Annual Report on Form
10-K for the year ended December 31, 1992).
10.15 Property Management Agreement No. 508 dated N/A
June 1, 1993, by and between the Partnership
and Coventry Properties, Inc.
10.16 Assignment and Assumption Agreement as to N/A
Certain Property Management Services dated
November 17, 1993, by and between Coventry
Properties, Inc. and Partnership Services,
Inc.
11 Statement regarding computation of 22
Net Income per Limited Partnership Unit
(Incorporated by reference to Note 1 of
Item 8 - Financial Statements of this
Form 10-K).
16 Letter, dated August 12, 1992, from N/A
Ernst & Young to the Securities and Exchange
Commission regarding change in certifying
accountant. (Incorporated by reference
to Form 8-K dated August 6, 1992).
27 Financial Data Schedule containing summary N/A
financial information extracted from the
balance sheet and statement of operations
which is qualified in its entirety by
reference to such financial statements.
28.1 Fee Owner's Limited Partnership Agreement N/A
dated November 14, 1990 (Incorporated by
reference to the 1990 Annual Report).
</TABLE>
(b) Reports on Form 8-K.
A Form 8-K dated December 8, 1994, was filed reporting a change in control
of the General Partner of the Registrant.
-49-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
By: CONCAP EQUITIES, INC.
Its General Partner,
March 30, 1995 By: /s/ Carroll D. Vinson
- ----------------------- ---------------------
Date Carroll D. Vinson
President
March 30, 1995 By: /s/ Robert D. Long, Jr.
- ----------------------- -----------------------
Date Robert D. Long, Jr.
Controller, Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
March 30, 1995 By: /s/ Carroll D. Vinson
- ----------------------- ---------------------
Date Carroll D. Vinson
Director and President
March 30, 1995 By: /s/ Robert D. Long, Jr.
- ----------------------- -----------------------
Date Robert D. Long, Jr.
Controller, Principal Accounting Officer
-50-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES AS FILED
IN THE PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,554
<SECURITIES> 8,329
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,211
<PP&E> 6,255
<DEPRECIATION> 1,505
<TOTAL-ASSETS> 107,630
<CURRENT-LIABILITIES> 426
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 107,204
<TOTAL-LIABILITY-AND-EQUITY> 107,630
<SALES> 0
<TOTAL-REVENUES> 4,434
<CGS> 0
<TOTAL-COSTS> 1,496
<OTHER-EXPENSES> (56)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,994
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,994
<EPS-PRIMARY> 14.90
<EPS-DILUTED> 14.90
</TABLE>
