FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-31905, eff 10/26/93.)
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 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period.........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, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Indicate by check mark whether the registrant (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
registrant 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 ( 229.405 of this chapter) 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] (Amended by Exch Act Rel
No. 28869, eff. 5/1/91.)
State the aggregate Market Value of the Limited Partnership Units ("Units")
held by non-affiliates of the Registrant. 155,999 of Partnership's 199,052
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 not subject to certain restrictions.
PART I
Item 1. Business
General
Consolidated Capital Institutional Properties (the "Partnership" or the
"Registrant") 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 entitled 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 "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.
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, ConCap Equities, Inc. ("CEI or the General Partner") 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
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 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. On October 24, 1995, MAE-ICC, Inc.
exercised the remaining portion of its option to purchase all of the remaining
outstanding capital stock of GII Realty, Inc. held by Gordon Realty, Inc.
Pursuant to the terms of the option, MAE-ICC, Inc. acquired the remaining
49.5% of the outstanding capital stock of GII Realty, Inc.
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 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, 1995, the Partnership had advanced a total of
approximately $180.1 million to EP and its successor under the Master Loan (as
defined in "Status of the Master Loan"). As of December 31, 1995, the balance
of the Master Loan, net of the allowance for possible losses, was
approximately $53.8 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, and three (3) office complexes. The Partnership acquired
The Loft Apartments through foreclosure in November 1990. Prior to that time,
The Loft Apartments had been collateral on the Master Loan. The Partnership
acquired a multiple-use building, The Carlton House Apartment and Office
Building ("Carlton House") through a deed-in-lieu of foreclosure transaction
on November 30, 1995. The Carlton House had been collateral on the Master
Loan. For a brief description of the properties refer to "Item 2 -
Description of Property."
The Registrant has no employees. Management and administrative services are
performed by CEI, the General Partner, and by an affiliate of Insignia
Financial Group, Inc. ("Insignia"), an affiliate of the General Partner.
The real estate business in which the Partnership is engaged is highly
competitive and the Partnership is not a significant factor in this industry.
The Registrant's property is subject to competition from similar properties in
the vicinity in which the property is located. In addition, various limited
partnerships have been formed by the General Partner and/or its affiliates to
engage in business which may be competitive with the Registrant.
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.
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 the Master Loan by the amount of CCEP's capital expenditures
since such amounts were previously excluded from Excess Cash Flow.
Item 2. Description of Property
The following table sets forth the Registrant's investment in real estate as
of December 31, 1995:
Date of
Property Purchase Type of Ownership Use
The Loft Apartments 11/19/90 Fee ownership. Apartment
Raleigh, NC 188 units
The Carlton House 12/01/95 Fee ownership. Apartment
Apartment and Office 537 units
Building Commercial
Philadelphia, PA 140,421 sq.ft.
Schedule of Properties:
(in thousands)
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
The Loft Apartments $ 6,468 $1,934 5-20 S/L $ 5,625
The Carlton House
Apartment and Office
Building 14,908 24 5-25 S/L 19,768
$21,376 $1,958
</TABLE>
See "Note A" of the financial statements included in "Item 8." for a
description of the Partnership's depreciation policy.
Schedule of Mortgages:
(in thousands)
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
The Loft Apartments
1st mortgage $4,545 6.95% (1) 12/2005 $3,903
<FN>
(1) Payments of approximately $30,000 consisting of principal and interest.
</TABLE>
Average Annual Rental Rate and Occupancy:
Average Annual Average
Rental Rates Occupancy
Property 1995 1994 1995 1994
The Loft Apartments $ 7,806/unit $7,271/unit 91% 94%
The Carlton House 10,185/unit (a) 86% (a)
(residential)
The Carlton House $3.53/s.f. (a) 46% (a)
(commercial)
(a) Rates for Carlton House represent December 1995 only as the property
was acquired by the Registrant on November 30, 1995.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial
buildings in the area. The General Partner believes that the properties are
adequately insured. The multi-family residential properties' lease terms are
for one year or less. One commercial tenant, an employment agency, leases
greater than 10% of the available space.
The following is a schedule of the lease expirations of the commercial space
in Carlton House for the years beginning 1996 through the maturities of
current leases:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
1996 8 35,040 $568,161 49.56%
1997 4 7,858 152,535 13.31%
1998 4 37,268 103,967 9.07%
1999 1 2,454 30,675 2.68%
2000 1 901 22,680 1.98%
2001 0 0 0 0%
2002 0 0 0 0%
2003 0 0 0 0%
2004 0 0 0 0%
2005 1 2,259 37,893 3.31%
Real estate taxes and rates in 1995 for each property were (in thousands):
1995 1995
Billing Rate
The Loft $63 1.17%
The Carlton House 49(a) 8.26%
(a) Represents portion of 1995 billings accrued for December 1995 only.
Item 3. Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is
not of a routine nature. The General Partner of the Registrant believes that
all such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial conditions, results of operations,
or liquidity of the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended December 31, 1995, no
matter was submitted to a vote of the Unit holders through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for the Registrant's Units of Limited Partnership and Related
Partner Matters
There is no established market for the Units and it is not anticipated that
any will occur in the foreseeable future. As of December 31, 1995, there were
24,416 holders of record owning an aggregate of 199,052 Units. Distributions
of approximately $3,007,000 and approximately $3,686,000 were made to the
limited partners in 1995 and 1994, respectively. Additionally, distributions
of approximately $30,000 and $37,000 were made to the General Partner in 1995
and 1994, respectively.
Future distributions will depend on the levels of cash generated from
operations, refinancings, property sales, and the availability of cash
reserves. Such cash reserves are subject to the requirements of the Agreement
which requires that the Partnership have reserves equal to 5% of Net Invested
Capital. Subsequent to year end, the Partnership paid a distribution of
approximately $15.5 million.
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>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<S> <C> <C> <C> <C> <C>
Revenues $ 5,265 $ 4,490 $ 6,180 $ 8,189 $ 7,692
Costs and expenses (3,078) (1,496) (1,849) (1,892) (1,953)
Provision for impairment loss (5,578) -- (11,100) (9,000) --
(Loss) income from operations (3,391) 2,994 (6,769) (2,703) 5,739
Gain on sale of securities
available for sale -- -- 20 -- 188
Net (loss) income $ (3,391) $ 2,994 $ (6,749)$ (2,703) $ 5,927
Net (loss) income per
Limited Partnership Unit:
(Loss) income from operations $ (16.87) $ 14.90 $ (33.67)$ (13.44) $ 28.54
Gain on sale of securities
available for sale -- -- .10 -- .93
Net (loss) income $ (16.87) $ 14.90 $ (33.57)$ (13.44) $ 29.47
Distributions per
Limited Partnership Unit $ 15.10 $ 18.52 $ 28.50 $ 26.25 $ 42.61
Limited Partnership
Units outstanding 199,052 199,045 199,051 199,051 199,051
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
BALANCE SHEETS 1995 1994 1993 1992 1991
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $ 106,351 $107,630 $108,442 $120,876 $129,003
Mortgage notes and interest payable $ 4,560 $ -- $ -- $ -- $ --
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
The Carlton House Apartment and Office building ("Carlton House") is a
multiple-use facility which consists of an apartment complex and commercial
space. This property was transferred from CCEP to a wholly owned subsidiary of
the Partnership on November 30, 1995. The operations of Carlton House had an
immaterial impact on the results of operations of the Partnership for the year
ended December 31, 1995, with revenues of $594,469 and expenses of $443,522.
Results of Operations
1995 Compared With 1994
The Partnership's net loss for the year ended December 31, 1995, was
approximately $3,391,000 as compared to net income of approximately $2,994,000
for the year ended December 31, 1994. The increase in net loss is primarily
due to the $5,578,000 increase in the provision for impairment loss on the
Master Loan. The primary cause of the increase in the provision for
impairment loss on the Master Loan is a reduction in the estimated fair value
of the underlying collateral properties. Also contributing to the increased
net loss is an increase in operating expenses at The Lofts as a result of
higher maintenance expenses and an increase in general and administrative
expenses. The increase in maintenance expense is the result of interior and
exterior painting projects, patio fencing, exterior lighting, window
renovations, curb and sidewalk repairs, and major landscaping. General and
administrative expenses increased due to increased insurance costs along with
the additional costs involved in printing 1994 10-K's for investors. There
were also additional costs associated with the combined efforts of the Dallas
and Greenville offices during the transition period that ended June 30, 1995.
The increased costs related to the transition efforts were incurred to
minimize any disruption in the year-end reporting function including K-1
preparation and distribution. Additionally, the Partnership incurred
approximately $772,000 in transfer fees related to the transfer of Carlton
House from CCEP to the Partnership. Depreciation expense increased during
1995 due to the purchase of additional fixed assets in 1995. Interest expense
increased as a result of the financing of The Lofts in December 1995. This
property did not have a mortgage balance prior to December 1995 and as a
result had no interest expense. Also, other income decreased due to a
settlement of suits against Southmark in 1994 resulting in the Partnership
receiving its pro rata share of the claims filed in Southmark's bankruptcy
proceeding. No such event occurred in 1995. Partially offsetting these
decreases in net income is an increase in rental income due to higher rental
rates which more than offset the decrease in occupancy at The Lofts.
In connection with the transfer of Carlton House to Kennedy Boulevard
Associates, L.P. ("KBA-I"), a wholly owned subsidiary of the Partnership, the
General Partner had a valuation performed on the property to determine its
estimated fair value. The asset had previously been recorded on the books of
CCEP and for valuation for the Master Loan based upon appraisals performed by
a third party. The last appraisal valued the property as of May 12, 1995.
Based on its ongoing evaluation of the condition of the property, the General
Partner concluded that additional information received during the fourth
quarter of 1995 regarding the extent of deferred maintenance and improvements
needed to the property indicated that a $5,000,000 write-down was needed to
reduce the property to its estimated net realizable value.
CCEP recorded this write-down during the fourth quarter before the
property was transferred to KBA-I. As this property was collateral for the
Master Loan and the value of the Master Loan is recorded based upon the
estimated fair value of the underlying collateral, the Partnership recorded an
increase in the Provision for Impairment Loss on the Master Loan to affiliate
due to this impairment.
As part of the ongoing business plan of the Partnership, the General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing
occupancy levels and protecting the Partnership from increases in expense. As
part of this plan, the General Partner attempts to protect the Partnership
from the burden of inflation-related increases in expenses by increasing rents
and maintaining a high overall occupancy level. However, due to changing
market conditions, which can result in the use of rental concessions and
rental reductions to offset softening market conditions, there is no guarantee
that the General Partner will be able to sustain such a plan.
1994 Compared With 1993
Rental revenues for the year ended December 31, 1994, increased $117,000
over 1993 primarily because of increased rental charges at The Lofts
Apartments. Operating expense for the year ended December 31, 1994, decreased
$154,000 as compared to 1993 primarily due to decreases in non-capital
refurbishments and replacements and lower personnel and property
administrative expense. General and administrative expenses for the year
ended December 31, 1994, decreased $232,000 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. Other
income for the year ended December 31, 1994, decreased $266,000 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.
For the year ended December 31, 1994, income from the investment in the
Master Loan decreased $1.5 million 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
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 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 February 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. All cash
flows generated by Carlton House are being reinvested in the property.
Liquidity and Capital Resources
At December 31, 1995, the Partnership had unrestricted cash of
approximately $26,122,000 versus approximately $1,520,000 at December 31,
1994. Net cash provided by operating activities decreased primarily due to a
decrease in net income as noted above and due to an increase in other assets.
These changes were partially offset by a decrease in due from affiliate and an
increase in accounts payable. Cash provided by investing activities increased
as a result of principal receipts on the Master Loan which was partially
offset by an increase in property improvements and replacements and an
increase in advances on the Master Loan. Principal receipts on the Master
Loan in 1995 were due primarily to the refinancing proceeds received from
CCEP. Net cash provided by financing activities increased due to the
financing of The Lofts.
At December 31, 1994, the Partnership had unrestricted cash of
approximately $1,520,000 versus approximately $214,000 at December 31, 1993.
Net cash provided by operating activities decreased primarily due to the
increase in restricted cash and due from affiliates, and the decrease in
accounts payable and distributions payable. Cash provided by investing
activities increased primarily as a result of the sale of securities available
for sale. This increase was partially offset by the purchase of
securities available for sale. Cash used in financing activities decreased as
a result of decreased distributions to partners.
The Partnership has budgeted for approximately $14 million of deferred
maintenance and capital improvements to be made to The Carlton House during
1996 and 1997. These programs will be paid for using a portion of the cash
received from CCEP in 1995 on debt service on the Master Loan. The major
budgeted capital improvements are for exterior renovation, elevator
rehabilitation, residential and commercial common area renovations.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
Distributions of approximately $1,485,000 or $7.46 per Unit were made to the
limited partners in both March and September 1995. A matching distribution of
approximately $15,000 was made to the General Partner for each distribution.
In July 1995, a distribution of approximately $36,000 was made to pay the
limited partners' income taxes due to the State of North Carolina for income
generated by the Partnership's investment property located in North Carolina
and a matching distribution of approximately $1,000 was made to the General
Partner. Subsequent to year end, the Partnership paid a distribution of
approximately $15.5 million. Future cash distributions will depend on the
levels of cash generated from operations, Master Loan interest income, capital
expenditure requirements, property sales, and the availability of cash
reserves.
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 $31.7 million, were greater than the reserve requirement of $8.0
million as of December 31, 1995.
CCEP Property Operations
The Partnership has invested approximately $4 million in CCEP during 1995
as additional advances under the Master Loan. This money was used by CCEP for
deferred maintenance and capital improvements at its properties. The money
was also used to pay off third party debt at certain of its investment
properties. Additional advances under the Master Loan are anticipated to be
made to CCEP in 1996 as these properties continue the deferred maintenance and
capital improvement programs.
For the year ended December 31, 1995, CCEP's net loss totaled $37.9
million on total revenues of $25.0 million. CCEP recognizes interest expense
on the New Master Loan Agreement obligation according to the note terms,
although payments to the Partnership are required only to the extent of Excess
Cash Flow, as defined therein. During 1995, CCEP's statement of operations
includes total interest expense attributable to the Master Loan of $29.9
million, of which approximately $27.4 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 1996 which will be available to be utilized as Master Loan debt
service.
During the year ended December 31, 1995, the Partnership received
approximately $38.9 million as principal and interest payments of the Master
Loan. Approximately $15.5 million was due to the transfer of Carlton House as
satisfaction for that portion of the loan. Normal interest payments as
required by the agreement accounted for approximately $2.5 million. Financing
proceeds of certain CCEP properties that were transferred to the partnership
as required per the agreement accounted for approximately $19.9 million. Cash
received on certain investments by CCEP, which are required to be transferred
to the Partnership per the agreement, accounted for approximately $1 million.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
LIST OF FINANCIAL STATEMENTS
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the Years Ended December 31, 1995,
1994 and 1993
Consolidated Statements of Partners' Capital (Deficit) for the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Institutional Properties
We have audited the accompanying consolidated balance sheet of Consolidated
Capital Institutional Properties as of December 31, 1995, and the related
consolidated statements of operations, changes in partners' capital (deficit)
and cash flows for the year then ended. 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 audit.
We conducted our audit 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 the Partnership's management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Consolidated Capital Institutional Properties as of December 31, 1995, and
the consolidated results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 15, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Consolidated Capital Institutional Properties:
We have audited the accompanying consolidated balance sheet of Consolidated
Capital Institutional Properties (a California limited partnership) as of
December 31, 1994, and the related statements of operations, partners' capital
(deficit) and cash flows for the years ended December 31, 1994 and 1993.
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
Institutional Properties as of December 31, 1994, and the results of its
operations and its cash flows for the years ended December 31, 1994 and 1993,
in conformity with generally accepted accounting principles.
/s/Arthur Andersen, LLP
Dallas, Texas
March 23, 1995
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
DECEMBER 31,
Assets 1995 1994
Cash and cash equivalents:
Unrestricted $ 26,122 $ 1,520
Restricted-tenant security deposits 335 34
Securities available for sale 5,264 8,329
Due from affiliates -- 935
Other assets 1,444 276
Net investment in Master Loan 95,246 127,686
Less: Allowance for impairment loss (41,478) (35,900)
53,768 91,786
Investment properties:
Land 3,620 1,053
Buildings and related personal property 17,756 5,202
21,376 6,255
Less: accumulated depreciation (1,958) (1,505)
19,418 4,750
$106,351 $107,630
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 368 $ 55
Tenant security deposits 323 47
Distributions payable 324 324
Mortgage note and interest payable 4,560 --
5,575 426
Partners' Capital (Deficit)
General Partner (358) (294)
Limited Partners - 199,052 and 199,045
units outstanding in 1995 and 1994 101,134 107,498
100,776 107,204
$106,351 $107,630
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rental income $ 2,069 $ 1,312 $ 1,195
Interest income on investment in Master Loan
to affiliate 2,502 2,448 3,989
Other income 694 730 996
Total revenues 5,265 4,490 6,180
Costs and expenses:
Operating 1,154 599 726
General and administrative 1,456 480 712
Depreciation 453 417 411
Interest 15 -- --
Provision for impairment loss 5,578 -- 11,100
Total expenses 8,656 1,496 12,949
(Loss) income from operations (3,391) 2,994 (6,769)
Gain on sale of securities available for sale -- -- 20
Net (loss) income $(3,391) $ 2,994 $(6,749)
Net (loss) income allocated to general partner $ (34) $ 30 $ (67)
Net (loss) income allocated to limited partners (3,357) 2,964 (6,682)
$(3,391) $ 2,994 $(6,749)
(Loss) income per Limited Partnership Unit $(16.87) $ 14.90 $(33.57)
Distributions per Limited Partnership Unit $ 15.10 $ 18.52 $ 28.50
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 200,342 $ 1 $200,342 $200,343
Partners' capital (deficit)
at December 31, 1992 199,051 (163) 120,575 120,412
Distributions (57) (5,673) (5,730)
Net loss for the year ended
December 31, 1993 (67) (6,682) (6,749)
Partners' capital (deficit) at
December 31, 1993 199,046 (287) 108,220 107,933
Distributions (37) (3,686) (3,723)
Net income for the year ended
December 31, 1994 30 2,964 2,994
Partners' capital (deficit) at
December 31, 1994 199,045 (294) 107,498 107,204
Distributions (30) (3,007) (3,037)
Net loss for the year ended
December 31, 1995 (34) (3,357) (3,391)
Partners' capital (deficit) at
December 31, 1995 199,052 $ (358) $101,134 $100,776
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(3,391) $ 2,994 $ (6,749)
Adjustments to reconcile net (loss) income
to net cash provided by operating
Depreciation 453 417 411
Amortization of discount on securities
available for sale -- 2 (2)
Provision for impairment loss on Master
Loan to affiliates 5,578 -- 11,100
Gain on sale of securities available
for sale -- -- (20)
Receipt of Southmark stock -- (7) --
Changes in accounts:
Restricted cash (301) (26) (8)
Due from affiliates 935 (376) (41)
Other assets (1,243) 99 215
Accounts payable 337 (68) 53
Distributions payable -- (8) --
Tenant security deposit liabilities 276 -- --
Net cash provided by operating activities 2,644 3,027 4,959
Cash flows from investing activities:
Property improvements and replacements (274) (27) (19)
Proceeds from sale of securities
available for sale 5,180 5,461 1,765
Purchase of securities available for (2,115) (3,392) (140)
Purchase of mortgage loan -- -- (100)
Principal receipts on Master Loan 21,661 -- --
Advances on Master Loan (4,002) (40) (2,390)
Net cash provided by (used in) investing
activities 20,450 2,002 (884)
Cash flows from financing activities:
Distributions to partners (3,037) (3,723) (5,738)
Proceeds from long-term borrowings 4,545 -- --
Net cash provided by (used in) financing
activities 1,508 (3,723) (5,738)
Net increase (decrease) in cash and
cash equivalents 24,602 1,306 (1,663)
Cash and cash equivalents, at beginning
of year 1,520 214 1,877
Cash and cash equivalents, at end of year $ 26,122 $ 1,520 $ 214
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - 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, 1995, the Partnership had advanced a total of
approximately $180.1 million to EP and its successor under the Master Loan.
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.
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.
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. On October 24, 1995, MAE-ICC, Inc.
exercised the remaining portion of its option to purchase all of the remaining
outstanding capital stock of GII Realty, Inc. held by Gordon Realty, Inc.
Pursuant to the terms of the option, MAE-ICC, Inc. acquired the remaining
outstanding capital stock of GII Realty, Inc.
The Partnership owns and operates one apartment property and one multiple-use
building in North Carolina and Pennsylvania, respectively. Also, the
Partnership is the holder of a note receivable which is collateralized by
apartment and commercial properties located throughout the United States.
Principles of Consolidation: The Partnership's financial statements include
the accounts of Kennedy Boulevard Associates I, L.P., a Pennsylvania limited
partnership ("KBA-I, L.P.") and four other affiliated limited and general
partnerships and three affiliated corporations, all of which are ultimately
wholly-owned by the Partnership. KBA-I, L.P. holds title to The Carlton House
Apartment and Office Building. All intercompany transactions have been
eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and the accompanying notes. Actual results could differ from those estimates.
Restricted Escrows:
Replacement Reserve Account: At the time of the December 15, 1995,
refinancing, $59,800 of the proceeds were designated for a "replacement
reserve fund" for certain capital replacements (as defined in the Replacement
Reserve Agreement) at The Lofts. At December 31, 1995, the balance remaining
was $59,800 and is included in other assets.
Repair Escrow Account: In addition to the Replacement Reserve
Account, $268,625 of the refinancing proceeds were designated for a "repair
escrow" to cover necessary repairs and replacements to be completed at The
Lofts within one year of closing. At December 31, 1995, the balance was
$268,625 and is included in other assets. All excess funds will be
transferred into the Replacement Reserve Account.
Escrows for Taxes: These funds are held by the Partnership and are designated
for the payment of real estate taxes and are included in other assets.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment and commercial properties and related
personal property. For Federal income tax purposes, the modified accelerated
cost recovery method is used. As a result of the Tax Reform Act of 1986, for
additions after December 31, 1986, the modified accelerated cost recovery
method is used for depreciation of (1) real property additions over 27 1/2
years and (2) personal property additions over 5 to 15 years.
Loan Costs: Loan costs of $123,097 are included in other assets and are being
amortized on a straight-line basis over the life of the loan.
Note A - Organization and summary of Significant Accounting Policies - continued
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks, money
market funds and U.S. Treasury Bills with original maturities less than 90
days. U.S. Treasury Notes and U.S. Treasury Bills with original maturities
greater than 90 days are considered to be investments. At certain times, the
amount of cash deposited at a bank may exceed the limit on insured deposits.
Restricted cash - tenant security deposits - The Partnership requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Advertising: The Partnership expenses the costs of advertising as incurred.
Investment Properties: Prior to 1995, investment properties were carried at
the lower of cost or estimated fair value, which was determined using the
higher of the property's non-recourse debt amount, when applicable, or the net
operating income of the investment property capitalized at a rate deemed
reasonable for the type of property. During 1995, the Partnership adopted
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount. The effect of adoption was not material.
Investment in Master Loan: Beginning in 1995, the Partnership adopted
Financial Accounting Standards Board Statement No. 114, "Accounting by
Creditors for Impairment of a Loan." Under the new standard, the 1995
allowance for credit losses related to loans that are identified for
evaluation in accordance with Statement 114 is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. The effect of adoption was
not material. Prior to 1995, the allowance for credit losses related to these
loans was based on undiscounted cash flows or the fair value of the collateral
for collateral dependent loans.
Investments: Securities available-for-sale: The General Partner determines
the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Presently, all of
the Partnership's investments are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, reported in a separate component of partner's capital. The
amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in investment income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of securities sold is
based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in investment income.
Note A - Organization and summary of Significant Accounting Policies - continued
Leases: The Partnership leases certain commercial space to tenants under
various lease terms. The leases are accounted for as operating leases in
accordance with Financial Accounting Standards Board Statement No. 13. Some
of the leases contain stated rental increases during their term. For leases
with fixed rental increases, rents are recognized on a straight-line basis
over the terms of the lease. For all other leases, minimum rents are
recognized over the terms of the leases.
The Partnership generally leases apartment units for twelve-month terms or
less. The Partnership recognizes income as earned on these leases. In
addition, management finds it necessary to offer rental concessions during
particularly slow months or in response to heavy competition from other
similar complexes in the area. Concessions are charged to expenses as
incurred.
Lease Commissions: Lease commissions are capitalized and amortized using the
straight-line method over the life of the applicable lease. At December 31,
1995 and 1994, lease commissions totaled $37,886 and $0, respectively, with
accumulated amortization of $500 and $0, respectively. Lease commissions are
included in other assets.
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 Unitholders 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
$81.1 million greater than the assets and liabilities as reported in the
financial statements.
Partners' Capital (Deficit): The Partnership Agreement ("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 Limited Partnership Unit: Net income (loss) per Limited
Partnership Unit ("Unit") is computed by dividing net income (loss) allocated
to the Limited Partners by the number of Units outstanding. Per Unit
information has been computed based on 199,052, 199,045 and 199,051 Units
outstanding in 1995, 1994 and 1993, respectively.
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value. The
carrying amount of the Partnership's cash and cash equivalents approximates
fair value due to short-term maturities. The Partnership estimates the fair
value of its fixed rate mortgages by discounted cash flow analysis, based on
estimated borrowing rates currently available to the Partnership. The General
Partner believes that the carrying amount of the debt approximates the fair
value due to the fact that the debt was obtained on December 15, 1995. The
carrying amount of the Partnership's net investment in the Master Loan
approximated fair value due to the fact that it has been valued based on the
fair value of the underlying collateral.
Reclassifications: Certain reclassifications have been made to the 1993 and
1994 information to conform to the 1995 presentation.
Note B - Securities Available for Sale
Investments, stated at cost, consist of the following at December 31, 1995
(in thousands):
<TABLE>
<CAPTION>
Interest Face Maturity
Rate Amount Cost Date
<S> <C> <C> <C> <C>
U.S. Treasury Note 7.38% $2,600 $2,591 May 15, 1996
U.S. Treasury Note 7.88% 2,647 2,660 July 15, 1996
Southmark Corporation
Redeemable Series A
Preferred Stock N/A 7 7 N/A
Accrued interest 6
$5,264
</TABLE>
Investments stated at cost consist of the following at December 31, 1994 (in
thousands):
Maturity
Cost Date
U.S. Treasury Note $1,999 April 15, 1995
U.S. Treasury Note 2,591 May 15, 1996
U.S. Treasury Note 2,660 July 15, 1996
U.S. Treasury Bill 585 February 16, 1995
U.S. Treasury Bill 487 March 30, 1995
Southmark Corporation
Redeemable Series A
Preferred Stock 7 N/A
$8,329
The Partnership's investments are classified as available-for-sale. The
General Partner believes that the market value of the investments is
approximately the same as the cost.
Note C - Net Investment in Master Loan
At December 31, 1995, the recorded investment in Master Loan is considered to
be impaired under Statement 114. The Partnership measures the impairment of
the loan based upon the estimated fair value of the collateral due to the fact
repayment of the loan is expected to be provided solely by the collateral.
For the year ended December 31, 1995, the Partnership recorded approximately
$5,578,000 in expense based upon a decrease in the fair value of the
collateral.
In connection with the transfer of Carlton House to Kennedy Boulevard
Associates, L.P. ("KBA-I"), a wholly owned subsidiary of the Partnership, the
General Partner had a valuation performed on the property to determine its
estimated fair value. The asset had previously been recorded on the books of
CCEP and for valuation for the Master Loan based upon appraisals performed by
a third party. The last appraisal valued the property as of May 12, 1995.
Based on its ongoing evaluation of the condition of the property, the General
Partner concluded that additional information received during the fourth
quarter of 1995 regarding the extent of deferred maintenance and improvements
needed to the property indicated that a $5,000,000 write-down was needed to
reduce the property to its estimated net realizable value.
CCEP recorded this write-down during the fourth quarter before the property
was transferred to KBA-I. As this property was collateral for the Master Loan
and the value of the Master Loan is recorded based upon the estimated fair
value of the underlying collateral, the Partnership recorded an increase in
the Provision for Impairment Loss on the Master Loan to affiliate due to this
impairment.
Interest due to the Partnership pursuant to the terms of the Master Loan
Agreement, but not recognized in the income statements, totaled approximately
$27.4 million, $24.6 million and $20.3 million for the years ended December
31, 1995, 1994 and 1993, respectively. At December 31, 1995, and December 31,
1994, such cumulative unrecognized interest totaling approximately $138.2
million and $110.8 million was not included in the balance of the investment
in Master Loan. In addition, seven of the properties are collateralized by
first mortgages totaling $24,970,000 which are superior to the Master Loan.
In February 1994, the Partnership advanced $40,000 to Consolidated Capital
Equity Partners, L.P. ("CCEP") as an advance on the Master Loan. CCEP then
advanced $40,000 to New Carlton House Partners as an advance on the note
receivable secured by the Carlton House Apartment and Office Building
("Carlton House") to pay the remaining balance of 1993 property taxes.
During 1995, the Partnership advanced approximately $4 million to CCEP as an
advance on the Master Loan. CCEP used the advances to pay for deferred
maintenance and capital improvements on the properties which collateralize the
Master Loan. A portion of the advance was used to pay off third party debt on
certain of the properties which collateralize the Master Loan.
Note C - Net Investment in Master Loan - continued
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,
1995, 1994, and 1993, 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.
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.
On November 30, 1995, New Carlton House Partners, Ltd., a Pennsylvania limited
partnership ("NCHP"), owner of a multi-use apartment/commercial building known
as The Carlton House, the Partnership, Philly Associates Inc., a Texas
Corporation ("Philly"), and Kennedy Boulevard Associates, L.P., a Pennsylvania
limited partnership ("KBA-I, L.P.") (an affiliate of CCIP) entered into a
consensual Transfer Agreement whereby certain mortgage notes held by CCEP and
Philly that are secured by The Carlton House were assigned to KBA-I, L.P. As
NCHP is unable to repay the debt, the parties agreed that in order to avoid
the additional costs and expenses of litigation or a judicial foreclosure,
that NCHP transfer Carlton House to KBA-I, L.P. by a deed-in-lieu of
foreclosure in full satisfaction of its obligations on the mortgages assigned
to KBA-I, L.P. As an additional matter, the transfer of the Carlton House to
KBA-I, L.P. shall be in satisfaction of a portion of the amounts owed by CCEP
to the Partnership under the Master Loan Agreement. NCHP transferred The
Carlton House to KBA-I, L.P. and the Partnership recorded the transfer on
November 30, 1995.
Note C - Net Investment in Master Loan - continued
The investment in Master Loan consists of the following:
AS OF DECEMBER 31,
1995 1994
(in thousands)
Master Loan funds advanced, at
beginning of year $127,686 $127,646
Master Loan funds advanced 4,002 40
Principal receipts on Master Loan (20,905) --
Principal reduction due to the
Carlton House acquisition, including
cash received of $756,000 (15,537) --
Master Loan funds advanced, at
end of year $ 95,246 $127,686
The allowance for impairment loss on Master Loan to affiliates consists of the
following:
AS OF DECEMBER 31,
1995 1994 1993
(in thousands)
Allowance for impairment loss on Master
Loan to affiliates, beginning of year $ 35,900 $ 35,900 $ 24,900
Provision for impairment loss 5,578 -- 11,000
Allowance for impairment loss on Master
Loan to affiliates, end of year $ 41,478 $ 35,900 $ 35,900
Note D - Mortgage Note Payable
On December 15, 1995, the Partnership successfully financed The Lofts. The
principal terms of mortgage note payable are as follows (in thousands):
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1995 Interest Rate Date Maturity
<S> <C> <C> <C> <C> <C>
The Lofts $ 4,545 $ 30 6.95% 12/1/05 $ 3,903
</TABLE>
The estimated fair value of the Partnership's aggregate debt is approximately
$4,545,000. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1995, are as follows (in thousands):
YEAR ENDED NOTES
DECEMBER 31, PAYABLE
1996 $ 47
1997 50
1998 53
1999 57
2000 62
Thereafter 4,276
Total $ 4,545
Note E - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and
its affiliates for management and administration of all Partnership
activities. The Partnership paid property management fees based upon
collected gross rental revenues for property management services as noted
below for the years ended December 31, 1995, 1994 and 1993. For the year
ended December 31, 1994, a portion of such property management fees were paid
to Coventry Properties, Inc. ("Coventry"), an affiliate of the General
Partner, for day-to-day property management services and a portion was paid to
Partnership Services, Inc. ("PSI") for advisory services related to day-to-day
property operations. During 1993, property management services were provided
by an unaffiliated management company. In July 1993, Coventry assumed day-to-
day property management responsibilities. In late December 1994, an affiliate
of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day property
management responsibilities for all of the Partnership's properties. Fees
paid to affiliates of Insignia during the year ended December 31, 1995, and
fees paid to Coventry and PSI for the years ended December 31, 1994 and 1993,
are reflected in the following table:
For the Year Ended
December 31,
1995 1994 1993
(in thousands)
Property management fees $120 $65 $38
The Partnership Agreement ("Agreement") also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. In 1995, the General Partner and
its current and former affiliates, which includes Coventry for the year ended
December 31, 1994 and 1993, received reimbursements as reflected in the
following table:
For the Year Ended
December 31,
1995 1994 1993
(in thousands)
Reimbursement for services
of affiliates $305 $226 $300
As of December 31, 1995, the Partnership had paid $14,501 and had accrued
$13,015 of reimbursements to an affiliate of the General Partner related to
the refinancing of The Lofts, which is included in Reimbursement for services
of affiliates above.
On July 1, 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner.
An affiliate of the General Partner acquired, in the acquisition of a
business, certain financial obligations from an insurance agency which was
later acquired by the agent who placed the current year's master policy. The
agent assumed the financial obligations to the affiliate of the General
Partner, who receives payments on these obligations from the agent. The
amount of the partnership's insurance premiums accruing to the benefit of the
affiliate of the General Partner by virtue of the agent's obligations is not
significant.
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 F - Commitments, Contingencies and Subsequent Events
The Partnership is required by the Agreement to maintain working capital
reserves for contingencies of not less than 5% of Net Invested Capital, as
defined in the Agreement. In the event expenditures are made from this
reserve, operating revenue shall be allocated to such reserves to the extent
necessary to maintain the foregoing level. Reserves, including cash and cash
equivalents and securities available for sale, totaling approximately $31.7
million, were greater than the reserve requirement of approximately $8.0
million at December 31, 1995. Subsequent to year-end, the Partnership paid a
distribution of approximately $15.5 million.
The Partnership is unaware of any pending or outstanding litigation that is
not of a routine nature. The General Partner believes that all such matters
are adequately covered by insurance and will be resolved without a material
adverse effect upon the business, financial condition, results of operations,
or liquidity of the Partnership.
Note G - Other Income
In 1991, the Partnership (and simultaneously other 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 partnerships'
allowed claim at $11 million, in the 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.
At December 31, 1995, the Partnership recognized approximately $152,000 of
income on the receipt of an insurance refund on a self-insurance policy that
expired on December 31, 1995.
Note H - Real Estate and Accumulated Depreciation
(in thousands)
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Land Property Acquisition
<S> <C> <C> <C>
The Lofts Apartments $ 1,053 $ 4,147 $ 1,268
Raleigh, NC
The Carlton House Apartments 2,567 12,341 --
and Office Building
Philadelphia, PA $ 3,620 $ 16,488 $ 1,268
</TABLE>
(in thousands)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
at December 31, 1995
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C>
The Lofts $ 1,053 $ 5,415 $ 6,468 $ 1,934 1975 11/19/90 5-20
The Carlton House 2,567 12,341 14,908 24 1961 12/01/95 5-25
Total $ 3,620 $17,756 $21,376 $ 1,958
</TABLE>
Note H - Real Estate and Accumulated Depreciation - continued
Reconciliation of real estate and accumulated depreciation:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
(in thousands)
REAL ESTATE:
<S> <C> <C> <C>
Balance, real estate at beginning of year $ 6,255 $ 6,228 $ 6,209
Additions 15,121 27 19
Balance, real estate at end of year $ 21,376 $ 6,255 $ 6,228
ACCUMULATED DEPRECIATION:
Balance, depreciation of real estate at
beginning of year $ 1,505 $ 1,088 $ 677
Depreciation of real estate 453 417 411
Balance, depreciation of real estate at
at end of year $ 1,958 $ 1,505 $ 1,088
</TABLE>
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1995 and 1994 is $26,404,138 and $6,394,326. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1995 and
1994 is $1,011,597 and $774,608.
Note I - Revenues
Rental income on the commercial property leases 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):
YEAR ENDING
DECEMBER 31,
1996 $ 926
1997 278
1998 121
1999 86
2000 46
Thereafter 182
$ 1,639
There is no assurance that this rental income will continue at the same level
when the current leases expire.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
As of May 3, 1995, Arthur Andersen LLP, the independent accountant previously
engaged as the principal accountant to audit the financial statements of the
Registrant, was dismissed. As of the same date, the firm of Ernst & Young LLP
was engaged to provide that service for the Registrant.
The audit report of Arthur Andersen LLP on the financial statements of the
Partnership as of and for the year ended December 31, 1994 did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principles.
During the Partnership's two most recent fiscal years and any subsequent
interim period preceding the change, there were no disagreements with the
former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the former accountant,
would have caused it to make reference to the subject matter of the
disagreements in connection with its report.
PART III
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 General Partner as of December 31, 1995, their ages
and the nature of all positions with CEI presently held by them are as
follows:
NAME OF INDIVIDUAL POSITION IN CEI AGE
Carroll D. Vinson President 55
William H. Jarrard, Jr. Vice President 49
John K. Lines Vice President/Secretary 36
Kelley M. Buechler Assistant Secretary 38
Robert D. Long, Jr. Chief Accounting Officer/ 28
Controller
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 - 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. 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 1984 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.
Item 11. Executive Compensation
No remuneration was paid to the General Partner nor any of its directors and
officers during the year ended December 31, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Except as provided below, as of December 31, 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. 43,053 22%
One Insignia Financial Plaza
P. O. Box 1089
Greenville, SC 29602
(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 December 31, 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%
One Insignia Financial Plaza
P. O. Box 1089
Greenville, SC 29602
Item 13. Certain Relationships and Related Transactions
Transactions with Current Management and Others
The Registrant has a property management agreement with Insignia Management
Group, L.P. pursuant to which Insignia Management Group, L.P., has assumed
direct responsibility for day-to-day management of the Partnership's
properties. This service includes the supervision of leasing, rent
collection, maintenance, budgeting, employment of personnel, payment of
operating expenses, etc. Insignia Management Group, L.P. receives a property
management fee equal to 5% of apartment revenues. During the fiscal year
ended December 31, 1995, Insignia Management Group, L.P. received $120,000 in
fees for property management.
Transactions with Former Related Parties
In 1991, the Partnership (and simultaneously other 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 partnerships'
allowed claim at $11 million, in the 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.
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
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the Years Ended December
31, 1995, 1994 and 1993
Consolidated Statements of Partners' Capital (Deficit) for the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December
31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Schedules
All 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
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
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 ("1990 Annual Report").
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
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).
10.4 Assignment of Partnership Interests in N/A
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 October 23, N/A
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 dated N/A
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 Reimbursement N/A
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 October 23, N/A
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 (Investor N/A
Services Agreement) dated October 23, 1990 by
and between CCEC and ConCap Services
Company (Incorporated by reference to the
1990 Annual Report).
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
10.10 Letter of Notice dated December 20,1991, from N/A
Partnership Services, Inc. ("PSI") to the Partner-
ship 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 October 23, N/A
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 (Financial N/A
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).
10.13 Letter of Notice dated December 20, 1991, from N/A
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.
10.17 Multifamily Note dated November 30, 1995
between Consolidated Capital Institutional
Properties, a California limited partnership,
and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holding Inc.
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
11 Statement regarding computation of Net Income 22
per Limited Partnership Unit (Incorporated by
reference to Note 1 of Item 8 - Financial State-
ments of this Form 10-K).
16 Letter, dated August 12, 1992, from Ernst & Young N/A
to the Securities and Exchange Commission regard-
ing 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 dated N/A
November 14, 1990 (Incorporated by reference to
the 1990 Annual Report).
99.1 Audited Financial Statements of Consolidated
Capital Equity Partners, L.P. for the years
ended December 31, 1995 and 1994.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1995:
A Form 8-K dated October 24, 1995, was filed reporting the purchase of the
remaining capital stock of GII Realty, Inc. by MAE-ICC, Inc.
A Form 8-K dated November 30, 1995, was filed reporting a transfer and
foreclosure on The Carlton House.
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 29, 1996 By: /s/ Carroll D. Vinson
Date Carroll D. Vinson
President
March 29, 1996 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 29, 1996 By: /s/ Carroll D. Vinson
Date Carroll D. Vinson
Director and President
March 29, 1996 By: /s/ Robert D. Long, Jr.
Date Robert D. Long, Jr.
Controller, Principal Accounting Officer
EXHIBIT 10.17 Loan No. 734079451
MULTIFAMILY NOTE
US $4,545,000.00 New York, New York
As of November 30, 1995
FOR VALUE RECEIVED, the undersigned promise to pay LEHMAN BROTHERS
HOLDINGS INC. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.,
or order, the principal sum of Four Million Five Hundred Forty-five Thousand and
00/100 Dollars, with interest on the unpaid principal balance from the date of
this Note, until paid, at the rate of 6.95 percent per annum. Principal and
interest shall be payable at 3 World Financial Center, New York, New York 10285,
or such other place as the holder hereof may designate in writing, in
consecutive monthly installments of Thirty Thousand Eighty Five Dollars and
53/100 (US $30,085.53) on the first day of each month beginning January, 1996,
until the entire indebtedness evidenced hereby is fully paid, except that any
remaining indebtedness, if not sooner paid, shall be due and payable on December
1, 2005.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
Prepayments shall be applied against the outstanding principal balance of
this Note and shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless the
holder hereof shall agree otherwise in writing. The holder hereof may require
that any partial prepayments be made on the date monthly installments are due
and be in the amount of that part of one or more monthly installments which
would be applicable to principal.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed
of Trust dated as of November 30, 1995, and reference is made thereto for rights
as to acceleration of the indebtedness evidenced by this Note. This Note shall
be governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
The undersigned shall pay any installment of principal and/or interest due
hereunder within ten (10) calendar days after such installment of principal
and/or interest is due. The undersigned shall pay any other installment due
hereunder or due in accordance with the terms of the Mortgage or Deed of Trust
Securing this Note, within thirty (30) calendar days of the date such
installment is due.
The monthly installment payable on January 1, 1996 shall include interest
on the outstanding principal balance of this Note for a full month at the above-
specified interest rate, notwithstanding the fact that as of the due date of
that installment principal may not have been outstanding for a full month.
Witness the hand(s) and seal(s) of the undersigned.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES, a
California limited partnership
ATTEST: By: ConCap Equities, Inc., a Delaware
corporation, its general partner
Secretary
By: /s/Robert Long
(Corporate Seal) Robert Long
Vice President and Chief Accounting
Officer
PAY TO THE ORDER OF FEDERAL HOME LOAN
MORTGAGE CORPORATION WITHOUT RECOURSE. This
30th day of November, 1995.
LEHMAN BROTHERS HOLDINGS INC. d/b/a
Lehman Capital, A Division of Lehman
Brothers Holdings Inc.
By:/s/ Eileen A. Brennan
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties 1995 Year-End 10-K and is qualified in its
entirety by reference to such 10-K filing.
</LEGEND>
<CIK> 0000352983
<NAME> CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 26,122
<SECURITIES> 5,264
<RECEIVABLES> 95,246
<ALLOWANCES> 41,478
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,376
<DEPRECIATION> 1,958
<TOTAL-ASSETS> 106,351
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,560
0
0
<COMMON> 0
<OTHER-SE> 100,776
<TOTAL-LIABILITY-AND-EQUITY> 106,351
<SALES> 0
<TOTAL-REVENUES> 5,265
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,391)
<EPS-PRIMARY> (16.87)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 and 1994
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
TABLE OF CONTENTS
December 31, 1995
LIST OF FINANCIAL STATEMENTS
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the Years Ended December 31,
1995, 1994 and 1993
Consolidated Statements of Partners' Deficit for the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Equity Partners L.P.
We have audited the accompanying consolidated balance sheet of Consolidated
Capital Equity Partners L.P. as of December 31, 1995, and the related
consolidated statements of operations, changes in partners' deficit and cash
flows for the year then ended. 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 audit.
We conducted our audit 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 the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Consolidated Capital Equity Partners L.P. as of December 31, 1995, and the
consolidated results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in 1995 the
Partnership changed its method of accounting for impairment of long-lived assets
and for long-lived assets to be disposed of.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 15, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Consolidated Capital Equity Partners, L.P.:
We have audited the accompanying consolidated balance sheet of Consolidated
Capital Equity Partners, L.P. (a California limited partnership) as of December
31, 1994, and the related consolidated statements of operations, partners'
deficit and cash flows for the years ended December 31, 1994 and 1993. 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 the results of its operations and
its cash flows for the years ended December 31, 1994 and 1993, in conformity
with generally accepted accounting principles.
/s/Arthur Andersen, LLP
Dallas, Texas
March 23, 1995
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
DECEMBER 31,
1995 1994
Assets
Cash and cash equivalents $ 2,225 $ 3,393
Securities available for sale -- 195
Investments in limited partnerships 460 2,508
Other assets 5,725 1,254
Investment properties:
Land 10,452 10,831
Building and related personal property 94,906 93,660
105,358 104,491
Less accumulated depreciation (68,167) (63,288)
37,191 41,203
Real estate assets of property in-
substance foreclosed -- 20,722
Less accumulated depreciation -- (1,122)
-- 19,600
$ 45,601 $ 68,153
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued liabilities $ 3,035 $ 2,038
Mortgage notes and interest payable 25,050 4,700
Master Loan and interest payable 233,490 238,486
Due to affiliates -- 969
261,575 246,193
Partners' Deficit
General Partner (2,159) (1,780)
Limited Partners (213,815) (176,260)
(215,974) (178,040)
$ 45,601 $ 68,153
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rental $ 24,907 $ 22,987 $ 19,161
Other income 119 77 173
Total revenues 25,026 23,064 19,334
Costs and expenses:
Interest 30,432 27,573 24,852
Operating 16,380 15,903 12,831
Depreciation and amortization 6,431 6,132 5,410
General and administrative 965 780 756
Loss on real estate in-substance
foreclosed -- -- 4,795
Write-down of investment properties
and investment in limited partnerships 8,814 -- --
Total expenses 63,022 50,388 48,644
Gain on real estate tax settlement -- -- 1,108
Gain (loss) on disposition of property 81 (31) --
Loss before extraordinary item (37,915) (27,355) (28,202)
Loss on early extinguishment of debt (19) -- --
Net loss $(37,934) $(27,355) $(28,202)
Net loss allocated to general partner (1%) $ (379) $ (273) $ (282)
Net loss allocated to limited partners (99%) (37,555) (27,082) (27,920)
$(37,934) $(27,355) $(28,202)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners' deficit at
December 31, 1992 $ (1,225) $(121,258) $(122,483)
Net loss for the year ended
December 31, 1993 (282) (27,920) (28,202)
Partners' deficit at
December 31, 1993 (1,507) (149,178) (150,685)
Net loss for the year ended
December 31, 1994 (273) (27,082) (27,355)
Partners' deficit at
December 31, 1994 (1,780) (176,260) (178,040)
Net loss for the year ended
December 31, 1995 (379) (37,555) (37,934)
Partners' deficit at
December 31, 1995 $ (2,159) $(213,815) $(215,974)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(37,934) $(27,355) $(28,202)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Loss on real estate in-substance
foreclosed -- -- 4,795
Gain on real estate tax statement -- -- (1,108)
Depreciation and amortization 6,440 6,132 5,410
(Gain) loss on disposition of property (81) 31 --
Cash received from property in-substance
foreclosed -- -- 800
Write-down of investment properties and
investments in limited partnerships 8,814 -- --
Change in accounts:
Other assets (2,871) (170) 7
Interest payable 79 24,648 20,270
Payable to affiliates (969) 349 (52)
Accounts payable and accrued
liabilities 1,039 141 (1,517)
Interest on Master Loan 27,428 -- --
Net cash provided by operating activities 1,945 3,776 403
Cash flows from investing activities:
Property improvements and replacements (5,137) (2,149) (710)
Purchase of securities available for sale -- (195) --
Proceeds from sale of securities available
for sale 195 -- --
Net proceeds from the disposition of
real estate -- 130 --
Net cash used in investing activities (4,942) (2,214) (710)
Cash flows from financing activities:
Proceeds from long-term borrowings 23,635 -- --
Advances on Master Loan 4,002 40 2,390
Loan costs paid (798) -- --
Principal payments on Master Loan (21,661) -- --
Principal payments on notes payable (3,349) (638) (652)
Net cash provided by (used in)
financing activities 1,829 (598) 1,738
Net (decrease) increase in cash and
and cash equivalents (1,168) 964 1,431
Cash and cash equivalents, at beginning
of year 3,393 2,429 998
Cash and cash equivalents, at end of year $ 2,225 $ 3,393 $ 2,429
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 2,917 $ 2,550 $ 4,577
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - 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 (the "Master Loan") from Consolidated Capital Institutional
Properties ("CCIP"), a California limited partnership. These notes are secured
by the real properties owned by EP. The 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 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. On October 24,
1995, MAE-ICC, Inc. exercised the remaining portion of its option to purchase
all of the remaining outstanding capital stock of GII Realty, Inc. held by
Gordon Realty, Inc. Pursuant to the terms of the option, MAE-ICC, Inc. acquired
the remaining 49.5% of the outstanding capital stock of GII Realty, Inc.
Principles of 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 at December 31, 1994, and operations from September
30, 1993, through November 30, 1995, of the Carlton House are consolidated in
CCEP's financial statements pursuant to accounting guidelines regarding notes
receivable in-substance foreclosed. Carlton House was transferred to CCIP in a
series of transactions on November 30, 1995.
Note A - Organization and Summary of Significant Accounting Policies - continued
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks and in
money market funds. At certain times, the amount of cash deposited at a bank
may exceed the limit on insured deposits.
Restricted cash - tenant security deposits - CCEP requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Restricted Escrows:
Replacement Reserve Account: At the time of the December 15, 1995,
refinancing $375,357 of the proceeds were designated for a "replacement reserve
fund" for certain capital replacements (as defined in the Replacement Reserve
Agreement) at Plantation Gardens, Palm Lake, Society Park East, The Knolls,
Indian Creek Village and Tates Creek Village. At December 31, 1995, the balance
remaining was $375,357 and is included in other assets.
Repair Escrow Account: In addition to the Replacement Reserve Account,
$2,456,056 of the refinancing proceeds were designated for a "repair escrow" to
cover necessary repairs and replacements to be completed at Plantation Gardens,
Palm Lake, Society Park East, The Knolls, Indian Creek Village and Tates Creek
Village within one year of closing. At December 31, 1995, the balance was
$2,465,056 and is included in other assets. All excess funds will be
transferred into the Replacement Reserve Account.
Escrows for Taxes: These funds, held by the Partnership and the mortgage
holder, are designated for the payment of real estate taxes and are included in
other assets.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of
the Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 5 to 15
years.
Loan Costs: Loan costs of $798,088 are included in other assets and are being
amortized on a straight-line basis over the life of the loans.
Note A - Organization and Summary of Significant Accounting Policies - continued
Investments: Securities available-for-sale: The General Partner determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses,
reported in a separate component of partner's capital. The amortized cost of
debt securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in investment
income. Realized gains and losses and declines in value judged to be other-
than-temporary on available-for-sale securities are included in investment
income. The cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available-for-sale
are included in other income.
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 B."
Investments in Limited Partnerships: The investments in limited partnerships
represent certain interest in three affiliated limited partnerships that were
contributed by EP's general partners to the Partnership. These investments are
stated at the lower of estimated fair value of the interests at the time of
contribution to the Partnership or the current estimated fair value of the
interests. The Partnership wrote this investment down $1 million to its
estimated fair value during the third quarter of 1995. Also, in the fourth
quarter of 1995, CCEP received distributions from two of the affiliated
partnerships in the amount of $1,047,860. This amount was subsequently paid to
CCIP as a principal payment on the Master Loan per the loan agreement.
Advertising: The Partnership expenses the costs of advertising as incurred.
Investment Properties: Prior to 1995, investment properties were carried at the
lower of cost or estimated fair value, which was determined using the higher of
the property's non-recourse debt amount, when applicable, or the net operating
income of the investment property capitalized at a rate deemed reasonable for
the type of property. During 1995, CCEP adopted FASB Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. The impairment loss is measured by comparing the
fair value of the asset to its carrying amount. 444 De Haro has experienced a
decline in its estimated net realizable value. Accordingly, the Partnership
recorded approximately $2.814 million in expense for the write-down on the real
estate in the year ended December 31, 1995.
Note A - Organization and Summary of Significant Accounting Policies - continued
Leases: The Partnership leases certain commercial space to tenants under
various lease terms. The leases are accounted for as operating leases in
accordance with Financial Accounting Standards Board Statement No. 13. Some of
the leases contain stated rental increases during their term. For leases with
fixed rental increases, rents are recognized on a straight-line basis over the
terms of the lease. For all other leases, minimum rents are recognized over the
terms of the leases.
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on these leases. In addition,
management finds it necessary to offer rental concessions during particularly
slow months or in response to heavy competition from other similar complexes in
the area. Concessions are charged to expenses as incurred.
Lease Commissions: Lease commissions are capitalized and amortized using the
straight-line method over the life of the applicable lease. At December 31,
1995 and 1994, lease commissions totaled $624,749 and $1,630,617, respectively,
with accumulated amortization of $201,461 and $1,319,052, respectively. Lease
commissions are included in other assets.
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 to affiliates primarily represents cash flow payments
owed by CCEP to CCIP in accordance with the terms of the Master Loan.
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
$128.8 million greater than the assets and liabilities as reported in the
financial statements at December 31, 1995.
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value. The
carrying amount of the Partnership's cash and cash equivalents approximates fair
value due to short-term maturities. The Partnership estimates the fair value of
its fixed rate mortgages by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership.
Reclassifications: Certain reclassifications have been made to the 1994 and
1993 information to conform to the 1995 presentation.
Note B - Note Receivable Deemed in-Substance Foreclosed
CCEP held a note receivable (the "Carlton House Note") secured by a deed of
trust on the 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 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 of interest income related to the note receivable in the
statements of operations for the year ended December 31, 1993. However, in 1994
and 1995, no interest income was recognized as no cash related to the note
receivable was received by CCEP.
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).
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. 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.
In September 1993, a wholly-owned subsidiary of CCIP purchased the $20.4 million
second lien mortgage note 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 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 for 1994.
On November 30, 1995, New Carlton House Partners, Ltd., a Pennsylvania limited
partnership ("NCHP"), owner of a multi-use apartment/commercial building known
as The Carlton House, the Partnership, Philly Associates Inc., a Texas
Corporation ("Philly"), and Kennedy Boulevard Associates, L.P., a Pennsylvania
limited partnership ("KBA-I, L.P.") (an affiliate of CCIP) entered into a
consensual Transfer Agreement whereby certain mortgage notes held by CCEP and
Philly that are secured by The Carlton House were assigned to KBA-I, L.P. As
NCHP is unable to repay the debt, the parties agreed that in order to avoid the
additional costs and expenses of litigation or a judicial foreclosure, that NCHP
transfer Carlton House to KBA-I, L.P. by a deed-in-lieu of foreclosure in full
satisfaction of its obligations on the mortgages assigned to KBA-I, L.P. As an
additional matter, the transfer of the Carlton House to KBA-I, L.P. shall be in
satisfaction of a portion of the amounts owed by CCEP to the Partnership under
the Master Loan Agreement. NCHP transferred The Carlton House to KBA-I, L.P.
and CCIP recorded the transfer on November 30, 1995.
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 years ended December 31, 1995, 1994 and 1993, 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:
December 31, 1994
ASSETS (in thousands)
Real estate:
Land $ 3,805
Buildings and improvements 16,917
20,722
Less: Accumulated depreciation (1,122)
19,600
Cash and cash equivalents 1,519
Securities available for sale 195
Prepaid expenses and other assets 103
Total assets $ 21,417
LIABILITIES AND PARTNERS' DEFICIT
Notes and interest payable $ 16
Due to affiliates 763
Other liabilities 467
Total liabilities 1,246
Partners' equity 20,171
Total liabilities and partners' equity $ 21,417
Note B - Note Receivable Deemed in-Substance Foreclosed - continued
<TABLE>
<CAPTION>
For the Eleven For the Year For the Three
Months Ended Ended Months Ended
November 30, December 31, December 31,
1995 1994 1993
<S> <C> <C> <C>
Rental revenue $ 5,705 $ 4,831 $ 1,164
Investment income 26 27 --
Total revenues 5,731 4,858 1,164
Costs and expenses:
Property operations 3,747 4,108 1,371
Depreciation 953 920 202
Administrative 103 78 --
Interest 1,342 3 3
Write-down of investment
property 5,000 -- --
Total costs and expenses 11,145 5,109 1,576
Loss from operations (5,414) (251) (412)
Gain on real estate
tax settlement -- -- 1,108
Net (loss) income $(5,414) $ (251) $ 696
</TABLE>
Note C - Disposition of Real Estate
CCEP recognized a gain of approximately $134,000 related to a clubhouse fire at
Tates Creek Village and a roof replacement at The Knolls. Offsetting these
gains were losses of approximately $53,000 relating to roof replacements at
Granada, Society Park East, Palm Lake, Indian Creek Village and Shirewood
Townhomes.
During 1994, CCEP sold a building and the related parcel of land which was
adjacent to the Plantation Gardens Apartments. CCEP recognized a $31,000 loss
on the sale.
Note D - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at December 31,
1995, and December 31, 1994, are $233.5 million and $238.5 million,
respectively.
Terms of 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, 1995, 1994 and 1993
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 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 the Partnership's properties
are paid to CCIP under the terms of the Master Loan Agreement. The Master Loan
Agreement matures in November 2000. The General Partner has determined that the
Master Loan and related interest payable has no determinable fair value since
payments are limited to net cash flow, as defined, however the fair value is not
believed to be in excess of the fair value of the underlying collateral.
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.
During 1995, CCIP advanced approximately $4 million to CCEP as an advance on the
Master Loan to pay for deferred maintenance and capital improvements and to pay
off certain third party mortgages. In December 1993, CCIP 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 1994 property taxes. In
February 1994, CCIP advanced approximately $589,000 to New Carlton House
Partners ("NCHP"), as an advance on the note receivable ("Carlton House Note")
secured by a deed of trust on the Carlton House Apartment and Office Building
("Carlton House"), to pay Carlton House's 1994 property taxes. In February
1994, CCIP 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. The Carlton House note was forgiven
in the November 30, 1995, deed-in-lieu of foreclosure transaction. The Carlton
House note had been previously written-off in the 1993 in-substance foreclosure
transaction.
In connection with the transfer of Carlton House to KBA-I the General Partner of
CCIP had a valuation performed on the property to determine its estimated fair
value. The asset had previously been recorded on the books on the Partnership
and for valuation for the Master Loan based upon appraisals performed by a third
party. The last appraisal valued the property as of May 12, 1995. The General
Partner believed that the information needed to evaluate the property had
changed since this appraisal and that the use of updated information would
ensure a more accurate recording of the transfer of this asset.
Based on its ongoing evaluation of the condition of the property, the General
Partner concluded that additional information received during the fourth quarter
of 1995 regarding the extent of deferred maintenance and improvements needed to
the property indicated that a $5,000,000 write-down was needed to reduce the
property to its estimated net realizable value. The Partnership recorded this
write-down during the fourth quarter before the property was transferred to KBA-
I.
Note E - Notes and Interest Payable
The principal terms of mortgage notes payable are as follows (in thousands):
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1995 Interest Rate Date Maturity
<S> <C> <C> <C> <C> <C>
Indian Creek Village
1st Mortgage $ 4,700 $ 31 6.95% 12/01/05 $ 4,036
The Knolls
1st Mortgage 5,425 36 6.95% 12/01/05 4,659
Lakeview Office Tower
1st Mortgage 1,335 17 10.5% 09/15/07 --
Palm Lake
1st Mortgage 1,750 12 6.95% 12/01/05 1,503
Plantation Gardens
1st Mortgage 7,100 47 6.95% 12/01/05 6,097
Society Park East
1st Mortgage 2,060 14 6.95% 12/01/05 1,769
Tates Creek Village
1st Mortgage 2,600 17 6.95% 12/01/05 2,233
Totals $24,970 $174
</TABLE>
At December 31, 1995, the notes payable are all nonrecourse, collateralized by
deeds of trust on the real property.
The estimated fair value of CCEP's aggregate debt, excluding the Master Loan, is
approximately $25,151,000. This estimate is not necessarily indicative of the
amount the Partnership may pay in actual market transactions.
Note E - Notes and Interest Payable - continued
On December 15, 1995, CCEP successfully financed new mortgage notes on
Plantation Gardens, Palm Lake, Society Park East, The Knolls, Tates Creek
Village and Indian Creek Village. Of the $23,635,000 gross proceeds received in
the refinancing, approximately $546,000 was used to pay off the old mortgage
debt on Tates Creek Village. Additionally, $19,857,000 of the net proceeds was
used to pay down the Master Loan to CCIP. This new debt is superior to the
Master Loan.
Summary of Maturities
Principal payments on notes payable are due as follows (in thousands):
Years Ending December 31, Notes Payable
1996 $ 304
1997 328
1998 355
1999 383
2000 414
Thereafter 23,186
Total $ 24,970
Note F - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for management and administration of all Partnership activities.
CCEP paid property management fees based upon collected gross rental revenues
for property management services in each of the years ended December 31, 1995,
1994 and 1993. For the years ended December 31, 1994 and 1993, a portion of
such property management fees were paid to the unaffiliated property management
companies performing day-to-day property management services and a portion was
paid to Partnership Services, Inc. ("PSI") for advisory services related to day-
to-day property operations. In July 1993, Coventry Properties, Inc.
("Coventry"), an affiliate of the General Partner, assumed day-to-day property
management responsibility for two of CCEP's properties under the same fee
arrangement as the unaffiliated management companies. Additionally, from
February 1993 until December 1994, Coventry managed The Carlton House for CCEP.
In late December 1994, an affiliate of Insignia Financial Group, Inc.
("Insignia"), an affiliate of the General Partner, assumed day-to-day property
management responsibilities for all of CCEP's properties. Fees paid to
affiliates of Insignia during the year ended December 31, 1995, and fees paid to
Coventry and PSI for the year ended December 31, 1994 and 1993, are reflected in
the following table.
Note F - Related Party Transactions - continued
Also, CCEP is subject to an Investment Advisory Agreement between CCEP and an
affiliate of ConCap Holdings, Inc. ("CHI"). This agreement provides for an
annual fee, payable in monthly installments, to an affiliate of CHI for advising
and consulting services for CCEP's properties. Advisory fees paid pursuant to
this agreement are reflected in the following table:
For the Years Ended
December 31,
1995 1994 1993
(in thousands)
Property management fees $1,253 $740 $292
Investment advisory fees 233 257 257
Lease commissions 221 110 --
The Partnership Agreement ("Agreement") also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of CCEP activities. The General Partner and its current and
former affiliates, which includes Coventry, received reimbursements for the year
ended December 31, 1995, 1994 and 1993, as reflected in the following table:
For the Years Ended
December 31,
1995 1994 1993
(in thousands)
Reimbursement for services of affiliates $423 $319 $322
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from Consolidated Capital
Institutional Properties ("CCIP") pursuant to the Master Loan Agreement. Such
interest payments totaled approximately $2.5 million and $1.5 million for the
year ended December 31, 1995 and 1994. The Partnership received advances under
the Master Loan Agreement totaling $40,000 in February 1994. Advances of
approximately $4 million were made under the Master Loan Agreement during the
year ended December 31, 1995. Carlton House was transferred to CCIP on November
30, 1995, in partial settlement of the Master Loan. As a result of this
transaction, CCIP relieved the Master Loan obligation by approximately
$15,537,000. Additionally, the net proceeds from the financing of Plantation
Gardens, Palm Lake, Society Park East, The Knolls, Tates Creek Village and
Indian Creek Village of $19,857,000 were paid to CCEP to pay down the Master
Loan. Also, approximately $1,048,000 of distributions received from two
affiliated partnerships were paid to CCIP to pay down the Master Loan.
Note F - Related Party Transactions - continued
On July 1, 1995, CCEP began insuring its properties under a master policy
through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner, who
receives payments on these obligations from the agent. The amount of CCEP's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note G - Revenues
Rental income on the commercial property leases 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):
YEAR ENDING
DECEMBER 31,
1996 $ 2,198
1997 1,823
1998 1,454
1999 1,227
2000 798
Thereafter 1,134
$ 8,634
There is no assurance that this rental income will continue at the same level
when the current leases expire.
Note H - Real Estate and Accumulated Depreciation
The investment properties owned by the Partnership consist of the following:
(in thousands)
<TABLE>
<CAPTION>
Building
& Related
Personal Accumulated Depreciable
Description Land Interest Total Depreciation Life-Years
<S> <C> <C> <C> <C> <C>
444 De Haro $ 947 $11,858 $ 12,805 $ 8,750 3-18
Granada 171 2,802 2,973 1,930 5-18
Indian Creek Village 1,041 7,861 8,902 5,492 5-18
The Knolls 647 6,578 7,225 4,497 5-18
Lakeview Office
Tower 235 3,415 3,650 2,501 5-18
Northlake Quadrangle 980 4,030 5,010 3,119 5-18
Village Square 272 4,101 4,373 2,978 5-18
Plantation Gardens 1,958 12,721 14,679 8,924 5-18
Regency 350 6,924 7,274 4,970 5-18
Sherwood Square 892 5,412 6,304 3,914 5-18
Shirewood Townhomes 494 5,794 6,288 4,120 5-18
Silverado 628 4,523 5,151 3,375 5-18
Society Park 966 8,052 9,018 5,821 5-18
Society Park East 489 4,572 5,061 3,257 5-18
Tates Creek Village 382 6,263 6,645 4,519 5-18
Total $10,452 $94,906 $105,358 $68,167
</TABLE>
