FORM 10-Q---QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
2000 1999
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 6,063 $ 11,175
Receivables and deposits 732 1,078
Restricted escrows 531 600
Other assets 2,078 1,641
Investment in Master Loan 67,756 67,865
Less: allowance for impairment loss (17,417) (17,417)
50,339 50,448
Investment properties:
Land 3,564 3,564
Building and related personal property 37,817 37,115
41,381 40,679
Less: accumulated depreciation (10,691) (9,953)
30,690 30,726
$ 90,433 $ 95,668
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 213 $ 108
Tenant security deposit liabilities 590 574
Accrued property taxes 16 --
Other liabilities 586 627
Mortgage note payable 26,999 27,074
28,404 28,383
Partners' (Deficit) Capital
General partner (56) (58)
Limited partners (199,045.2 units issued and
outstanding) 62,085 67,343
62,029 67,285
$ 90,433 $ 95,668
Note: The balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
Revenues:
Rental income $ 2,587 $ 2,456
Interest income on investment in
Master Loan to affiliate -- 800
Interest income 114 72
Other income 145 133
Total revenues 2,846 3,461
Expenses:
Operating 1,161 1,158
Depreciation 738 574
General and administrative 100 116
Property taxes 143 143
Interest 479 471
Total expenses 2,621 2,462
Net income $ 225 $ 999
Net income allocated to general partner (1%) $ 2 $ 10
Net income allocated to limited partners (99%) 223 989
$ 225 $ 999
Net income per limited partnership unit $ 1.12 $ 4.97
Distributions per limited partnership unit $ 27.54 $ 9.29
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 200,342.0 $ 1 $200,342 $200,343
Partners' (deficit) capital
at December 31, 1998 199,045.2 $ (96) $ 86,230 $ 86,134
Distributions -- -- (1,850) (1,850)
Net income for the three months
ended March 31, 1999 -- 10 989 999
Partners' (deficit) capital
at March 31, 1999 199,045.2 $ (86) $ 85,369 $ 85,283
Partners' (deficit) capital at
December 31, 1999 199,045.2 (58) $ 67,343 $ 67,285
Distributions -- -- (5,481) (5,481)
Net income for the three months
ended March 31, 2000 -- 2 223 225
Partners' (deficit) capital at
March 31, 2000 199,045.2 $ (56) $ 62,085 $ 62,029
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net income $ 225 $ 999
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 767 604
Change in accounts:
Receivables and deposits 346 388
Other assets (466) (536)
Accounts payable 105 (330)
Tenant security deposit liabilities 16 21
Accrued property taxes 16 (46)
Other liabilities (41) (106)
Net cash provided by operating activities 968 994
Cash flows from investing activities:
Net receipts from (deposits to) restricted escrows 69 (82)
Property improvements and replacements (702) (550)
Principal receipts on Master Loan 109 121
Net cash used in investing activities (524) (511)
Cash flows from financing activities:
Distributions to partners (5,481) (1,850)
Payments on notes payable (75) (78)
Loan costs paid -- (8)
Net cash used in financing activities (5,556) (1,936)
Net decrease in cash and cash equivalents (5,112) (1,453)
Cash and cash equivalents at beginning of period 11,175 8,683
Cash and cash equivalents at end of period $ 6,063 $ 7,230
Supplemental disclosure of cash flow information:
Cash paid for interest $ 464 $ 461
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Institutional Properties (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
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."), Kennedy
Boulevard Associates II, L.P. a Pennsylvania Limited Partnership ("KBA-II,
L.P."), Kennedy Boulevard Associates III, L.P. a Pennsylvania Limited
Partnership ("KBA-III, L.P."), Kennedy Boulevard Associates IV, L.P. a
Pennsylvania Limited Partnership ("KBA-IV, L.P.") and Kennedy Boulevard GP I, a
Pennsylvania Partnership. The general partners of each of the affiliated Limited
and General Partnerships are Limited Liability Corporations of which the
Partnership is the sole member. The Limited Partners of each of the affiliated
limited and general partnerships are either the Partnership or a Limited
Liability Corporation of which the Partnership is the sole member. Therefore,
the Partnership controls the affiliated Limited and General Partnerships and
consolidation is appropriate. KBA-I, L.P. holds title to The Sterling Apartment
Home and Commerce Center ("Sterling").
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were paid to the General
Partner and its affiliates during the three months ended March 31, 2000 and
1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 136 $ 133
Reimbursement for services of affiliates (included in
operating, and general and administrative expenses
and investment properties) 54 69
During the three months ended March 31, 2000 and 1999, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Registrant's
properties for providing property management services. The Registrant paid to
such affiliates approximately $136,000 and $133,000 for the three months ended
March 31, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $54,000 and $69,000 for the
three months ended March 31, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 116,705.30 limited partnership units in
the Partnership representing 58.63% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. As a result of its
ownership of 58.63% of the outstanding units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note D - Net Investment in Master Loan
The Partnership was formed for the benefit of its limited partners to lend funds
to Consolidated Capital Equity Partners ("CCEP"), a California general
partnership. The Partnership loaned funds to CCEP subject to a nonrecourse note
with a participation interest (the "Master Loan"). At March 31, 2000, the
recorded investment in the Master Loan was considered to be impaired under
Statement of Financial Accounting Standard No. 114 ("SFAS 114"), Accounting by
Creditors for Impairment of a Loan. The Partnership measures the impairment of
the loan based upon the fair value of the collateral due to the fact that
repayment of the loan is expected to be provided solely by the collateral. For
the three months ended March 31, 1999, the Partnership recorded approximately
$800,000, of interest income based upon "Excess Cash Flow" generated (as defined
in the terms of the New Master Loan Agreement). There was no interest income
recorded for the three months ended March 31, 2000.
The fair value of the collateral properties was determined using the net
operating income of the collateral properties capitalized at a rate deemed
reasonable for the type of property adjusted for market conditions, the physical
condition of the property and other factors, or by obtaining an appraisal by an
independent third party. This methodology has not changed from that used in
prior calculations performed by the General Partner in determining the fair
value of the collateral properties. There was no change in the provision for
impairment loss for the three months ended March 31, 2000 and 1999. The General
Partner evaluates the net realizable value on a semi-annual basis.
Interest, calculated on the accrual basis, due to the Partnership pursuant to
the terms of the Master Loan Agreement, but not recognized in the consolidated
statements of operations due to the impairment of the loan, totaled
approximately $10,608,000 and $9,293,000 for the three months ended March 31,
2000 and 1999, respectively. Interest income is recognized on the cash basis as
allowed under SFAS 114. At March 31, 2000, and December 31, 1999, such
cumulative unrecognized interest totaling approximately $277,469,000 and
$266,861,000 was not included in the balance of the investment in Master Loan.
In addition, six of the properties are collateralized by first mortgages
totaling approximately $22,478,000 which are superior to the Master Loan.
Accordingly, this fact has been taken into consideration in determining the fair
value of the Master Loan.
During the three months ended March 31, 2000 and 1999, the Partnership received
approximately $109,000 and $121,000 respectively, in principal payments on the
Master Loan. This amount represents cash received on certain investments held by
CCEP, which are required to be transferred to the Partnership per the Master
Loan Agreement.
Note E - Commitment
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital,
as defined in the Partnership Agreement. 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 tenant security deposits totaling approximately $6,653,000,
were greater than the reserve requirement of approximately $4,685,000 at March
31, 2000.
Note F - Distributions
Distributions from surplus cash of approximately $5,481,000 were paid to the
limited partners ($27.54 per limited partnership unit) during the three months
ended March 31, 2000. During the three months ended March 31, 1999, the
Partnership paid approximately $1,850,000 in distributions from surplus cash to
the limited partners ($9.29 per limited partnership unit). Included in these
amounts are payments to the North Carolina Department of Revenue for withholding
taxes related to income generated by the Registrant's investment property
located in that state.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has two reportable segments: residential properties and
commercial properties. The Partnership's residential property segment consist of
one apartment complex located in North Carolina and one multiple-use facility
consisting of apartment units and commercial space located in Pennsylvania. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less. The commercial property leases space to various medical offices,
various career services facilities, and a credit union at terms ranging from two
months to fifteen years.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those described in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segments are investment properties that offer
different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.
Segment information for the three months ended March 31, 2000 and 1999 is shown
in the tables below (in thousands). The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segment.
2000 Residential Commercial Other Totals
Rental income $ 2,210 $ 377 $ -- $ 2,587
Interest income 9 1 104 114
Other income 90 55 -- 145
Interest expense 420 59 -- 479
Depreciation 718 20 -- 738
General and administrative
expense -- -- 100 100
Segment profit 110 111 4 225
Total assets 33,688 2,317 54,428 90,433
Capital expenditures for
investment properties 694 8 -- 702
1999 Residential Commercial Other Totals
Rental income $ 2,130 $ 326 $ -- $ 2,456
Interest income 10 1 61 72
Other income 109 24 -- 133
Interest income on investment
in Master Loan -- -- 800 800
Interest expense 412 59 -- 471
Depreciation 561 13 -- 574
General and administrative
expense -- -- 116 116
Segment profit 203 51 745 999
Total assets 34,461 1,422 77,909 113,792
Capital expenditures for
investment properties 549 1 -- 550
Note H - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of two properties, The Loft and
The Sterling Apartment Homes and Commerce Center ("The Sterling"). The Sterling
is a multiple-use facility which consists of an apartment complex and commercial
space. The following table sets forth the average occupancy of the properties
for the three months ended March 31, 2000 and 1999:
Average Occupancy
Property 2000 1999
The Loft Apartments 94% 96%
Raleigh, North Carolina
The Sterling Apartment Homes 91% 94%
The Sterling Commerce Center 88% 79%
Philadelphia, Pennsylvania
The decrease in occupancy at The Sterling Apartment Homes is attributable to a
major renovation project which was performed at the property during the past
year to improve the curb appeal of the property. The increase in occupancy at
the Sterling Commerce Center is attributable to major capital improvements
including exterior renovations, elevator rehabilitation and common area
renovations which have been completed during the past year.
Results of Operations
The Partnership's net income for the three months ended March 31, 2000 was
approximately $225,000 compared to a net income of approximately $999,000 for
the corresponding period in 1999. The decrease in net income for the three
months ended March 31, 2000 as compared to the three months ended March 31, 1999
was primarily due to a decrease in total revenues and, to a lesser extent, an
increase in total expenses. The decrease in total revenues is due primarily to a
decrease in interest income related to the Master Loan, which was partially
offset by an increase in rental income and interest income. The decrease in
interest income related to the Master Loan is a factor of the method used to
recognize income. Interest income is only recognized to the extent that actual
cash is received. The receipt of cash is dependent on the corresponding cash
flow of the properties which secure the Master Loan. Cash flow for these
properties was lower for the three months ended March 31, 2000 as a result of
capital expenditures at the properties. The increase in rental income was due to
an increase in average rental rates at The Loft and The Sterling Apartment Homes
and to an increase in occupancy at The Sterling Commerce Center, which more than
offset the decrease in occupancy at The Loft and The Sterling Apartment Homes.
The increase in interest income is the result of increased levels of cash
maintained in interest bearing accounts.
The increase in total expenses for the three months ended March 31, 2000 is
primarily due to an increase in depreciation expense, slightly offset by a
decrease in general and administrative expenses. Depreciation expense increased
due to major capital improvements and replacements at The Sterling during 1999
and 1998. General and administrative expense decreased due to a decrease in
reimbursements to the General Partner for accountable administrative expenses.
Included in general and administrative expenses for the three month periods
ended March 31, 2000 and 1999 are management reimbursements to the General
Partner allowed under the Partnership Agreement. In addition, costs associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit required by the Partnership Agreement are also
included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 2000, the Partnership had cash and cash equivalents of
approximately $6,063,000 as compared to approximately $7,230,000 at March 31,
1999. Cash and cash equivalents decreased approximately $5,112,000 for the three
months ended March 31, 2000 from the Partnership's year ended December 31, 1999.
This decrease was primarily due to approximately $5,556,000 of net cash used in
financing activities and, to a lesser extent, to approximately $524,000 of net
cash used in investing activities which was partially offset by approximately
$968,000 of net cash provided by operating activities. Cash used in investing
activities consisted primarily of property improvements and replacements
partially offset by principal repayments received on the Master Loan and, net
receipts from escrow accounts maintained by the mortgage lender. Cash used in
financing activities consisted primarily of distributions to partners and, to a
lesser extent, payments of principal made on the mortgages encumbering the
Registrant's properties. The Registrant invests its working capital reserves in
money market accounts.
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 tenant security deposits totaling approximately $6,653,000, were
greater than the reserve requirement of approximately $4,685,000 at March 31,
2000.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and local, legal and regulatory requirements. Capital
improvements planned for each of the Registrant's properties are detailed below.
The Loft
The Partnership has budgeted, but is not limited to, approximately $55,200 for
capital improvements during the current year consisting of floor covering and
mini-blinds replacements, appliances, HVAC condensing units, and water heaters.
During the three months ended March 31, 2000, the Partnership completed
approximately $22,000 of capital improvements, consisting primarily of
appliances, floor covering replacement and mini-blind replacements. These
improvements were funded from cash flow.
The Sterling
The Partnership has budgeted, but is not limited to, approximately $1,379,000
for capital improvements during the current year consisting of appliances,
cabinet replacements, interior building improvements, electrical and plumbing
upgrades, and floor covering replacements. During the three months ended March
31, 2000, the Partnership completed approximately $680,000 of capital
improvements consisting primarily of plumbing and electrical upgrades, appliance
and cabinet replacements and interior building improvements. These improvements
were funded primarily from cash flow and replacement reserves.
The additional capital improvements planned for 2000 at the Partnership's
properties will be made only to the extent of cash available from operations and
Partnership reserves. To the extent that such budgeted capital improvements are
completed, the Registrant's distributable cash flow, if any, may be adversely
affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $26,999,000 requires monthly payments of principal
and interest and balloon payments of approximately $3,903,000 and $19,975,000 on
December 1, 2005 and October 1, 2008, respectively. The General Partner will
attempt to refinance such indebtedness and/or sell the properties prior to such
maturity date. If the properties cannot be refinanced or sold for a sufficient
amount, the Registrant may risk losing such properties through foreclosure.
Distributions from surplus cash of approximately $5,481,000 were paid to the
limited partners ($27.54 per limited partnership unit) during the three months
ended March 31, 2000. During the three months ended March 31, 1999, the
Partnership paid approximately $1,850,000 in distributions from surplus cash to
the limited partners ($9.29 per limited partnership unit). Included in these
amounts are payments to the North Carolina Department of Revenue for withholding
taxes related to income generated by the Registrant's investment property
located in that state. The Registrant's distribution policy is reviewed on a
semi-annual basis. Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, and the
timing of debt maturities, refinancings, and/or property sales. Furthermore,
cash reserves are subject to the requirement of the Partnership Agreement which
requires that the Partnership maintain reserves equal to 5% of Net Investment
Capital. There can be no assurance, however, that the Partnership will generate
sufficient funds from operations, after planned capital improvement
expenditures, to permit further distributions to its partners during the
remainder of 2000 or subsequent periods.
CCEP Property Operations
For the three months ended March 31, 2000, CCEP's net loss totaled approximately
$9,882,000 on total revenues of approximately $4,936,000. CCEP recognizes
interest expense on the 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 the three months ended March 31,
2000 and 1999, CCEP's statement of operations includes total interest expense
attributable to the Master Loan of approximately $10,608,000 and $9,293,000,
respectively, which 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.
During the three months ended March 31, 2000, the Partnership received
approximately $109,000 in principal payments on the Master Loan. These amounts
were received on certain investments by CCEP, which are required to be
transferred to the Partnership per the Master Loan Agreement.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks associated with its Master Loan to
Affiliate ("Loan). Receipts (interest income) on the Loan are based upon the
operations and cash flow of the underlying investment properties that
collateralize the Loan. Both the income and expenses of operating the investment
properties are subject to factors outside the Partnership's control, such as an
oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in the patterns or needs of users.
The investment properties are also susceptible to the impact of economic and
other conditions outside of the control of the Partnership as well as being
affected by current trends in the market area in which they operate. In this
regard, the General Partner of the Partnership closely monitors the performance
of the properties collateralizing the loans. Based upon the fact that the loan
is considered impaired under Statement of Financial Accounting Standard No. 114,
Accounting by Creditors for Impairment of a Loan, interest rate fluctuations do
not offset the recognition of income, as income is only recognized to the extent
of cash flow. Therefore, market risk factors do not offset the Partnership's
results of operations as it relates to the Loan.
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for its
borrowing activities used to maintain liquidity and fund business operations. To
mitigate the impact of fluctuations in U.S. interest rates, the Partnership
maintains its debt as fixed rate in nature by borrowing on a long-term basis.
Based on interest rates at March 31, 2000, a 1% increase or decrease in market
interest rates would not have a material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at December
31, 1999. The interest rates represent the weighted-average rates. The fair
value of the debt obligations approximate the recorded value as of March 31,
2000.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 6.86%
(in thousands)
2000 $ 222
2001 323
2002 346
2003 371
2004 393
Thereafter 25,344
Total $ 26,999
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The plaintiffs seek monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the General
Partner filed a motion seeking dismissal of the action. In lieu of responding to
the motion, the plaintiffs have filed an amended complaint. The General Partner
filed demurrers to the amended complaint which were heard February 1999. Pending
the ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement, settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
General Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
S-K Reference
Number Description
27 Financial Data Schedule, is filed as an exhibit to
this report.
99.1 Consolidated Capital Equity Partners, L.P., unaudited
financial statements for the three months ended March
31, 2000 and 1999.
b) Reports on Form 8-K during the quarter ended March 31, 2000:
None.
SIGNATURES
Pursuant to the requirements 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
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: May 15, 2000
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
March 31, 2000 and 1999
EXHIBIT 99.1 (Continued)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
2000 1999
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 4,030 $ 2,865
Receivables and deposits 1,083 1,359
Restricted escrows 580 718
Other assets 830 761
Investment properties:
Land 8,290 8,290
Building and related personal property 86,906 85,969
95,196 94,259
Less accumulated depreciation (72,907) (71,592)
22,289 22,667
$ 28,812 $ 28,370
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 461 $ 493
Tenant security deposit liabilities 489 466
Accrued property taxes 411 435
Other liabilities 491 555
Mortgage notes 22,478 22,556
Master loan and interest payable 345,339 334,840
369,669 359,345
Partners' Deficit
General partner (3,409) (3,310)
Limited partners (337,448) (327,665)
(340,857) (330,975)
$ 28,812 $ 28,370
Note: The balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EXHIBIT 99.1 (Continued)
b)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Revenues: (restated)
Rental income $ 4,555 $ 4,455
Other income 381 381
Total revenues 4,936 4,836
Expenses:
Operating 1,999 2,045
General and administrative 161 138
Depreciation 1,314 1,141
Property taxes 326 289
Interest 11,018 10,511
Total expenses 14,818 14,124
Loss from continuing operations (9,882) (9,288)
Income from discontinued operations -- 68
Net loss $ (9,882) $ (9,220)
Net loss allocated to general partner (1%) $ (99) $ (92)
Net loss allocated to limited partners (99%) (9,783) (9,128)
$ (9,882) $ (9,220)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EXHIBIT 99.1 (Continued)
c)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands)
General Limited
Partners Partners Total
Partners' deficit at
December 31, 1998 $ (3,108) $(307,679) $(310,787)
Net loss for the three months
ended March 31, 1999 (92) (9,128) (9,220)
Partners' deficit
at March 31, 1999 $ (3,200) $(316,807) $(320,007)
Partners' deficit
at December 31, 1999 $ (3,310) $(327,665) $(330,975)
Net loss for the three months
ended March 31, 2000 (99) (9,783) (9,882)
Partners' deficit at
March 31, 2000 $ (3,409) $(337,448) $(340,857)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EXHIBIT 99.1 (Continued)
d)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net loss $ (9,882) $ (9,220)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,336 1,352
Change in accounts:
Receivables and deposits 276 (77)
Other assets (90) (103)
Accounts payable (32) (148)
Tenant security deposit liabilities 23 20
Accrued property taxes (24) 102
Other liabilities (64) (77)
Accrued interest on Master Loan 10,608 9,293
Net cash provided by operating activities 2,151 1,142
Cash flows from investing activities:
Property improvements and replacements (937) (463)
Lease commissions paid -- (42)
Net receipts from (deposits to) restricted escrows 138 (64)
Net cash used in investing activities (799) (569)
Cash flows from financing activities:
Principal payments on Master Loan (109) (121)
Principal payments on notes payable (78) (72)
Net cash used in financing activities (187) (193)
Net increase in cash and cash equivalents 1,165 380
Cash and cash equivalents at beginning of period 2,865 1,992
Cash and cash equivalents at end of period $ 4,030 $ 2,372
Supplemental disclosure of cash flow information:
Cash paid for interest $ 391 $ 1,197
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The Partnership's financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership continues to incur
operating losses, suffers from inadequate liquidity, has an accumulated deficit
and is unable to repay the Master Loan balance, which matures in November 2000.
The Partnership realized a net loss of approximately $9,882,000 for the three
months ended March 31, 2000. The General Partner expects the Partnership to
continue to incur such losses from operations. The Partnership generated cash
from operations of approximately $2,151,000 during the three months ended March
31, 2000; however, this was primarily the result of accruing interest of
approximately $10,608,000 on its Master Loan indebtedness.
The Partnership's indebtedness to CCIP under the Master Loan of approximately
$345,339,000, including accrued interest, matures in November 2000. The
Partnership has not received notice as to the maturity of the Master Loan. The
holder of the note has two options, which include foreclosing on the properties
that collateralize the Master Loan or extending the term of the note. Currently,
the Partnership does not have the means with which to satisfy this obligation.
No other sources of additional financing have been identified by the
Partnership, nor does the General Partner have any other plans to remedy the
liquidity problems the Partnership is currently experiencing. At March 31, 2000,
partners' deficit was approximately $340,857,000.
The General Partner expects revenues from the eleven investment properties will
be sufficient over the next twelve months to meet all property operating
expenses, mortgage debt service requirements and capital expenditure
requirements. However, these cash flows will be insufficient to repay to CCIP
the Master Loan balance, including accrued interest, in the event it is not
renegotiated.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or amounts and classifications of
liabilities that may result from these uncertainties.
Note B - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Equity Partners, L.P. ("CCEP" or the "Partnership") have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Holdings, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2000.
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
Consolidation
As of December 31, 1998, CCEP owned a 75% interest in a limited partnership
("Western Can, Ltd.") which owned 444 De Haro, an office building in San
Francisco, California. No minority interest liability was reflected, as of
December 31, 1998, for the 25% minority interest because Western Can, Ltd. had a
net capital deficit and no minority liability existed with respect to CCEP. In
May 1999, a limited partner in Western Can, Ltd. withdrew in connection with a
settlement with CCEP pursuant to which the partner was paid $1,350,000 by CCEP.
This settlement effectively terminated Western Can Ltd. as CCEP became the sole
limited partner. CCEP's investment in Western Can, Ltd. is consolidated in
CCEP's financial statements. In September 1999, 444 DeHaro was sold (see "Note D
- - Discontinued Segment").
Note C - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note D - Discontinued Segment
In September 1999, 444 De Haro located in San Francisco, California was sold to
an unaffiliated third party. 444 DeHaro was the only remaining property in the
commercial segment of the Partnership. Due to the sale of this property, the
results of operations of the property have been classified as "Income from
Discontinued Operations" for the three months ended March 31, 2000 and 1999.
Revenues from 444 DeHaro were approximately $511,000 for the three months ended
March 31, 1999. No revenues from 444 DeHaro were recorded during the three
months ended March 31, 2000.
Note E - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates during the three months ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 250 $ 240
Investment advisory fees (included in general
and administrative expense) 45 43
Reimbursement for services of affiliates (included in
operating, general and administrative expenses
and investment properties) 93 72
During the three months ended March 31, 2000 and 1999, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Partnership's
residential properties for providing property management services. The
Partnership paid to such affiliates approximately $250,000 and $240,000 for the
three months ended March 31, 2000 and 1999, respectively.
The Partnership is also subject to an Investment Advisory Agreement between the
Partnership and an affiliate of the General Partner. This agreement provides for
an annual fee, payable in monthly installments, to an affiliate of the General
Partner for advising and consulting services for CCEP's properties. The
Partnership paid to such affiliates approximately $45,000 and $43,000 for the
three months ended March 31, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $93,000 and $72,000 for the
three months ended March 31, 2000 and 1999, respectively.
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 (the
"Master Loan"), which is described more fully in the 1999 annual report. Such
interest payments totaled approximately $800,000 for the three months ended
March 31, 1999. There were no interest payments made during the three months
ended March 31, 2000. There were no advances on the Master Loan during the three
months ended March 31, 2000 or 1999. During the three months ended March 31,
2000 and 1999 CCEP paid approximately $109,000 and $121,000 respectively, to
CCIP as principal payments on the Master Loan. These amounts were from cash
received on certain investments by CCEP, which are required to be transferred to
CCIP as per the Master Loan Agreement.
Note F - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at March 31,
2000 and December 31, 1999, are approximately $345,339,000 and $334,840,000,
respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan, 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%. Payments are currently payable
quarterly in an amount equal to "Excess Cash Flow", generally defined in the
Master Loan as net cash flow from operations after third-party debt service and
capital expenditures. Any unpaid interest is added to principal, compounded
annually, and is payable at the loan's maturity. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to CCIP under the terms of
the Master Loan Agreement. The Master Loan Agreement matures in November 2000.
The Partnership has not received notice as to the maturity of the Master Loan.
The holder of the note has two options which include foreclosing on the
properties that collateralize the Master Loan or extending the terms of the
note.
During the three months ended March 31, 2000, CCEP paid approximately $109,000
to CCIP as principal payments on the Master Loan. This amount was from cash
received on certain investments by CCEP, which are required to be transferred to
CCIP per the Master Loan Agreement. There were no advances on the Master Loan
for the three months ended March 31, 2000 or 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties 2000 First Quarter 10-Q and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000352983
<NAME> Consolidated Capital Institutional Properties
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,063
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 41,381
<DEPRECIATION> 10,691
<TOTAL-ASSETS> 90,433
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 26,999
0
0
<COMMON> 0
<OTHER-SE> 62,029
<TOTAL-LIABILITY-AND-EQUITY> 90,433
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<TOTAL-REVENUES> 2,846
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 479
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<EPS-BASIC> 1.12 <F2>
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<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
