FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1998
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period.........to.........
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant as specified in its charter)
California 94-2768742
(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)
Issuer's telephone number (864) 239-1000
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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
September 30, December 31,
1998 1997
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 13,529 $ 12,090
Receivables and deposits 2,276 1,999
Note and interest receivable 1,061 1,081
Restricted escrows 3,131 3,174
Other assets 1,606 1,874
Investment properties:
Land 12,491 12,491
Buildings and related personal property 120,720 118,162
133,211 130,653
Less accumulated depreciation (101,837) (98,490)
31,374 32,163
$ 52,977 $ 52,381
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 799 $ 526
Distribution payable 1,747 --
Tenant security deposit liabilities 562 580
Accrued property taxes 1,405 1,312
Other liabilities 1,013 902
Mortgage notes payable 72,116 72,439
77,642 75,759
Partners' Deficit
General partner (6,079) (6,174)
Limited partners (342,773 units issued
and outstanding at September 30, 1998 and
December 31, 1997) (18,586) (17,204)
(24,665) (23,378)
$ 52,977 $ 52,381
Note: The balance sheet at December 31, 1997, 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 PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 6,935 $ 6,742 $20,680 $19,948
Other income 575 544 1,628 1,452
Casualty gain (loss) net (44) -- 183 --
Total revenues 7,466 7,286 22,491 21,400
Expenses:
Operating 3,337 3,611 9,644 9,652
General and administrative 323 194 970 651
Depreciation 1,140 1,682 3,458 4,919
Interest 1,460 1,468 4,389 4,415
Property taxes 464 431 1,366 1,255
Total expenses 6,724 7,386 19,827 20,892
Net income (loss) $ 742 $ (100) $ 2,664 $ 508
Net income (loss) allocated to general
partner (4%) $ 30 $ (4) $ 107 $ 20
Net income (loss) allocated to limited
partners (96%) 712 (96) 2,557 488
Net income (loss) $ 742 $ (100) $ 2,664 $ 508
Net income (loss) per limited partnership unit $ 2.08 $ (.28) $ 7.46 $ 1.42
Distributions per limited partnership unit $ 5.09 $ -- $ 11.49 $ 4.07
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1998 and 1997
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partner Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 1996 342,783 $(6,089) $(15,153) $(21,242)
Net income for the nine months
ended September 30, 1997 -- 20 488 508
Distributions to Partners -- (60) (1,395) (1,455)
Partners' deficit at
September 30, 1997 342,783 $(6,129) $(16,060) $(22,189)
Partners' deficit at
December 31, 1997 342,773 $(6,174) $(17,204) $(23,378)
Net income for the nine months
ended September 30, 1998 -- 107 2,557 2,664
Distributions to Partners -- (12) (3,939) (3,951)
Partners' deficit at
September 30, 1998 342,773 $(6,079) $(18,586) $(24,665)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income $ 2,664 $ 508
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,458 4,919
Amortization of loan costs 236 213
Loss on disposition of investment property -- 33
Casualty (gain) loss net (183) 14
Change in accounts:
Receivables and deposits (306) (69)
Other assets 49 (128)
Accounts payable 236 (315)
Tenant security deposit liabilities (18) (58)
Accrued property taxes 93 59
Other liabilities 111 (15)
Net cash provided by operating activities 6,340 5,161
Cash flows from investing activities:
Property improvements and replacements (2,659) (1,832)
Proceeds from sale of investments -- 492
Net receipts from restricted escrows 43 275
Collections of note receivable 20 32
Net insurance proceeds from casualty gain (loss) 239 (14)
Net cash used in investing activities (2,357) (1,047)
Cash flows from financing activities:
Payments on notes payable (323) (307)
Distributions to partners (2,204) (1,455)
Loan costs paid (17) --
Net cash used in financing activities (2,544) (1,762)
Net increase in cash and cash equivalents 1,439 2,352
Cash and cash equivalents at beginning of period 12,090 9,239
Cash and cash equivalents at end of period $13,529 $11,591
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $4,148,000 and $4,201,000 for the nine
months ended September 30, 1998 and 1997, respectively.
At September 30, 1998, accounts payable and property improvements and
replacements were each adjusted by approximately $37,000 and receivables and
deposits were adjusted by approximately $27,000 for non-cash activity.
At September 30, 1998, distributions payable and distributions to partners were
each adjusted by $1,747,000 for non-cash activity.
e)
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership") 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 and nine
months ended September 30, 1998, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the fiscal
year ended December 31, 1997.
Consolidation
The consolidated financial statements include the Partnership's majority
interest in a joint venture which owns South Port Apartments. The Partnership
has the ability to control the major operating and financial policies of the
Joint Venture. No minority interest has been reflected for the joint venture
because minority interests are limited to the extent of their equity capital,
and losses in excess of the minority interest equity capital are charged
against the Partnership's interest. Should the losses reverse, the Partnership
would be credited with the amount of minority interest losses previously
absorbed.
The Partnership's consolidated financial statements include the accounts of the
Partnership, its wholly-owned partnerships and its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
ConCap Rivers Edge Associates, Ltd., Foothill Chimney Associates, L.P., ConCap
Metro Centre Associates, Ltd., and ConCap Stratford Associates, Ltd. The
Partnership may remove the General Partner of its 99%-owned partnerships;
therefore, these partnerships are deemed controlled and therefore consolidated
by the Partnership. All significant interpartnership balances have been
eliminated.
Presentation of Accounts
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all of the partnership
activities, as provided in the Limited Partnership Agreement ("Partnership
Agreement"). Partnership management and administrative services as well as
property management services are provided by affiliates of the General Partner.
The following transactions with the General Partner and its affiliates were
incurred during the nine months ended September 30, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included
in operating expenses) $1,103 $1,039
Reimbursements for services of affiliates
including approximately $60,000 and $48,000 in
construction services reimbursements in 1998
and 1997, respectively, (included in general
and administrative and operating expenses and
investment properties) 487 450
The Partnership has paid the property management fees noted above based on
collected gross rental revenues for property management services in each of the
nine months ended September 30, 1998 and 1997, respectively.
In addition, the Partnership Agreement provides for a special management fee
equal to 9% of the total distributions made to the limited partners from cash
flow provided by operations to be paid to the General Partner for executive and
administrative management services. The Partnership paid or accrued
approximately $341,000 and $48,000 under this provision of the Partnership
Agreement to affiliates of the General Partner for the nine months ended
September 30, 1998 and 1997, respectively. These fees are included in general
and administrative expenses.
In addition to reimbursements for services of affiliates for the nine months
ended September 30, 1998, $7,000 of loan costs were capitalized and included in
"Other assets" on the Consolidated Balance Sheet. These loan costs are related
to the refinancing of South Port Apartments in 1997.
For the period January 1, 1997, to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an insurer unaffiliated with the General Partner. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the master policy. The agent assumed the financial obligations
to the affiliate of the General Partner, which received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the General Partner by virtue of the
agent's obligations was not significant.
On August 28, 1997, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 85,000 of the outstanding units of
limited partnership interest in the Partnership, at $140 per Unit, net to the
seller in cash. As a result of the tender offer, the Purchaser acquired 29,618
of the outstanding limited partner units of the Partnership.
NOTE C - COMMITMENTS AND CONTINGENCIES
Commitments
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of $500 per apartment unit owned by the
Partnership, or approximately $2,100,000. In the event expenditures are made
from these reserves, operating revenue shall be allocated to such reserves to
the extent necessary to maintain the foregoing level. Reserves, including cash
and cash equivalents totaling approximately $13,529,000 at September 30, 1998,
exceeded the Partnership's reserve requirements of approximately $2,100,000.
NOTE D - DISTRIBUTIONS
During the nine months ended September 30, 1998, the General Partner declared
and/or paid distributions attributable to cash flow from operations of
approximately $3,951,000.
During the nine months ended September 30, 1997, the General Partner declared
and paid distributions attributable to cash flow from operations totaling
approximately $550,000 and approximately $903,000 representing a return of
capital. Additionally, in September 1997, in conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $2,000 was distributed to the general partners of the
majority-owned sub-tier limited partnerships.
NOTE E - NOTE AND INTEREST RECEIVABLE
When Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a promissory note which matured in March 1996. In March 1996, an
extension, under the existing terms, was negotiated to extend the note until
April 1997. The note matured and the outstanding principal balance was not
repaid. The Partnership negotiated with the borrower to extend the terms of the
note until April 1, 1998, with all other terms of the note remaining unchanged.
In March 1998, an extension, under modified terms, was negotiated to extend the
note until September 1, 1998. The modified terms provide for consideration to
be paid to the Partnership of an amount equal to one half of one percent of the
outstanding principal balance due as of March 31, 1998 as an extension fee. The
fee was received in May of 1998. The estimated value of the note receivable
approximates its carrying value. A letter of default was issued in September
1998; however, the Partnership is currently negotiating an extension of the note
until the end of 1998.
NOTE F - CASUALTY GAINS
In the third quarter of 1998, Foothill Place Apartments sustained windstorm
damage. The Partnership has incurred expenses to date of approximately $27,000.
The Partnership is in the process of negotiating a settlement with the insurance
carrier. These costs are included in operating expense for the nine month
period ended September 30, 1998.
In March 1998, Nob Hill Apartments had a fire that destroyed one apartment unit
in a section of a 24-unit building. Additionally, the remaining units in this
section of the building, as well as the laundry room, sustained water and smoke
damage which eventually caused mold and mildew. The Partnership anticipates
that insurance proceeds will approximate the estimated $222,000 cost of
replacement, resulting in a minimal effect on its operations. Work on the
project was substantially completed at September 30, 1998.
In November 1997, Overlook Apartments had a fire which destroyed one apartment
unit and caused water and smoke damage in the remaining apartment units in the
affected building. Insurance proceeds of $239,000 were received during the nine
months ended September 30, 1998 with approximately $27,000 receivable from the
insurer. Repair efforts were completed in July 1998 and the related costs have
been capitalized as a part of the investment property. Total insurance proceeds
anticipated to be received less the cost of repairs and the write off of assets
replaced, resulted in a net casualty gain of $183,000 for the nine months ended
September 30, 1998.
In January 1997, Foothill Place Apartments sustained extensive wind and flood
damage from severe storms. Additionally, in February 1997, a fire occurred at
Foothill Place Apartments resulting in minor damage to one of its balconies
including the immediately surrounding area. The insurance proceeds received
less the costs to repair Foothill Place Apartments and the write-off of assets
that were replaced, resulted in a net casualty loss for these events of
approximately $14,000 which is included in operating expense for the nine month
period ended September 30, 1997. All repairs and replacements related to these
casualties were completed in the second quarter of 1997.
NOTE G - TRANSFER OF CONTROL - SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of
a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the
IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable
limited proxy to unaffiliated representatives of IPT to vote the IPT Shares
acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result
of AIMCO's ownership and its agreement, the vote of no other holder of IPT is
required to approve the merger. The General Partner does not believe that this
transaction will have a material effect on the affairs and operations of the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of seventeen apartment
complexes. The following table sets forth the average occupancy of the
properties for the nine months ended September 30, 1998 and 1997:
Average Occupancy
1998 1997
The Apartments
Omaha, NE 94% 96%
Arbours of Hermitage Apartments
Nashville, TN 96% 96%
Briar Bay Racquet Club Apartments
Miami, FL 97% 93%
Chimney Hill Apartments
Marietta, GA 90% 90%
Citadel Apartments
El Paso, TX 96% 92%
Citadel Village Apartments
Colorado Springs, CO 96% 98%
Foothill Place Apartments
Salt Lake City, UT 94% 94%
Knollwood Apartments
Nashville, TN 95% 95%
Lake Forest Apartments
Omaha, NE 93% 95%
Nob Hill Villa Apartments
Nashville, TN 93% 95%
Overlook Apartments
Memphis, TN 88% 90%
Point West Apartments
Charleston, SC 98% 98%
Post Ridge Apartments
Nashville, TN 97% 97%
Rivers Edge Apartments
Auburn, WA 97% 97%
South Port Apartments
Tulsa, OK 97% 93%
Stratford Place Apartments
Austin, TX 92% 89%
Village East Apartments
Cimarron Hills, CO 96% 99%
Occupancy for the Briar Bay Racquet Club Apartments has increased due to strong
marketing efforts and a focus on renewals. The low occupancy at Chimney Hill
Apartments is attributable to a highly competitive market and ongoing
construction. Citadel Apartments experienced an increase in occupancy due to
aggressive marketing efforts and an overall increase in the El Paso market.
Occupancy at Overlook Apartments remains low but relatively consistent with the
overall projected rate for the Memphis apartment market. New construction and
low interest rates are primarily responsible for the continued soft market in
this area. As a result of a new staff and aggressive marketing, Stratford Place
has increased occupancy. The increase in occupancy at South Port Apartments is
attributable to an improved appearance, clubhouse renovations and increased
marketing efforts. Poor market conditions due to military transfers and
increased home purchasing contributed to a decrease in occupancy at Village East
Apartments.
The Partnership's net income for the nine months ended September 30, 1998 and
1997 was approximately $2,664,000 and $508,000, respectively. The Partnership's
net income for the three months ended September 30, 1998 was approximately
$742,000 versus a net loss of approximately $100,000 for the three months ended
September 30, 1998. The increase in net income is primarily attributable to an
increase in total revenues and a decrease in depreciation expense. Rental
income increased for the nine months ended September 30, 1998, compared to the
nine months ended September 30, 1997, due to increased rental rates at the
majority of the Partnership's investment properties combined with increased
occupancy at several of the investment properties. Other income increased
primarily due to higher cash balances held for the nine months ended September
30, 1998 versus September 30, 1997. In addition, the casualty gain of
approximately $183,000, as discussed in Note F contributed to the increase in
total revenues for the nine months ended September 30, 1998. Depreciation
expense decreased due to major assets at several properties becoming fully
depreciated during 1997. Partially offsetting these favorable variances were
increases in general and administrative and property tax expenses. General and
administrative expense increased primarily due to an increase in the special 9%
management fee on distributions from operating cash flows. Distributions from
operations increased by approximately $3,400,000 for the nine month period ended
September 30, 1998 as compared to the same period of 1997. Property tax expense
increased due to higher assessed values at several of the Partnership's
investment properties.
Included in operating expense is approximately $555,000 of major repairs and
maintenance mainly comprised of major landscaping costs, gutter repairs,
exterior building repairs, exterior painting, parking lot repairs and
construction oversight costs during the nine months ended September 30, 1998.
During the nine months ended September 30, 1997, approximately $808,000 of major
repairs and maintenance comprised primarily of exterior building repairs,
parking lot repairs, exterior painting and major landscaping costs were included
in operating expense.
When Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a promissory note that matured in March 1996. In March 1996, an
extension, under the existing terms, was negotiated to extend the note until
April 1997. The note matured and the outstanding principal balance was not
repaid. The Partnership negotiated with the borrower to extend the terms of the
note until April 1, 1998 with all other terms of the note remaining unchanged.
In March 1998, an extension, under modified terms, was negotiated to extend the
note until September 1, 1998. The modified terms provide for consideration to
be paid to the Partnership of an amount equal to one half of one percent of the
outstanding principal balance due as of March 31, 1998 as an extension fee.
This fee was received in May of 1998. The estimated value of the note
receivable approximates its carrying value. A letter of default was issued in
September 1998; however, the Partnership is currently negotiating an extension
of the note until the end of 1998.
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.
At September 30, 1998, the Partnership held cash and cash equivalents of
approximately $13,529,000 compared to approximately $11,591,000 at September 30,
1997. Cash and cash equivalents had a net increase of approximately $1,439,000
and $2,352,000 for the nine months ended September 30, 1998 and 1997,
respectively. Net cash provided by operating activities increased due to a
decrease in cash used for accounts payable, increased net income, as described
above, a decrease in other assets and an increase in other liabilities. The
increase in accounts payable results from the timing of payments and the accrual
of the 9% management fee due to the General Partner on distributions from cash
flow from operations. Other assets decreased due to a decrease in prepaid
insurance and taxes. Partially offsetting these positive influences was an
increase in cash used for payment of property taxes, as discussed above. Net
cash used in investing activities increased primarily due to the non-recurring
proceeds from the sale of Treasury Bills in 1997, increased property
improvements and replacements, and a decrease in net receipts from restricted
escrows. These increases in cash used in investing activities were partially
offset by the collection of insurance proceeds related to the Overlook
Apartments casualty. Net cash used in financing activities increased as a
result of increased distributions to partners during the nine months ended
September 30, 1998, compared to the prior year.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and meet other operating needs of the Partnership and to comply with
federal, state and local legal and regulatory requirements. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The General Partner is currently assessing the need for capital improvements at
each of the Partnership's properties. To the extent that additional capital
improvements are required, the Partnership's distributable cash flow, if any,
may be adversely affected at least in the short term. The mortgage indebtedness
of approximately $72,116,000 matures at various dates between December 1998 and
December 2005, with balloon payments due at maturity. The debt underlying the
Overlook Apartments property is scheduled to mature in December 1998 and the
General Partner is currently negotiating a debt refinancing with the lender.
However, there can be no assurance that the Partnership will successfully work
out a refinancing agreement prior to the December 1998 maturity. The General
Partner will attempt to refinance such remaining indebtedness or sell the
properties prior to such maturity dates. If the properties cannot be refinanced
or sold for a sufficient amount, the Partnership will risk losing such
properties through foreclosure. During the nine months ended September 30, 1998
and 1997, cash distributions of approximately $3,951,000 ($11.49 per unit of
limited partnership interest) and $1,455,000 ($4.07 per unit of limited
partnership interest), respectively, were declared and/or paid. Future cash
distributions will depend on the levels of cash generated from operations,
property sales, and the availability of cash reserves. The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations to permit further distributions to its partners in 1998 or subsequent
periods.
Transfer of Control - Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of
a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the
IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable
limited proxy to unaffiliated representatives of IPT to vote the IPT Shares
acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result
of AIMCO's ownership and its agreement, the vote of no other holder of IPT is
required to approve the merger. The General Partner does not believe that this
transaction will have a material effect on the affairs and operations of the
Partnership.
Year 2000
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any computer programs or hardware
that have date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the General Partner was to the security systems,
elevators, heating-ventilation-air-conditioning systems, telephone systems and
switches, and sprinkler systems. The General Partner is currently engaged in the
identification of all non-compliant operational systems, and is in the process
of estimating the costs associated with any potential modifications or
replacements needed to such systems in order for them to be Year 2000 compliant.
It is not expected that such costs would have a material adverse affect upon
the operations of the Partnership.
Risk Associated with the Year 2000
The General Partner believes that the Managing Agent has an effective program in
place to resolve the Year 2000 issue in a timely manner and has appropriate
contingency plans in place for critical applications that could affect the
Partnership's operations. To date, the General Partner is not aware of any
external agent with a Year 2000 issue that would materially impact the
Partnership's results of operations, liquidity or capital resources. However,
the General Partner has no means of ensuring that external agents will be Year
2000 compliant. The General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or results of
operations of the Partnership. However, the effect of non-compliance by
external agents is not readily determinable.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANCES, 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 complaint 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. and
entities which were, at the 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 as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks 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, plaintiffs have recently filed an amended complaint. The General
Partner has filed demurrers to the amended complaint which are scheduled to be
heard on January 8, 1999. The General Partner believes the action to be without
merit, and intends to vigorously defend it.
On July 30, 1998 certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint in the Superior Court of the State of
California, County of Los Angeles. The action, entitled EVEREST PROPERTIES LLC
V. INSIGNIA FINANCIAL GROUP, INC., involves 44 real estate limited partnerships
(including the Partnership) in which the plaintiffs allegedly own interests and
which Insignia Affiliates allegedly manage or control (the "Subject
Partnerships"). The complaint names as defendants Insignia, several Insignia
Affiliates alleged to be managing partners of the Subject Partnerships, the
Partnership and the Managing General Partner. Plaintiffs allege that they have
requested from, but have been denied by each of the Subject Partnerships, lists
of their respective limited partners for the purpose of making tender offers to
purchase up to 4.9% of the limited partner units of each of the Subject
Partnerships. The complaint also alleges that certain of the defendants made
tender offers to purchase limited partner units in many of the Subject
Partnerships, with the alleged result that plaintiffs have been deprived of the
benefits they would have realized from ownership of the additional units. The
plaintiffs assert eleven causes of action, including breach of contract, unfair
business practices, and violations of the partnership statutes of the states in
which the Subject Partnerships are organized. Plaintiffs seek compensatory,
punitive and treble damages. The General Partner filed an answer to the
complaint on September 15, 1998. The General Partner believes the claims to be
without merit and intends to defend the action vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes
that all such other pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition, or operations of
the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Partnership
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES IV
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Capital Properties IV 1998 Third Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000355804
<NAME> CONSOLIDATED CAPITAL PROPERTIES IV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,529
<SECURITIES> 0
<RECEIVABLES> 2,276
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 133,211
<DEPRECIATION> (101,837)
<TOTAL-ASSETS> 52,977
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 72,116
0
0
<COMMON> 0
<OTHER-SE> (24,665)
<TOTAL-LIABILITY-AND-EQUITY> 52,977
<SALES> 0
<TOTAL-REVENUES> 22,491
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,827
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,389
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,664
<EPS-PRIMARY> 7.46<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
