FORM 10-Q_ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 September 30, 1999
[ ] 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 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of small business issuer 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, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
September 30, December 31,
1999 1998
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 9,105 $ 13,241
Receivables and deposits 2,069 2,246
Restricted escrows 1,525 2,743
Other assets 1,551 1,459
Investment properties:
Land 12,491 12,491
Buildings and related personal property 124,428 121,741
136,919 134,232
Less accumulated depreciation (106,320) (103,250)
30,599 30,982
$ 44,849 $ 50,671
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 420 $ 379
Tenant security deposit liabilities 565 568
Accrued property taxes 1,431 1,309
Other liabilities 1,152 1,045
Mortgage notes payable 70,438 70,775
74,006 74,076
Partners' Deficit
General partner (6,405) (6,175)
Limited partners (342,773 units issued and
outstanding) (22,752) (17,230)
(29,157) (23,405)
$ 44,849 $ 50,671
Note: The balance sheet at December 31, 1998, has been derived from the
audited financial statements at the 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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 7,194 $ 6,935 $21,311 $20,680
Other income 552 575 1,575 1,628
Casualty (loss) gain -- (44) -- 183
Total revenues 7,746 7,466 22,886 22,491
Expenses:
Operating 2,777 3,337 8,328 9,644
General and administrative 224 323 1,248 970
Depreciation 969 1,140 3,070 3,458
Interest 1,417 1,460 4,257 4,389
Property taxes 490 464 1,440 1,366
Total expenses 5,877 6,724 18,343 19,827
Net income $ 1,869 $ 742 $ 4,543 $ 2,664
Net income allocated
to general partner (4%) $ 75 $ 30 $ 182 $ 107
Net income allocated
to limited partners (96%) 1,794 712 4,361 2,557
$ 1,869 $ 742 $ 4,543 $ 2,664
Net income per limited partnership unit $ 5.23 $ 2.08 $ 12.72 $ 7.46
Distribution per limited partnership unit $ 3.22 $ 5.09 $ 28.83 $ 11.49
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(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, 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)
Partners' deficit
at December 31, 1998 342,773 $ (6,175) $(17,230) $(23,405)
Net income for the nine months
ended September 30, 1999 -- 182 4,361 4,543
Distributions to partners -- (412) (9,883) (10,295)
Partners' deficit
at September 30, 1999 342,773 $ (6,405) $(22,752) $(29,157)
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,
1999 1998
Cash flows from operating activities:
Net income $ 4,543 $ 2,664
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,070 3,458
Amortization of loan costs 237 236
Casualty gain -- (183)
Change in accounts:
Receivables and deposits 177 (306)
Other assets (329) 49
Accounts payable 41 236
Tenant security deposit liabilities (3) (18)
Accrued property taxes 122 93
Other liabilities 107 111
Net cash provided by operating activities 7,965 6,340
Cash flows from investing activities:
Property improvements and replacements (2,687) (2,659)
Net withdrawals from restricted escrows 1,218 43
Collections of note receivable -- 20
Net insurance proceeds from casualty gain -- 239
Net cash used in investing activities (1,469) (2,357)
Cash flows from financing activities:
Payments on mortgage notes payable (337) (323)
Distribution to partners (10,295) (2,204)
Loan costs paid -- (17)
Net cash used in financing activities (10,632) (2,544)
Net (decrease) increase in cash and cash
equivalents (4,136) 1,439
Cash and cash equivalents at beginning of period 13,241 12,090
Cash and cash equivalents at end of period $ 9,105 $ 13,529
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $4,021,000 and $4,148,000 for the nine
months ended September 30, 1999 and 1998, 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.
See Accompanying Notes to Consolidated Financial Statements
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" 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 "CEI" or "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1999, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1999. 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, 1998.
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.
The Partnership's consolidated financial statements also 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., and ConCap Stratford Associates, Ltd.
Because the Partnership may remove the general partner of its 99% owned
partnerships; these partnerships are controlled and consolidated by the
Partnership. All significant interpartnership balances have been eliminated.
NOTE B - TRANSFER OF CONTROL
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1988, through a series
of transactions, Southmark Corporation ("Southmark") acquired a controlling
interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter
11 of the United States Bankruptcy Code. In 1990, as part of its reorganization
plan, CEI acquired CCEC's general partner interests in the Partnership and in 15
other affiliated public limited partnerships (the "Affiliated Partnerships") and
CEI replaced CCEC as managing general partner in all 16 partnerships. The
selection of CEI as the sole managing general partner was approved by a majority
of the Limited Partners in the Partnership and in each of the affiliated
partnerships pursuant to a solicitation of the Limited Partners dated August 10,
1990. As part of this solicitation, the Limited Partners also approved an
amendment to the Partnership Agreement to limit changes of control of the
Partnership, and the conversion of CCMC from a general partner to a special
limited partner, thereby leaving CEI as the sole general partner of the
Partnership. On November 14, 1990, CCMC was dissolved and its special limited
partnership interest was divided among its former partners. All of CEI's
outstanding stock was owned by Insignia Properties Trust ("IPT").
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT 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 will have a material
effect on the affairs and operations of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTNERS
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 certain payments to affiliates for
services and reimbursements of certain expenses incurred by affiliates on behalf
of the Partnership. The following transactions with the General Partner and/or
its affiliates were incurred during the nine months ended September 30, 1999 and
1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $1,155 $1,103
Reimbursement for services of affiliates (included in
investment properties and general and administrative
and operating expenses) 451 487
Partnership management fee (included in general and
administrative expenses) 555 341
During the nine months ended September 30, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $1,155,000 and
$1,103,000 for the nine months ended September 30, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $451,000 and $487,000 for the
nine months ended September 30, 1999 and 1998, respectively. Included in such
costs for the nine months ended September 30, 1999 and 1998, is approximately
$10,000 and $60,000, respectively, in reimbursement for construction oversight
costs.
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 approximately $555,000 and $341,000
under this provision of the Partnership Agreement to the General Partner during
the nine months ended September 30, 1999 and 1998, respectively.
In addition to reimbursement for services of affiliates in 1998, the Partnership
paid an affiliate of the General Partner approximately $7,000 for loan costs
related to the 1997 refinancing of South Port Apartments. These costs were
capitalized and are included in other assets on the consolidated balance sheets.
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 108,405.39 (approximately 31.63% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $148 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 8,322.50
units. As a result, AIMCO and its affiliates currently own 116,184.50 units of
limited partnership interest in the Partnership representing approximately
33.90% of the total outstanding limited partnership units. 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 (See "Note H - Legal
Proceedings").
NOTE D - CONTINGENCIES
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 $9,105,000 at September 30, 1999,
exceeded the Partnership's reserve requirements of approximately $2,100,000.
NOTE E - DISTRIBUTIONS
During the nine months ended September 30, 1999, the General Partner declared
and paid distributions attributable to cash flow from operations of
approximately $7,573,000 (approximately $7,270,000 to the limited partners,
$21.21 per limited partnership unit) and approximately $2,722,000 (approximately
$2,613,000 to the limited partners, $7.62 per limited partnership unit)
representing a return of capital.
Subsequent to September 30, 1999, the Partnership approved and paid a
distribution from operations of approximately $3,222,000 (approximately
$3,093,000 to the limited partners, $9.02 per limited partnership unit).
During the nine months ended September 30, 1998, the General Partner declared
and paid a distribution attributable to cash flow from operations of
approximately $3,951,000 (approximately $3,939,000 to the limited partners,
$11.49 per limited partnership unit).
NOTE F - CASUALTY GAINS
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
building. Insurance proceeds of $239,000 were received during the nine months
ended September 30, 1998, with approximately an additional $27,000 receivable
from the insurer. Repair efforts were completed in July 1998, and the related
costs were 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 approximately $183,000
during the nine months ended September 30, 1998. Total insurance proceeds
received and receivable at September 30, 1998, approximated the cost of
replacement.
NOTE G - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties. The Partnership's residential property segment consists
of seventeen apartment complexes in ten states in the southeastern, western, and
mid-western United States. The Partnership rents apartment units to tenants for
terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on net income. 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
fiscal year ended December 31, 1998.
Factors management used to identify the Partnership's reportable segments: The
Partnership's reportable segments are investment properties that offer similar
products and services. Although each of the investment properties are managed
separately, they have been aggregated into one segment as they provide services
with similar types of products and customers.
Segment information for the nine months ended September 30, 1999 and 1998, is
shown in the tables below. The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segments.
1999 Residential Other Totals
(in thousands)
Rental income $21,311 $ -- $21,311
Other income 1,468 107 1,575
Interest expense 4,246 11 4,257
Depreciation 3,070 -- 3,070
General and administrative
expenses -- 1,248 1,248
Segment profit (loss) 5,695 (1,152) 4,543
Total assets 39,312 5,537 44,849
Capital expenditures for
investment properties 2,687 -- 2,687
1998 Residential Other Totals
(in thousands)
Rental income $20,680 $ -- $20,680
Other income 1,265 363 1,628
Casualty gain 183 -- 183
Interest expense 4,370 19 4,389
Depreciation 3,458 -- 3,458
General and administrative
expenses -- 970 970
Segment profit (loss) 3,290 (626) 2,664
Total assets 38,072 14,905 52,977
Capital expenditures for
investment properties 2,659 -- 2,659
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 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.
("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 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, 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 ("Stipulation"), settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the General Partner will make tender offers for all
outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. 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.
NOTE I - SUBSEQUENT EVENT
On November 3, 1999, the Partnership secured financing on Point West Apartments.
The new indebtedness of $2,460,000 matures on December 1, 2019. The
indebtedness carries an interest rate of 7.86% and requires monthly payments of
approximately $20,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 Partnership'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 Partnership'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 seventeen apartment
complexes. The following table sets forth the average occupancy of the
properties for the nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
The Apartments 93% 94%
Omaha, NE
Arbours of Hermitage Apartments 96% 96%
Nashville, TN
Briar Bay Racquet Club Apartments 97% 97%
Miami, FL
Chimney Hill Apartments 95% 90%
Marietta, GA
Citadel Apartments 94% 96%
El Paso, TX
Citadel Village Apartments 98% 96%
Colorado Springs, CO
Foothill Place Apartments 97% 94%
Salt Lake City, UT
Knollwood Apartments 96% 95%
Nashville, TN
Lake Forest Apartments 87% 93%
Omaha, NE
Nob Hill Villa Apartments 94% 93%
Nashville, TN
Overlook Apartments 92% 88%
Memphis, TN
Point West Apartments 96% 98%
Charleston, SC
Post Ridge Apartments 96% 97%
Nashville, TN
Rivers Edge Apartments 96% 97%
Auburn, WA
South Port Apartments 96% 97%
Tulsa, OK
Stratford Place Apartments 94% 92%
Austin, TX
Village East Apartments 98% 96%
Cimarron Hills, CO
The increase in occupancy at Chimney Hill Apartments is attributable to a strong
local market and a more aggressive marketing plan over the last nine months.
The increase in occupancy at Foothill Place Apartments and Overlook Apartments
can be attributed to a more intensified marketing campaign over the past year.
Lake Forest Apartments experienced a decrease in occupancy due to a number of
units temporarily lost due to structural repairs and increased competition in
the local market.
Results of Operations
The Partnership's net income for the nine months ended September 30, 1999,
totaled approximately $4,543,000 as compared to a net income of approximately
$2,664,000 for the corresponding period of 1998. The Partnership's net income
for the three months ended September 30, 1999 and 1998, totaled approximately
$1,869,000 and $742,000, respectively. The increase in net income for the three
and nine month periods ended September 30, 1999, is primarily attributable to a
decrease in total expenses and, to a lesser extent, an increase in total
revenues. Total expenses decreased due to decreases in operating expenses and,
to a lesser extent, decreases in depreciation and interest expense as well as a
decrease in general and administrative expense for the three months ended
September 30, 19999. The decrease in operating expenses is primarily
attributable to a decrease in maintenance expense as the result of the
completion during the nine months ended September 30, 1998, of exterior building
improvements including painting, landscaping, parking lot repairs, interior
improvements, and sewer repair costs at a number of the Partnership's investment
properties. Depreciation decreased in 1999 due to major assets at several of
the Partnership's investment properties becoming fully depreciated during 1998.
Interest expense decreased due to the pay off in 1998 of two first-lien
mortgages associated with a previously sold property and to the expected
increase in the amount of debt service payments applied to the principal portion
of the Partnership's debt rather than charged to interest.
Partially offsetting these decreases in expense is an increase in general and
administrative for the nine month period ended September 30, 1999, and property
tax expenses for the three and nine month periods ended September 30, 1999. The
increase in general and administrative expense is primarily attributable to an
increase in the special 9% management fee related to distributions from
operating cash flows to the limited partners. Distributions from operations
paid to the partners increased by approximately $3,626,000 during the
nine months ended September 30, 1999, as compared to the same period of 1998.
Included in general and administrative expenses at both September 30, 1999 and
1998, are reimbursements to the General Partner allowed under the Partnership
Agreement associated with its management of the Partnership. 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. Property tax expense increased due to the tax refunds
received in 1998 for the Partnership's Foothill Place and Nob Hill Villas
properties as a result of tax appeals during the previous year and minor
increases due to increased tax billings at several of the Partnership's
properties.
Total revenues increased due to an increase in rental income partially offset by
decreases in other income and casualty gains. The increase in rental income is
primarily due to increased rental rates at most of the Partnership's investment
properties accompanied by increased occupancy levels at a number of the
properties which more than offset occupancy decreases at other properties (see
occupancy discussion above). The decrease in other income is attributable to
lower average cash balances maintained in interest-bearing accounts during the
last twelve months. This decrease was partially offset by an increase in tenant
charges at several of the Partnership's investment properties. There was no
casualty gain recognized during the nine months ended September 30, 1999 as was
during the nine months ended 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 building. Insurance
proceeds of $239,000 were received during the nine months ended September 30,
1998, with approximately an additional $27,000 receivable from the insurer.
Repair efforts were completed in July 1998, and the related costs were
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 approximately $183,000 during the
nine months ended September 30, 1998. Total insurance proceeds received and
receivable at September 30, 1998, approximated the cost of replacement.
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 September 30, 1999, the Partnership held cash and cash equivalents of
approximately $9,105,000, compared to approximately $13,529,000 at September 30,
1998. Cash and cash equivalents decreased approximately $4,136,000 for the nine
months ended September 30, 1999 from the Partnership's year ended December 31,
1998. This net decrease was comprised of approximately $10,632,000 of net cash
used in financing activities and approximately $1,469,000 of cash used in
investing activities, partially offset by net cash provided by operating
activities of approximately $7,965,000. Cash used in financing activities
consisted primarily of distributions to partners and, to a lesser extent,
payments made on the mortgages encumbering the Partnership's investment
properties. Cash used in investing activities consisted of property
improvements and replacements partially offset by net withdrawals from escrow
accounts maintained by mortgage lenders. The Partnership invests its working
capital reserves in money market accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Partnership's properties are detailed below.
The Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $187,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, landscaping, air conditioning
upgrades, water heater upgrades, and electrical, plumbing, and other
improvements. The landscaping, air conditioning upgrades, water heater
upgrades, and plumbing improvements are substantially complete as of September
30, 1999. These improvements were funded from the Partnership reserves and
operating cash flow. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $260,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $313,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, air
conditioning upgrades, landscaping, roof replacement, and other building
improvements.
Arbours of Hermitage Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $163,000 of capital improvements at the property, consisting
primarily of appliance replacement, carpet and flooring replacement, air
conditioning upgrades, and other building and structural improvements. The air
conditioning upgrades are substantially complete as of September 30, 1999.
These improvements were funded from Partnership reserves and operating cash
flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the General
Partner on interior improvements, it is estimated that the property requires
approximately $516,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $560,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, air
conditioning upgrades, landscaping, roof replacement, swimming pool
enhancements, and structural and other building improvements.
Briar Bay Racquet Club Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $67,000 of capital improvements at the property, consisting
primarily of parking lot resurfacing, plumbing upgrades, and carpet and vinyl
replacement. The parking lot resurfacing is approximately 75% complete and the
plumbing upgrades are substantially complete as of September 30, 1999. These
improvements were funded from Partnership reserves and operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$114,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $139,000
for 1999 at this property which include certain of the required improvements and
consist of carpet and vinyl replacement, electrical upgrades, landscaping, and
parking lot resurfacing.
Chimney Hill Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $147,000 of capital improvements at the property, consisting
primarily of floor covering replacement, cabinet replacements, air conditioning
upgrades, landscaping, and other building improvements. These improvements were
funded from Partnership reserves and operating cash flow. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $180,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $252,000 for 1999 at this
property which include certain of the required improvements and consist of
interior and exterior building improvements.
Citadel Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $143,000 for capital improvements at the property, consisting
primarily of floor covering, air conditioning upgrades, pool improvements, and
appliance replacements. These improvements were funded from Partnership
reserves and operating cash flow. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $227,000 of capital improvements over
the next few years. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $256,000 for 1999 at this property which
include certain of the required improvements and consist of carpet and vinyl
replacement, air conditioning upgrades, electrical upgrades, landscaping, roof
replacement, and parking lot improvements.
Citadel Village Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $216,000 of capital improvements at the property, consisting
primarily of floor covering, roof replacement, landscaping, signage, recreation
facility upgrades, appliance replacements, and other improvements. The roof
project has been completed as of September 30, 1999. These improvements were
funded from Partnership reserves and operating cash flow. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $301,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $216,000 for 1999 at this
property which include certain of the required improvements and consist of
carpet and vinyl replacement, roof replacement, landscaping, and other
improvements.
Foothill Place Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $235,000 of capital improvements at the property, consisting
primarily of floor covering, appliance replacements, parking lot and swimming
pool improvements, air conditioning upgrades, and landscaping improvements. The
parking lot project is approximately 75% complete and the landscaping
improvements are substantially complete as of September 30, 1999. These
improvements were funded from Partnership reserves. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $273,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $362,000 for 1999 at this
property which include certain of the required improvements and consist of
carpet and vinyl replacement, electrical upgrades, landscaping, parking lot
improvements, roof replacement, appliance replacement, and structural
improvements.
Knollwood Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $214,000 for capital improvements at the property, consisting
primarily of floor covering, air conditioning upgrades, structural improvements,
and appliance replacements. The air conditioning upgrade and structural
improvements are substantially complete as of September 30, 1999. These
improvements were funded from Partnership reserves and operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$584,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $626,000
for 1999 at this property which include certain of the required improvements and
consist of carpet and vinyl replacement, electrical upgrades, parking lot
improvements, roof replacement, and structural and other building improvements.
Lake Forest Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $318,000 for capital improvements at the property, consisting
primarily of structural, air conditioning upgrades, floor covering, service
vehicles, landscaping, and other improvements. These improvements were
primarily funded from Partnership reserves. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $267,000 of capital improvements over
the next few years. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $522,000 for 1999 at this property which
include certain of the required improvements and consist of carpet and vinyl
replacement, air conditioning units, landscaping, parking lot improvements, and
other improvements.
Nob Hill Villa Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $197,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement, electrical
improvements, and other building improvements. These improvements were funded
from Partnership reserves and operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $275,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $292,000 for 1999 at this
property which include certain of the required improvements and consist of
carpet and vinyl replacement, air conditioning units, electrical upgrades, roof
replacement, and other improvements.
Overlook Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $119,000 for capital improvements at the property, consisting
primarily of floor covering, appliance replacement, landscaping, and other
building improvements. These improvements were funded from the Partnership's
operating cash flow. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $557,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $238,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, roof
replacement, and other improvements.
Point West Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $71,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, landscaping, fencing, air
conditioning upgrades, and roof replacement. The fencing is substantially
complete as of September 30, 1999. These improvements were funded from the
Partnership's operating cash flow. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $132,000 of capital improvements over
the next few years. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $119,000 for 1999 at this property which
include certain of the required improvements and consist of carpet replacement
and landscaping.
Post Ridge Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $151,000 for capital improvements at the property, consisting
primarily of floor covering, plumbing upgrades, landscaping, and other
improvements. These improvements were primarily funded from Partnership
reserves. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the General
Partner on interior improvements, it is estimated that the property requires
approximately $345,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $347,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, roof
replacement, and parking lot improvements.
Rivers Edge Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $54,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement, landscaping,
and other building improvements. These improvements were funded from
Partnership's reserves and operating cash flow. Based on a report received from
an independent third party consultant analyzing necessary exterior improvements
and estimates made by the General Partner on interior improvements, it is
estimated that the property requires approximately $115,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $129,000 for 1999 at this
property which include certain of the required improvements and consist of
carpet replacement, appliance replacements, and landscaping.
South Port Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $163,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement, landscaping,
fencing, recreation facility upgrades, and other structural upgrades. These
improvements were funded from Partnership's reserves and operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$222,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $231,000
for 1999 at this property which include certain of the required improvements and
consist of carpet and vinyl replacement, appliance replacements, landscaping,
other structural improvements, and fencing upgrades.
Stratford Place Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $79,000 for capital improvements at the property, consisting
primarily of floor covering, appliance replacement, and air conditioning. These
improvements were funded from Partnership reserves and operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$1,077,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $579,000
for 1999 at this property which include certain of the required improvements and
consist of landscaping, plumbing upgrades, and other structural improvements.
Village East Apartments
During the nine months ended September 30, 1999, the Partnership expended
approximately $163,000 for capital improvements at the property, consisting
primarily of floor covering, interior remodeling, roof replacement, and
structural improvements. The roof replacement, interior remodeling and
structural improvements are substantially complete as of September 30, 1999.
These improvements were funded from Partnership reserves and operating cash
flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the General
Partner on interior improvements, it is estimated that the property requires
approximately $156,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $181,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, parking lot
improvements, and roof replacement.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any near-
term needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $70,438,000 matures at various dates between 1999
and 2005. The mortgage note payable on Overlook Apartments matured in March
1999, however, the Partnership negotiated an extension of the note until the
General Partner is able to complete a refinancing agreement. Should the
Partnership not be able to obtain permanent financing or obtain additional
extensions, the lender may choose to foreclose on the property. Since the note
is non-recourse and the mortgage balance exceeds the book value of the property,
no loss is expected. The General Partner will attempt to refinance such
remaining indebtedness and/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.
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 $9,105,000 at September 30, 1999,
exceeded the Partnership's reserve requirements of approximately $2,100,000.
Cash distributions from operations of approximately $7,573,000 (approximately
$7,270,000 to the limited partners, $21.21 per limited partnership unit) and
approximately $2,722,000 (approximately $2,613,000 to the limited partners,
$7.62 per limited partnership unit) representing a return of capital were
declared and paid during the nine months ended September 30, 1999. Subsequent to
September 30, 1999, the Partnership approved and paid a distribution from
operations of $3,222,000 (approximately $3,093,000 to the limited partners,
$9.02 per limited partnership unit). During the nine months ended September 30,
1998, the General Partner declared and paid a distribution attributable to cash
flow from operations totaling approximately $3,951,000 (approximately $3,939,000
to the limited partners, $11.49 per limited partnership unit). The
Partnership's distribution policy will be reviewed on a quarterly 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. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital expenditures to permit further distributions to its
partners during the remainder of 1999 or subsequent periods.
Tender Offer
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 108,405.39 (approximately 31.63% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $148 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 8,322.50
units. As a result, AIMCO and its affiliates currently own 116,184.50 units of
limited partnership interest in the Partnership representing approximately
33.90% of the total outstanding units. 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 (See "Item 1. Financial Statements, Note
H - Legal Proceedings").
Year 2000 Compliance
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 digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the 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.
Over the past two years, 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
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation 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.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of 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 September 30, 1999,
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, 1998, the Partnership's latest fiscal year end. The interest rates
represent the weighted-average rates. The fair value of the debt obligations
approximated the recorded value as of December 31, 1998.
Principal amount by expected maturity:
Long Term Debt_____________
Fixed Rate Debt Average Interest Rate
(in thousands)
1999 $ 2,238 7.75%
2000 12,474 7.56%
2001 191 7.25%
2002 208 7.25%
2003 8,976 7.25%
Thereafter 46,688 7.23%
Total $70,775
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 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.
("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 I _ Financial Information, Item 1. Financial Statements, Note B _ Transfer
of Control"). 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, 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 ("Stipulation"), settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. The Court has preliminarily approved the Settlement and scheduled a
final approval hearing for December 10, 1999. In exchange for a release of all
claims, the Stipulation provides that, among other things, an affiliate of the
General Partner will make tender offers for all outstanding limited partnership
interests in 49 partnerships, including the Registrant, subject to the terms and
conditions set forth in the Stipulation, and has agreed to establish a reserve
to pay an additional amount in settlement to qualifying class members (the
"Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will
make an application for attorneys' fees and reimbursement of expenses, to be
paid in part by the partnerships and in part from the Settlement Fund. 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:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
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 J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties IV 1999 Third Quarter 10-Q and is qualified in its entirety
by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000355804
<NAME> CONSOLIDATED CAPITAL PROPERTIES IV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,105
<SECURITIES> 0
<RECEIVABLES> 2,069
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 136,919
<DEPRECIATION> (106,320)
<TOTAL-ASSETS> 44,849
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 70,438
0
0
<COMMON> 0
<OTHER-SE> (29,157)
<TOTAL-LIABILITY-AND-EQUITY> 44,849
<SALES> 0
<TOTAL-REVENUES> 22,886
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,257
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,543
<EPS-BASIC> 12.72<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
