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 June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11002
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, 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Note)
Assets
<S> <C> <C>
Cash and cash equivalents $ 4,793 $ 8,921
Receivables and deposits 1,649 2,162
Restricted escrows 1,689 1,402
Other assets 1,762 1,403
Investment properties:
Land 12,094 12,094
Buildings and related personal property 123,917 122,539
136,011 134,633
Less accumulated depreciation (106,138) (104,057)
29,873 30,576
$ 39,766 $ 44,464
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 654 $ 960
Tenant security deposit liabilities 528 506
Accrued property taxes 1,113 1,284
Distribution payable 343 4,318
Other liabilities 975 1,287
Mortgage notes payable 74,476 70,997
78,089 79,352
Partners' Deficit
General partners (6,783) (6,634)
Limited partners (342,773 units issued and
outstanding) (31,540) (28,254)
(38,323) (34,888)
$ 39,766 $ 44,464
</TABLE>
Note: The balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 6,905 $ 7,029 $13,784 $14,117
Other income 643 560 1,163 1,023
Total revenues 7,548 7,589 14,947 15,140
Expenses:
Operating 2,857 2,833 5,615 5,551
General and administrative 347 263 803 1,024
Depreciation 1,052 1,049 2,081 2,101
Interest 1,444 1,419 2,885 2,840
Property taxes 475 487 971 950
Total expenses 6,175 6,051 12,355 12,466
Income before extraordinary item 1,373 1,538 2,592 2,674
Extraordinary loss on early extinguishment
of debt (5) -- (64) --
Net income $ 1,368 $ 1,538 $ 2,528 $ 2,674
Net income allocated to general partner (4%) 55 62 101 107
Net income allocated to limited partners (96%) 1,313 1,476 2,427 2,567
$ 1,368 $ 1,538 $ 2,528 $ 2,674
Per limited partnership unit:
Income before extraordinary item 3.84 4.31 7.26 7.49
Extraordinary loss on early extinguishment
of debt (0.01) -- (0.18) --
Net income $ 3.83 $ 4.31 $ 7.08 $ 7.49
Distributions per limited partnership unit $ 5.12 $ -- $ 16.67 $ 25.61
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited Total
Partnership General Limited Partners'
Units Partners Partners Deficit
<S> <C> <C> <C> <C>
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 1998 $342,773 $ (6,175) $(17,230) $(23,405)
Distributions to partners -- (366) (8,778) (9,144)
Net income for the six months
ended June 30, 1999 -- 107 2,567 2,674
Partners' deficit at
June 30, 1999 342,773 $ (6,434) $(23,441) $(29,875)
Partners' deficit at
December 31, 1999 342,773 $ (6,634) $(28,254) $(34,888)
Distributions to partners -- (250) (5,713) (5,963)
Net income for the six months
ended June 30, 2000 -- 101 2,427 2,528
Partners' deficit at
June 30, 2000 342,773 $ (6,783) $(31,540) $(38,323)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 2,528 $ 2,674
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,081 2,101
Amortization of loan costs 123 158
Extraordinary loss on early extinguishment of debt 64 --
Change in accounts:
Receivables and deposits 300 411
Other assets (82) (173)
Accounts payable (306) (46)
Tenant security deposit liabilities 22 --
Accrued property taxes (171) (287)
Other liabilities (312) 163
Net cash provided by operating activities 4,247 5,001
Cash flows from investing activities:
Property improvements and replacements (1,378) (1,488)
Net (deposits to) withdrawals from restricted escrows (287) 671
Insurance proceeds 213 --
Net cash used in investing activities (1,452) (817)
Cash flows from financing activities:
Payments on mortgage notes payable (227) (222)
Repayment of mortgage notes payable (10,329) --
Proceeds from mortgage notes payable 14,035 --
Distribution to partners (9,938) (9,144)
Prepayment penalties paid (30) --
Loan costs paid (434) --
Net cash used in financing activities (6,923) (9,366)
Net decrease in cash and cash equivalents (4,128) (5,182)
Cash and cash equivalents at beginning of period 8,921 13,241
Cash and cash equivalents at end of period $ 4,793 $ 8,059
</TABLE>
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $2,708,000 and $2,684,000 for the six
months ended June 30, 2000 and 1999, respectively.
Distribution payable and distributions to partners were each adjusted by
approximately $343,000 for non-cash activity for the six months ended June 30,
2000.
Distributions to partners of approximately $4,318,000 were declared at December
31, 1999 and approximately $4,113,000 of this balance was paid during the six
months ended June 30, 2000. The remaining balance is deferred per the
Partnership Agreement.
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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. ("CEI" or 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 six month periods ended June 30, 2000, 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, 1999.
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 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., Foothill Chimney Associates, L.P., 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
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
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 six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $751 $765
Reimbursement for services of affiliates (included in
investment properties and general and administrative
and operating expenses) 326 286
Partnership management fee (included in general and
administrative expenses) 279 555
Loan costs (included in other assets) 140 --
During the six months ended June 30, 2000 and 1999, 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 $751,000 and $765,000 for the
six months ended June 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $326,000 and $286,000 for the
six months ended June 30, 2000 and 1999, respectively.
The Limited Partnership Agreement ("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 $279,000 and $555,000 under this provision of the Partnership
Agreement to the General Partner during the six months ended June 30, 2000 and
1999, respectively.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $140,000 for loan costs related
to the refinancing of three of the Partnership's properties during the six
months ended June 30, 2000. These costs were capitalized and are included in
other assets on the consolidated balance sheet.
AIMCO and its affiliates currently own 169,136 limited partnership units in the
Partnership representing approximately 49.34% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. As a
result of its ownership of approximately 49.34% of the outstanding units, AIMCO
is in a position to significantly influence all voting decisions with respect to
the Registrant. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the General Partner
because of their affiliation with the General Partner.
Note D - 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 $2,004,000. 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 $4,793,000 at June 30, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
Note E - Distributions
During the six months ended June 30, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared and paid distributions of approximately
$5,951,000 (approximately $5,713,000 to the limited partners or $16.67 per
limited partnership unit) during the six months ended June 30, 2000 consisting
of approximately $2,724,000 (approximately $2,615,000 to the limited partners or
$7.63 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, and Stratford Place Apartments and sale proceeds from
Overlook Apartments which sold in December of 1999, and approximately $3,227,000
(approximately $3,098,000 to the limited partners or $9.04 per limited
partnership unit) from operations. Approximately $343,000 of the distribution
from operations was payable at June 30, 2000 to the General Partner and special
limited partners. Approximately $31,000 of this balance was paid subsequent to
June 30, 2000. The remaining balance is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus funds. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $15,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
In January 1999, the General Partner declared and paid a distribution
attributable to cash flow from operations of approximately $6,422,000
(approximately $6,165,000 to the limited partners or $17.99 per limited
partnership unit) and approximately $2,722,000 (approximately $2,613,000 to the
limited partners or $7.62 per limited partnership unit) representing a return of
capital.
Note F - Casualty Gains
In January 2000, Stratford Place Apartments had a fire which damaged 12
apartment units and 30% of the roof. Insurance proceeds of approximately
$214,000 were received during the six months ended June 30, 2000. The Managing
General Partner is repairing the damage and the financial impact is still being
determined.
Note G - Extraordinary Loss on Early Extinguishment of Debt
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place. The refinancing replaced mortgage indebtedness of approximately
$2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a
rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $124,000.
The Partnership wrote off approximately $4,000 in unamortized loan costs and
paid prepayment penalties of approximately $1,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $5,000.
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $153,000.
The Partnership wrote off approximately $11,000 in unamortized loan costs and
paid prepayment penalties of approximately $22,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $33,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $141,000. The Partnership wrote off approximately $19,000 in
unamortized loan costs and paid prepayment penalties of approximately $7,000
resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the six months ended June
30, 2000.
Note H - 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 sixteen 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 segment profit (loss) before depreciation. The accounting policies of
the reportable segment are the same as those described in the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
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 three and six month periods ended June 30, 2000 and
1999, is shown in the tables below. The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segments.
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 2000 Residential Other Totals
(in thousands)
<S> <C> <C> <C>
Rental income $ 6,905 $ -- $ 6,905
Other income 621 22 643
Interest expense 1,444 (3) 1,444
Depreciation 1,052 -- 1,052
General and administrative expenses -- 347 347
Extraordinary loss on early extinguishment
of debt (5) -- (5)
Segment profit (loss) 1,690 (322) 1,368
For the Six Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $13,784 $ -- $13,784
Other income 1,106 57 1,163
Interest expense 2,885 -- 2,885
Depreciation 2,081 -- 2,081
General and administrative expenses -- 803 803
Extraordinary loss on early extinguishment
of debt (64) -- (64)
Segment profit (loss) 3,274 (746) 2,528
Total assets 32,329 7,436 39,765
Capital expenditures for investment
properties 1,378 -- 1,378
For the Three Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 7,029 $ -- $ 7,029
Other income 535 25 560
Interest expense 1,419 -- 1,419
Depreciation 1,049 -- 1,049
General and administrative expenses -- 263 263
Segment profit (loss) 1,776 (238) 1,538
For the Six Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $14,117 $ -- $14,117
Other income 931 92 1,023
Interest expense 2,840 -- 2,840
Depreciation 2,101 -- 2,101
General and administrative expenses -- 1,024 1,024
Segment profit (loss) 3,606 (932) 2,674
Total assets 37,824 5,985 43,809
Capital expenditures for investment
properties 1,488 -- 1,488
</TABLE>
Note I - 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, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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.
<PAGE>
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 sixteen apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
The Apartments 94% 93%
Omaha, NE
Arbours of Hermitage Apartments 95% 95%
Nashville, TN
Briar Bay Racquet Club Apartments 97% 97%
Miami, FL
Chimney Hill Apartments 94% 95%
Marietta, GA
Citadel Apartments 91% 94%
El Paso, TX
Citadel Village Apartments 96% 98%
Colorado Springs, CO
Foothill Place Apartments 95% 97%
Salt Lake City, UT
Knollwood Apartments 93% 96%
Nashville, TN
Lake Forest Apartments 92% 85%
Omaha, NE
Nob Hill Villa Apartments 97% 93%
Nashville, TN
Point West Apartments 98% 97%
Charleston, SC
Post Ridge Apartments 93% 96%
Nashville, TN
Rivers Edge Apartments 98% 96%
Auburn, WA
South Port Apartments 97% 95%
Tulsa, OK
Stratford Place Apartments 95% 93%
Austin, TX
Village East Apartments 97% 98%
Cimarron Hills, CO
<PAGE>
The decrease in occupancy at Citadel Apartments, Knollwood Apartments, and Post
Ridge Apartments is due to increased competition in the local market. The
increase in occupancy at Lake Forest Apartments and Nob Hill Villa Apartments is
due to increased marketing efforts and strong local markets.
Results of Operations
The Partnership's net income for the six months ended June 30, 2000, totaled
approximately $2,528,000 as compared to a net income of approximately $2,674,000
for the corresponding period of 1999. The Partnership's net income for the three
month period ended June 30, 2000 was approximately $1,368,000 as compared to
approximately $1,538,000 for the corresponding period in 1999. The decrease in
net income for the six months ended June 30, 2000, is due to a decrease in total
revenues and an extraordinary loss on early extinguishment of debt partially
offset by reduced total expenses. The decrease in net income for the three month
period ended June 30, 2000 is due to decreased total revenues and an
extraordinary loss on early extinguishment of debt as well as increased total
expenses. Total revenues for both the three and six month periods as well as
total expenses for the six months ended June 30, 2000 decreased largely due to
the sale of Overlook Apartments in December 1999 as discussed below. Excluding
Overlook Apartment's operations, total expenses and total revenues increased for
the Partnership's remaining properties for the three and six months ended June
30, 2000.
Total expenses on the remaining properties increased due to an increase in
operating, depreciation, property tax and interest expenses partially offset by
a decrease in general and administrative expenses. Operating expenses increased
due primarily to increased utility expenses, increased salary expenses,
increased hazard insurance expense, and reduced net insurance proceeds on
casualties. In the six months ended June 30, 1999 there were several small
insurance claims made and proceeds received. Fewer similar claims were made
during the six months ended June 30, 2000. Depreciation expense on the remaining
properties increased due to capital improvements completed during the past
twelve months. Property tax expense increased due to increased assessed values
at some of the Partnership's properties, as well as the timing of the receipt of
1999 tax bills affecting the accruals recorded at June 30, 2000 and 1999. The
increase in interest expense is primarily due to the new financing at Point West
Apartments late in 1999 and to increased debt balances at The Apartments and
Citadel Apartments due to the refinancings in February 2000. The decrease in
general and administrative expenses is due to the fact that a smaller special
management fee of 9% on distributions from operations was paid during the six
months ended June 30, 2000 as compared to the six months ended June 30, 1999.
While there was a distribution from operations of approximately $6,422,000
during the six months ended June 30, 1999, the total distributions from
operations during the six months ending June 30, 2000 was approximately
$3,227,000, so the special management fee was lower.
Total revenues for the Partnership's remaining properties increased due to an
increase in rental income and an increase in other income. Rental income
increased due to increased average rental rates partially offset by an increase
in bad debt expenses at most of the Partnership's properties. Other income
increased primarily due to increased utility income, telephone commissions, and
cable TV income, partially offset by a decrease in laundry income and reduced
security deposit forfeitures.
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 June 30, 2000, the Partnership held cash and cash equivalents of
approximately $4,793,000, compared to approximately $8,059,000 at June 30, 1999.
Cash and cash equivalents decreased approximately $4,128,000 for the six months
ended June 30, 2000 from the Partnership's year ended December 31, 1999. This
net decrease was comprised of approximately $6,889,000 of net cash used in
financing activities and approximately $1,452,000 of cash used in investing
activities, partially offset by net cash provided by operating activities of
approximately $4,213,000. Cash used in financing activities consisted of the
repayment of the mortgages encumbering The Apartments, Citadel Apartments, and
Stratford Place Apartments, distributions to the partners, loan costs and
prepayment penalties paid and payments of principal made on the mortgages
encumbering some of the Partnership's properties, partially offset by proceeds
from the new loans on The Apartments, Citadel Apartments, and Stratford Place
Apartments. Cash used in investing activities consisted primarily of property
improvements and replacements and net deposits to restricted escrows, partially
offset by net insurance proceeds received. 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 six months ended June 30, 2000, the Partnership expended
approximately $25,000 on capital improvements at the property, consisting
primarily of carpet and vinyl replacement and other building improvements. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $61,000 for 2000 at
this property which consist primarily of carpet and vinyl replacement.
Arbours of Hermitage Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $167,000 on capital improvements at the property, consisting
primarily of appliance and carpet replacement, as well as structural
improvements, lighting upgrades, air conditioning upgrades, and fencing
upgrades. These improvements were funded from operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $1,525,000 for 2000 at this property which consist primarily of
structural improvements, floor covering replacement, countertop replacements,
appliance replacement, air conditioning upgrades, equipment and fencing
upgrades.
Briar Bay Racquet Club Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $80,000 on budgeted and non-budgeted capital improvements at the
property, consisting primarily of electrical upgrades, elevator upgrades, other
building improvements, carpet and vinyl replacement, and plumbing upgrades.
These improvements were funded from operating cash flow and Partnership
reserves. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $81,000 for 2000 at this property which consist
primarily of appliance replacements, carpet replacements, structural
improvements, elevator upgrades, cabinet replacements, major landscaping, and
air conditioning upgrades.
Chimney Hill Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $208,000 on capital improvements at the property, consisting
primarily of roof replacements, carpet and vinyl replacements, cabinet and
countertop replacements, other building improvements, plumbing upgrades, and
appliance replacements. These improvements were funded from operating cash flow.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $216,000 for 2000 at this property which consist primarily of
appliance replacements, plumbing upgrades, carpet and vinyl replacement, major
landscaping, and air conditioning upgrades.
Citadel Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $47,000 for capital improvements at the property, consisting
primarily of roof replacements, carpet and vinyl replacements, other building
improvements, and water heater upgrades. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has budgeted, but
is not limited to, capital improvements of approximately $78,000 for 2000 at
this property which consist primarily of carpet and vinyl replacements, air
conditioning upgrades, structural improvements, appliance replacements, window
covering replacements, and roof replacements.
Citadel Village Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $37,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacements. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has budgeted, but
is not limited to, capital improvements of approximately $87,000 for 2000 at
this property which consist primarily of carpet and vinyl replacement, appliance
replacements, plumbing upgrades, and other building improvements.
Foothill Place Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $198,000 on capital improvements at the property, consisting
primarily of carpet and vinyl replacements, appliance replacements, lighting
upgrades, and water heater upgrades. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has budgeted, but
is not limited to, capital improvements of approximately $261,000 for 2000 at
this property which consist primarily of carpet and vinyl replacement, light
fixture enhancements, appliance replacements, and structural improvements.
Knollwood Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $120,000 for capital improvements at the property, consisting
primarily of carpet replacement and appliance replacements. These improvements
were funded from operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $499,000 for 2000 at this
property which consist primarily of carpet and vinyl replacement, air
conditioning upgrades, plumbing enhancements, and appliance replacements.
Lake Forest Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $102,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of electrical upgrades, appliance replacements,
equipment replacements, carpet and vinyl replacements, and water heater
upgrades. These improvements were primarily funded from operating cash flow and
Partnership reserves. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $94,000 for 2000 at this property which
consist primarily of carpet and vinyl replacement, and appliance replacements.
Nob Hill Villa Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $62,000 for capital improvements at the property, consisting
primarily of carpet replacement, appliance replacements, and water heater
upgrades. These improvements were funded from operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $234,000 for 2000 at this property which consist primarily of
floor covering replacement, appliance replacements, structural improvements,
cabinet replacements, water heater upgrades, and parking lot improvements.
Point West Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $19,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement and appliance replacements. These
improvements were funded from the Partnership's operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $100,000 for 2000 at this property which consist primarily of
carpet and vinyl replacement, interior decoration, appliance replacements,
fencing upgrades, and other building improvements.
Post Ridge Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $57,000 for capital improvements at the property, consisting
primarily of appliance replacements, carpet replacements, plumbing upgrades,
interior decorations, and structural improvements. These improvements were
primarily funded from operating cash flow. The Partnership has budgeted, but is
not limited to, capital improvements of approximately $219,000 for 2000 at this
property which consist primarily of carpet replacements, plumbing enhancements,
appliance replacements, air conditioning upgrades, and interior decoration.
Rivers Edge Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $24,000 for capital improvements at the property, consisting
primarily of carpet replacements, and appliance replacements. These improvements
were funded from Partnership's reserves and operating cash flow. The Partnership
has budgeted, but is not limited to, capital improvements of approximately
$94,000 for 2000 at this property which consist primarily of carpet and vinyl
replacement, appliance replacements, and landscaping and plumbing enhancements.
South Port Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $70,000 for capital improvements at the property, consisting
primarily of floor covering replacement, appliance replacements, and plumbing
upgrades. These improvements were funded from operating cash flow and
Partnership reserves. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $221,000 for 2000 at this property which
consist primarily of floor covering replacements, roof replacements, plumbing
enhancements, and appliance replacements
Stratford Place Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $120,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of floor covering replacement, appliance
replacements, fencing upgrades, interior decoration, and maintenance equipment
replacement. These improvements were funded from Partnership reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $69,000 for 2000 at this property which consists primarily of
floor covering replacements, roof replacements, air conditioning upgrades,
maintenance equipment replacements, and other building improvements.
Village East Apartments
During the six months ended June 30, 2000, the Partnership expended
approximately $42,000 for capital improvements at the property, consisting
primarily of plumbing upgrades, electrical upgrades, and carpet replacements.
These improvements were funded from operating cash flow. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $68,000
for 2000 at this property which consists of carpet and vinyl replacement and
electrical and plumbing enhancements.
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 $74,476,000 matures at various dates
between 2000 and 2020. The General Partner will attempt to refinance such
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.
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place. The refinancing replaced mortgage indebtedness of approximately
$2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a
rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $124,000.
The Partnership wrote off approximately $4,000 in unamortized loan costs and
paid prepayment penalties of approximately $1,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $5,000.
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $153,000.
The Partnership wrote off approximately $11,000 in unamortized loan costs and
paid prepayment penalties of approximately $22,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $33,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $141,000. The Partnership wrote off approximately $19,000 in
unamortized loan costs and paid prepayment penalties of approximately $7,000
resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the six months ended June
30, 2000.
During the six months ended June 30, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared and paid distributions of approximately
$5,951,000 (approximately $5,713,000 to the limited partners or $16.67 per
limited partnership unit) during the six months ended June 30, 2000 consisting
of approximately $2,724,000 (approximately $2,615,000 to the limited partners or
$7.63 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, and Stratford Place Apartments and sale proceeds from
Overlook Apartments which sold in December of 1999, and approximately $3,227,000
(approximately $3,098,000 to the limited partners or $9.04 per limited
partnership unit) from operations. Approximately $343,000 of the distribution
from operations was payable at June 30, 2000 to the General Partner and special
limited partners. Approximately $31,000 of this balance was paid subsequent to
June 30, 2000. The remaining balance is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus funds. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $15,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
In January 1999, the General Partner declared and paid a distribution
attributable to cash flow from operations of approximately $6,422,000
(approximately $6,165,000 to the limited partners or $17.99 per limited
partnership unit) and approximately $2,722,000 (approximately $2,613,000 to the
limited partners or $7.62 per limited partnership unit) representing a return of
capital.
The Partnership's distribution policy is 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 planned capital improvement expenditures, to permit further distributions
to its partners in 2000 or subsequent periods.
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 $2,004,000. 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 $4,793,000 at June 30, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
<PAGE>
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 June 30, 2000, a 1%
increase or decrease in market interest rates would not have a material impact
on the Partnership.
The following table summarizes the Partnership's debt obligations at June 30,
2000. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of June 30, 2000.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2000 $ 2,158 7.57%
2001 548 7.51%
2002 596 7.53%
2003 9,398 7.53%
2004 4,819 7.57%
Thereafter 56,957 7.57%
Total $74,476
<PAGE>
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, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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 10.80, Multifamily Note dated May 31, 2000 between Concap
Stratford Associates, Ltd., a Texas limited partnership and ARCS
Commercial Mortgage Co., L.P., a California limited partnership.
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 June 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED CAPITAL 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:
<PAGE>
Exhibit 10.80
MULTIFAMILY NOTE
(TEXAS)
US $4,550,000.00 As of May 25, 2000
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of ARCS Commercial Mortgage Co.,
L.P., a California limited partnership, the principal sum of Four Million Five
Hundred Fifty Thousand Dollars and no/100's (US $4,550,000.00), with interest on
the unpaid principal balance at the annual rate of Eight and 480/1000's percent
(8.480%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of this Note, and (ii) the term "Indebtedness" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable
at 26901 Agoura Road, Suite 200, Calabasas Hills, CA 91301, or such other place
as may be designated by written notice to Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be
paid as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of Thirty Nine Thousand Four Hundred Twenty Eight Dollars and
38/100's (US $39,428.38), shall be payable on the first day of each month
beginning on July 1, 2000, until the entire unpaid principal balance evidenced
by this Note is fully paid. Any accrued interest remaining past due for 30 days
or more shall be added to and become part of the unpaid principal balance and
shall bear interest at the rate or rates specified in this Note, and any
reference below to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on June 1, 2020 or on any earlier date on
which the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "Maturity Date"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest
that is received by Lender before the date it is due shall be deemed to have
been received on the due date solely for the purpose of calculating interest
due.
4. Application of Payments. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. Default Rate. So long as (a) any monthly installment under this Note
remains past due for 30 days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of 4 percentage points above the
rate stated in the first paragraph of this Note or the maximum interest rate
which may be collected from Borrower under applicable law. If the unpaid
principal balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate. Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the loan evidenced by this Note (the "Loan"), that,
during the time that any monthly installment under this Note is delinquent for
more than 30 days, Lender will incur additional costs and expenses arising from
its loss of the use of the money due and from the adverse impact on Lender's
ability to meet its other obligations and to take advantage of other investment
opportunities, and that it is extremely difficult and impractical to determine
those additional costs and expenses. Borrower also acknowledges that, during the
time that any monthly installment under this Note is delinquent for more than 30
days or any other Event of Default has occurred and is continuing, Lender's risk
of nonpayment of this Note will be materially increased and Lender is entitled
to be compensated for such increased risk. Borrower agrees that the increase in
the rate of interest payable under this Note to the Default Rate represents a
fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
8. Loan Charges. Borrower and Lender intend at all times to comply with
the law of the State of Texas governing the maximum rate or amount of interest
payable on or in connection with this Note and the Indebtedness (or applicable
United States federal law to the extent that it permits Lender to contract for,
charge, take, reserve or receive a greater amount of interest than under Texas
law). If the applicable law is ever judicially interpreted so as to render
usurious any amount payable under this Note or under any other Loan Document, or
contracted for, charged, taken, reserved or received with respect to the
Indebtedness, or of acceleration of the maturity of this Note, or if any
prepayment by Borrower results in Borrower having paid any interest in excess of
that permitted by any applicable law, then Borrower and Lender expressly intend
that all excess amounts collected by Lender shall be applied to reduce the
unpaid principal balance of this Note (or, if this Note has been or would
thereby be paid in full, shall be refunded to Borrower), and the provisions of
this Note, the Security Instrument and any other Loan Documents immediately
shall be deemed reformed and the amounts thereafter collectible under this Note
or any other Loan Document reduced, without the necessity of the execution of
any new documents, so as to comply with any applicable law, but so as to permit
the recovery of the fullest amount otherwise payable under this Note or any
other Loan Document. The right to accelerate the maturity of this Note does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and Lender does not intend to collect any
unearned interest in the event of acceleration. All sums paid or agreed to be
paid to Lender for the use, forbearance or detention of the Indebtedness shall,
to the extent permitted by any applicable law, be amortized, prorated, allocated
and spread throughout the full term of the Indebtedness until payment in full so
that the rate or amount of interest on account of the Indebtedness does not
exceed the applicable usury ceiling. Notwithstanding any provision contained in
this Note, the Security Instrument or any other Loan Document that permits the
compounding of interest, including any provision by which any accrued interest
is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to
the Indebtedness shall not exceed the amount calculated on a simple (i.e.,
noncompounded) interest basis at the maximum rate on principal amounts actually
advanced to or for the account of Borrower, including all current and prior
advances and any advances made pursuant to the Security Instrument or other Loan
Documents (such as for the payment of taxes, insurance premiums and similar
expenses or costs).
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the original principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment of
all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on the last Business Day of a calendar month if Borrower
has given Lender at least 30 days prior notice of its intention to make such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Schedule A. For all purposes including the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the month
shall be deemed to have been received on the last calendar day of such month.
For purposes of this Note, a "Business Day" means any day other than a Saturday,
Sunday or any other day on which Lender is not open for business. Borrower shall
not have the option to voluntarily prepay less than all of the unpaid principal
balance.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid principal
balance of this Note outstanding at the time of the acceleration, (A) all
accrued interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note prior
to the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
180 days before the Maturity Date, or (B) any prepayment occurring as a result
of the application of any insurance proceeds or condemnation award under the
Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Commercial Purpose. Borrower represents that the Indebtedness is
being incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
15. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
16. Governing Law. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
17. Captions. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
18. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
19. Consent to Jurisdiction and Venue. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "Property
Jurisdiction"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
20. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
|X | Schedule A Prepayment Premium (required)
|X | Schedule B Modifications to Multifamily Note
<PAGE>
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or
has caused this Instrument to be signed and delivered by its duly authorized
representative.
BORROWER:
ConCap Stratford Associates, Ltd.
a Texas limited partnership
By: ConCap CCP/IV Stratford Place Properties, Inc.
Its: General Partner
By: ________________________
Patti K. Fielding
Its: Vice President
--------------------------------------
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF
WITHOUT RECOURSE
ARCS Commercial Mortgage Co., L. P.,
a California limited partnership
By: ACMC Realty, Inc.,
a California corporation
Its: General Partner
By: _________________________
Kathy Millhouse
Its: Senior Vice President
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date
that is 180 months after the first day of the first calendar month following the
date of this Note (the "Yield Maintenance Period"), the prepayment premium shall
be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in any other case, the date on which
Lender accelerates the unpaid principal balance of the Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
9.250% U.S. Treasury Security due February 1, 2016, as reported in
The Wall Street Journal, expressed as a decimal calculated to five
digits. In the event that no yield is published on the applicable
date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the
publication of such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine
the Assumed Reinvestment Rate. The selection of an alternate
security pursuant to this Paragraph shall be made in Lender's
discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than 180 days before the Maturity Date, the
prepayment premium shall be 1.0% of the unpaid principal balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 7 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents in accordance with the terms of the Security Instrument.
