<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
...............................................
OR
[ ] 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 0-11723
.......................................................
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
................................................................................
(Exact name of registrant as specified in its charter)
California 94-2883067
................................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5520 LBJ Freeway, Suite 430, Dallas, Texas 75240
................................................................................
(Address of principal executive offices) (Zip code)
(214) 702-0027
................................................................................
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Index to Exhibits: 11
Total Pages: 19
-1-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
------ --------------------
BALANCE SHEETS
(unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1994 1993
- - ------ --------- -----------
<S> <C> <C>
Real estate, net of accumulated depreciation
and allowance for possible losses................ $ 8,221 $ 8,347
--------- -----------
Net Investment in Master Loan (net of allowance
for possible losses of $39,730).................. 52,108 52,108
--------- -----------
Cash and cash equivalents.......................... 4,146 1,912
United States Treasury Notes, at cost (market -
$6,313 in 1994 and $8,751 in 1993)............... 6,227 8,572
Due from affiliates................................ 376 284
Other assets....................................... 568 552
--------- -----------
$ 71,646 $ 71,775
========= ===========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- - ------------------------------------------
<S>................................................ <C> <C>
Accounts payable and accrued expenses.............. $ 191 $ 232
Distributions payable.............................. 141 143
--------- -----------
332 375
--------- -----------
Commitment (Note 4)............................
Partners' equity (deficit):
Limited Partners - 909,154 units outstanding..... 71,706 71,791
General Partner.................................. (392) (391)
--------- -----------
71,314 71,400
--------- -----------
$ 71,646 $ 71,775
========= ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------------
1994 1993
---------- ----------
<S> <C> <C>
Revenues:
Rental..................................... $ 422 $ 393
Income on investment in Master Loan to
affiliate................................. 85 469
Interest on investments.................... 148 162
---------- ----------
Total revenues............................ 655 1,024
---------- ----------
Costs and expenses:
Property operations........................ 413 420
Depreciation............................... 232 202
Administrative............................. 176 273
---------- ----------
Total costs and expenses (a).............. 821 895
---------- ----------
Income (loss) from operations............... (166) 129
Other income (Note 5)....................... 80 -
---------- ----------
Net income (loss)........................... $ (86) $ 129
========== ==========
Net income (loss) per Limited Partnership
Unit:
Income (loss) from operations.............. $(.18) $ .14
Other income............................... .09 -
---------- ----------
Net income (loss).......................... $(.09) $ .14
========== ==========
</TABLE>
(a) Costs and expenses include $80,000 and $127,000 to related parties for the
three months ended March 31, 1994 and 1993, respectively. See supplemental
information with respect to related party transactions in Notes 2 and 3 of
the financial statements.
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(unaudited)
For the Three Months Ended March 31, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS EQUITY (DEFICIT)
--------- ---------- ------------------
<S> <C> <C> <C>
Balance at December 31, 1992........... $ (360) $ 74,906 $ 74,546
Net income............................. 1 128 129
--------- --------- ----------
Balance at March 31, 1993.............. $ (359) $ 75,034 $ 74,675
========= ========= ==========
Balance at December 31, 1993........... $ (391) $ 71,791 $ 71,400
Net loss............................... (1) (85) (86)
--------- --------- ----------
Balance at March 31, 1994.............. $ (392) $ 71,706 $ 71,314
========= ========= ==========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(unaudited)
Increase in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants............. $ 389 $ 333
Cash paid to suppliers (a)............. (599) (610)
Interest received (b).................. 198 1,146
Property taxes paid.................... (73) (16)
Other income received.................. 80 -
------------ ------------
Net cash provided by (used in)
operating activities................... (5) 853
------------ ------------
Cash flows from investing activities:
Additions to real estate............... (106) (73)
Advances on Master Loan................ - (662)
Principal receipts on Master Loan...... - 13
Proceeds from sale of United States
Treasury Notes........................ 3,817 -
Purchase of a United States Treasury
Note.................................. (1,472) -
------------ ------------
Net cash provided by (used in)
investing activities................... 2,239 (722)
------------ -------------
Net increase in cash and cash
equivalents............................ 2,234 131
Cash and cash equivalents, at beginning
of period.............................. 1,912 1,595
------------ -------------
Cash and cash equivalents, at end of
period................................. $ 4,146 $ 1,726
============ =============
</TABLE>
(a) Payments to related parties totaling $80,000 and $127,000 for the three
months ended March 31, 1994 and 1993, respectively, are included in cash
paid to suppliers.
(b) Payments from related parties totaling $947,000 for the three months
ended March 31, 1993 are included in interest received.
See supplemental information with respect to related party
transactions in Notes 2 and 3 of the financial statements.
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
Notes to Financial Statements
March 31, 1994
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- - ------------------------------
The financial statements reflect all adjustments necessary for a fair
presentation of the financial position of Consolidated Capital Institutional
Properties/2 (the "Partnership") and the results of its operations. All
adjustments were of a normal recurring nature. However, the results of
operations for the three months ended March 31, 1994, are not necessarily
indicative of the results to be expected for the year ending December 31, 1994.
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1993 (the "1993 Annual Report"), and the notes thereto,
as filed with the Securities and Exchange Commission, which is available upon
request by writing to the General Partner, ConCap Equities, Inc. ("CEI"),
Investor Relations, 5520 LBJ Freeway, Suite 430, Dallas, Texas 75240.
Net Income (Loss) Per Limited Partnership Unit
- - ----------------------------------------------
Net income (loss) per Limited Partnership Unit is computed by dividing net
income (loss) allocated to the Limited Partners by the number of Units
outstanding. Per Unit information has been computed based on the number of
Units outstanding of 909,154 and 909,174 for the three months ended March 31,
1994 and 1993, respectively.
NOTE 2 - RELATED PARTY TRANSACTIONS
- - -----------------------------------
The Partnership has paid property management fees equal to 5% of collected gross
rental revenues ("Rental Revenues") for property management services in each of
the three month periods ended March 31, 1994 and 1993. A portion of such
property management fees equal to 4% of Rental Revenues has been paid to an
unaffiliated property management company performing day-to-day property
management services and the portion equal to 1% of Rental Revenues has been paid
to Partnership Services, Inc. ("PSI"), an affiliate of the General Partner, for
advisory services related to day-to-day property operations. Fees paid to PSI
have been reflected in the following table as compensation to related parties:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------
COMPENSATION 1994 1993
- - ------------ ------------ ------------
(in thousands)
<S> <C> <C>
Charged to property operations expense:
Property management fee................ $ 4 $ 4
============ ============
</TABLE>
The Partnership Agreement provides for reimbursement to the general partner and
its affiliates for costs incurred in connection with administration of
Partnership activities. The General Partner and its affiliates received
reimbursements as reflected in the following table:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------
REIMBURSEMENTS 1994 1993
- - -------------- ------------ ------------
(in thousands)
<S> <C> <C>
Charged to administrative expenses:
Reimbursement of administrative expenses
(including payroll reimbursements)........ $ 76 $ 123
=========== ============
</TABLE>
In addition to the compensation and reimbursement described above, interest
payments are received from and loan advances are made to Consolidated Capital
Equity Partners/Two, Ltd. ("CCEP/2") pursuant to the Master Loan Agreement,
which is described more fully in the 1993 Annual Report. See Note 3.
-6-
<PAGE>
NOTE 3 - INVESTMENT IN MASTER LOAN
- - ----------------------------------
Interest due to the Partnership according to the terms of the Master Loan
Agreement but not recognized in the income statements totaled approximately $4.2
million and $3.4 million for the three months ended March 31, 1994 and 1993,
respectively. At March 31, 1994, such cumulative unrecognized interest totaling
approximately $82.8 million was not included in the balance of the investment in
Master Loan.
Effective January 1, 1993, the Partnership and CCEP/2 amended the Master Loan
Agreement to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the
Master Loan from the Partnership to CCEP/2. During the three months ended March
31, 1993, the Partnership paid $662,000 of capital improvement advances accrued
at December 31, 1992.
NOTE 4 - COMMITMENT
- - -------------------
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital
as defined in the Partnership Agreement. Reserves, including cash and cash
equivalents and Treasury Notes, at market, totaling approximately $10.5 million
at March 31, 1994, exceeded the reserve requirement of approximately $7.6
million.
NOTE 5 - OTHER INCOME
- - ---------------------
As described in the 1993 Annual Report, the Partnership (and simultaneously 15
affiliated partnerships) entered claims in Southmark Corporation's Chapter 11
bankruptcy proceeding in 1991. These claims related to Southmark Corporation's
activities while it exercised control (directly, or indirectly through its
affiliates) over the Partnership. The Bankruptcy Court set the Partnership's
and the affiliated partnerships' allowed claim at $11 million, in aggregate. In
March 1994, the Partnership received $80,472 in cash, 1,468 shares of Southmark
Corporation Redeemable Series A Preferred Stock and 10,738 shares of Southmark
Corporation New Common Stock representing the Partnership's share of the
recovery, based on its pro rata share of the claims filed.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- - ---------------------
Property Operations:
Rental revenues for the three months ended March 31, 1994 increased $29,000 or
7% over 1993, primarily as a result of higher average occupancy at the
Partnership's sole property, the North Park Plaza Office Complex. Depreciation
expense for the three months of 1994 increased $30,000 or 15% over 1993 due to
capital improvements at the property.
Administrative Expenses:
Administrative expenses for the three months ended March 31, 1994, decreased
$97,000 or 36% from 1993 primarily due to decreased administrative overhead
costs and other professional fees.
Interest on Investments:
Interest income on investments for the three months ended March 31, 1994,
decreased $14,000 or 9% from 1993 primarily because of lower interest rates
earned on the Partnership's Treasury Notes.
Income on Investment in Master Loan:
As described below under "Status of the Master Loan," income on the Investment
in Master Loan is based on operations of Consolidated Capital Equity
Partners/2's ("CCEP/2") properties which secure the Master Loan. The following
table summarizes the sources of income and payments on the Investment in Master
Loan with respect to CCEP/2's operations during the three months ended March 31,
1994 and 1993, respectively:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------
1994 1993
----------- ---------
(in thousands)
<S> <C> <C>
Funds provided by property operations.............. $ 4,531 $ 4,327
Funds used for property operations (includes
administrative expenses).......................... (3,691) (3,087)
Debt service payments on underlying notes payable.. (761) (761)
----------- ---------
Net funds provided by property operations.......... 79 479
Net investing activity............................. 6 3
----------- ---------
Net funds provided................................. $ 85 $ 482
=========== =========
Master Loan activity:
Principal receipts on Master Loan.................. $ - $ 13
Interest income.................................... 85 469
----------- ---------
$ 85 $ 482
=========== =========
</TABLE>
During the three months ended March 31, 1994, income on the Investment in Master
Loan decreased $397,000 or 82% from 1993, primarily as a result of a $400,000
decrease in net funds provided by property operations resulting from increased
leasing expenses at Richmond Plaza, one of the CCEP/2 office buildings. During
the first quarter of 1994, Richmond Plaza was successful in obtaining the
renewal of a lease with the tenant who occupies 48% of the building. At March
31, 1994, CCEP/2 accrued lease commissions totaling $455,000, related to the
lease renewal, which are due to the building's management company as provided
for in the management agreement.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Three Months Ended March 31, 1994
- - ---------------------------------
The Partnership's sole cash inflow for the three months ended March 31, 1994,
was approximately $3.8 million of proceeds from the sale of United States
Treasury Notes. The primary uses of cash, which totaled approximately $1.6
million during the same period, consisted of the purchase of a United States
Treasury Notes of approximately $1.5 million and additions to real estate of
$106,000.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital
as defined in the Partnership Agreement. Reserves, including cash and cash
equivalents and Treasury Notes, at market, totaling approximately $10.5 million
at March 31, 1994, exceeded the reserve requirement of approximately $7.6
million.
As described in the 1993 Annual Report, the Partnership (and simultaneously 15
affiliated partnerships) entered claims in Southmark Corporation's Chapter 11
bankruptcy proceeding in 1991. These claims related to Southmark Corporation's
activities while it exercised control (directly, or indirectly through its
affiliates) over the Partnership. The Bankruptcy Court set the Partnership's
and the affiliated partnerships' allowed claim at $11 million, in aggregate. In
March 1994, the Partnership received $80,472 in cash, 1,468 shares of Southmark
Corporation Redeemable Series A Preferred Stock and 10,738 shares of Southmark
Corporation New Common Stock representing the Partnership's share of the
recovery, based on its pro rata share of the claims filed.
Status of the Master Loan
- - -------------------------
Effective January 1, 1993, the Partnership and CCEP/2 amended the Master Loan
Agreement to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the
Master Loan from the Partnership to CCEP/2. During the three months ended March
31, 1994, the Partnership made no advances on the Master Loan. However, during
the first three months of 1993, the Partnership paid $662,000 of Master Loan
advances accrued at December 31, 1992.
CCEP/2 Property Operations
- - --------------------------
For the three months ended March 31, 1994, CCEP/2's net loss totaled
approximately $4.7 million on total revenues of approximately $4.5 million
primarily because of the recognition of approximately $4.3 million in interest
expense attributable to the Master Loan, of which approximately $4.2 million
represents interest accrued in excess of required Excess Cash Flow payments.
CCEP/2 recognizes interest expense on the Master Loan obligation according to
the note terms, although payments to the Partnership are required only to the
extent of Excess Cash Flow, as defined in the Master Loan Agreement. CCEP/2
will continue to generate operating losses as a result of such interest accruals
and noncash charges for depreciation.
Richmond Plaza Office Building
- - ------------------------------
The Richmond Plaza Office Building ("Richmond Plaza") leases 48% of its leasable
square feet to a single tenant under a lease which was scheduled to expire in
July 1994. The tenant had previously expressed its desire to relocate its
offices. As a result of the general partner's and the building management
company's extensive renewal efforts, CCEP/2 was successful in obtaining the
renewal of the tenant's lease during the first quarter of 1994. Since the
former lease was based on rental rates that were higher than current market
rates, future rental revenue from this tenant will not be consistent with prior
years. At March 31, 1994, CCEP/2 accrued lease commissions totaling $455,000,
related to the lease renewal, which are due to the building's management company
as provided for in the management agreement. CCEP/2 expects to pay this accrued
lease commission in the second quarter of 1994. Richmond Plaza secures
approximately $14.7 million in mortgage debt (the "first lien note") which is
superior to CCEP/2's related obligation under the Master Loan of approximately
$2.4 million. The first lien note matured in March 1994. During the second
quarter of 1994, management negotiated a one-year extension with the lender
which extends the maturity of the first lien note to March 1995.
-9-
<PAGE>
Village Brooke Apartments
- - -------------------------
The Village Brooke Apartments, located in Cincinnati, Ohio, secures
approximately $6.9 million of first lien mortgage debt (the "first lien note")
which is superior to CCEP/2's related obligation under the Master Loan of
approximately $2 million. The first lien note matures in June 1994. Management
expects to extend the maturity of the first lien note to June 1995, however, no
assurance can be given that the extension will be completed.
-10-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - ------ -----------------
The Partnership is not a party to, nor is any of the Partnership's property the
subject of, any material pending legal proceedings as of March 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------ --------------------------------
(a) Exhibits:
<TABLE>
<CAPTION>
S-K REFERENCE SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
--------------- ----------- -----------
<S> <C> <C>
28.1 Consolidated Capital Equity Partners/Two, 13-19
L.P., unaudited Financial Statements for
the three months ended March 31, 1994,
and 1993.
</TABLE>
(b) Reports on Form 8-K:
None.
-11-
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
By: CONCAP EQUITIES, INC.
Its General Partner,
May 19, 1994 By: /s/ David C. Meek
- - ------------------------------ --------------------------------
Date David C. Meek
President
May 19, 1994 By: /s/ David K. Ronck
- - ------------------------------ --------------------------------
Date David K. Ronck
Vice President and Secretary
May 19, 1994 By: /s/ Patricia L. Campbell
- - ------------------------------ --------------------------------
Date Patricia L. Campbell
Vice President and Treasurer
(chief accounting officer)
-12-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1994 AND 1993
-13-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1994 1993
- - ------ ------------ ------------
<S> <C> <C>
Real estate, net of accumulated depreciation..... $ 66,501 $ 67,634
------------ ------------
Cash and cash equivalents........................ 1,953 1,506
Investments in limited partnerships.............. 2,508 2,508
Other assets..................................... 2,943 2,383
------------ ------------
$ 73,905 $ 74,031
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- - ---------------------------------
Master Loan and interest payable................. $ 174,590 $ 170,364
Notes and interest payable....................... 26,217 26,354
Other liabilities................................ 1,800 1,881
Due to affiliates................................ 848 302
------------ ------------
203,455 198,901
------------ ------------
Partners' deficit:
Limited Partners................................ (128,268) (123,635)
General Partner................................. (1,282) (1,235)
------------ ------------
(129,550) (124,870)
------------ ------------
$ 73,905 $ 74,031
============ ============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-14-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------
1994 1993
------- -------
<S> <C> <C>
Revenues:
Rental....................................... $ 4,475 $ 4,234
Interest..................................... 6 3
------- -------
Total revenues............................. 4,481 4,237
------- -------
Costs and expenses:
Interest (a)................................. 4,936 4,592
Property operations.......................... 2,634 2,547
Depreciation................................. 1,453 1,492
Administrative............................... 138 135
------- -------
Total costs and expenses (b)............... 9,161 8,766
------- -------
Net loss....................................... $ (4,680) $ (4,529)
======= =======
</TABLE>
(a) Interest expense includes approximately $4.3 million and $3.9 million to
related parties for the three months ended March 31, 1994 and 1993,
respectively.
(b) Costs and expenses include $354,000 and $252,000 to related parties for the
three months ended March 31, 1994 and 1993, respectively. See supplemental
information with respect to related party transactions in Note 2 of the
financial statements.
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-15-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF PARTNERS' DEFICIT
(unaudited)
For the Three Months Ended March 31, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS (DEFICIT)
-------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1992.. $ (1,064) $(106,657) $(107,721)
Net loss (45) (4,484) (4,529)
------- -------- --------
Balance at March 31, 1993..... $ (1,109) $(111,141) $(112,250)
======= ======== ========
Balance at December 31, 1993.. $ (1,235) $(123,635) $(124,870)
Net loss (47) (4,633) (4,680)
------- -------- --------
Balance at March 31, 1994 $ (1,282) $(128,268) $(129,550)
======= ======== ========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-16-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF CASH FLOWS
(unaudited)
Increase in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------------
1994 1993
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants............. $ 4,531 $ 4,327
Cash paid to suppliers (a)............. (2,675) (2,455)
Interest received...................... 6 3
Interest paid (b)...................... (624) (1,583)
Property taxes paid.................... (334) (428)
--------------- --------------
Net cash provided by (used in)
operating activities................... 904 (136)
--------------- --------------
Cash flows from investing activities:
Additions to real estate............... (320) (275)
--------------- --------------
Cash flows from financing activities:
Advances on Master Loan................ - 662
Principal payments on Master Loan...... - (13)
Principal payments on notes payable.... (137) (125)
--------------- --------------
Net cash provided by (used in)
financing activities................... (137) 524
--------------- --------------
Net increase in cash and cash
equivalents............................ 447 113
Cash and cash equivalents, at beginning
of period.............................. 1,506 1,149
--------------- --------------
Cash and cash equivalents, at end of
period................................. $ 1,953 $ 1,262
=============== ==============
</TABLE>
(a) Payments to related parties totaling $354,000 and $252,000 for the three
months ended March 31, 1994 and 1993, respectively, are included in cash
paid to suppliers. See supplemental information with respect to related
party transactions in Note 2 of the financial statements.
(b) Payments to related parties totaling $947,000 for the three months ended
March 31, 1993 are included in interest paid.
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of the financial statements.
-17-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
Notes to Financial Statements
March 31, 1994
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
- - ------------------------------
The financial statements reflect all adjustments necessary for a fair
presentation of the financial position of Consolidated Capital Equity
Partners/Two, L.P. ("CCEP/2") and the results of its operations. CCEP/2's
general partner, ConCap Holdings, Inc. ("CHI") is a wholly-owned subsidiary of
ConCap Equities, Inc. ("CEI"). All adjustments were of a normal recurring
nature. However, the results of operations for the three months ended March 31,
1994, are not necessarily indicative of the results to be expected for the year
ending December 31, 1994.
The financial statements and notes included herein omit certain disclosures
required by generally accepted accounting principles, and should be read in
conjunction with CCEP/2's financial statements contained in Consolidated Capital
Institutional Properties/2's ("CCIP/2") Annual Report on Form 10-K for the year
ended December 31, 1993 (the "1993 Annual Report"), and the notes thereto, as
filed with the Securities and Exchange Commission, which is available upon
request by writing to ConCap Equities, Inc., Investor Relations, 5520 LBJ
Freeway, Suite 430, Dallas, Texas 75240.
Presentation of Accounts
- - ------------------------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current presentation.
NOTE 2 - RELATED PARTY TRANSACTIONS
- - -----------------------------------
CCEP/2 has paid property management fees equal to 5% of collected gross rental
revenues ("Rental Revenues") for property management services in each of the
three month periods ended March 31, 1994 and 1993. A portion of such property
management fees equal to 4% of Rental Revenues has been paid to the property
management companies performing day-to-day property management services and the
portion equal to 1% of Rental Revenues has been paid to Partnership Services,
Inc. ("PSI"), an affiliate of the General Partner, for advisory services related
to day-to-day property operations. During the three months ended March 31,
1993, day-to-day property management services were provided to 11 of CCEP/2's
properties by unaffiliated management companies. Also, during 1993, Coventry
Properties, Inc. ("Coventry"), an affiliate of CHI, performed day-to-day
property management responsibilities for one of CCEP/2's properties under the
same management fee arrangement as the unaffiliated management companies.
Coventry assumed day-to-day property management responsibilities for three
additional CCEP/2 properties in January 1994. Fees paid to PSI and Coventry
have been reflected in the table below as compensation to related parties.
Also, CCEP/2 is subject to an Investment Advisory Agreement between CCEP/2 and
an affiliate of CHI. This agreement provides for an annual fee, payable in
monthly installments, to an affiliate of CHI for advising and consulting
services for CCEP/2's properties. Advisory fees paid pursuant to this agreement
are reflected in the following table:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
COMPENSATION 1994 1993
- - ------------ --------- --------
(in thousands)
<S> <C> <C>
Charged to property operations expense:
Property management fee................. $ 127 $ 85
Charged to administrative expense:
Investment advisory fees................ 48 55
--------- --------
$ 175 $ 140
========= ========
</TABLE>
-18-
<PAGE>
The Partnership Agreement provides for reimbursement to the general partner and
its affiliates for costs incurred in connection with administration of CCEP/2's
activities and for reimbursement to Coventry for expenses related to property
operations (primarily salaries and related costs for on-site property
personnel). CHI and its affiliates, including Coventry, received reimbursements
included in the following table:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
REIMBURSEMENTS 1994 1993
- - -------------- --------- ---------
(in thousands)
<S> <C> <C>
Charged to property operations expenses:
Reimbursement of direct property expense............. $ 125 $ 55
Charged to administrative expenses:
Reimbursement of administrative expenses (including
payroll reimbursements)............................. 54 57
-------- --------
$ 179 $ 112
======== ========
</TABLE>
In addition to the compensation and reimbursements described above, interest
payments are paid to and loan advances are received from CCIP/2 pursuant to the
Master Loan Agreement, which is described more fully in the 1993 Annual Report.
See Note 3.
During the first quarter of 1994, CCEP/2 was successful in obtaining the renewal
of a lease with the tenant who occupies 48% of the Richmond Plaza Office
Building. At March 31, 1994, CCEP/2 accrued lease commissions totaling
$455,000, related to the lease renewal, which are due to Coventry as provided
for in the management agreement. CCEP/2 expects to pay this accrued lease
commission in the second quarter of 1994.
NOTE 3 - MASTER LOAN AND ACCRUED INTEREST PAYABLE
- - -------------------------------------------------
Effective January 1, 1993, CCEP/2 and CCIP/2 amended the Master Loan Agreement
to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the
Master Loan to CCEP/2. During the three months ended March 31, 1993, CCEP/2
received $662,000 of capital improvement advances accrued at December 31, 1992.
No such loan advances from CCIP/2 occurred during the three months ended March
31, 1994.
-19-
