<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 September 30, 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>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1994 1993
- - ------ ------------- ------------
<S> <C> <C>
Real estate, net of accumulated
depreciation and
allowance for possible losses..... $ 8,164 $ 8,347
----------- ----------
Net Investment in Master Loan to
affiliate......................... 52,053 52,108
----------- ----------
Cash and cash equivalents.......... 1,314 1,912
United States Treasury Notes and
other investments,
at cost (market - $9,812 in 1994
and $8,751 in 1993)............... 9,769 8,572
Due from affiliates................ 148 284
Other assets....................... 537 552
----------- ----------
$ 71,985 $ 71,775
=========== ==========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
------------------------------------------
<S> <C> <C>
Accounts payable and
accrued expenses.................. $ 169 $ 232
Distributions payable.............. 141 143
----------- ----------
310 375
----------- ----------
Commitment (Note 5)................
Partners' equity (deficit):
Limited Partners - 909,154 units
outstanding...................... 72,063 71,791
General Partner................... (388) (391)
----------- ----------
71,675 71,400
----------- ----------
$ 71,985 $ 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 FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- --------------------
1994 1993 1994 1993
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental............................ $ 478 $ 385 $1,308 $1,125
Income on investment in Master
Loan to affiliate................ 91 347 915 1,626
Investment income................. 155 167 463 486
----- ----- ------ ------
Total revenues.................. 724 899 2,686 3,237
----- ----- ------ ------
Costs and expenses:
Property operations............... 456 398 1,267 1,208
Depreciation...................... 255 240 726 644
Administrative.................... 128 180 454 644
----- ----- ------ ------
Total costs and expenses (a).... 839 818 2,447 2,496
----- ----- ------ ------
Income (loss) from operations...... (115) 81 239 741
Loss on sales of United States
Treasury Notes.................... (55) - (55) -
Other income (Note 4).............. - - 91 -
----- ----- ------ ------
Net income (loss).................. $(170) $ 81 $ 275 $ 741
===== ===== ====== ======
Net income (loss) per Limited
Partnership Unit:
Income (loss) from operations..... $(.12) $ .09 $ .26 $ .81
Loss on sales of United States
Treasury Notes................... (.06) - (.06) -
Other income...................... - - .10 -
----- ----- ------ ------
Net income (loss).................. $(.18) $ .09 $ .30 $ .81
===== ===== ====== ======
</TABLE>
(a) Costs and expenses include $62,000 and $118,000 to related parties for the
three months ended September 30, 1994 and 1993, respectively, and $238,000
and $356,000 for the nine months ended September 30, 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 Nine Months Ended September 30, 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........................ 7 734 741
------ ------- -------
Balance at September 30, 1993..... $ (353) $ 75,640 $ 75,287
====== ======= =======
Balance at December 31, 1993...... $ (391) $ 71,791 $ 71,400
Net income........................ 3 272 275
------ ------- -------
Balance at September 30, 1994 $ (388) $ 72,063 $ 71,675
====== ======= =======
</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 (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1994 1993
------ ------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants................. $ 1,307 $ 1,093
Cash paid to suppliers (a)................. (1,697) (1,657)
Interest received (b)...................... 1,623 2,642
Property taxes paid........................ (182) (133)
Other income received...................... 80 -
------- ------
Net cash provided by operating activities.... 1,131 1,945
------- ------
Cash flows from investing activities:
Additions to real estate................... (543) (474)
Advances on Master Loan.................... - (662)
Principal receipts on Master Loan.......... 55 1,074
Proceeds from sale of United States
Treasury Notes............................ 7,488 2,350
Purchase of a United States Treasury Notes. (8,729) -
------- ------
Net cash provided by (used in) investing
activities.................................. (1,729) 2,288
------- ------
Net increase (decrease) in cash and cash
equivalents................................. (598) 4,233
Cash and cash equivalents, at beginning of
period...................................... 1,912 1,595
------- ------
Cash and cash equivalents, at end of period.. $ 1,314 $ 5,828
======= ======
</TABLE>
(a) Payments to related parties totaling $238,000 and $356,000 for the nine
months ended September 30, 1994 and 1993, respectively, are included in
cash paid to suppliers.
(b) Payments from related parties totaling approximately $1.1 million and
$1.6 million for the nine months ended September 30, 1994 and 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
September 30, 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 nine months ended September 30, 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 Per Limited Partnership Unit
- - ---------------------------------------
Net income per Limited Partnership Unit is computed by dividing net income
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 nine months ended September 30, 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 nine month periods ended September 30, 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 NINE MONTHS
ENDED SEPTEMBER 30,
---------------------
COMPENSATION 1994 1993
- - ------------ ------ ------
(in thousands)
<S> <C> <C>
Charged to property operations expense:
Property management fee............ $ 14 $ 11
===== =====
</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 NINE MONTHS
ENDED SEPTEMBER 30,
---------------------
REIMBURSEMENTS 1994 1993
- - -------------- ------ ------
(in thousands)
<S> <C> <C>
Charged to administrative expenses:
Reimbursement of administrative expenses
(including payroll reimbursements)...... $ 224 $ 345
===== =====
</TABLE>
-6-
<PAGE>
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.
NOTE 3 - INVESTMENT IN MASTER LOAN
- - ----------------------------------
General
- - -------
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 $12 million for the three and nine months ended September 30, 1994,
and approximately $3.6 million and $10.2 million for the three and nine months
ended September 30, 1993. At September 30, 1994, such cumulative unrecognized
interest totaling approximately $90.5 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 previously funded from advances on the
Master Loan from the Partnership to CCEP/2. During the nine months ended
September 30, 1993, the Partnership paid $662,000 of capital improvement
advances accrued at December 31, 1992.
NOTE 4 - 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 cash, 1,468 shares of Southmark Corporation
Redeemable Series A Preferred Stock and 10,738 shares of Southmark Corporation
New Common Stock, with a total market value on the date of receipt of $91,000,
representing the Partnership's share of the recovery, based on its pro rata
share of the claims filed.
NOTE 5 - 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 United States Treasury Notes and other investments, at market,
totaling approximately $11.1 million at September 30, 1994, exceeded the reserve
requirement of approximately $7.6 million.
-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 and nine months ended September 30, 1994,
increased $93,000 or 24% and $183,000 or 16%, respectively, over 1993 primarily
as a result of higher average occupancy at the Partnership's sole property, the
North Park Plaza Office Complex. Property operations expense increased $58,000
or 15% and $59,000 or 5%, respectively, over 1993, primarily due to a refund of
1990 property taxes received in 1993. Depreciation expense for the three and
nine months ended September 30, 1994, increased $15,000 or 6% and $82,000 or
13%, respectively, over 1993 due to capital improvements at the property.
Administrative Expenses:
Administrative expenses for the three and nine months ended September 30, 1994,
decreased $52,000 or 29% and $190,000 or 30%, respectively, from 1993 primarily
due to decreased administrative overhead costs and other professional fees.
Investment Income:
Investment income for the three and nine months ended September 30, 1994,
decreased $12,000 or 7% and $23,000 or 5%, respectively, from 1993 because of
lower interest rates earned on the Partnership's investments.
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 CCEP/2's 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
nine months ended September 30, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1994 1993
-------- --------
<S> <C> <C>
Funds provided by property operations.......... $ 13,709 $ 13,891
Funds used for property operations (includes
administrative expenses)...................... (10,569) (8,909)
Debt service payments on underlying notes
payable....................................... (2,210) (2,304)
-------- --------
Net funds provided by property operations...... 930 2,678
Net investing activity......................... 40 22
-------- --------
Net funds provided............................. $ 970 $ 2,700
======== ========
Master Loan activity:
Principal receipts on Master Loan.............. $ 55 $ 1,074
Interest income................................ 915 1,626
-------- --------
$ 970 $ 2,700
======== ========
</TABLE>
During the nine months ended September 30, 1994, net funds provided for payments
on the Master Loan decreased approximately $1.7 million or 64% from 1993
primarily as a result of a $1.7 million increase in funds used for property
operations resulting from higher capital expenditures at CCEP/2's properties and
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. In May 1994, CCEP/2 paid lease commissions totaling $455,000, related
to the lease renewal, which were due to the building's management company as
provided for in the management agreement.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Nine Months Ended September 30, 1994
- - ------------------------------------
The Partnership's cash inflows, which totaled approximately $8.7 million during
the nine months ended September 30, 1994, consisted of proceeds from the sale of
United States Treasury Notes of approximately $7.5 million, net cash provided by
operations of approximately $1.1 million and principal receipts on the Master
Loan of $55,000. The primary uses of cash, which totaled approximately $9.3
million during the same period, consisted of the purchase of a United States
Treasury Notes of approximately $8.7 million and additions to real estate of
$543,000.
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 and other investments, at market, totaling
approximately $11.1 million at September 30, 1994, exceeded the reserve
requirement of approximately $7.6 million.
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 previously funded from advances on the
Master Loan from the Partnership to CCEP/2. During the nine months ended
September 30, 1994, the Partnership made no advances on the Master Loan.
However, during the first nine months of 1993, the Partnership paid $662,000 of
Master Loan advances accrued at December 31, 1992.
CCEP/2 Property Operations
- - --------------------------
For the three and nine months ended September 30, 1994, CCEP/2's net losses
totaled approximately $4.8 million and $13.9 million, respectively, on total
revenues of approximately $4.5 million and $13.6 million, respectively,
primarily due to the recognition of approximately $4.3 million and $12.9
million, respectively, in interest expense attributable to the Master Loan, of
which approximately $4.2 million and $12 million, respectively, 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. In May 1994, CCEP/2 paid lease commissions totaling $455,000, related to
the lease renewal, which were due to the building's management company as
provided for in the management agreement. Richmond Plaza secures approximately
$14.6 million in mortgage debt (the "first lien note") which is superior to
CCEP/2's related obligation under the Master Loan of approximately $2.3 million.
In May 1994, management negotiated a one-year extension with the lender which
extends the maturity of the first lien note, which matured in March 1994, to
March 1995.
Village Brooke Apartments
- - -------------------------
The Village Brooke Apartments, located in Cincinnati, Ohio, secures
approximately $6.8 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. In May 1994, management negotiated a one-year
extension with the lender which extends the maturity of the first lien note,
which matured in June 1994, to June 1995.
-9-
<PAGE>
Town Center Office Complex
- - --------------------------
The Town Center Office Complex located in Santa Ana, California, secures
approximately $3.1 million of third party mortgage debt in three notes payable
superior to approximately $16.6 million of the investment in Master Loan. The
Town Center Office Complex consists of four buildings ("Phases I, II, III and
IV"). The note payable of approximately $897,000, secured by Phase III matured
in October 1992. The note payable of approximately $1.1 million secured by
Phase IV matured in July 1993. In April 1994, management negotiated an
extension and modification of these notes which provide for a reduced interest
rate, and extension of the maturities to October 2000.
Other
- - -----
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 cash, 1,468 shares of Southmark Corporation
Redeemable Series A Preferred Stock and 10,738 shares of Southmark Corporation
New Common Stock, with a total market value on the date of receipt of $91,000,
representing the Partnership's share of the recovery, based on its pro rata
share of the claims filed.
-10-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - ------ -----------------
The Partnership is not a party to, nor is the Partnership's property the subject
of, any material pending legal proceedings as of September 30, 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
nine months ended September 30, 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,
November 21, 1994 By: /s/ David C. Meek
- - ---------------------- -----------------------------------
Date David C. Meek
President
November 21, 1994 By: /s/ David K. Ronck
- - ---------------------- -----------------------------------
Date David K. Ronck
Vice President and Secretary
Nobember 21, 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 NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993
-13-
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1994 1993
- - ------ ------------- ------------
<S> <C> <C>
Real estate, net of accumulated
depreciation....................... $ 64,856 $ 67,634
------------ ------------
Cash and cash equivalents........... 594 1,506
United States Treasury Notes, at
cost (market - $390
in 1994)........................... 390 -
Investments in limited partnerships. 2,508 2,508
Other assets........................ 2,841 2,383
------------ ------------
$ 71,189 $ 74,031
============ ============
<CAPTION>
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
<S> <C> <C>
Master Loan and interest payable.... $ 182,313 $ 170,364
Notes payable....................... 25,994 26,354
Other liabilities................... 1,519 1,881
Due to affiliates................... 153 302
------------ ------------
209,979 198,901
------------ ------------
Contingency (Note 4)................
Partners' deficit:
Limited Partners................... (137,416) (123,635)
General Partner.................... (1,374) (1,235)
------------ ------------
(138,790) (124,870)
------------ ------------
$ 71,189 $ 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 FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental......................... $ 4,498 $ 4,429 $ 13,575 $ 13,138
Interest....................... 25 14 40 22
Miscellaneous revenue.......... - 650 - 650
------- ------- -------- --------
Total revenues............... 4,523 5,093 13,615 13,810
------- ------- -------- --------
Costs and expenses:
Interest (a)................... 4,872 4,607 14,800 13,787
Property operations............ 2,759 2,751 7,905 7,905
Depreciation................... 1,449 1,447 4,346 4,441
Loss on limited partnership
investment.................... - 224 - 224
Administrative................. 201 142 484 409
------- ------- -------- --------
Total costs and expenses (b). 9,281 9,171 27,535 26,766
------- ------- -------- --------
Net loss........................ $(4,758) $(4,078) $(13,920) $(12,956)
======= ======= ======== ========
</TABLE>
(a) Interest expense includes approximately $4.3 and $3.9 million to related
parties for the three months ended September 30, 1994 and 1993,
respectively, and approximately $12.9 and $11.8 million for the nine months
ended September 30, 1994 and 1993, respectively.
(b) Costs and expenses include $392,000 and $255,000 to related parties for the
three months ended September 30, 1994 and 1993, respectively, and
approximately $1.1 million and $754,000 for the nine months ended September
30, 1994 and 1993, respectively. See supplemental information with respect
to related parties 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 Nine Months Ended September 30, 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.......................... (130) (12,826) (12,956)
------- -------- ---------
Balance at September 30, 1993..... $ (1,194) $ (119,483) $ (120,677)
======= ======== =========
Balance at December 31, 1993...... $ (1,235) $ (123,635) $ (124,870)
Net loss.......................... (139) (13,781) (13,920)
------- -------- ---------
Balance at September 30, 1994..... $ (1,374) $ (137,416) $ (138,790)
======= ======== =========
</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 NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants..................... $13,709 $13,891
Cash paid to suppliers (a)..................... (8,030) (6,919)
Interest received.............................. 40 22
Interest paid (b).............................. (2,956) (4,036)
Property taxes paid............................ (1,302) (1,457)
------- -------
Net cash provided by operating activities........ 1,461 1,501
------- -------
Cash flows from investing activities:
Additions to real estate....................... (1,568) (828)
Purchase of a United States Treasury Note...... (390) -
------- -------
Net cash used in investing activities............ (1,958) (828)
------- -------
Cash flows from financing activities:
Advances on Master Loan........................ - 662
Principal payments on Master Loan.............. (55) (1,074)
Principal payments on notes payable............ (360) (383)
------- -------
Net cash used in financing activities............ (415) (795)
------- -------
Net decrease in cash and cash equivalents........ (912) (122)
Cash and cash equivalents, at beginning of
period.......................................... 1,506 1,149
------- -------
Cash and cash equivalents, at end of period...... $ 594 $ 1,027
======= =======
</TABLE>
(a) Payments to related parties totaling approximately $1.6 million and
$754,000 for the nine months ended September 30, 1994 and 1993,
respectively, are included in cash paid to suppliers. See supplemental
information with respect to related parties in Note 2 of the financial
statements.
(b) Payments to related parties totaling approximately $1.1 million and $1.6
million for the nine months ended September 30, 1994 and 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
September 30, 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 nine months ended September
30, 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.
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
nine month periods ended September 30, 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. Prior to July 1993, day-to-
day property management services were provided to 11 of CCEP/2's properties by
unaffiliated management companies. After June 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. The management fee arrangement with Coventry and the
unaffiliated management companies also provided for the payment of leasing
commissions to the management companies as compensation for their services in
connection with obtaining new or renewed leases with tenants of the commercial
office buildings. 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:
-18-
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
COMPENSATION 1994 1993
- - ------------ ---------- ---------
(in thousands)
<S> <C> <C>
Charged to other assets:
Lease commissions....................... $ 455 $ -
Charged to property operations expense:
Property management fee................. 388 265
Charged to administrative expense:
Investment advisory fees................ 143 143
----- -----
$ 986 $ 408
===== =====
</TABLE>
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 NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
REIMBURSEMENT 1994 1993
- - ------------- ---------- ---------
(in thousands)
<S> <C> <C>
Charged to property operations expenses:
Reimbursement of direct property expense............. $ 420 $ 174
Charged to administrative expenses:
Reimbursement of administrative expenses (including
payroll reimbursements)............................. 235 172
----- -----
$ 655 $ 346
===== =====
</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.
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 previously funded from advances on the
Master Loan to CCEP/2. During the nine months ended September 30, 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 nine months ended
September 30, 1994.
NOTE 4 - CONTINGENCY
- - --------------------
In 1993, the parking garage adjacent to the Chagrin Richmond Office Building
suffered a structural failure, and since that time, the garage has been
partially closed. The Chagrin Richmond Office Building secures approximately
$1.4 million of third party mortgage debt, which is superior to approximately
$4.4 million of Master Loan debt. CCEP/2 has been involved in evaluating the
damage and in obtaining estimates for repair, and in July 1994, the third party
lender notified CCEP/2 that as a result of the structural failure, it is not in
compliance with certain provisions of the loan document. Additionally, the
lender notified the Partnership that it may be subject to mortgage participation
interest, as defined in the loan agreement. CCEP/2 is involved in discussions
with the lender to resolve the debt compliance issues; however, there is no
assurance that CCEP/2 will be successful in these discussions. Additionally,
CCEP/2 may pursue other options to protect the Partnership's interest.
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Consolidated Capital Institutional Properties as filed
in the Partnership's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 476
<SECURITIES> 8,469
<RECEIVABLES> 127,686
<ALLOWANCES> (35,900)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,255
<DEPRECIATION> (1,400)
<TOTAL-ASSETS> 106,701
<CURRENT-LIABILITIES> 406
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 106,295
<TOTAL-LIABILITY-AND-EQUITY> 106,701
<SALES> 0
<TOTAL-REVENUES> 3,144
<CGS> 0
<TOTAL-COSTS> 1,115
<OTHER-EXPENSES> (56)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,085
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,085
<EPS-PRIMARY> 10.38
<EPS-DILUTED> 0
</TABLE>
