FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 04/26/93.)
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, 1995
or
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period.........to.........
Commission file number 0-11723
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
(Exact name of small business issuer as specified in its charter)
California 94-2883067
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (803) 239-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports ), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
----- ------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, December 31,
1995 1994
---------- ------------
Assets
Cash and cash equivalents
$ 1,753 $ 1,351
Securities available for sale 9,250 9,769
Prepaid expenses and other assets 668 575
Due from affiliates 1,347 1,347
Net investment in master loan 43,230 42,531
Investment properties:
Land 1,247 1,247
Building and related personal property 7,698 7,578
------- -------
8,945 8,825
Less accumulated depreciation (3,531) (3,325)
------- -------
5,414 5,500
------- -------
$ 61,662 $ 61,073
======= =======
Liabilities and Partners' Capital (Deficit)
Accounts payable and accrued expenses $ 197 $ 89
Tenant security deposits 97 106
Distributions payable 141 141
Accrued property taxes -- 73
------- -------
435 409
------- -------
Partners' Capital (Deficit)
General partner (492) (498)
Limited partners (909,145 units outstanding) 61,719 61,162
------- -------
61,227 60,664
------- -------
$ 61,662 $ 61,073
======= =======
See Accompanying Notes to the Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1995 1994
------- -------
Revenues:
Rental income $ 489 $ 422
Interest on investment in master loan
to affiliate 699 85
Interest income 159 148
----- -----
Total revenues 1,347 655
----- -----
Expenses:
Property operations 254 413
Depreciation and amortization 219 232
Administrative 311 176
----- -----
Total expenses 784 821
----- -----
Other income (Note D) -- 80
----- -----
Net income (loss) $ 563 $ (86)
===== =====
Net income (loss) allocated to
general partners (1%) $ 6 $ (1)
Net income (loss) allocated to
limited partners (99%) 557 (85)
----- -----
$ 563 $ (86)
===== =====
Net income (loss) per limited
partnership unit $ .61 $ (.09)
===== =====
See Accompanying Notes to the Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1995 and 1994
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
----------- ---------- ---------- ---------
Original capital
contributions 912,182 $ 1 $228,046 $228,047
======= ====== ======= =======
Partners' capital (deficit)
at December 31, 1993 909,154 $ (391) $ 71,791 $ 71,400
Net loss for the three months
ended March 31, 1994 -- (1) (85) (86)
------- ------ ------- -------
Partners' capital (deficit)
at March 31, 1994 909,154 $ (392) $ 71,706 $ 71,314
======= ====== ======= =======
Partners' capital (deficit)
at December 31, 1994 909,145 $ (498) $ 61,162 $ 60,664
Net income for the three months
ended March 31, 1995 -- 6 557 563
------- ------ ------- -------
Partners' capital (deficit)
at March 31, 1995 909,145 $ (492) $ 61,719 $ 61,227
======= ====== ======= =======
See Accompanying Notes to the Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1995 1994
-------- --------
Cash flows from operating activities:
Net income (loss) $ 563 $ (86)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 219 232
Change in accounts:
Prepaid expenses and other assets (105) (15)
Interest receivable master loan (699) (85)
Accounts payable and accrued expenses 108 (36)
Distributions payable -- (2)
Due from affiliates -- (8)
Tenant security deposits (9) (29)
Accrued taxes (73) 24
------ ------
Net cash provided by (used in)
operating activities 4 (5)
------ ------
Cash flows from investing activities:
Property improvements and replacements (121) (106)
Purchase of securities available for sale (7,447) (1,472)
Proceeds from sale of securities
available for sale 7,966 3,817
------ ------
Net cash provided by investing activities 398 2,239
------ ------
Cash flow from financing activities: -- --
------ ------
Net increase in cash and cash equivalents 402 2,234
Cash and cash equivalents at beginning of period 1,351 1,912
------ ------
Cash and cash equivalents at end of period $ 1,753 $ 4,146
====== ======
See Accompanying Notes to the Financial Statements
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements 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 the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1995 are
not necessarily indicative of the results that may be expected for the fiscal
year ended December 31, 1995. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-K for the fiscal year ended December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform to
the 1995 presentation.
Investment in Master Loan
- -------------------------
The Master Loan and the New Master Loan agreements are considered investments in
acquisition, development, and construction ("ADC") loans, primarily because the
Partnership is entitled to receive, according to the provisions of the Master
Loan and New Master Loan agreements, in excess of 50% of the residual profits
from the sale or refinancing of the properties securing the agreements. The
investment in Master Loan is accounted for by the cost method, whereby income
from the investment is recognized as interest income to the extent of payments
received and losses in the estimated net realizable value of the investment are
recognized in the period they are identified. Interest income contractually due
according to the terms of the Master Loan and New Master Loan agreements in
excess of payments received is deferred. As of March 31, 1995, and December 31,
1994, such cumulative deferred interest, which is not included in the balance of
the net investment in Master Loan, totaled $97.9 million and $93.9 million,
respectively.
NOTE B - RELATED PARTY TRANSACTIONS
- -----------------------------------
Consolidated Capital Institutional Properties/2 ("Partnership") paid property
management fees equal to 5% of collected gross rental revenues ("Rental
Revenues") for property management services in each of the three months ended
March 31, 1995 and 1994. For the three months ended March 31, 1994, a portion of
such property management fees equal to 4% of Rental Revenues were paid to an
unaffiliated property management company for day-to-day property management
services and the portion equal to 1% of Rental Revenues were paid to Partnership
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE B - RELATED PARTY TRANSACTIONS (CONTINUED)
- -----------------------------------
Services, Inc. ("PSI") for advisory services related to day-to-day property
operations. In late December 1994, an affiliate of Insignia assumed day-to-day
property management responsibilities for all of the Partnerships' properties.
Fees paid to affiliates of Insignia during the three months ended March 31,
1995, and fees paid to PSI for the three months ended March 31, 1994, are
reflected in the following table:
For the Three Months Ended
March 31,
1995 1994
-------- -------
(in thousands)
Property management fees $21 $ 4
The Partnership Agreement ("Agreement") also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The General Partner and its current
and former affiliates which includes Coventry for the three months ended March
31, 1994, received reimbursements as reflected in the following table:
For the Three Months Ended
March 31,
--------------------------
1995 1994
-------- --------
(in thousands)
Reimbursement for services of affiliates $149 $ 76
NOTE C - NET INVESTMENT IN MASTER LOAN
Interest due to the Partnership according to the terms of the New Master Loan
Agreement but not recognized in the income statements totaled approximately $4.0
and $4.2 million for the three months ended March 31, 1995, and 1994,
respectively. At March 31, 1995, and December 31, 1994, such cumulative
unrecognized interest totalling approximately $97.9 million and $93.9 million
was not included in the balance of the investment in Master Loan.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE D - OTHER INCOME
In 1991, the Partnership (and simultaneously other affiliated partnerships)
entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding.
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 the aggregate. In March 1994, the Partnership
received 1,468 shares of Southmark Corporation Redeemable Series A Preferred
stock and 10,738 shares of Southmark Corporation New Common Stock, with an
aggregate market value on the date of receipt of $11,000, and $80,472 in cash
representing the Partnership's share of the recovery, based on its pro rata
share of the claims filed.
NOTE E - 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. In the event expenditures are made from
this reserve, operating revenue shall be allocated to such reserves to the
extent necessary to maintain the foregoing level. Reserves, including cash and
cash equivalents and securities available for sale (at market), totalling
approximately $11 million, were greater than the reserve requirement of $7.6
million at March 31, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
----------------------------------------------------------
The Partnership's investment properties consist of one apartment complex.
The following table sets forth the average occupancy of this property for the
three months ended March 31, 1995, and 1994:
Average
Occupancy
1995 1994
------------
North Park Plaza
Southfield, Michigan 59% 54%
The General Partner attributes the increase in occupancy to its efforts to
attract new tenants. Subsequent to March 31, 1995, the General Partner has
obtained a commitment to lease approximately 18,000 square feet of space.
The Partnership realized net income of approximately $563,000 for the three
months ended March 31, 1995, as compared to a net loss of $86,000 for the three
months ended March 31, 1994. The increase in net income is due primarily to an
increase in interest income on the Master Loan due to increased cash flows at
the affiliated investment properties (income is recorded based on the cash flow
of the properties collateralized by the Master Loan). The increase in rental
income is attributable to increased rental rates and higher occupancy rates at
North Park Plaza. In addition, property operations expense decreased due to
decreased taxes and a decrease in personnel and service costs. Offsetting these
decreases was an increase in insurance expense resulting from higher premiums.
Offsetting these increases to net income was an increase in administrative
expenses for the three months ended March 31, 1995, as compared to the three
months ended March 31, 1994. The increase in administrative expenses was due to
the $107,000 increase in expense related to the combined efforts of the Dallas
and Greenville offices during the transition period for the three months ended
March 31, 1995. The increased costs related to the transition efforts were
incurred to minimize any disruption in the year-end reporting function including
the financial reporting and K-1 preparation and distribution. The General
Partner expects administrative expenses to be reduced after the second quarter
of 1995 once the transition efforts are complete.
Other income realized in the three months ended March 31, 1994, is due to the
receipt of its pro rata share of the claims filed in Southmark's Chapter 11
bankruptcy proceedings. (See Note D).
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At March 31, 1995, the Partnership had cash and cash equivalents of
approximately $1,753,000 as compared to $4,146,000 at March 31, 1994. Net cash
provided by operations increased slightly due to an increase in net income
offset by a increase in interest receivable on the Master Loan. Net cash
provided by investing activities decreased due to an increase in the purchase of
securities available for sale offset partially by an increase in proceeds from
sale of securities available for sale. There were no financing activities for
the three months ended March 31, 1995, or 1994.
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 property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. No distributions
were made in the three months ended March 31, 1995, or in 1994. Future cash
distributions will depend on the levels of net cash generated from operations,
master loan interest income, property sales, and the availability of cash
reserves.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Partnership is not a party to, nor are any of the Partnership's
properties the subject of, any material pending legal proceedings, other than
ordinary litigation routine to the Partnership's business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
S-K Reference Sequential
Number Description Page Number
------------- ----------- -----------
28.1 Consolidated Capital Equity
Partners/Two, L.P., unaudited
financial statements for the
three months ended March 31,
1995 and 1994.
(b) Reports on Form 8-K:
None filed during the three months ended March 31, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES/2
By: CONCAP EQUITIES, INC.
General Partner
By: Carroll D. Vinson
-----------------------------------
Carroll D. Vinson
President
By: Robert D. Long, Jr.
------------------------------------
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: June 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Consolidated Capital Institutional Properties/2 10-Q for
the three months ended March 31, 1995 and is qualified in its entirety by
reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,753
<SECURITIES> 9,250
<RECEIVABLES> 43,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,015
<PP&E> 8,945
<DEPRECIATION> (3,531)
<TOTAL-ASSETS> 61,662
<CURRENT-LIABILITIES> 435
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 61,227
<TOTAL-LIABILITY-AND-EQUITY> 61,662
<SALES> 1,347
<TOTAL-REVENUES> 1,347
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 784
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 563
<INCOME-TAX> 563
<INCOME-CONTINUING> 563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 563
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<FN>
</FN>
</TABLE>
EXHIBIT 28.1
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND 1994
EXHIBIT 28.1 (Continued)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
a) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
March 31, December 31,
1995 1994
---------- ------------
Assets
Cash and cash equivalents $ 2,431 $ 1,936
Securities available for sale 398 390
Prepaid expenses and other assets 3,378 3,121
Investments in limited partners 2,508 2,508
Due from affiliates 10 10
Land 13,337 13,418
Buildings and related personal equipment
95,443 95,171
-------- --------
108,780 108,589
Less accumulated depreciation
(49,701) (48,364)
-------- --------
59,079 60,225
-------- --------
$ 67,804 $ 68,190
======== ========
Liabilities and Partners' Deficit
Accounts payable and accrued expenses $ 2,001 $ 1,781
Notes and interest payable 24,358 24,441
Master loan and interest payable 190,142 185,442
Due to affiliates 1,318 1,318
-------- --------
217,819 212,982
Partners' Deficit
General partner (1,486) (1,434)
Limited partners (148,529) (143,358)
-------- --------
(150,015) (144,792)
-------- --------
$ 67,804 $ 68,190
======== ========
See Accompanying Notes to the Financial Statements
EXHIBIT 28.1 (Continued)
b) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1995 1994
-------- --------
Revenues:
Rental income $ 4,158 $ 4,475
Interest income 24 6
------ ------
Total revenues 4,182 4,481
------ ------
Expenses:
Property operations 2,491 2,634
Depreciation and amortization 1,462 1,453
Interest 5,294 4,936
Administrative 158 138
------ ------
Total expenses 9,405 9,161
------ ------
Net loss $(5,223) $(4,680)
====== ======
Net loss allocated to general
partners (1%) $ (52) $ (47)
Net loss allocated to limited
partners (99%) (5,171) (4,633)
------ ------
$(5,223) $(4,680)
====== ======
See Accompanying Notes to the Financial Statements
EXHIBIT 28.1 (Continued)
c) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Three Months Ended March 31, 1995 and 1994
(in thousands)
General Limited
Partners Partners Total
---------- ---------- ---------
Partners' deficit at December 31, 1993 $(1,235) $(123,635) $(124,870)
Net loss for the three months
ended March 31, 1994 (47) (4,633) (4,680)
------ -------- --------
Partners' deficit at March 31, 1994 $(1,282) $(128,268) $(129,550)
====== ======== ========
Partners' deficit at December 31, 1994 $(1,434) $(143,358) $(144,792)
Net loss for the three months
ended March 31, 1995 (52) (5,171) (5,223)
------ -------- --------
Partners' deficit at March 31, 1995 $(1,486) $(148,529) $(150,015)
====== ======== ========
See Accompanying Notes to the Financial Statements
EXHIBIT 28.1 (Continued)
d) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1995 1994
-------- --------
Cash flows from operating activities:
Net loss $(5,223) $(4,680)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,480 1,453
Change in accounts:
Prepaid expenses and other assets (400) (560)
Accounts payable and accrued expenses 221 (82)
Interest on master loan 4,700 4,227
Due to affiliates -- 546
Note interest payable 20 --
------ ------
Net cash provided by
operating activities 798 904
------ ------
Cash flows from investing activities:
Property improvements and replacements (191) (320)
Proceeds from sale of securities
available for sale 389 --
Purchase of securities available for sale (398) --
------ ------
Net cash used in investing activities (200) (320)
------ ------
Cash flows used in financing activities:
Payments on notes payable (103) (137)
Advances on master loan -- --
------ ------
Net cash used in financing activities (103) (137)
------ ------
Net increase in cash and cash equivalents 495 447
Cash and cash equivalents at beginning of period 1,936 1,506
------ ------
Cash and cash equivalents at end of period $ 2,431 $ 1,953
====== ======
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 556 $ 624
====== ======
See Accompanying Notes to the Financial Statements
EXHIBIT 28.1 (Continued)
e) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
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 the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1995,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1995.
Certain reclassifications have been made to the 1994 information to conform to
the 1995 presentation.
Consolidation
- -------------
In 1985, Equity Partners/Two ("EP/2"), a California general partnership,
together with Anderson CC 2, a Georgia limited partnership, entered into a
general partnership agreement ("CC Office Associates") to acquire Cosmopolitan
Center, an office building located in Atlanta, Georgia. Pursuant to such
general partnership agreement, the property ownership is split 90%/10% between
Consolidated Capital Equity Partners/Two, L.P. ("Partnership"), as successor to
EP/2, and Anderson CC 2, respectively. The Partnership's investment in CC
Office Associates is consolidated in the Partnership's financial statements. No
minority interest liability has been reflected for Anderson CC 2's minority 10%
interest because the Master Loan balance, which is secured by a deed of trust
held by Consolidated Capital Institutional Properties/2 ("CCIP/2") on
Cosmopolitan Center, exceeds the value of the property. As a result, CC Office
Associates has a net capital deficit and no minority liability exists with
respect to the Partnership.
Investments in Limited Partnerships
The investments in limited partnerships represent certain general partner
interest in seven affiliated limited partnerships that were contributed by
EP/2's general partners to the Partnership. These investments are stated at the
lower of estimated fair value of the interests at the time of contribution to
the Partnership or the current estimated fair value of the interests.
EXHIBIT 28.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE B - RELATED PARTY TRANSACTIONS
The Partnership paid property management fees equal to 5% of collected gross
rental revenues ("Rental Revenues") for property management services in each of
the three months ended March 31, 1995 and 1994. For the three months ended March
31, 1994 a portion of such property management fees equal to 4% of Rental
Revenues were paid to the property management companies performing day-to-day
property management services and the portion equal to 1% of Rental Revenues were
paid to Partnership Services, Inc. ("PSI") for advisory services related to day-
to-day property operations. Coventry Properties, Inc. ("Coventry"), an
affiliate of the General Partner, provided day-to-day property management
responsibilities for four of the Partnership's properties under the same
management fee arrangement as the unaffiliated management companies. In late
December 1994, an affiliate of Insignia assumed day-to-day property management
responsibilities for all of the Partnerships' properties. Fees paid to
affiliates of Insignia during the three months ended March 31, 1995, and fees
paid to Coventry and PSI for the three months ended March 31, 1994, are
reflected in the following table.
Also, the Partnership is subject to an Investment Advisory Agreement between the
Partnership and an affiliate of ConCap Holdings, Inc. ("CHI"). This agreement
provides for an annual fee, payable in monthly installments, to an affiliate of
CHI for advising and consulting services for the Partnership's properties.
Advisory fees paid pursuant to this agreement are reflected in the following
table:
For the Three Months Ended
March 31,
--------------------------
1995 1994
-------- --------
(in thousands)
Property management fees $185 $127
Investment advisory fees 46 48
Property management fees increased for the three months ended March 31, 1995
compared to the three months ended March 31, 1994, due to the fact that only
four of the Partnership's investment properties were managed by Coventry during
the three months ended March 31, 1994. All of the Partnership's investment
properties were managed by an affiliate of Insignia during the three months
ended March 31, 1995.
The Partnership Agreement ("Agreement") also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The General Partner and its current
and former affiliates which includes Coventry for the three months ended March
31, 1994, received reimbursements as reflected in the following table:
EXHIBIT 28.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE B - RELATED PARTY TRANSACTIONS (CONTINUED)
For the Three Months Ended
March 31,
--------------------------
1995 1994
-------- --------
(in thousands)
Reimbursement for services of affiliates $ 98 $ 54
Reimbursements for services of affiliates increased during the three months
ended March 31, 1995 compared to the three months ended March 31, 1994 due to
increased expense reimbursements related to the combined efforts of the Dallas
and Greenville offices during the transition period for the three months ended
March 31, 1995. These increased costs related to the transition efforts were
incurred to minimize any disruption in the year-end reporting function including
the financial reporting and K-1 preparation and distribution. The General
Partner expects overall administrative expenses to be reduced after the second
quarter of 1995 once the transition efforts are complete.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from CCIP/2 pursuant to the
New Master Loan Agreement, which is described more fully in the 1994 Annual
Report. No such interest payments were paid during the three months ended March
31, 1995 and 1994, respectively. No advances under the new Master Loan
Agreement were made during the three months ended March 31, 1995 and March 31,
1994.
NOTE C - MASTER LOAN AND ACCRUED INTEREST PAYABLE
The Master Loan and accrued interest payable balances at March 31, 1995 and
December 31, 1994 are $190.1 million and $185.4 million, respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan Agreement, interest accrues at 10% per annum.
The interest rates for each of the three month periods ended March 31, 1995 and
1994 was 10%. Interest payments are currently payable quarterly in an amount
equal to "Excess Cash Flow", generally defined in the Master Loan Agreement as
net cash flow from operations after third-party debt service. If such Excess
Cash Flow payments are less than the current accrued interest during the
quarterly period, the unpaid interest is added to principal, compounded
annually, and is payable at the loan's maturity. If such Excess Cash Flow
payments are greater than the currently payable interest, the excess amount is
applied to the principal balance of the loan. Any net proceeds from sale or
refinancing of any of the Partnership's properties are paid to CCIP/2 under the
terms of the Master Loan Agreement. The Master Loan Agreement matures in
November 2000.
EXHIBIT 28.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE C - MASTER LOAN AND ACCRUED INTEREST PAYABLE (CONTINUED)
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Effective January 1, 1993, the Partnership 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 from CCIP/2 to the Partnership. This amendment and change in the
definition of Excess Cash Flow will have the effect of reducing Master Loan
payments to CCIP/2 by the amount of the Partnership's capital expenditures since
such amounts were previously excluded from Excess Cash Flow. The amendment will
have no effect on the computation of interest expense on the Master Loan for the
Partnership.
NOTE D - NOTES PAYABLE
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The Village Brooke Apartments, located in Cincinnati, Ohio, secures
approximately $6.8 million of first mortgage debt that matures in June 1995 and
is superior to the Partnership's related obligation under the Master Loan of
approximately $3.5 million. The General Partner is negotiating with the lender
to extend the maturity of the mortgage debt. No assurance can be given that the
General Partner will be successful in negotiations with the lender.
The Richmond Plaza Office Building, located in Richmond, Virginia, secures
approximately $14.5 million in mortgage debt which is superior to the
Partnership's related obligation under the Master Loan of approximately $5.3
million. In March 1995, the General Partner negotiated a three month extension
with the lender which extends the maturity of the mortgage debt to June 1995.
The General Partner is negotiating with the lender to extend maturity of the
mortgage debt. No assurance can be given that the General Partner will be
successful in negotiations with the lender.
