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, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........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.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (864) 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
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, December 31,
1996 1995
Assets
Cash and cash equivalents:
Unrestricted $ 9,477 $ 9,276
Restricted--tenant security deposits 7 5
Prepaid expenses and other assets 560 829
Net investment in master loan to affiliate 43,293 43,366
Investment properties:
Land 716 716
Building and related personal property 5,488 5,440
6,204 6,156
Less accumulated depreciation (4,291) (4,138)
1,913 2,018
$ 55,250 $ 55,494
Liabilities and Partners' Capital (Deficit)
Accounts payable and accrued expenses $ 136 $ 136
Tenant security deposits 114 114
Distributions payable 141 141
Accrued taxes 39 58
430 449
Partners' Capital (Deficit)
General partner (556) (554)
Limited partners (909,138 units
outstanding at March 31, 1996 and
December 31, 1995, respectively) 55,376 55,599
54,820 55,045
$ 55,250 $ 55,494
See Accompanying Notes to Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues:
Rental income $ 411 $ 489
Interest income on net investment in Master
Loan to affiliate -- 699
Other income 114 159
Total revenues 525 1,347
Expenses:
Operating 418 254
Depreciation and amortization 167 219
General and administrative 165 311
Total expenses 750 784
Net (loss) income $ (225) $ 563
Net (loss) income allocated to general partner (1%) $ (2) $ 6
Net (loss) income allocated to limited partners (99%) (223) 557
$ (225) $ 563
Net (loss) income per limited partnership unit $ (.24) $ .61
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 912,182 $ 1 $228,046 $228,047
Partners' capital (deficit) at
December 31, 1994 909,154 $ (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
Partners' capital (deficit) at
December 31, 1995 909,138 $ (554) $ 55,599 $ 55,045
Net loss for the three months
ended March 31, 1996 (2) (223) (225)
Partners' capital (deficit) at
March 31, 1996 909,138 $ (556) $ 55,376 $ 54,820
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net (loss) income $ (225) $ 563
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 167 219
Change in accounts:
Restricted cash (2) --
Prepaid expenses and other assets 254 (105)
Interest receivable on master loan -- (699)
Accounts payable and accrued expenses -- 108
Tenant security deposit liabilities -- (9)
Accrued taxes (19) (73)
Net cash provided by operating activities 175 4
Cash flows from investing activities:
Property improvements and replacements (48) (121)
Principal receipts on Master Loan 74 --
Purchase of investments -- (7,447)
Proceeds from sale of investments -- 7,966
Net cash provided investing activities 26 398
Cash flows from financing activities: -- --
Net increase in cash and cash equivalents 201 402
Cash and cash equivalents at beginning of period 9,276 1,351
Cash and cash equivalents at end of period $ 9,477 $ 1,753
See Accompanying Notes to Financial Statements
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital
Institutional Properties/2 ("Partnership") 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, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
Note B - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and
its affiliates for the management and administration of all partnership
activities. The Partnership paid property management fees based upon collected
gross rental revenues for property management services as noted below for the
three month periods ended March 31, 1996 and 1995. Fees paid to affiliates of
Insignia during the three month periods ended March 31, 1996 and 1995, are
included in operating expenses on the statement of operations and are reflected
in the following table. 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. These
reimbursements are included in general and administrative expense on the
statement of operations. The General Partner, and its current affiliates,
received reimbursements as reflected in the following table:
For the Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $ 20 $ 21
Reimbursement for services of affiliates 67 149
Reimbursements for services of affiliates decreased during the three months
ended March 31, 1996, as compared to the three months ended March 31, 1995. The
three months ended March 31, 1995, included the additional costs associated with
the combined efforts of the Dallas and Greenville offices during the transition
period that ended June 30, 1995. The increased costs related to the transition
efforts were incurred to minimize any disruption in the 1994 year-end reporting
functions including the financial reporting and K-1 preparation and
distribution.
On July 1, 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note C - Net Investment in Master Loan
Interest due to the Partnership pursuant to the terms of the Master Loan
Agreement, but not recognized in the income statements, totaled approximately
$5.2 million and $4.0 million for the three months ended March 31, 1996 and
1995, respectively. At March 31, 1996, and December 31, 1995, such cumulative
unrecognized interest totaling approximately $117.9 million and $112.7 million
was not included in the balance of the investment in Master Loan.
During the first quarter of 1996, no advances were made to Consolidated
Capital Equity Partners/2, L.P. ("CCEP/2") as an advance on the Master Loan.
During the first quarter of 1996, the Partnership received approximately $74,000
as principal payments on the Master Loan which represented cash received by
CCEP/2 on certain investments held by CCEP/2, which are required to be
transferred to the Partnership per the agreement. Subsequent to March 31, 1996,
the Partnership made an advance under the Master Loan to CCEP/2 in the amount of
$1.0 million to fund planned improvements at CCEP/2's investment properties.
Note D - Commitment
The Partnership is required by the Agreement to maintain working capital
reserves for contingencies of not less than 5% of Net Invested Capital, as
defined in the 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
totaling approximately $9.5 million, were greater than the reserve requirement
of approximately $7.6 million at March 31, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership's investment property consists of one office building. The
following table sets forth the average occupancy of this property for the three
months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
North Park Plaza
Southfield, Michigan 63% 59%
The General Partner attributes the increase in occupancy to its efforts to
attract new tenants. The property has reduced the rental rates charged per
square foot and has offered additional amenities as compared with other
buildings in the area.
Results of Operations
The Partnership realized a net loss of approximately $225,000 for the three
months ended March 31, 1996, as compared to net income of approximately $563,000
for the three months ended March 31, 1995. The increase in net loss is
primarily due to the fact that no interest income was recorded on the investment
in Master Loan to affiliate during the three months ended March 31, 1996. This
decrease is the result of a decrease in net income and an increase in capital
expenditures at the affiliated properties. Rental revenues also decreased for
the three months ended March 31, 1996, compared to the corresponding period of
1995, resulting from the property offering lower rates to new tenants in order
to increase occupancy. Other income also decreased for the three months ended
March 31, 1996, compared to the three months ended March 31, 1995, due to
decreased interest income which resulted from a decrease in the amount of cash
invested in interest bearing accounts. Also contributing to the increase in net
loss was an increase in operating expenses, primarily due to an increase in real
estate taxes and maintenance expense. Maintenance expenses increased due to
deferred maintenance being performed on the property to help attract new
tenants. Offsetting the increase in net loss was a decrease in depreciation and
amortization and general and administrative expenses during the three months
ended March 31, 1996, compared to the corresponding period of 1995. The
decrease in depreciation expense is the result of approximately $3.4 million in
writedowns taken on the investment property in 1995. The decrease in general
and administrative expense is the result of additional costs associated with the
combined efforts of the Dallas and Greenville offices during the transition
period that ended June 30, 1995. The increased costs relating to the transition
efforts were incurred to minimize any disruption in the 1994 year-end reporting
function, including K-1 preparation and distribution.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expense. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 1996, the Partnership had unrestricted cash of approximately
$9,477,000 versus approximately $1,753,000 at March 31, 1995. Net cash provided
by operating activities increased primarily due to the decrease in interest
receivable on the Master Loan and a decrease in prepaid expenses and other
assets. The decrease in prepaid and other assets is attributable to the timing
of payments received from tenants. Offsetting this increase was an increase in
net loss as explained above and a decrease in accounts payable which is
attributable to the timing of payments to vendors. Cash provided by investing
activities decreased due to a decrease in proceeds from the sale of investments
which was partially offset by a decrease in the purchase of investments. There
were no financing activities for the three months ended March 31, 1996 or 1995.
The General Partner is currently marketing North Park Plaza for sale.
However, the property is still considered an Asset to be Held and Used in
Operations, as the General Partner will not necessarily sell the property unless
certain terms of the potential sale are satisfied. If the property cannot be
sold at terms deemed acceptable by the General Partner after a period of time,
the property will no longer be marketed for sale. At this time, the General
Partner has been contacted by a potential purchaser and is negotiating a
possible sale. The General Partner has not entered into any agreement to sell
the property to the potential purchaser and the General Partner will continue to
solicit other purchasers until a sales agreement is signed or the property is
removed from the market. Capital improvement projects planned for 1996 include
approximately $3 million in deferred maintenance and general upgrades at several
of the CCEP/2 properties which will be funded by additional borrowings under the
Master Loan. These upgrades and repairs include exterior and interior
improvements, drainage repair, HVAC upgrades, installation of fire and sprinkler
systems and upgrades necessary to comply with ADA requirements.
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. See "CCEP/2
Property Operations" for discussion on CCEP/2's ability to provide future cash
flow as Master Loan debt service. No distributions were made during the three
months ended March 31, 1996 or 1995. 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.
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 by the Partnership Agreement. Reserves, including cash and cash
equivalents, totaling approximately $9.5 million, were greater than the reserve
requirement of $7.6 million as of March 31, 1996.
CCEP/2 Property Operations
For the three months ended March 31, 1996, CCEP/2's net loss totaled
approximately $5,619,000 on total revenues of approximately $4.2 million.
CCEP/2 recognizes interest expense on the New Master Loan Agreement obligation
according to the note terms, although payments to the Partnership are required
only to the extent of Excess Cash Flow, as defined therein. During the three
months ended March 31, 1996, CCEP/2's statement of operations includes total
interest expense attributable to the Master Loan of approximately $5.2 million,
all of which represents interest accrued in excess of required payments. CCEP/2
is expected to continue to generate operating losses as a result of such
interest accruals and noncash charges for depreciation.
During the three months ended March 31, 1996, the Partnership received
approximately $74,000 as principal payments on the Master Loan. This amount
received was due to cash received on certain investments held by CCEP/2, which
are required to be transferred to the Partnership per the agreement. Subsequent
to March 31, 1996, the Partnership made an advance under the Master Loan to
CCEP/2 in the amount of $1.0 million to fund planned improvements at CCEP/2's
investment properties.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
S-K Reference
Number Description
27 Financial Data Schedule is filed as an
exhibit to this report.
99.1 Consolidated Capital Equity Partners/Two,
L.P., unaudited financial statements for the
three months ended March 31, 1996 and 1995.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1996.
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:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties 2 1996 First Quarter 10-Q and is qualified in
its entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000719184
<NAME> CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 2
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,477
<SECURITIES> 0
<RECEIVABLES> 43,293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 6,204
<DEPRECIATION> 4,291
<TOTAL-ASSETS> 55,250
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 54,820
<TOTAL-LIABILITY-AND-EQUITY> 55,250
<SALES> 0
<TOTAL-REVENUES> 525
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
EXHIBIT 99.1 (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,
1996 1995
Assets
Cash and cash equivalents $ 2,099 $ 2,132
Prepaid expenses and other assets 3,359 3,773
Investments in limited partnerships 386 460
Investment properties:
Land 10,977 10,977
Building and related personal equipment 87,060 85,853
98,037 96,830
Less accumulated depreciation (54,632) (53,493)
43,405 43,337
$ 49,249 $ 49,702
Liabilities and Partners' Deficit
Accounts payable and accrued expenses $ 2,844 $ 2,608
Mortgage notes and interest payable 24,188 24,351
Master loan and interest payable 208,898 203,805
235,930 230,764
Partners' Deficit
General partner (1,853) (1,797)
Limited partners (184,828) (179,265)
(186,681) (181,062)
$ 49,249 $ 49,702
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
b) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues:
Rental income $ 4,199 $ 4,158
Other income 20 24
Total revenues 4,219 4,182
Expenses:
Operating 2,730 2,491
General and administrative 125 158
Depreciation and amortization 1,265 1,462
Interest 5,718 5,294
Total expenses 9,838 9,405
Net loss $ (5,619) $ (5,223)
Net loss allocated to general partner (1%) $ (56) $ (52)
Net loss allocated to limited partners (99%) (5,563) (5,171)
$ (5,619) $ (5,223)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
c) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
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)
Partners' deficit at December 31, 1995 $(1,797) $(179,265) $(181,062)
Net loss for the three months ended
March 31, 1996 (56) (5,563) (5,619)
Partners' deficit at March 31, 1996 $(1,853) $(184,828) $(186,681)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
d) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,619) $(5,223)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,269 1,480
Change in accounts:
Prepaid expenses and other assets 370 (400)
Accounts payable and accrued expenses 237 221
Interest on master loan 5,166 4,700
Interest payable (48) 20
Net cash provided by operating activities 1,375 798
Cash flows from investing activities:
Property improvements and replacements (1,208) (191)
Proceeds from sale of investments -- 389
Purchase of investments -- (398)
Net cash used in investing activities (1,208) (200)
Cash flow used in financing activities:
Principal payments on notes payable (115) (103)
Principal payments on Master Loan (74) --
Loan costs paid (11) --
Net cash used in financing activities (200) (103)
Net (decrease) increase in cash and cash equivalents (33) 495
Cash and cash equivalents at beginning of period 2,132 1,936
Cash and cash equivalents at end of period $ 2,099 $ 2,431
Supplemental disclosure of cash flow information:
Cash paid for interest $ 597 $ 556
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
EXHIBIT 99.1 (Continued)
e) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated 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, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1996.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 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. ("CCEP/2"), as successor to EP/2,
and Anderson CC 2, respectively. CCEP/2's investment in CC Office Associates is
consolidated in CCEP/2'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 CCEP/2.
Note B Related Party Transactions
CCEP/2 has no employees and is dependent on the General Partner and its
affiliates for management and administration of all partnership activities.
CCEP/2 paid property management fees based upon collected gross rental revenues
for property management services in each of the three month periods ended March
31, 1996 and 1995. Fees paid to affiliates of Insignia during the three month
periods ended March 31, 1996 and 1995, are included in operating expenses on the
consolidated statement of operations and are reflected in the following table.
The Partnership Agreement ("Agreement") also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of CCEP/2's activities. These reimbursements are included in
general and administrative expense on the consolidated statement of operations.
The General Partner, and its current affiliates, received reimbursements for
the three months ended March 31, 1996 and 1995, as reflected in the following
table.
Also, CCEP/2 is subject to an Investment Advisory Agreement between CCEP/2
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 CCEP/2's properties. Advisory fees paid
pursuant to this agreement are included in general and administrative expenses
on the consolidated statement of operations and are reflected in the following
table:
For the Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $ 193 $185
Investment advisory fees 39 46
Lease commissions 30 --
Reimbursement for services of affiliates 79 98
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
Master Loan Agreement, which is described more fully in the 1995 Annual Report.
No interest payments were made during the three month periods ended March 31,
1996 and 1995. (See further discussion in "Note C"). No advances were made
under the Master Loan Agreement during the three months ended March 31, 1996.
Principal payments of approximately $74,000 were made on the Master Loan during
the three months ended March 31, 1996.
On July 1, 1995, CCEP/2 began insuring its properties under a master policy
through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner, who
receives payments on these obligations from the agent. The amount of CCEP/2's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note C - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at March 31,
1996, and December 31, 1995, are approximately $208.9 million and approximately
$203.8 million, respectively. Subsequent to March 31, 1996, CCIP/2 made an
additional advance under the Master Loan to CCEP/2 in the amount of $1.0 million
to fund planned improvements at CCEP/2's investment properties.
Terms of Master Loan Agreement
Under the terms of the Master Loan Agreement, interest accrues at 10% per
annum. 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 and capital expenditures.
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 CCEP/2's properties are paid to CCIP/2 under the terms of
the Master Loan Agreement. The Master Loan Agreement matures in November 2000.
