FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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, 1997
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
(in thousands, except unit data)
March 31, December 31,
1997 1996
(Unaudited) (Note)
Assets
Cash and cash equivalents: $ 18,889 $ 18,478
Securities available for sale 11 11
Other assets 119 23
Investment in Master Loan to affiliate 83,843 84,167
Less: Allowance for impairment loss (47,907) (48,043)
35,936 36,124
$ 54,955 $ 54,636
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued liabilities $ 24 $ 29
Distributions payable 141 141
165 170
Partners' Capital (Deficit)
General partner (557) (560)
Limited partners (909,138 units
outstanding at March 31, 1997 and
December 31, 1996) 55,347 55,026
54,790 54,466
$ 54,955 $ 54,636
Note: The balance sheet at December 31, 1996, has been derived from the audited
financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ -- $ 411
Interest income on investment in Master
Loan to affiliate 89 --
Reduction of allowance for impairment loss
in Master Loan to affiliate 136 --
Other income 208 114
Total revenues 433 525
Expenses:
Operating -- 418
Depreciation and amortization -- 167
General and administrative 109 165
Total expenses 109 750
Net income (loss) $ 324 $ (225)
Net income (loss) allocated to general partner (1%) $ 3 $ (2)
Net income (loss) allocated to limited partners (99%) 321 (223)
$ 324 $ (225)
Net income (loss) per limited partnership unit $ .35 $ (.24)
See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(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, 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
Partners' capital (deficit) at
December 31, 1996 909,138 $ (560) $ 55,026 $ 54,466
Net income for the three months
ended March 31, 1997 3 321 324
Partners' capital (deficit) at
March 31, 1997 909,138 $ (557) $ 55,347 $ 54,790
See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 324 $ (225)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization -- 167
Reduction of allowance for impairment loss
in Master Loan to affiliate (136) --
Change in accounts:
Restricted cash -- (2)
Other assets (96) 254
Accounts payable and accrued expenses (5) --
Accrued taxes -- (19)
Net cash provided by operating activities 87 175
Cash flows from investing activities:
Property improvements and replacements -- (48)
Principal receipts on Master Loan 324 74
Net cash provided by investing activities 324 26
Cash flows from financing activities: -- --
Net increase in cash and cash equivalents 411 201
Cash and cash equivalents at beginning of period 18,478 9,276
Cash and cash equivalents at end of period $18,889 $ 9,477
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 Concap Equities, Inc. (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, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. 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, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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
period ended March 31, 1996. Fees paid to affiliates of Insignia during the
three month period ended March 31, 1996, 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,
1997 1996
(in thousands)
Property management fees $ -- $ 20
Reimbursement for services of affiliates 83 67
The Partnership insures 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
At March 31, 1997, the recorded investment in the Master Loan was considered to
be impaired under "FASB 114." The Partnership measures the impairment of the
loan based upon the fair value of the collateral due to the fact that repayment
of the loan is expected to be provided solely by the collateral. For the three
months ended March 31, 1997, the Partnership recorded approximately $225,000 in
income based upon an increase in the fair value of the collateral.
Approximately $89,000 was recorded as interest income on investment in Master
Loan to affiliate. A cash payment for this amount will be received from
Consolidated Capital Equity Partners/2, L.P. ("CCEP/2") subsequent to March 31,
1997. Approximately $136,000 was recorded as a reduction of allowance for
impairment loss in Master Loan to affiliate.
Interest due to the Partnership pursuant to the terms of the Master Loan
Agreement, but not recognized in the income statements, totaled approximately
$5.4 million and $5.2 million for the three months ended March 31, 1997 and
1996, respectively. At March 31, 1997, and December 31, 1996, such cumulative
unrecognized interest totaling approximately $138.7 million and $133.3 million
was not included in the balance of the investment in Master Loan.
During the first quarter of 1997, no advances were made to CCEP/2 as an advance
on the Master Loan. During the first quarter of 1997, the Partnership received
approximately $324,000 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.
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 $18.9 million, were greater than the reserve requirement
of approximately $7.6 million at March 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership's sole investment property, North Park Plaza, was sold in
September 1996. As of March 31, 1997, the Partnership has no real estate
assets.
Results of Operations
The Partnership reported net income of approximately $324,000 for the three
months ended March 31, 1997, as compared to a net loss of approximately
$225,000 for the corresponding period of 1996. The increase in net income is
attributable to an increase in interest income on investment in Master Loan,
with a reduction in the allowance for impairment loss in Master Loan, a decrease
in property related expenses, a decrease in general and adminstrative expenses,
and an increase in other income. The Partnership recorded interest income of
approximately $89,000 on the Master Loan, as well as a reduction in the
allowance for impairment loss of approximately $136,000 for the three months
ended March 31, 1997. No corresponding interest income or reduction of
allowance was recorded during the first quarter of 1996. The decrease in
property related expenses was due to the lack of net operating loss of
approximately $174,000 from the Partnership's sole investment property, North
Park Plaza, which was sold in September 1996. Finally, other income increased
due to an increase in interest income on investments in 1997 by approximately
$95,000 as compared to 1996 due to an increase in the amount of cash balances in
interest bearing accounts, coupled with higher yields on these investments.
Liquidity and Capital Resources
At March 31, 1997 the Partnership had unrestricted cash of approximately
$18,889,000 versus approximately $9,477,000 at March 31, 1996. Net cash
provided by operating activities decreased primarily due to the increase in the
interest receivable on the Master Loan and an increase in other assets for the
three months ended March 31, 1997. These items were partially offset by the
increase in net income. Net cash provided by investing activities increased due
to an increase in principal receipts on the Master Loan for the three months
ended March 31, 1997 as compared to the three months ended March 31, 1996.
There were no financing activities for the three months ended March 31, 1997 or
1996.
The sufficiency of existing liquid assets to meet future liquidity requirements
is directly related to the level of expenditures required to meet the ongoing
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, 1997 or 1996. Subsequent to March 31, 1997, the Partnership made
a distribution of approximately $10 million. Future cash distributions will
depend on the levels of net cash generated from operations, Master Loan
interest income, 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 $18.9 million, were greater than the reserve
requirement of $7.6 million as of March 31, 1997.
CCEP/2 Property Operations
For the three months ended March 31, 1997, CCEP/2's net loss totaled
approximately $5.6 on total revenues of approximately $4.5 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, 1997, CCEP/2's statement of operations includes total
interest expense attributable to the Master Loan of approximately $5.5 million,
all except approximately $89,000 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, 1997, the Partnership received
approximately $324,000 as principal payments on the Master Loan. This cash was
received by CCEP/2 on certain investments which it holds. Such cash receipts
are required to be transferred to the Partnership per the Agreement.
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,
1997 and 1996.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1997.
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.
Its General Partner,
May 15, 1997 By: /s/ William H. Jarrard, Jr.
Date William H. Jarrard, Jr.
President
May 15, 1997 By: /s/ Ronald Uretta
Date Ronald Uretta
Vice President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
May 15, 1997 By: /s/William H. Jarrard, Jr.
Date William H. Jarrard, Jr.
President
May 15, 1997 By: /s/Ronald Uretta
Date Ronald Uretta
Vice President/Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties/2 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,889
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,955
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 54,790
<TOTAL-LIABILITY-AND-EQUITY> 54,955
<SALES> 0
<TOTAL-REVENUES> 433
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 324
<EPS-PRIMARY> .35<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
March 31, December 31,
1997 1996
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 1,652 $ 1,478
Other assets 5,092 4,956
Investments in limited partnerships 12 336
Investment properties:
Land 10,841 10,841
Buildings and related personal property 90,119 89,443
100,960 100,284
Less accumulated depreciation (59,360) (58,187)
41,600 42,097
$ 48,356 $ 48,867
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued liabilities $ 1,947 $ 1,793
Mortgage notes and interest payable 33,204 33,395
Master loan and interest payable 221,938 216,775
257,089 251,963
Partners' Deficit
General partner (2,073) (2,017)
Limited partners (206,660) (201,079)
(208,733) (203,096)
$ 48,356 $ 48,867
Note: The balance sheet at December 31, 1996, has been derived from the audited
financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 4,477 $ 4,199
Other income 26 20
Total revenues 4,503 4,219
Expenses:
Operating 2,544 2,730
General and administrative 134 125
Depreciation and amortization 1,319 1,265
Interest 6,143 5,718
Total expenses 10,140 9,838
Net loss $ (5,637) $ (5,619)
Net loss allocated to general partner (1%) $ (56) $ (56)
Net loss allocated to limited partners (99%) (5,581) (5,563)
$ (5,637) $ (5,619)
See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
(in thousands)
General Limited
Partner Partners Total
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)
Partners' deficit at December 31, 1996 $(2,017) $(201,079) $(203,096)
Net loss for the three months ended
March 31, 1997 (56) (5,581) (5,637)
Partners' deficit at March 31, 1997 $(2,073) $(206,660) $(208,733)
See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net loss $(5,637) $(5,619)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,346 1,269
Change in accounts:
Other assets (280) 370
Accounts payable and accrued liabilities 153 237
Interest on master loan 5,488 5,166
Interest payable (115) (48)
Net cash provided by operating activities 955 1,375
Cash flows from investing activities:
Property improvements and replacements (676) (1,208)
Distributions from investment in limited partnerships 324 --
Net cash used in investing activities (352) (1,208)
Cash flows from financing activities:
Principal payments on notes payable (76) (115)
Principal payments on Master Loan (324) (74)
Loan costs paid (29) (11)
Net cash used in financing activities (429) (200)
Net increase (decrease) in cash and cash equivalents 174 (33)
Cash and cash equivalents at beginning of period 1,478 2,132
Cash and cash equivalents at end of period $ 1,652 $ 2,099
Supplemental disclosure of cash flow information:
Cash paid for interest $ 742 $ 597
See Accompanying Notes to Consolidated Financial Statements
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 Concap Equities, Inc. (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, 1997, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1997.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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, 1997 and 1996. Fees paid to affiliates of Insignia during the three month
periods ended March 31, 1997 and 1996, 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, 1997 and 1996, 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 advisory
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,
1997 1996
(in thousands)
Property management fees $214 $193
Investment advisory fees 38 39
Lease commissions 142 30
Reimbursement for services of affiliates 80 79
Included in "Reimbursement for services of affiliates" for 1997 are
approximately $6,000 of construction oversight costs.
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 1996 Annual Report.
No interest payments were made during the three month periods ended March 31,
1997 and 1996. (See further discussion in "Note C"). An Excess Cash Flow
payment of approximately $89,000 was accrued at March 31, 1997. Payment will be
made to CCIP/2 subsequent to March 31, 1997. No advances were received under
the Master Loan Agreement during each of the three months ended March 31, 1997
and 1996. Principal payments of approximately $324,000 and $74,000 were made on
the Master Loan during the three months ended March 31, 1997 and 1996,
respectively.
The Partnership insures 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,
1997, and December 31, 1996, are approximately $222 million and approximately
$217 million, respectively.
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. Any unpaid
interest is added to principal, compounded annually, and is payable at the
loan's maturity. 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.
During the three months ended March 31, 1997, CCEP/2 paid approximately $324,000
to CCIP/2 as principal payments on the Master Loan. These payments were
comprised of cash received by CCEP/2 on certain investments which is required to
be transferred to CCIP/2 per the Master Loan Agreement. An Excess Cash Flow
payment of approximately $89,000 was accrued at March 31, 1997.
