FORM 10-K --ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
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.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number
(864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
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___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (Amended by Exch. Act Rel No.
28869, eff. 5/1/91).
State the aggregate market value of the Limited Partnership Units ("Units") held
by non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
General
Consolidated Capital Institutional Properties/2 (the "Partnership" or
"Registrant") was organized on April 12, 1983, as a limited partnership under
the California Uniform Limited Partnership Act. On July 22, 1983, the
Partnership registered with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933 (File No. 2-83540) and commenced a public offering
for the sale of Units. The Units represent equity interests in the Partnership
and entitle the holders thereof to participate in certain allocations and
distributions of the Partnership. The sale of Units terminated on July 21, 1985,
with 912,182 Units sold at $250 each, or gross proceeds of approximately $227.8
million to the Partnership. As permitted under its Partnership Agreement (the
original partnership agreement of the Partnership with all amendments shall be
referred to as the "Partnership Agreement"), the Partnership has repurchased and
retired a total of 3,048 Units for a total of $611,000. During 1999, 10.4 units
were abandoned and accordingly retired by the Partnership. The Partnership may,
at its absolute discretion, repurchase Units, but is under no obligation to do
so. Since its initial offering, the Registrant has not received, nor are limited
partners required to make, additional capital contributions.
Upon the Partnership's formation in 1983, CCEC, a Colorado corporation, was the
corporate general partner. In 1988, through a series of transactions, Southmark
Corporation ("Southmark") acquired controlling interest in CCEC. In December
1988, CCEC filed for reorganization under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11"). In 1990, as part of CCEC's reorganization plan,
ConCap Equities, Inc. ("CEI" or the General Partner) acquired CCEC's general
partner interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing
general partner in all 16 partnerships. The selection of CEI as the general
partner was approved by a majority of the limited partners in the Partnership
and in each of the Affiliated Partnerships pursuant to a solicitation of the
Limited Partners dated August 10, 1990. As part of this solicitation, the
Limited Partners also approved an amendment to the Partnership Agreement to
limit changes of control of the Partnership. The General Partner is a subsidiary
of Apartment Investment and Management Company ("AIMCO"). The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2013
unless terminated prior to such date.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999, 1998 and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 370,955.70
units of limited partnership interest in the Partnership representing
approximately 40.80% of the outstanding units. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
The Partnership's primary business and only industry segment is real estate
related operations. See "Item 8. Financial Statements - Note A" for detailed
disclosure of the Partnership's Segment Reporting. The Partnership was formed,
for the benefit of its Limited Partners (herein so called and together with the
General Partner shall be called the "Partners"), to lend funds to Equity
Partners/Two ("EP/2"), a California general partnership in which certain of the
partners were former shareholders and former management of CCEC, the former
corporate general partner of the Partnership. See "Status of Master Loan" for a
description of the loan and settlement of EP/2's bankruptcy. Through December
31, 1999, the Partnership had advanced a total of approximately $183,470,000 to
EP/2 and its successor under the Master Loan (as defined in "Status of Master
Loan"). As of December 31, 1999, the balance of the Master Loan, net of the
allowance for possible losses, was approximately $18,374,000. EP/2 used the
proceeds from these loans to acquire eleven (11) apartment buildings and ten
(10) office complexes, which collateralized the Master Loan. EP/2's successor in
bankruptcy (as more fully described in "Status of Master Loan") currently owns
four (4) apartment buildings which secure the Master Loan.
The Registrant has no employees. Management and administrative services are
performed by the General Partner and by agents of the General Partner.
Status of Master Loan
Prior to 1989, the Partnership had loaned funds totaling approximately
$176,000,000 to EP/2 subject to a nonrecourse note (the "Master Loan"), pursuant
to the Master Loan Agreement dated July 22, 1983, between the Partnership and
EP/2. The Partnership secured the Master Loan with deeds of trust or mortgages
on real property purchased with the funds advanced as well as by the assignment
and pledge of promissory notes from the partners of EP/2.
During 1989, EP/2 defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP/2 filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the bankruptcy court approved EP/2's consensual
plan of reorganization (the "Plan"). In November 1990, EP/2 and the Partnership
consummated a closing under the Plan pursuant to which, among other things, the
Partnership and EP/2 executed an amended and restated loan agreement (the "New
Master Loan Agreement"), EP/2 was converted from a California general
partnership to a California limited partnership, Consolidated Capital Equity
Partners/Two, L.P., ("CCEP/2") and CCEP/2 renewed the deeds of trust and
mortgages on all the properties collaterally securing the New Master Loan
Agreement. ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned
subsidiary of CEI, is the sole general partner of CCEP/2 and an affiliate of the
Partnership. The general partners of EP/2 became limited partners in CCEP/2. CHI
has full discretion with respect to conducting CCEP/2's business, including
managing CCEP/2's properties and initiating and approving capital expenditures
and asset dispositions and refinancings. Under the new partnership agreement,
CCEP/2 is managed by CHI primarily for the benefit of the Partnership. CCEP/2's
primary objective is to conduct its business to maximize the Partnership's
recovery under the New Master Loan Agreement.
Under the terms of the New Master Loan Agreement, interest accrues at 10% and
payments are due quarterly in an amount equal to Excess Cash Flow, generally
defined in the New Master Loan Agreement as net cash flow from operations after
third-party debt service and capital improvements. 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
current accrued 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 the Partnership under the terms of the New Master Loan
Agreement. The Master Loan matures in November 2000.
Effective January 1, 1993, the Partnership and CCEP/2 amended the New Master
Loan Agreement to stipulate that Excess Cash Flow would be computed net of
capital improvements. Such expenditures were formerly funded from advances on
the Master Loan from the Partnership to CCEP/2. This amendment and change in the
definition of Excess Cash Flow will have the effect of reducing the
Partnership's interest income from the Master Loan by the amount of CCEP/2's
capital expenditures since such amounts were previously excluded from Excess
Cash Flow.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the General Partner. The General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Segments
Segment data for the years ended December 31, 1999, 1998, and 1997 is included
in "Item 8. Financial Statements - Note A" and is an integral part of the Form
10-K.
Item 2. Property
As of December 31, 1998 and 1999, the Partnership has no real estate assets.
Item 3. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 8. Financial Statements Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard February 1999. Pending the ruling on such
demurrers, settlement negotiations commenced. On November 2, 1999, the parties
executed and filed a Stipulation of Settlement settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. Preliminary approval of the settlement was
obtained on November 3, 1999 from the Superior Court of the State of California,
County of San Mateo, at which time the Court set a final approval hearing for
December 10, 1999. Prior to the December 10, 1999 hearing the Court received
various objections to the settlement, including a challenge to the Court's
preliminary approval based upon the alleged lack of authority of class
plaintiffs' counsel to enter the settlement. On December 14, 1999, the General
Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matter was submitted to a vote of
the unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for Registrant's Units of Limited Partnership and Related
Security Holder Matters
The Partnership, a publicly-held limited partnership, offered and sold 912,182
limited partnership units aggregating $227,800,000. The Partnership currently
has 25,903 holders of record owning an aggregate of 909,123.60 Units. Affiliates
of the General Partner owned 370,955.70 units or approximately 40.80% at
December 31, 1999. No public trading market has developed for the Units, and it
is not anticipated that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1997, 1998 and 1999.
Distributions
Per Limited
Aggregate Partnership Unit
01/01/97 - 12/37/97 $ 9,992,000 (1) $ 10.98
01/01/98 - 12/31/98 2,985,000 (2) 3.28
01/01/99 - 12/31/99 37,995,000 (3) 41.73
(1) Consists of $992,000 from operations which was distributed to all partners
and $9,000,000 from refinancing proceeds of the CCEP/2 properties which
was distributed 100% to the limited partners.
(2) Distribution was made from surplus funds which was distributed 100% to the
limited partners.
(3) Consists of $323,000 from surplus funds and $32,000,000 from sale proceeds
of CCEP/2 commercial proceeds distributed 100% to the limited partners and
$5,672,000 from operations distributed to all partners.
The Partnership's distribution policy is reviewed on a semi-annual basis. Future
cash distributions will depend on CCEP/2's ability to make payments on the
account of the Master Loan and the availability of cash reserves. There can be
no assurance, however, that the Partnership will generate sufficient funds from
operations to permit any additional distributions to its partners in 2000 or
subsequent periods. In addition, the Partnership is restricted from making
distributions if reserves equal to 5% of Net Invested Capital are not
maintained.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999, 1998 and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 370,955.70
limited partnership interest in the Partnership representing approximately
40.80% of the outstanding units. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
<PAGE>
Item 6. Selected Financial Data
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in "Item 8. Financial
Statements and Supplementary Data".
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<S> <C> <C> <C> <C> <C>
Total Revenues $ 1,328 $ 15,367 $ 6,755 $ 2,070 $ 4,065
Total Expenses (520) (820) (480) (2,649) (6,681)
Net income (loss) $ 808 $ 14,547 $ 6,275 $ (579) $ (2,616)
Net income (loss) per
Limited Partnership Unit $ .88 $ 15.84 $ 6.83 $ (.63) $ (2.85)
Distributions per Limited
Partnership Unit $ 41.73 $ 3.28 $ 10.98 $ -- $ 3.27
Limited Partnership Units
outstanding 909,124 909,134 909,134 909,138 909,138
AS OF DECEMBER 31,
BALANCE SHEETS 1999 1998 1997 1996 1995
(in thousands)
Total assets $ 25,323 $ 62,466 $ 50,906 $ 54,636 $ 55,494
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
1999 Compared with 1998
The Partnership realized net income of approximately $808,000 and $14,547,000
for the years ended December 31, 1999 and 1998, respectively. The decrease in
net income is due to a decrease in total revenues, which was slightly offset by
a decrease in total expenses. The decrease in total revenues is due to the
reduction of provision for impairment loss recognized during 1998 and to a
lesser extent a decrease in interest income on net investment in Master Loan to
an affiliate and interest income on investments. As discussed in "Item 8. Note C
- - Net Investment in Master Loan", the Partnership recorded interest income of
approximately $998,000 and $1,200,000 for the years ended December 31, 1999 and
1998, respectively. No reduction of allowance for impairment loss was recorded
for the year ended December 31, 1999. As the fair value of the remaining
collateral properties underlying the Master Loan did not significantly change
from their fair value at December 31, 1998, no change to the allowance was
deemed necessary during 1999. Interest income on investments decreased due to a
reduction in the cash balance in interest-bearing money market accounts as a
result of the distributions to partners made during 1999. The decrease in total
revenues was partially offset by a decrease in total expenses resulting from a
decrease in general and administrative expenses for the year ended December 31,
1999. General and administrative expenses decreased primarily due to a decrease
in reimbursements to the General Partner and a reduction in the amount of legal
fees incurred by the Partnership.
1998 Compared with 1997
The Partnership reported net income of approximately $14,547,000 and $6,275,000
for the years ended December 31, 1998 and 1997, respectively. The increase in
net income is due to an increase in total revenues which was slightly offset by
an increase in total expenses. The increase in revenues is due to the reduction
of provision for impairment loss and to a lesser extent an increase in interest
income on net investment in Master Loan to affiliate. As discussed in "Item 8.
Note C - Net Investment in Master Loan," the Partnership recorded interest
income of approximately $1,200,000 and $870,000 and recorded a reduction of
allowance for impairment loss of approximately $13,586,000 and $5,328,000 for
the years ended December 31, 1998 and 1997, respectively. The allowance for
impairment loss was reduced because the fair value of the collateral properties
underlying the Master Loan was increased as a result of capital improvements and
repairs performed over the last few years, changing market conditions and
improved operations at such properties which include increased occupancy rates.
(See table and comments below for details of the average annual occupancy and
rental rates for 1999, 1998 and 1997.) Without giving effect to the reduction of
provision for impairment loss, the Partnership generated net income for the year
ended December 31, 1998 of $961,000 as compared to $947,000 for the year ended
December 31, 1997. Expenses increased due to an increase in general and
administrative expenses resulting from increased legal fees. Legal fees
increased due to the lawsuits which have since been finalized as disclosed in
previous quarters.
<TABLE>
<CAPTION>
1998 Average 1997 Average 1996 Average
Annual Annual Annual
Rental Rental Rental
Occupancy Rate Occupancy Rate Occupancy Rate
Residential
<S> <C> <C> <C> <C> <C> <C>
Canyon Crest 96% $ 8,776 96% $ 8,485 95% $ 8,100
Highcrest Townhomes 95% 10,298 95% 9,789 94% 9,559
Windmere 95% 7,106 95% 6,583 84% 5,985
Village Brooke 88% 7,700 90% 7,324 89% 7,116
Commercial (1) (2)
Lahser Center I 96% 14.10 96% 13.80 87% 12.06
Lahser Center II 95% 13.49 100% 13.33 100% 13.64
Crescent Centre 97% 12.42 86% 12.76 93% 10.91
Richmond Plaza 85% 12.58 89% 11.68 90% 11.40
Town Center Plaza 90% 13.98 75% 12.90 71% 13.43
Central Park Plaza 96% 15.02 97% 14.68 95% 12.68
Civic Center 98% 14.65 95% 13.82 90% 13.66
(1) Commercial average annual rental rate is per square foot.
(2) Investment properties were sold during 1999.
</TABLE>
The General Partner attributed the increase in the net realizable value of the
collateral properties securing the Master Loan, with the exception of Richmond
Plaza, to an increase in occupancy and/or average rental rates as presented in
the table above. The increase in occupancy at the properties is attributable to
approximately $9,721,000 of combined capital improvements that have been made to
most of the properties over the past few years. These improvements were funded
from the various properties' operations and cash flows as the advances from the
Partnership to CCEP/2 for operating needs total approximately $1,150,000 for
1998, 1997 and 1996. The underlying asset values of the properties support the
net reduction in the allowance for impairment loss of approximately $13,586,000
recorded during 1998. During the fourth quarter of 1998, the Partnership
recorded a $14,000,000 increase in the allowance for impairment loss due to the
continuing evaluation of the collateral properties resulting from appraisals
received during February 1999 on several of the collateral properties and
additional information received concerning Richmond Plaza.
Liquidity and Capital Resources
At December 31, 1999, the Registrant had cash and cash equivalents of
approximately $6,846,000 as compared to approximately $10,969,000 at December
31, 1998. The net decrease of approximately $4,123,000 is due to approximately
$37,995,000 of cash used in financing activities, which was partially offset by
approximately $33,111,000 of cash provided by investing activities and
approximately $761,000 of cash provided by operating activities. Cash provided
by investing activities consisted of principal receipts on the Master Loan. Cash
used in financing activities consisted of distributions to partners.
At December 31, 1998, the Registrant had cash and cash equivalents of
approximately $10,969,000 as compared to approximately $12,417,000 at December
31, 1997. The net decrease of approximately $1,448,000 is due to approximately
$65,000 of cash used in investing activities and approximately $2,985,000 of
cash used in financing activities which was partially offset by approximately
$1,602,000 of cash provided by operating activities. Cash used in investing
activities consisted of advances on the Master Loan which was partially offset
by principal receipts on the Master Loan. Cash used in financing activities
consisted of distributions to the partners.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required to meet the ongoing operating needs of the Partnership and
to comply with Federal, state, local, legal, and regulatory requirements. 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.
The Partnership made distributions totaling approximately $37,995,000 (of which
$37,939,000 was to the limited partners or approximately $41.73 per limited
partnership unit) during the twelve months ended December 31, 1999. During the
twelve months ended December 31, 1998, the Partnership made distributions of
approximately $2,985,000 (approximately $3.28 per limited partnership unit).
During the twelve months ended December 31, 1997, the Partnership made a
distribution of approximately $9,992,000 (of which $9,982,000 was to the limited
partners approximately $10.98 per limited partnership unit). Future cash
distributions will depend on CCEP/2's ability to make payments on account of the
Master Loan and the availability of cash reserves. The Partnership's
distribution policy is reviewed on a semi-annual basis. There can be no
assurance, however, that the Partnership will have sufficient funds from
operations to permit any additional distributions to its partners in 2000 or
subsequent periods.
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 $6,846,000 were greater than the reserve
requirement of approximately $5,391,000 at December 31, 1999.
CCEP/2 Property Operations
CCEP/2 had net income of approximately $1,797,000 for the year ended December
31, 1999, versus a net loss of $22,613,000 for the year ended December 31, 1998.
The increase in net income was primarily due to a gain on sale of discontinued
operations and to, a lesser extent, a casualty gain at Village Brooke as
discussed below. Excluding the impact of discontinued operations and the
casualty gain at Village Brooke, CCEP/2 had a net loss of approximately
$24,401,000 for the year ended December 31, 1999 on revenues of approximately
$6,207,000, versus a net loss of approximately $23,869,000 for the year ended
December 31, 1998 on revenues of $6,985,000. 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 1999, CCEP/2's consolidated statement of
operations includes total interest expense attributable to the Master Loan of
approximately $24,962,000. Approximately $998,000 of required cash flow payments
were made to CCIP/2 during 1999 and classified as interest income. CCEP/2 is
expected to continue to generate operating losses as a result of such interest
accruals and noncash charges for depreciation.
During the year ended December 31, 1999, the Partnership received approximately
$33,111,000 as principal payments on the Master Loan consisting of required cash
flow payments. These funds are required to be transferred to the Partnership
under the terms of the Master Loan.
On September 10, 1999, the five commercial properties located in Michigan
(Lahser One, Lahser Two, Crescent Centre, Central Park Place, Central Park
Plaza) were sold to an unaffiliated third party for $26,125,000. After closing
expenses of approximately $1,727,000 the net proceeds received by the
Partnership were approximately $24,398,000. The sale of the properties resulted
in a gain on sale of investment property of approximately $10,392,000.
On September 22, 1999, Town Center Plaza, located in Santa Ana, California, was
sold to an unaffiliated third party for $11,650,000. After closing expenses of
approximately $1,004,000, the net proceeds received by the Partnership were
approximately $10,646,000. The Partnership used some of the proceeds from the
sale of the property to pay off the debt encumbering the property of
approximately $2,316,000. The sale of the property resulted in a gain on sale of
investment property of approximately $4,862,000 and a loss on early
extinguishment of debt of approximately $7,000.
On December 23, 1999, Richmond Plaza, located in Richmond, Virginia, was sold to
an unaffiliated third party for $14,900,000. Closing expenses were approximately
$784,000. The debt encumbering the property of approximately $14,500,000 was
assumed by the buyer. The sale of the property resulted in a gain on sale of
investment property of approximately $5,499,000 and a loss on early
extinguishment of debt of approximately $24,000.
In April 1999, one of CCEP/2's residential properties, Village Brooke, was
completely destroyed by a tornado. It is currently estimated that the property
sustained approximately $16,000,000 in damages. As of December 31, 1999,
$10,000,000 in insurance proceeds have been received with additional insurance
proceeds expected in the future. All of the property's fixed assets and related
accumulated depreciation were written off as a result of this casualty. Lost
rents of approximately $750,000 and expenses of approximately $845,000 have been
recorded as of December 31, 1999 which resulted in a casualty gain of
approximately $5,473,000 at December 31, 1999. The General Partner is currently
negotiating with the taxing authorities to have the property taxed as
undeveloped land. The General Partner is currently evaluating and surveying the
land to determine possible new construction of the property.
In April 1999, an electrical fire occurred at Town Center. The property
sustained approximately $181,000 in damages and realized a casualty loss of
approximately $33,000. This property was subsequently sold in September 1999
(see above) and the purchaser of the property assumed the remaining obligation
related to the fire.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
Item 7a. Market Risk Factors
The Partnership is exposed to market risks associated with its Master Loan to
Affiliate ("Loan"). Receipts (interest income) on the Loan are based upon the
operations and cash flow of the underlying investment properties that
collateralize the Loan. Both the income and expenses of operating the investment
properties are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in the patterns or needs of users.
The investment properties are also susceptible to the impact of economic and
other conditions outside of the control of the Partnership as well as being
affected by current trends in the market area which they operate. In this
regard, the General Partner of the Partnership closely monitors the performance
of the properties collateralizing the loans.
Based upon the fact that the loan is considered impaired under Statement of
Financial Accounting Standards No. 114, "Accounting by Creditor for Impairment
of a Loan", interest rate fluctuations do not affect the recognition of income,
as income is only recognized to the extent of cash flow. Therefore, market risk
factors do not affect the Partnership's results of operations as it relates to
the Loan. See "Item 8 - Financial Statements and Supplementary Data - Note C"
for further information.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPTIAL INSTITIONAL PROPERTIES/2, L.P.
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the Years ended December 31, 1999, 1998 and
1997
Statements of Changes in Partners' (Deficit) Capital for the Years ended
December 31, 1999, 1998 and 1997
Statements of Cash Flows for the Years ended December 31, 1999, 1998 and
1997
Notes to Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Institutional Properties/2
We have audited the accompanying balance sheet of Consolidated Capital
Institutional Properties/2 as of December 31, 1999 and 1998, and the related
statements of operations, changes in partners' (deficit) capital and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Capital
Institutional Properties/2 at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 8, 2000
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
December 31,
1999 1998
Assets
<S> <C> <C>
Cash and cash equivalents $ 6,846 $ 10,969
Accounts receivable 92 --
Other assets 11 12
Investment in Master Loan to affiliate 47,503 80,614
Less: Allowance for impairment loss (29,129) (29,129)
18,374 51,485
$ 25,323 $ 62,466
Liabilities and Partners' (Deficit) Capital
Liabilities
Other liabilities $ 58 $ 14
Distributions payable 141 141
199 155
Partners' (Deficit) Capital
General partner (410) (362)
Limited partners (909,123.60 outstanding at
December 31, 1999 and 909,134 outstanding at 1998) 25,534 62,673
25,124 62,311
$ 25,323 $ 62,466
See Accompanying Notes to Financial Statements
</TABLE>
CONSOLIDATED CAPTIAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1999 1998 1997
Revenues:
Interest income on net investment
in Master Loan to affiliate $ 998 $ 1,200 $ 870
Reduction of provision for impairment loss -- 13,586 5,328
Interest income on investments 330 581 557
Total revenues 1,328 15,367 6,755
Expenses:
General and administrative 520 820 480
Total expenses 520 820 480
Net income (Note I) $ 808 $14,547 $ 6,275
Net income allocated to general partner (1%) $ 8 $ 145 $ 63
Net income allocated to limited partners (99%) 800 14,402 6,212
$ 808 $14,547 $ 6,275
Net income per Limited Partnership Unit $ .88 $ 15.84 $ 6.83
Distribution per Limited Partnership Unit $ 41.73 $ 3.28 $ 10.98
See Accompanying Notes to Financial Statements
</TABLE>
CONSOLIDATED CAPTIAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
<TABLE>
<CAPTION>
Total
Limited Partners
Partnership General Limited Capital
Units Partners Partners (Deficit)
<S> <C> <C> <C> <C>
Original capital contributions 912,182 $ 1 $228,046 $228,047
Partners' (deficit) capital
at December 31, 1996 909,138 $ (560) $ 55,026 $ 54,466
Distributions to partners (10) (9,982) (9,992)
Net income for the year ended
December 31, 1997 63 6,212 6,275
Partners' (deficit) capital at
December 31, 1997 909,134 (507) 51,256 50,749
Distributions to partners -- (2,985) (2,985)
Net income for the year ended
December 31, 1998 145 14,402 14,547
Partners' (deficit) capital at
December 31, 1998 909,134 (362) 62,673 62,311
Distributions to partners (56) (37,939) (37,995)
Net income for the year ended
December 31, 1999 8 800 808
Partners' (deficit) capital
at December 31, 1999 909,124 $ (410) $ 25,534 $ 25,124
See Accompanying Notes to Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 808 $ 14,547 $ 6,275
Adjustments to reconcile net income to
net cash provided by operating activities:
Reduction of provision for impairment loss -- (13,586) (5,328)
Change in accounts:
Interest receivable on Master Loan (92) 634 (634)
Other assets 1 9 13
Accounts payable -- (6) 6
Other liabilities 44 4 (19)
Net cash provided by operating
activities 761 1,602 313
Cash flows from investing activities:
Advances on Master Loan -- (220) (150)
Principal receipts on Master Loan 33,111 155 3,768
Net cash provided by (used in)
investing activities 33,111 (65) 3,618
Cash flows used in financing activities:
Distributions to partners (37,995) (2,985) (9,992)
Net decrease in cash and cash equivalents (4,123) (1,448) (6,061)
Cash and cash equivalents at beginning
of period 10,969 12,417 18,478
Cash and cash equivalents at end of period $ 6,846 $ 10,969 $ 12,417
See Accompanying Notes to Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
Note A - Organization and Summary of Significant Accounting Policies
Organization: Consolidated Capital Institutional Properties/2 (the "Partnership"
or "Registrant"), a California Limited Partnership, was formed on April 12,
1983, to lend funds through non-recourse notes with participation interests (the
"Master Loan"). The loans were made to, and the real properties that secure the
Master Loan were purchased and owned by, Equity Partners/Two ("EP/2"), a
California general partnership in which certain of the partners were former
shareholders and former management of Consolidated Capital Equities Corporation
("CCEC"), the former corporate general partner of the Partnership. Through
December 31, 1999, the Partnership had advanced approximately $183,470,000 under
the Master Loan.
During 1989, EP/2 defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP/2 filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"). On October 18, 1990, the bankruptcy court
approved EP/2's consensual plan of reorganization (the "Plan"). In November
1990, EP/2 and the Partnership consummated a closing under the Plan pursuant to
which, among other things, the Partnership and EP/2 executed an amended and
restated loan agreement (the "New Master Loan Agreement"). EP/2 was converted
from a California general partnership to a California limited partnership,
Consolidated Capital Equity Partners/Two, L.P. ("CCEP/2"), and CCEP/2 renewed
the deeds of trust and mortgages on all the properties collaterally securing the
New Master Loan Agreement. ConCap Holdings, Inc. ("CHI"), a Texas corporation
and wholly-owned subsidiary of CEI, is the sole general partner of CCEP/2 and an
affiliate of the Partnership. The general partners of EP/2 became limited
partners in CCEP/2. CHI has full discretion with respect to conducting CCEP/2's
business, including managing CCEP/2's properties and initiating and approving
capital expenditures and asset dispositions and refinancings. See "Note C" for
further discussion of EP/2's bankruptcy settlement.
Upon the Partnership's formation in 1983, CCEC, a Colorado corporation, was the
corporate general partner. In December 1988, CCEC filed for reorganization under
Chapter 11. In 1990, as part of CCEC's reorganization plan, ConCap Equities,
Inc., a Delaware corporation (the "General Partner" or "CEI") acquired CCEC's
general partner interests in the Partnership and in 15 other affiliated public
limited partnerships and replaced CCEC as managing general partner in all 16
partnerships. The General Partner is a subsidiary of Apartment Investment and
Management Company ("AIMCO"). See "Note B - Transfer of Control." The directors
and officers of the General Partner also serve as executive officers of AIMCO.
The Partnership Agreement provides that the Partnership is to terminate on
December 31, 2013 unless terminated prior to such date. The Partnership
commenced operations on July 22, 1983. The Partnership was formed for the
benefit of its Limited Partners to lend funds to Equity Partners/Two ("EP/2").
The Partnership is the holder of a note receivable which is collateralized by
four apartment properties located throughout the United States.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: Includes cash on hand and in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Investment in Master Loan: The Partnership has adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan"("Statement 114"). Under the standard, the allowance for credit losses
related to loans that are identified for evaluation in accordance with
"Statement 114" is based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans.
Investments: The General Partner determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Presently, all of the Partnership's investments are
classified as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, reported in a
separate component of partner's capital. The amortized cost of debt securities
in this category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in investment income.
Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in investment
income. The cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available-for-sale
are included in other income.
Investments, stated at cost of approximately $11,000, consist of Southmark
Corporation Redeemable Series A Preferred Stock. These investments are
classified as available for sale and are included in other assets.
Income Taxes: No provision has been made in the financial statements for Federal
income taxes because, under current law, no Federal income taxes are paid
directly by the Partnership. The Unit holders are responsible for their
respective shares of Partnership net income or loss. The Partnership reports
certain transactions differently for tax than for financial statement purposes.
Partners' (Deficit) Capital: The Partnership Agreement provides for net income
and net losses for both financial and tax reporting purposes to be allocated 99%
to the Limited Partners and 1% to the General Partner. "Distributable Cash from
Operations", as defined in the Partnership Agreement, is to be allocated 99% to
the Limited Partners and 1% to the General Partner. Distributions of surplus
funds are to be allocated 100% to the Limited Partners.
Net Income Per Limited Partnership Unit: Net income per Limited Partnership Unit
("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
909,133.60 Units outstanding in 1999, 1998 and 1997.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments approximates their fair value due to the short term
maturity of these instruments. The carrying amount of the Partnership's net
investment in the Master Loan approximates fair value due to the fact that it
has been valued based on the fair value of the underlying collateral.
Allowance for Impairment Loss: Allowances to reduce the carrying cost of the
Master Loan are provided when it is probable that reasonably estimable net
realizable values are less than the recorded carrying cost of such investment.
Gains or losses that result from the ongoing periodic evaluation of the net
realizable value of the Master Loan are credited or charged, as appropriate, to
operations in the period in which they are identified. If a collateral party is
sold, CCEP/2 remains liable for any outstanding debt under the Master Loan
Agreement, however, the value of the net investment in Master Loan on the
Partnership's books would be written down to the appropriate level.
Segment Reporting: Statement of Financial Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("Statement
131") established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. As defined
in SFAS No. 131, the Partnership has only one reportable segment. Moreover, due
to the very nature of the Partnership's operations, the General Partner believes
that segment-based disclosures will not result in a more meaningful presentation
than the financial statements as presently presented.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the General Partner. The General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Note C - Net Investment in Master Loan
At December 31, 1999, the recorded investment in the Master Loan is considered
to be impaired under "Statement of Financial Accounting Standards No. 114 ("SFAS
114") "Accounting by Creditors for Impairment of a Loan". 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 years ended December 31, 1998 and 1997, the Partnership
recorded approximately $13,586,000 and $5,328,000 respectively, in income based
upon an increase in the fair value of the collateral. No such income was
recorded in 1999 as the recorded value of the Master Loan approximated the fair
value of the collateral at December 31, 1999.
The principal balance of the Master Loan due to the Partnership totaled
approximately $47,503,000 and $80,614,000 at December 31, 1999 and 1998,
respectively. Interest due to the Partnership pursuant to the terms of the
Master Loan Agreement, but not recognized in the income statements, totaled
approximately $23,964,000, $22,609,000 and $21,070,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998, such cumulative unrecognized interest totaling
approximately $200,943,000 and $176,979,000 was not included in the balance of
the investment in Master Loan as it is not expected to be collected. The
allowance for possible losses totaled approximately $29,129,000 at December 31,
1999 and 1998.
No advances were made to CCEP/2 during the year ended December 31, 1999 as an
advance on the Master Loan. During the year ended December 31, 1998, an advance
of $220,000 was made to CCEP/2 as an advance on the Master Loan. CCEP/2 has
approximately $15,557,000 in liens on the collateral that are superior to the
Master Loan.
The investment in Master Loan consists of the following:
As of December 31,
1999 1998
(in thousands)
Master Loan funds advanced, at
beginning of year $ 80,614 $ 80,549
Advances on Master Loan -- 220
Principal receipts on Master Loan (33,111) (155)
Master Loan funds advanced, at
end of year $ 47,503 $ 80,614
The allowance for impairment loss on Master Loan to affiliates consists of the
following:
<TABLE>
<CAPTION>
As of December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Allowance for impairment loss on Master
Loan to affiliates, beginning of year $ 29,129 $ 42,715 $ 48,043
Reduction of provision for impairment loss -- (13,586) (5,328)
Allowance for impairment loss on Master
Loan to affiliates, end of year $ 29,129 $ 29,129 $ 42,715
</TABLE>
The fair value of the collateral properties was determined using the net
operating income of the collateral properties capitalized at a rate deemed
reasonable for the type of property adjusted for market conditions, physical
condition of the property and other factors, or by obtaining an appraisal by an
independent third party. This methodology has not changed from that used in
prior calculations performed by the General Partner in determining the fair
value of the collateral properties. The approximate $13,586,000 net reduction in
the provision for impairment loss that was recognized during the year ended
December 31, 1998 is attributed to an increase in the net realizable value of
the collateral properties. The General Partner evaluates the net realizable
value on a semi-annual basis. The General Partner has seen a consistent increase
in the net realizable value of the collateral properties, taken as a whole, over
the past two years (1998 and 1997). The increase is deemed to be attributable to
major capital improvement projects and the strong effort to complete deferred
maintenance items that have been ongoing over the past few years at the various
properties. This has enabled the properties to increase their respective
occupancy levels or in some cases to maintain the properties' high occupancy
levels. The vast majority of this work was funded by cash flow from the
collateral properties themselves as the total amount borrowed on the master loan
or from other sources in the past few years for this purpose totals $1,150,000.
Based upon the consistent increase in net realizable value of the collateral
properties, the General Partner determined the increase to be permanent in
nature and accordingly reduced the allowance for impairment loss on the master
loan during the year ended December 31, 1998.
Approximately $998,000, $1,200,000 and $870,000 for the years ended December 31,
1999, 1998, and 1997, respectively was recorded as interest income on investment
in the Master Loan to an affiliate based upon cash generated as a result of
improved operations of the properties which secure the loan. A cash payment of
approximately $575,000 was received from Consolidated Capital Equity Partners/2
L.P. ("CCEP/2") during the second quarter of 1999. A cash payment of
approximately $423,000 was received during the fourth quarter of 1999 from
CCEP/2. A cash payment of approximately $634,000 was received during the first
quarter of 1998 for interest income recognized in 1997. A cash payment of
approximately $564,000 for the interest income recorded in the first quarter of
1998 was received during the second quarter of 1998. A cash payment of
approximately $505,000 was received from CCEP/2 during the third quarter of
1998. A cash payment of approximately $131,000 was received from CCEP/2 during
the fourth quarter for interest income recognized in the fourth quarter of 1998.
In accordance with the terms of the Master Loan Agreement the Partnership
received approximately $32,034,000 of net proceeds from the sale of seven of
CCEP/2's properties during 1999.
Terms of the New Master Loan Agreement
Under the terms of the New Master Loan Agreement, interest accrues at 10% and
payments are due quarterly in an amount equal to Excess Cash Flow, generally
defined in the New Master Loan Agreement as net cash flow after third party debt
service and capital improvements. 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 maturity.
If such Excess Cash Flow payments are greater than the current accrued interest,
the excess amount is applied to the principal balance of the loan. Any net
proceeds from the sale or refinancing of any of CCEP/2's properties are paid to
the Partnership under the terms of the New Master Loan Agreement. The New Master
Loan Agreement matures in November 2000. The Partnership is currently evaluating
its options as to the maturity of the Master Loan in November 2000. The options
include foreclosing on the properties that collateralize the Master Loan or
extending the terms of the loan.
Effective January 1, 1993, the Partnership and CCEP/2 amended the New Master
Loan Agreement to stipulate that Excess Cash Flow would be computed net of
capital improvements. Such expenditures were formerly funded from advances on
the Master Loan from the Partnership to CCEP/2. This amendment and change in the
definition of Excess Cash Flow will have the effect of reducing income on the
investment in Master Loan by the amount of CCEP/2's capital expenditures, since
such amounts were previously excluded from Excess Cash Flow.
EP/2's Bankruptcy Settlement: In November 1990, pursuant to EP/2's
reorganization plan described in "Note A", the Partnership and EP/2 consummated
a closing pursuant to which: (1) the Partnership and EP/2 executed the New
Master Loan Agreement more fully described below; (2) CCEP/2 renewed the deeds
of trust on all the collateral securing the Master Loan; (3) the Partnership
received cash of approximately $2,500,000, including $1,800,000 from the general
partners of EP/2 related to their promissory notes; (4) the Partnership accepted
assignment of certain partnership interests in affiliated partnerships (the
"Affiliated Partnership Interests"), which were valued by management of the
Partnership at approximately $2,500,000, as additional collateral securing the
Master Loan; and (5) all claims between the Partnership and EP/2's general
partners were released.
EP/2 was the holder of a note receivable secured by North Park Plaza which had
not been performing according to the note terms since 1989. In the process of
negotiating the final bankruptcy settlement discussed above, EP/2 assigned its
interest in the note receivable to the Partnership. The Partnership foreclosed
upon and acquired North Park Plaza in July 1990, CCEP/2 is still obligated for
$6,600,000 under the Master Loan attributable to North Park Plaza not
extinguished in the foreclosure proceeding.
Note D - Transaction with Affiliated Parties
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 Agreement (the "Agreement") provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The following payments were made to
the General Partner and affiliates during the years ended December 31, 1999,
1998, and 1997:
For the years ended December 31,
1999 1998 1997
(in thousands)
Reimbursements for services of affiliates
(included in general and administrative
expenses) $ 217 $ 303 $ 278
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $217,000, $303,000 and
$278,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Several tender offers were made by various parties, including affiliates of the
General Partners, during the years ended December 31, 1999, 1998 and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 370,955.70
units of limited partnership interest in the Partnership representing
approximately 40.80% of the outstanding units. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note E - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note F - 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 levels. Reserves, including cash and
cash equivalents totaling approximately $6,846,000, were more than the reserve
requirement of approximately $5,391,000 at December 31, 1999.
Note G - Distribution
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1997, 1998 and 1999.
Distributions
Per Limited
Aggregate Partnership Unit
01/01/97 - 12/37/97 $ 9,992,000 (1) $ 10.98
01/01/98 - 12/31/98 2,985,000 (2) 3.28
01/01/99 - 12/31/99 37,995,000 (3) 41.73
(1) Consists of $992,000 from operations which was distributed to all partners
and $9,000,000 from refinancing proceeds of the CCEP/2 properties which
was distributed 100% to the limited partners. ($9,982,000 to the limited
partners, $10.98 per limited partnership unit).
(2) Distribution was made from surplus funds which was distributed 100% to the
limited partners. (approximately $3.28 per limited partnership unit).
(3) Consists of $323,000 from surplus funds and $32,000,000 from sale proceeds
of CCEP/2 commercial proceeds distributed 100% to the limited partners and
$5,672,000 from operations distributed to all partners ($37,939,000 to the
limited partners, $41.73 per limited partnership unit).
Note H - Abandonment of Units
In 1999, the number of limited partnership units decreased by 10 due to limited
partners abandoning their units. In abandoning his or her Limited Partnership
Units, a limited partner relinquished all right, title and interest in the
Partnership as of the date of abandonment. However, during the year of
abandonment, the limited partner is allocated his or her share of the income or
loss for that year. The net income (loss) per limited partnership unit is
calculated based on the number of units outstanding at the beginning of the
year.
Note I - Partner Tax Information
The following is a reconciliation between net income as reported in the
financial statements and federal taxable (loss) income allocated to the partners
in the Partnership's information return for the years ended December 31, 1999,
1998 and 1997 (in thousands, except per unit data):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income as reported $ 808 $ 14,547 $ 6,275
Add (deduct):
Accrued expenses 44 4 (19)
Interest income (1,129) (1,200) (870)
Valuation allowances -- (13,586) (5,328)
Other 35 36 --
Federal taxable (loss) income $ (312) $ (199) $ 58
Federal taxable (loss) income per
limited partnership unit $ (.34) $ (.22) $ .06
</TABLE>
The tax basis of the Partnership's assets and liabilities is approximately
$78,891,000 greater than the assets and liabilities as reported in the financial
statements at December 31, 1999.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
AS OF DECEMBER 31, 1999
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Partners' Deficit for the Years Ended December
31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Equity Partners/Two L.P.
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Equity Partners/Two L.P. as of December 31, 1999 and 1998, and the
related consolidated statements of operations, changes in partners' deficit and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Equity Partners/Two L.P. at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note A to
the consolidated financial statements, the Partnership has incurred operating
losses, suffers from inadequate liquidity, has an accumulated deficit and is
unable to repay the Master Loan balance which matures in 2000. These conditions
raise substantial doubt about the Partnership's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note A. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liability that may result from the
outcome of this uncertainty.
As discussed in Note K to the financial statements, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping effective January 1, 1999.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 8, 2000
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
Assets
<S> <C> <C>
Cash and cash equivalents $ 3,747 $ 2,199
Restricted cash 7,750 --
Receivables and deposits (net of allowance of $260) 853 2,142
Restricted escrows 139 1,699
Other assets 260 2,413
Investment properties: (Notes F and H)
Land 2,731 10,498
Buildings and related personal property 17,228 91,462
19,959 101,960
Less accumulated depreciation (11,317) (64,476)
8,642 37,484
$ 21,391 $ 45,937
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 323 $ 194
Tenant security deposit liabilities 194 581
Accrued property taxes 546 745
Other liabilities 812 488
Mortgage notes (Note F) 15,557 32,619
Master loan and interest payable (Note E) 247,753 256,901
265,185 291,528
Partners' Deficit
General Partner (2,424) (2,442)
Limited Partners (241,370) (243,149)
(243,794) (245,591)
$ 21,391 $ 45,937
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
Revenues: (restated) (restated)
<S> <C> <C> <C>
Rental income $ 5,597 $ 6,322 $ 6,109
Other income 610 663 492
Casualty gain 5,473 -- --
Total revenues 11,680 6,985 6,601
Expenses:
Operating 2,173 2,805 2,959
General and administrative 510 991 766
Depreciation 1,145 1,438 1,363
Interest 26,210 25,061 23,180
Property taxes 570 559 556
Total expenses 30,608 30,854 28,824
Loss before discontinued operations and
extraordinary item (18,928) (23,869) (22,223)
Income (loss) from discontinued operations 3 1,204 (398)
Gain on sale of discontinued operations 20,753 52 2,739
Income (loss) before extraordinary item 1,828 (22,613) (19,882)
Extraordinary loss on debt extinguishment (31) -- --
Net income (loss) $ 1,797 $(22,613) $(19,882)
Net income (loss) allocated to general
partner (1%) $ 18 $ (226) $ (199)
Net income (loss) allocated to limited
partners (99%) 1,779 (22,387) (19,683)
$ 1,797 $(22,613) $(19,882)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(in thousands)
General Limited
Partner Partners Total
Partners' deficit at
December 31, 1996 $ (2,017) $(201,079) $ (203,096)
Net loss for the year ended
December 31, 1997 (199) (19,683) (19,882)
Partners' deficit
at December 31, 1997 (2,216) (220,762) (222,978)
Net loss for the year ended
December 31, 1998 (226) (22,387) (22,613)
Partners' deficit at
December 31, 1998 (2,442) (243,149) (245,591)
Net income for the year ended
December 31, 1999 18 1,779 1,797
Partners' deficit at
December 31, 1999 $ (2,424) $(241,370) $ (243,794)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 1,797 $ (22,613) $ (19,882)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation 3,843 4,975 4,822
Amortization of loan costs, lease commissions
and ground lease 60 605 641
Gain on disposal of properties -- (52) (2,739)
Gain on sale of discontinued operations (20,753) -- --
Extraordinary loss on early extinguishment of debt 31 -- --
Casualty gain (5,473) -- --
Change in accounts:
Restricted cash (7,750) -- --
Receivables and deposits 1,218 (178) 224
Other assets 337 (48) (2)
Accounts payable 56 (429) 94
Tenant security deposit liabilities (387) 17 8
Accrued property taxes (199) (25) 254
Other liabilities (123) (94) 175
Interest on Master Loan 23,963 21,975 21,704
Net cash (used in) provided by operating
activities (3,380) 4,133 5,299
Cash flows from investing activities:
Insurance proceeds received 8,406 -- --
Property improvements and replacements (2,431) (2,591) (3,022)
Proceeds from sale of investment properties 35,180 52 3,350
Net withdrawals from (deposits to) restricted escrows (550) (454) (583)
Lease commissions paid -- (527) (583)
Distributions from investment in limited partnerships -- -- 336
Net cash provided by (used in) investing
activities 40,605 (3,520) (502)
Cash flows from financing activities:
Prepayment penalty (4) -- --
Advances on Master Loan -- 220 150
Loan costs paid -- -- (29)
Principal payments on mortgage notes payable (247) (286) (275)
Principal payments on Master Loan (33,111) (155) (3,768)
Repayment of mortgage notes payable (2,315) -- --
Net cash used in financing activities (35,677) (221) (3,922)
Net increase in cash and cash equivalents 1,548 392 875
Cash and cash equivalents at beginning of period 2,199 1,807 932
Cash and cash equivalents at end of period $ 3,747 $ 2,199 $ 1,807
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,630 $ 4,306 $ 2,920
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Organization and Summary of Significant Accounting Policies
The Partnership's financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership continues to incur
operating losses, suffers from inadequate liquidity, has an accumulated deficit,
and is unable to repay the Master Loan balance which matures in 2000. The
Partnership realized net income of approximately $1,797,000 for the year ended
December 31, 1999. This was due to the recognition of a gain on the sale of
discontinued operations of approximately $20,753,000 relating to the sales of
all seven of the Partnership's commercial properties. The Partnership incurred a
loss before the gain on the sale of discontinued operations of approximately
$18,928,000. The General Partner expects the Partnership to continue to incur
such losses from operations.
The Partnership's indebtedness to CCIP/2 under the Master Loan of approximately
$247,753,000, including accrued interest, matures in November 2000. The General
Partner is currently in negotiations with CCIP/2 with respect to its options on
maturity. The Partnership does not have the means with which to satisfy this
obligation. No other sources of additional financing have been identified by the
Partnership, nor does the General Partner have any other plans to remedy the
liquidity problems the Partnership is currently experiencing. At December 31,
1999, partners' deficit was approximately $243,794,000.
The General Partner expects revenues from the four investment properties will be
sufficient over the next twelve months to meet all property operating expenses,
mortgage debt service requirements and capital expenditure requirements.
However, these cash flows will be insufficient to repay to CCIP/2 the Master
Loan balance, including accrued interest, in the event it is not renegotiated.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from these uncertainties.
Organization: Equity Partners/Two ("EP/2"), a California Corporate General
Partnership, was formed on April 28, 1983, to engage in the business of
acquiring, operating and holding equity investments in income-producing real
estate properties. Certain of the general partners of EP/2 were former
shareholders and former management of Consolidated Capital Equities Corporation
("CCEC"), the former corporate general partner of CCIP/2 (as defined below). On
November 16, 1990, pursuant to the bankruptcy settlement discussed below, EP/2's
general partners executed a new partnership agreement (the "New Partnership
Agreement") whereby EP/2 converted from a general partnership to a California
limited partnership, Consolidated Capital Equity Partners/Two, L.P. ("CCEP/2").
The general partners of EP/2 became limited partners of CCEP/2. ConCap Holdings,
Inc. ("CHI"), a Texas corporation, is CCEP/2's General Partner.
The operations of EP/2 were financed substantially through nonrecourse notes
with participation interests (the "Master Loan") from Consolidated Capital
Institutional Properties/2 ("CCIP/2"), a California limited partnership. These
notes are secured by the real properties owned by and notes receivable on sold
properties owed to CCEP/2. The Partnership Agreement provides that the
Partnership is to terminate on June 24, 2011 unless terminated prior to such
date. The Partnership commenced operations on April 28, 1983. The Partnership
operates four apartment properties located in Colorado, Illinois, Ohio and
Texas. Six commercial properties were sold in September, 1999 and one commercial
property was sold in December 1999.
Principles of Consolidation: The financial statements include all the amounts of
the Partnership and its 99.00% owned partnership. The General Partner of the
consolidated partnerships is ConCap Holdings, Inc. ConCap Holdings Inc. may be
removed as the general partner of the consolidated partnership by the
Registrant; therefore, the consolidated partnerships are controlled and
consolidated by the Registrant. All significant interpartnership balances have
been eliminated.
EP/2 Bankruptcy and Reorganization: During 1989, EP/2 defaulted on certain
interest payments that were due to CCIP/2 under the Master Loan and, before
CCIP/2 was able to exercise its remedies for such default, EP/2 filed for
bankruptcy protection in a Chapter 11 reorganization proceeding ("Chapter 11").
On October 18, 1990, the bankruptcy court approved EP/2's consensual plan of
reorganization (the "Plan"). On November 16, 1990, CCIP/2 consummated a closing
under the Plan pursuant to which: (1) CCIP/2 and EP/2 executed an amended and
restated loan agreement ("New Master Loan Agreement"); (2) CCEP/2 renewed the
deeds of trust on all collateral securing the Master Loan; (3) EP/2 paid CCIP/2
cash of approximately $2.5 million, including $1.8 million contributed by the
Corporate General Partners of EP/2 related to their promissory notes; (4) the
general partners of EP/2 contributed certain partnership interests in affiliated
partnerships ("General Partnership Interests"), which were valued by management
of CCIP/2 at approximately $2.5 million, that were assigned to CCIP/2 as
additional collateral securing the Master Loan and (5) all liabilities and
claims between EP/2's general partners and CCIP/2 were released. See "Note E"
for a description of the terms of the New Master Loan Agreement.
The Corporate Managing General Partner of EP/2 was Consolidated Capital
Enterprises, Inc. ("CCEI"), a Georgia corporation. In December 1988, CCEC filed
for Chapter 11 protection. In October 1990, as part of CCEC's reorganization
plan, CCEC sold its general partner interest in CCIP/2 to ConCap Equities, Inc.
("CEI"), a Delaware corporation. Pursuant to the New Partnership Agreement as
discussed above, CHI, a wholly-owned subsidiary of CEI, became the sole general
partner of CCEP/2, replacing CCEI, and the former general partners of EP/2
became limited partners of CCEP/2. Pursuant to the New Partnership Agreement,
CCEP/2 is managed by CHI and CHI has full discretion with respect to conducting
CCEP/2's business. CHI and the limited partners are hereinafter referred to
collectively as the "Partners." All of CEI's outstanding stock is owned by
Insignia Properties Trust, an affiliate of Apartment Investment and Management
Company ("AIMCO"). (See Note B - Transfer of Control), which was acquired
through two transactions in December 1994 and October 1995.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: Includes cash on hand and in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Restricted Cash: Includes insurance proceeds received to date related to the
casualty at Village Brooke (see Note C) net of costs incurred. This money is
restricted to be used to reconstruct the property.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of the
Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 5 years.
Effective January 1, 1999 the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note K).
Loan Costs: Loan costs of approximately $418,000 and approximately $607,000 at
December 31, 1999 and 1998, respectively, less accumulated amortization of
approximately $198,000 and $251,000, at December 31, 1999 and 1998, respectively
are included in other assets and are being amortized on a straight-line basis
over the life of the loans. The amortization expense is included in interest
expense. As a result of the sale of Town Center and Richmond Plaza, loan costs
of approximately $27,000, net of accumulated amortization were written off in
1999.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $159,000, $156,000, and $158,000 for the
years ended December 31, 1999, 1998 and 1997, respectively, were charged to
expense as incurred.
Investment Properties: Investment properties consist of four apartment complexes
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
Costs of properties that have been permanently impaired have been written down
to appraised value. No adjustments for impairment of value were recorded in the
years ended December 31, 1999, 1998, and 1997.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the General Partner's policy is to offer rental concessions during particularly
slow months or in response to heavy competition from other similar complexes in
the area. Concessions are charged against rental income as incurred.
The Partnership leased certain commercial space to tenants under various lease
terms. The leases were accounted for as operating leases in accordance with
"Financial Accounting Standards Board Statement No. 13." Some of the leases
contained stated rental increases during their term. For leases with fixed
rental increases, rents were recognized on a straight-line basis over the terms
of the lease.
For all other leases, minimum rents were recognized over the terms of the
leases.
Restricted Escrow:
Reserve Account: A general Reserve Account was established in 1996 with the
refinancing proceeds for each mortgaged property. These funds were established
to cover necessary repairs and replacements of existing improvements, debt
service, out of pocket expenses incurred for ordinary and necessary
administrative tasks, and payment of real property taxes and insurance premiums.
The Partnership is required to make quarterly deposits of net operating income
(as defined in the mortgage note) from each refinanced property to the
respective reserve account. The balance at December 31, 1999 and 1998, is
approximately $139,000 and $168,000, respectively, which includes interest.
Capital Improvement Account: A Capital Improvement Account was also established
in 1996 with the refinancing proceeds from Richmond Plaza. This fund was
established to cover necessary repairs and replacements of existing
improvements, debt service, out of pocket expenses incurred for ordinary and
necessary administrative tasks, and payment of real property taxes and insurance
premiums. The Partnership is required to make quarterly deposits of net
operating income (as defined in the mortgage note). The balance at December 31,
1998 was approximately $1,551,000 which included interest. The property was sold
in December 1999 with the balance in this account being transferred to the
buyer.
Lease Commissions: Lease commissions are capitalized and amortized using the
straight-line method over the life of the applicable lease. At December 31, 1998
lease commissions totaled approximately $3,188,000 with accumulated amortization
of approximately $1,837,000. The seven commercial properties for which lease
commissions were applicable were sold during 1999, and the corresponding balance
in lease commissions was written off.
Allocation of Net Income and Cash Distributions: Pursuant to the Partnership
Agreement, net income and net losses for both financial and tax reporting
purposes are allocated 99% to the Limited Partners and 1% to CHI. Distributions
to the Partners are not allowed until CCEP/2 has fully paid and performed under
the terms of the Master Loan.
Income Taxes: No provision has been made in the financial statements for Federal
income taxes because under current law, no Federal income taxes are paid
directly by CCEP/2. The Partners are responsible for their respective shares of
CCEP/2's net income or loss. CCEP/2 reports certain transactions differently for
tax than for financial statement purposes.
The tax basis of the Partnership's assets and liabilities is approximately
$187,178,000 greater than the assets and liabilities as reported in the
financial statements.
Reclassifications: Certain reclassifications have been made to the 1998 and 1997
information to conform to the 1999 presentation.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the General Partner. The General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Note C - Casualty Event
In April 1999, one of the Partnership's residential properties, Village Brooke,
was completely destroyed by a tornado. It is estimated that the property
sustained approximately $16,000,000 in damages. As of December 31, 1999,
$10,000,000 in insurance proceeds have been received. All of the property's
fixed assets and related accumulated depreciation were written off as a result
of this casualty. Lost rents of approximately $750,000 and expenses of
approximately $844,000 have been recorded as of December 31, 1999 which resulted
in a casualty gain of approximately $5,473,000 at December 31, 1999. The General
Partner is currently negotiating with the taxing authorities to have the
property taxed as undeveloped land. The General Partner is currently evaluating
and surveying the land to determine possible new construction of the property.
In April 1999, an electrical fire occurred at Town Center. The property
sustained approximately $181,000 in damages and realized a casualty loss of
approximately $33,000 which is included in operating expense. The property was
sold in September (see Note D). The purchaser of the property assumed the
remaining obligations related to the fire.
Note D - Sale of Investment Property-Discontinued Operations
On September 10, 1999, the five commercial properties located in Michigan
(Lahser One, Lahser Two, Crescent Centre, Central Park Place, Central Park
Plaza) were sold to an unaffiliated third party for $26,125,000. After closing
expenses of approximately $1,727,000 the net proceeds received by the
Partnership were approximately $24,398,000. The sale of the properties resulted
in a gain on sale of investment property of approximately $10,392,000.
On September 22, 1999, Town Center Plaza, located in Santa Ana, California, was
sold to an unaffiliated third party for $11,650,000. After closing expenses of
approximately $1,004,000 the net proceeds received by the Partnership were
approximately $10,646,000. The Partnership used some of the proceeds from the
sale of the property to pay off the debt encumbering the property of
approximately $2,316,000. The sale of the property resulted in a gain on sale of
investment property of approximately $4,862,000 and a loss on early
extinguishment of debt of approximately $7,000.
On December 23, 1999, Richmond Plaza, located in Richmond, Virginia, was sold to
an unaffiliated third party for $14,900,000. Closing expenses were approximately
$784,000. The debt encumbering the property of approximately $14,500,000 was
assumed by the buyer. The sale of the property resulted in a gain on sale of
investment property of approximately $5,499,000 and a loss on early
extinguishment of debt of approximately $24,000.
These sales constituted all of the Partnership's commercial properties and
accordingly have been classified as discontinued operations at December 31,
1999. The Partnership's consolidated statements of operations have been restated
to reflect the commercial property operations as discontinued.
Revenues from discontinued operations were approximately $9,005,000, $12,250,000
and $11,072,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Note E - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at December 31,
1999 and 1998, are approximately $247,753,000 and approximately $256,901,000,
respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan, interest accrues at 10% per annum and
payments are due quarterly in an amount equal to Excess Cash Flow, generally
defined in the Master Loan Agreement as net cash flow from operations after
capital improvements and 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. The net proceeds from the sale of the commercial properties
during the year ended December 31, 1999 were paid to CCIP/2 as required under
the terms of the Master Loan Agreement.
Effective January 1, 1993, CCEP/2 and CCIP/2 amended the Master Loan Agreement
to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the Master
Loan from CCIP/2 to CCEP/2. 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 CCEP/2'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.
No advances were received from CCIP/2 during the year ended December 31, 1999 as
an advance on the Master Loan. The Master Loan matures in November 2000. The
General Partner has determined that the Master Loan and related interest payable
has no determinable fair value since payments are limited to net cash flows, as
defined, but is not believed to be in excess of the fair values of the
underlying collateral. The General Partner is currently in negotiations with
CCIP/2 with respect to its options upon maturity. If the Master Loan cannot be
extended prior to maturity, the Partnership will risk losing its four investment
properties through foreclosure.
During 1999, CCEP/2 paid down the Master Loan by $33,111,000. These payments
were made from distributions received from three affiliated partnerships, excess
cash from the Partnership's investment properties and from proceeds received
from the sale of the Partnership's commercial properties. During 1998, CCIP/2
loaned approximately $220,000 to CCEP/2 as an advance on the Master Loan. Also
during 1998, CCEP/2 paid down the Master Loan by $155,000. These payments were
made from distributions received from two affiliated partnerships. During 1997,
CCIP/2 loaned approximately $150,000 to CCEP/2 as an advance on the Master Loan.
Also during 1997, CCEP/2 paid down the Master Loan by $3,768,000. These payments
were made from approximately $461,000 of proceeds from certain investments and
approximately $3,307,000 of proceeds from the sale of Cosmopolitan Center.
Note F - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Canyon Crest
1st Mortgage $ 2,000 $ 12 7.33% 11/01/03 $ 2,000
Highcrest Townhomes
1st Mortgage 4,000 24 7.33% 11/01/03 4,000
Windemere
1st Mortgage 3,000 18 7.33% 11/01/03 3,000
Village Brooke
1st Mortgage 6,557 54 8.00% 12/01/02 6,161
Totals $15,557 $108 $15,161
</TABLE>
The mortgage notes payable are nonrecourse and are collateralized by deeds of
trust on the real property. The mortgage notes require prepayment penalties if
repaid prior to maturity. All of these notes are superior to the Master Loan.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1999, are as follows (in thousands):
Years Ending December 31,
2000 $ 126
2001 136
2002 6,295
2003 9,000
Total $ 15,557
Note G - Related Party Transactions
CCEP/2 has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
Affiliates of the General Partner provide property management and asset
management services to the Partnership. CCEP/2 paid property management fees
based upon collected gross rental revenues for property management services in
each of the years ended December 31, 1999, 1998 and 1997. The Partnership
Agreement (the "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.
Also, CCEP/2 is subject to an Investment Advisory Agreement between CCEP/2 and
an affiliate of the General Partner. This agreement provides for an annual fee,
payable in monthly installments, to an affiliate of the General Partner for
advising and consulting services for CCEP/2's properties. The General Partner
and its affiliates received reimbursements and fees for the years ended December
31, 1999, 1998, and 1997 as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Property management fees (included in
operating expenses) $ 304 $ 696 $ 881
Investment advisory fees (included in general
and administrative expense) 178 173 154
Lease commissions -- 381 380
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 237 292 296
Real estate brokerage commissions (included in
gain on sale of discontinued operations) 1,580 -- --
</TABLE>
During the years ended December 31, 1999, 1998, and 1997, affiliates of the
General Partner were entitled to receive 5% of gross receipts from the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $304,000, $337,000, and
$323,000 for the years ended December 31, 1999, 1998, and 1997, respectively.
For the years ended December 31, 1998 and 1997 affiliates of the General Partner
were entitled to receive varying percentages of gross receipts from all the
Registrant's commercial properties for providing property management services.
The Registrant paid to such affiliates $359,000 and $558,000 for the nine months
ended September 30, 1998 and the year ended December 31, 1997, respectively. No
such fees were paid for the year ended December 31, 1999 as these services were
provided by an unrelated third party effective October 1, 1998.
An affiliate of the General Partner received investment advisory fees amounting
to approximately $178,000, $173,000, and $154,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expense amounting to approximately $237,000, $292,000, and
$296,000 for the years ended December 31, 1999, 1998, and 1997, respectively.
For acting as real estate broker in connection with the sales of seven of the
Partnership's commercial properties, the General Partner was paid a real estate
commission of approximately $1,580,000 during the year ended December 31, 1999.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from Consolidated Capital
Institutional Properties/2 ("CCIP/2") pursuant to the Master Loan Agreement.
Such interest payments totaled approximately $998,000, $1,834,000, and $236,000
for the years ended December 31, 1999, 1998, and 1997, respectively. Advances of
approximately $220,000 and $150,000 were made under the Master Loan Agreement
during the years ended December 31, 1998 and 1997. No advances were made under
the Master Loan Agreement during the year ended December 31, 1999. Additionally,
CCEP/2 made principal payments on the Master Loan of approximately $33,111,000,
$155,000 and $3,768,000 respectively. These funds were received from
distributions from three affiliated partnerships, excess cash from the
Partnership's investment properties, and from proceeds received from the sale of
commercial properties.
Note H - Real Estate and Accumulated Depreciation
The investment properties owned by the Partnership consist of the following:
(in thousands)
<TABLE>
<CAPTION>
Building
& Related
Personal Accumulated Depreciable
Description Land Interest Total Depreciation Life-Years
<S> <C> <C> <C> <C> <C>
Canyon Crest $ 145 $ 3,603 $ 3,748 $ 2,283 3-20
Highcrest Townhomes 707 7,658 8,365 4,959 3-20
Village Brooke 1,099 48 1,147 -- 3-20
Windmere 780 5,919 6,699 4,075 3-20
Total $ 2,731 $17,228 $ 19,959 $11,317
</TABLE>
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note J - Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
Note K - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
increase income before the change by approximately $48,000. The cumulative
effect, had this change been applied to prior periods, is not material. The
accounting principle change will not have an effect on cash flow, funds
available for distributions or fees payable to the General Partner or
affiliates.
PART III
Item 10. Directors and Executive Officers of the General Partner of the
Partnership
The Registrant has no officers or directors. The General Partner is ConCap
Equities, Inc. ("CEI"). The names and ages of, as well as the position and
offices held by the present executive officers and directors of the General
Partner are set forth below. There are no family relationships between or among
any officers or directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council. He
received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Martha L. Long has been Senior Vice President and Controller of the General
Partner and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO and its joint filers failed to timely file a Form 4 with respect to its
acquisition of Units.
Item 11. Executive Compensation
None of the directors and officers of the General Partner received any
remuneration from the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1999:
Entity Number of Units Percentage
Reedy River Properties
(an affiliate of AIMCO) 168,736.5 18.56%
Insignia Properties LP
(an affiliate of AIMCO) 17,240.6 1.89%
AIMCO Properties, LP
(an affiliate of AIMCO) 117,459.9 12.92%
Cooper River Properties, LLC
(an affiliate of AIMCO) 67,518.7 7.43%
Reedy River Properties, Insignia Properties LP, and Cooper River Properties, LLC
are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie
Place, Greenville, SC 29602.
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Boulevard, Denver, Colorado 80222.
No directors or officers of the General Partner owns any Units of the
Partnership of record or beneficially.
Item 13. Certain Relationships and Related 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 Agreement (the "Agreement") provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The following payments were made to
the General Partner and affiliates during the years ended December 31, 1999,
1998, and 1997:
For the years ended December 31,
1999 1998 1997
(in thousands)
Reimbursements for services of affiliates
(included in general and administrative
expenses) $ 217 $ 303 $ 278
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $217,000, $303,000 and
$278,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Several tender offers were made by various parties, including affiliates of the
General Partners, during the years ended December 31, 1999, 1998 and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 370,955.70
units of limited partnership interest in the Partnership representing
approximately 40.80% of the outstanding units. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) Exhibits
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1999:
A Form 8-K/A dated September 22, 1999, as filed with the Securities
and Exchange Commission on November 16, 1999, in connection with the
sale of Towne Center Plaza.
A Form 8-K dated December 23, 1999, as filed with the Securities and
Exchange Commission on January 7, 2000, in connection with the sale
of Richmond Plaza.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: March 29, 2000
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 on the date indicated.
/s/Patrick J. Foye Date: March 29, 2000
Patrick J. Foye
Executive Vice President and Director
/s/Martha L. Long Date: March 29, 2000
Martha L. Long
Senior Vice President and Controller
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 2
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998
between AIMCO and IPT.
3 Certificates of Limited Partnership, as amended to date.
10.1 Amended Loan Agreement dated November 15, 1990 (the "Effective
Date"), by and between the Partnership and EP/2 (Incorporated
by reference to the Annual Report on Form 10-K for the year
ended December 31, 1990 ("1990 Annual Report")).
10.2 Assumption Agreement as of the Effective Date, by and between
EP/2 and CCEP/2 (Incorporated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective Date, by and
between the Partnership and EP/2. (Incorporated by reference
to the 1990 Annual Report).
10.4 Assignment of Partnership Interests in CC Office Associates
and Broad and Locust Associates dated November 16, 1990 (the
effective date), by and between EP/2 and CCEP/2 (Incorporated
by reference to the 1990 Annual Report).
10.5 Property Management Agreement No. 113 dated October 23, 1990,
by and between the Partnership and CCEC (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990).
10.6 Bill of Sale and Assignment dated October 23, 1990, by and
between CCEC and ConCap Services Company (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990).
10.7 Assignment and Assumption dated October 23, 1990, by and
between CCEC and ConCap Management Limited Partnership
("CCMLP") (Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended September 30, 1990).
10.8 Assignment and Agreement as to Certain Property Management
Services dated October 23, 1990, by and between CCMLP and
ConCap Capital Company (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September
30, 1990).
10.9 Assignment and Agreement dated October 23, 1990, by and
between CCMLP and The Hayman Company (100 Series of Property
Management Contracts)(Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September
30, 1990).
10.10 Construction Management Cost Reimbursement Agreement dated
January 1, 1991, by and between the Partnership and The Hayman
Company. (Incorporated by reference to the Annual Report on
Form 10-K for the year ended December 31, 1991).
10.11 Investor Services Agreement dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990).
10.12 Assignment and Assumption Agreement (Investor Services
Agreement) dated October 23, 1990 by and between CCEC and
ConCap Services Company.
10.13 Letter of Notice dated December 20, 1991, from Partnership
Services, Inc. ("PSI") to the Partnership regarding the change
in ownership and dissolution of ConCap Services Company
whereby PSI assumed the Investor Services Agreement.
(Incorporated by reference to the Annual Report on Form 10-K
for the year ended December 31, 1991).
10.14 Financial Services Agreement dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990) (Incorporated by reference to the 1990
Annual Report).
10.15 Assignment and Assumption Agreement (Financial Services
Agreement) dated October 23, 1990, by and between CCEC and
ConCap Capital Company (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September
30, 1990).
10.16 Letter of Notice dated December 20, 1991, from PSI to the
Partnership regarding the change in ownership and dissolution
of ConCap Capital Company whereby PSI assumed the Financial
Services Agreement. (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991).
10.17 Property Management Agreement No.501 dated February 16, 1993,
by and between the Partnership and Coventry Properties, Inc.
(Incorporated by reference to the Annual Report on Form 10-K
for the year ended December 31, 1992)
10.18 Property Management Agreement No. 412 dated May 13, 1993,
by and between Consolidated Capital Equity Partners/Two L.P.
and Coventry Properties, Inc. (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
10.19 Assignment and Assumption Agreement (Property Management
Agreement No. 412) dated May 13, 1993, by and between Coventry
Properties, Inc., R&B Apartment Management Company Inc.
and Partnership Services, Inc. (Incorporated by reference
to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
10.20 Assignment and Agreement as to Certain Property Management
Services dated May 13, 1993, by and between Coventry
Properties, Inc. and Partnership Services, Inc. (Incorporated
by reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993).
10.21 Property Management Agreement No. 413 dated May 13, 1993,
by and between Consolidated Capital Equity Partners/Two L.P.
and Coventry Properties, Inc. (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
10.22 Assignment and Assumption Agreement (Property Management
Agreement No. 413) dated May 13, 1993, by and between Coventry
Properties, Inc., R&B Apartment Management Company, Inc.
and Partnership Services, Inc.(Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
10.23 Assignment and Agreement as to Certain Property Management
Services dated May 13, 1993, by and between Coventry
Properties, Inc. and Partnership Services, Inc. (Incorporated
by reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993).
10.24 Contract for sale of real estate for North Park Plaza dated
September 12, 1996, between Consolidated Capital Institutional
Properties/2, a California limited partnership and North Park
Southfield, L.L.C., a Michigan limited liability company.
10.25 Contract for sale of real estate for Lahser One, Lahser Two,
Crescent Centre, Central Park Place, and Central Park Plaza
dated September 10, 1999 between Consolidated Capital
Institutional Properties/2, a California limited partnership
and Southfield Office Properties, LLC. (Filed with Form 8-K
dated September 10, 1999)
10.26 Second amendment to purchase and sale contract between
Consolidated Capital Institutional Properties/2, a California
limited partnership and Southfield Office Properties, LLC for
sale of real estate for Lahser One, Lahser Two, Crescent
Centre, Central Park Place, and Central Park Plaza (Filed with
Form 8-K dated September 10, 1999)
10.27 Reinstatement of and Third amendment to purchase and sale
contract between Consolidated Capital Institutional
Properties/2, a California limited partnership and Southfield
Office Properties, LLC for sale of real estate for Lahser One,
Lahser Two, Crescent Centre, Central Park Place, and Central
Park Plaza (Filed with Form 8-K dated September 10, 1999)
10.28 Contract for sale of real estate for Towne Center Plaza dated
September 22, 1999 between Consolidated Capital Institutional
Properties/2 , a California limited partnership and Colton
Real Estate Group, d/b/a The Colton Company (Filed with Form
8-K/A dated September 22, 1999)
10.29 Contract for sale for real estate for Richmond Plaza dated
December 23, 1999 between Consolidated Capital Institutional
Properties/2, a California limited partnership and The
Bernstein Companies (Filed with Form 8-K dated December 23,
1999)
11 Statement regarding computation of Net Income per Limited
Partnership Unit (Incorporated by reference to Note 1 of
Item 8 - Financial Statements of this Form 10-K).
16 Letter, dated August 12, 1992, from Ernst & Young to the
Securities and Exchange Commission regarding change in
certifying accountant. (Incorporated by reference to Form 8-K
dated August 6, 1992).
27 Financial Data Schedule containing summary financial
information extracted from the balance sheet and statement
of operations which is qualified in its entirety by reference
to such financial statements.
28.1 Fee Owner's Limited Partnership Agreement dated November 14,
1990 (Incorporated by reference to the 1990 Annual Report).
99.1 Consolidated Capital Equity Partners/Two, L.P., audited
financial statements for the years ended December 31, 1999 and
1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties/2 1999 Fourth Quarter 10-KSB and is qualified
in its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000719184
<NAME> Consolidated Capital Institutional Properties/2
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,846
<SECURITIES> 0
<RECEIVABLES> 92
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 47,503
<DEPRECIATION> (29,129)
<TOTAL-ASSETS> 25,323
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,124
<TOTAL-LIABILITY-AND-EQUITY> 25,323
<SALES> 0
<TOTAL-REVENUES> 1,328
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 808
<EPS-BASIC> 0.88 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
