FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-13083
CONSOLIDATED CAPITAL PROPERTIES V
(Exact name of small business issuer as specified in its charter)
California 94-2918560
(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)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1999
Assets
Cash and cash equivalents $ 1,376
Receivables and deposits (net of allowance of $12
for doubtful accounts) 310
Restricted escrows 265
Other assets 247
Investment properties:
Land $ 1,969
Buildings and related personal property 20,013
21,982
Less accumulated depreciation (16,013) 5,969
$ 8,167
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 83
Tenant security deposit liabilities 76
Accrued property taxes 389
Other liabilities 138
Mortgage notes payable 10,869
Partners' Deficit
General partner $ (21)
Special limited partners (50)
Limited partners (179,537.20 units issued and
outstanding) (3,317) (3,388)
$ 8,167
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 1,078 $ 1,080 $ 3,218 $ 3,202
Other income 59 44 143 149
Total revenues 1,137 1,124 3,361 3,351
Expenses:
Operating 565 544 1,523 1,560
General and administrative 53 52 158 151
Depreciation 285 297 840 846
Interest 205 191 607 612
Property taxes 118 115 316 357
Total expenses 1,226 1,199 3,444 3,526
Net loss $ (89) $ (75) $ (83) $ (175)
Net loss allocated to general
partner (.2%) $ -- $ -- $ -- $ --
Net loss allocated to limited
partners (99.8%) (89) (75) (83) (175)
Net loss $ (89) $ (75) $ (83) $ (175)
Net loss per limited partnership unit $ (.50) $ (.41) $ (.47) $ (.97)
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
Original capital
contributions 180,037 $ 1 $ -- $ 45,009 $ 45,010
Partners' deficit
at December 31, 1998 179,537.20 $ (21) $ (50) $ (3,234) $ (3,305)
Net loss for the nine months
ended September 30, 1999 -- -- -- (83) (83)
Partners' deficit
at September 30, 1999 179,537.20 $ (21) $ (50) $ (3,317) $ (3,388)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net loss $ (83) $ (175)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 840 846
Amortization of lease commissions,
loan costs, and debt forgiveness (3) (5)
Change in accounts:
Receivables and deposits 87 101
Other assets (23) 5
Accounts payable 26 (85)
Tenant security deposit liabilities 22 (4)
Accrued property taxes (71) (63)
Other liabilities (3) (12)
Net cash provided by operating activities 792 608
Cash flows from investing activities:
Property improvements and replacements (395) (443)
Net (deposits to) withdrawals from restricted escrows (83) 27
Lease commissions paid (58) (5)
Proceeds from sale of investments -- 100
Net cash used in investing activities (536) (321)
Cash flows from financing activities:
Payments on mortgage notes payable (57) (63)
Net increase in cash and cash equivalents 199 224
Cash and cash equivalents at beginning of period 1,177 574
Cash and cash equivalents at end of period $ 1,376 $ 798
Supplemental disclosure of cash flow information:
Cash paid for interest $ 581 $ 598
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES V
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties V (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1999, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998.
Principles of Consolidation:
The Partnership's consolidated financial statements include the accounts of its
lower tier limited partnerships (Aspen Ridge Associates, Ltd., Sutton Place
CCPV, L.P. and 51 North High Street, L.P.). At December 31, 1997, the General
Partner's interest in each of these three limited partnerships was transferred
to three wholly owned (by the Registrant) Limited Liability Companies making the
entities wholly owned by the Registrant. All significant interpartnership
balances have been eliminated.
Reclassifications:
Certain reclassifications have been made to the 1998 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 Apartment Investment and Management Company ("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
will have a material effect on the affairs and operations of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTNERS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
During the nine months ended September 30, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $126,000 and $121,000 for
the nine months ended September 30, 1999 and 1998, respectively. For the nine
months ended September 30, 1999 and 1998 affiliates of the General Partner were
entitled to receive varying percentages of gross receipts from the Registrant's
commercial property for providing property management services. The Registrant
paid to such affiliates $4,000 and $51,000 for the nine months ended September
30, 1999 and 1998, respectively. Effective October 1, 1998 (the effective date
of the Insignia Merger) these services for the commercial property were provided
by both an affiliate of the General Partner and an unrelated party. These fees
are included in operating expenses.
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with the administration of
Partnership activities. An affiliate of the General Partner received
reimbursement of accountable administrative expenses amounting to approximately
$73,000 and $96,000 for the nine months ended September 30, 1999 and 1998,
respectively. Included in these reimbursements is approximately $6,000 and
$11,000 of construction oversight reimbursement for the nine months ended
September 30, 1999 and 1998, respectively. These reimbursements are included in
investment property and general and administrative expenses.
During the nine months ended September 30, 1998, the Partnership paid to
affiliates of the General Partner approximately $6,000 for lease commissions on
the Partnership's commercial property. No such costs were paid to affiliates
for the nine months ended September 30, 1999. These lease commissions are
included in other assets and are amortized over the term of the respective
leases.
During December 1997, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 70,000 of the outstanding units of
limited partnership interest in the Partnership, at $30 per Unit, net to the
seller in cash. During February 1998, the tender offer was completed and the
Purchaser acquired 43,795.8 units of limited partnership interest at $30 per
Unit in the Partnership or 24.39% of the total outstanding units.
On July 30, 1998, another affiliate of the General Partner (the "Second
Purchaser") commenced a second tender offer for limited partnership interests in
the Partnership. The Purchaser offered to purchase up to 40,000 of the
outstanding units of limited partnership interest in the Partnership, at $33 per
unit, net to the seller in cash. During November 1998, the tender offer was
completed and the Second Purchaser acquired 11,175.00 units of limited
partnership interest at $33 per Unit in the Partnership or 6.22% of the total
outstanding units.
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 55,455.45 (approximately 30.89% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $30 per unit. The offer expired on July 30,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 5,855.70 units.
As a result, AIMCO and its affiliates currently own 64,502.50 units of limited
partnership interest in the Partnership representing approximately 35.93% of the
total outstanding units. It is possible that AIMCO or its affiliate 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. (See "Note F - Legal Proceedings").
NOTE D - COMMITMENT
The Partnership is required to maintain working capital reserves for normal
repairs, replacements, working capital and contingencies of not less than 5% of
Net Invested Capital, as defined in the Partnership Agreement. In the event
expenditures are made from these reserves, operating revenue shall be allocated
to such reserves to the extent necessary to maintain the foregoing level. Cash
and cash equivalents, tenant security deposits and investments totaling
approximately $1,455,000, are less than the reserve requirement of approximately
$1,760,000 at September 30, 1999. The Partnership intends to replenish the
working capital reserve from cash flow from operations after consideration of
any capital improvement needs of the properties. The Partnership's recent cash
flows from operations, however, have not been sufficient to replenish the
reserve and there is no assurance that future levels of cash flow from
operations will be adequate to accomplish this objective. The working capital
requirement must be met prior to any distributions to the partners; therefore,
no distributions were made for the nine month periods ended September 30, 1999
or 1998.
NOTE E - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has two reportable segments: residential properties and
commercial properties. The Partnership's residential property segment consists
of two apartment complexes located in West Chicago, Illinois and Corpus Christi,
Texas. The Partnership rents apartment units to tenants for terms that are
typically twelve months or less. The commercial property segment consists of an
office building located in Columbus, Ohio. This property leases space to a
government agency, a bank, and various other businesses at terms ranging from 12
months to 10 years.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those in the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1998.
Factors management used to identify the enterprise's reportable segments:
The Partnership's reportable segments consist of investment properties that
offer different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.
Segment information for the nine months ended September 30, 1999 and 1998, is
shown in the tables below. The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segments.
1999 Residential Commercial Other Totals
(in thousands)
Rental income $2,326 $ 892 $ -- $ 3,218
Other income 114 8 21 143
Interest expense 529 78 -- 607
Depreciation 602 238 -- 840
General and administrative expense -- -- 158 158
Segment profit (loss) 21 33 (137) (83)
Total assets 5,528 1,801 838 8,167
Capital expenditures for
investment properties 372 23 -- 395
1998 Residential Commercial Other Totals
(in thousands)
Rental income $ 2,285 $ 917 $ -- $ 3,202
Other income 103 19 27 149
Interest expense 531 81 -- 612
Depreciation 572 274 -- 846
General and administrative expense -- -- 151 151
Segment (loss) profit (76) 25 (124) (175)
Total assets 5,648 1,957 751 8,356
Capital expenditures for
investment properties 357 86 -- 443
NOTE F - 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 complaint 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 complaint seeks 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 ("Stipulation"), settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the General Partner will make tender offers for all
outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussions 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 operation. 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.
The Partnership's investment properties consist of two apartment complexes and
one commercial property. The following table sets forth the average occupancy
of the properties for the nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Aspen Ridge Apartments 95% 94%
West Chicago, Illinois
Sutton Place Apartments 92% 91%
Corpus Christi, Texas
51 North High Street Building 98% 100%
Columbus, Ohio
The General Partner is currently in negotiations to sell this property to an
unaffiliated third party. There can be no assurance that the General Partner
will be successful in its negotiations or that the property will ultimately be
sold.
Results of Operations
The Registrant's net loss for the three and nine months ended September 30, 1999
was approximately $89,000 and $83,000, respectively, as compared to a net loss
of approximately $75,000 and $175,000 for the three and nine months ended
September 30, 1998. The increase in net loss for the three months ended
September 30, 1999 was due to an increase in total expenses, which was offset by
a small increase in total revenues. The increase in total revenues is the
result of an increase in other income. Other income increased primarily due to
an increase in miscellaneous income. Total expenses increased for the three
months ended September 30, 1999 as a result of an increase in operating and
interest expense, which was offset by a decrease in depreciation. Operating
expense increased due to an increase in property expenses as a result of an
increase in salaries and related employee benefits for the three months.
Interest expense increased for the three months as a result of the amortization
method utilized to calculate interest on the debt on 51 North High Street.
The decrease in net loss for the nine months ended September 30, 1999 is due to
a decrease in total expense and to a lesser extent to an increase in total
revenues. Total revenue increased due to an increase in rental income. Rental
income increased primarily due to an increase in average annual rental rates at
all three of the Registrant's investment properties and to the increases in
occupancy at Aspen Ridge Apartments and Sutton Place Apartments, which offset
the slight decrease in occupancy at 51 North High Street Building. Total
expenses decreased primarily due to a decrease in operating expense and property
tax expense. Operating expense decreased due to a decrease in insurance and
maintenance expense. Insurance expense decreased at all of the investment
properties due to a change in insurance carriers during the fourth quarter of
1998. Maintenance expense decreased as a result of a decrease in interior
building improvements at all of the Partnership's investment properties, which
was offset by an increase in interior painting at the residential properties.
Property tax decreased due to a refund of taxes in 1999 at Sutton Place
Apartment from 1997 property tax payments and to a decrease in the assessment
value of 51 North High Street Building.
General and administrative, interest and depreciation expense remained
relatively constant for the comparable periods. Included in general and
administrative expenses for the nine months ended September 30, 1999 and 1998
are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $1,376,000 as compared to approximately $798,000 at September 30,
1998. Cash and cash equivalents increased approximately $199,000 during the
nine months ended September 30, 1999 from the Partnership's year end, primarily
due to approximately $792,000 of cash provided by operating activities, which
was partially offset by approximately $57,000 of cash used in financing
activities and approximately $536,000 of cash used in investing activities.
Cash used in financing activities consisted of payments of principal made on the
mortgages encumbering the Partnership's properties. Cash used in investing
activities consisted of property improvements and replacements, lease
commissions and net deposits to the escrow accounts maintained by the mortgage
lender. The Partnership invests its working capital reserves in money market
accounts.
The Partnership is required to maintain working capital reserves for normal
repairs, replacements, working capital and contingencies of not less than 5% of
Net Invested Capital as defined in the Partnership Agreement. In the event
expenditures are made from these reserves, operating revenue shall be allocated
to such reserves to the extent necessary to maintain the foregoing level. Cash
and cash equivalents, tenant security deposits and investments totaling
approximately $1,455,000, are less than the reserve requirement of approximately
$1,760,000 at September 30, 1999. The Partnership intends to replenish the
working capital reserve from cash flow from operations after consideration of
any capital improvement needs of the properties.
The Partnership's recent cash flows from operations, however, have not been
sufficient to replenish the reserve and there is no assurance that future levels
of cash flow from operations will be adequate to accomplish this objective. The
working capital requirement must be met prior to any 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 at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Partnership's properties are detailed below.
Aspen Ridge Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates by the General Partner on interior
improvements, it is estimated that the property requires approximately $210,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $266,000 for 1999
which include certain of the required improvements and consist of HVAC
condensing unit replacement, appliance and floor covering replacements, interior
building, parking lot, and swimming pool improvements. As of September 30,
1999, approximately $241,000 has been incurred consisting primarily of appliance
and floor covering replacements, HVAC condensing unit replacements, interior
building improvements, exterior building enhancements and pool improvements. As
of September 30, 1999 the exterior building enhancements are substantially
complete. These improvements were funded from the Partnership's replacement
reserve account.
Sutton Place Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates by the General Partner on interior
improvements, it is estimated that the property requires approximately $169,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $192,000 for 1999
which include certain of the required improvements and consist of HVAC
condensing unit replacement, appliance and floor covering replacements,
structural improvements, parking lot improvements and swimming pool
improvements. As of September 30, 1999, approximately $131,000 has been
incurred consisting primarily of appliance and floor covering replacements, HVAC
condensing unit replacements, structural improvements and parking lot
improvements. These improvements were funded from Partnership reserves and
operations.
51 North High Building
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates by the General Partner on interior
improvements, it is estimated that the property requires approximately $300,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $53,000 for 1999
which include certain of the required improvements and consist of tenant
improvements and interior and exterior improvements. As of September 30, 1999,
approximately $23,000 has been incurred consisting primarily of tenant
improvements and roof replacement. These improvements were funded from
Partnership reserves and operations. The General Partner is currently in
negotiations to sell this property to an unaffiliated third party. There can be
no assurance that the General Partner will be successful in its negotiations or
that the property will ultimately be sold.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any near-
term needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $10,869,000 is amortized over varying periods with
required balloon payments ranging from November 1, 2003 to June 1, 2004. The
General Partner will attempt to refinance such indebtedness and/or sell the
properties prior to such maturity date. If the properties cannot be refinanced
or sold for a sufficient amount, the Partnership will risk losing such
properties through foreclosure.
There were no cash distributions to the partners during the nine months ended
September 30, 1999 and 1998. No distributions are expected to be made in 1999
since the Partnership's working capital reserves do not meet the 5% of Net
Capital requirement.
Tender Offer
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 55,455.45 (approximately 30.89% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $30 per unit. The offer expired on July 30,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 5,855.70 units.
As a result, AIMCO and its affiliates currently own 64,502.50 units of limited
partnership interest in the Partnership representing approximately 35.93% of the
total outstanding units. It is possible that AIMCO or its affiliate 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. (See "Item 1. Financial Statements, Note F - Legal
Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
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 computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
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.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. 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 complaint 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
"Part I _ Financial Information, Item 1. Financial Statements, Note B _ Transfer
of Control"). The complaint seeks 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 ("Stipulation"), settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. The Court has preliminarily approved the Settlement and scheduled a
final approval hearing for December 10, 1999. In exchange for a release of all
claims, the Stipulation provides that, among other things, an affiliate of the
General Partner will make tender offers for all outstanding limited partnership
interests in 49 partnerships, including the Registrant, subject to the terms and
conditions set forth in the Stipulation, and has agreed to establish a reserve
to pay an additional amount in settlement to qualifying class members (the
"Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will
make an application for attorneys' fees and reimbursement of expenses, to be
paid in part by the partnerships and in part from the Settlement Fund.
The General Partner does not anticipate that costs associated with this case
will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS 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:
None filed during the quarter ended September 30, 1999
SIGNATURES
In accordance with the requirements of the Exchange Act, the Partnership caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES V
By: CONCAP EQUITIES, INC.
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: November 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties V 1999 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000725614
<NAME> CONSOLIDATED CAPITAL PROPERTIES V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,376
<SECURITIES> 0
<RECEIVABLES> 310
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,982
<DEPRECIATION> 16,013
<TOTAL-ASSETS> 8,167
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,869
0
0
<COMMON> 0
<OTHER-SE> (3,388)
<TOTAL-LIABILITY-AND-EQUITY> 8,167
<SALES> 0
<TOTAL-REVENUES> 3,361
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 607
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83)
<EPS-BASIC> (.47)
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
