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 March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to ________
Commission file number 0-13083
CONSOLIDATED CAPITAL PROPERTIES V
(Exact name of small business issuer as specified in its charter)
California 94-2918560
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. 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)
March 31, 1999
Assets
Cash and cash equivalents $ 1,277
Receivables and deposits 396
Restricted escrows 193
Other assets 233
Investment properties:
Land $ 1,969
Buildings and related personal property 19,752
21,721
Less accumulated depreciation (15,458) 6,263
$ 8,362
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 70
Tenant security deposit liabilities 56
Accrued property taxes 453
Other liabilities 149
Mortgage notes payable 10,947
Partners' Deficit
General partner $ (21)
Special limited partners (50)
Limited partners (179,537.20 units
issued and outstanding) (3,242) (3,313)
$ 8,362
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
March 31,
1999 1998
Revenues:
Rental income $1,079 $1,064
Other income 35 46
Total revenues 1,114 1,110
Expenses:
Operating 486 464
General and administrative 53 48
Depreciation 285 271
Interest 201 208
Property taxes 97 120
Total expenses 1,122 1,111
Net loss $ (8) $ (1)
Net loss allocated to general partner (.2%) $ -- $ --
Net loss allocated to limited partners (99.8%) (8) (1)
$ (8) $ (1)
Net loss per limited partnership unit $(0.04) $ --
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
three months ended
March 31, 1999 -- -- -- (8) (8)
Partners' deficit at
March 31, 1999 179,537.20 $ (21) $ (50) $ (3,242) $(3,313)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net loss $ (8) $ (1)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 285 271
Amortization of lease commissions, loan costs,
and debt forgiveness (6) (2)
Change in accounts:
Receivables and deposits 1 104
Other assets (23) 11
Accounts payable 13 (102)
Tenant security deposit liabilities 2 (3)
Accrued property taxes (7) (65)
Other liabilities 8 (49)
Net cash provided by operating activities 265 164
Cash flows from investing activities:
Property improvements and replacements (134) (69)
Net (deposits to) withdrawals from restricted escrows (11) 11
Proceeds from sale of investments -- 100
Net cash (used in) provided by
investing activities (145) 42
Cash flows from financing activities:
Payments on mortgage notes payable (20) (27)
Net cash used in financing activities (20) (27)
Net increase in cash and cash equivalents 100 179
Cash and cash equivalents at beginning of period 1,177 574
Cash and cash equivalents at end of period $1,277 $ 753
Supplemental disclosure of cash flow information:
Cash paid for interest $ 192 $ 211
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 months ended March 31, 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
limited partnerships wholly owned by the Registrant. All significant
interpartnership balances have been eliminated.
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, a publicly traded real
estate investment trust, ("AIMCO") with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO ultimately acquired a 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 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.
During the three months ended March 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $41,000 and $40,000 for the
three months ended March 31, 1999 and 1998, respectively. For the three months
ended March 31, 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 $19,000 for the three months ended March 31, 1998. Effective October
1, 1998 (the effective date of the Insignia Merger) these services for the
commercial property were provided by an unrelated party.
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
$28,000 and $30,000 for the three months ended March 31, 1999 and 1998,
respectively.
During the three months ended March 31, 1998, the Partnership paid to affiliates
of the General Partner approximately $1,000 for lease commissions on the
Partnership's commercial property. No such costs were incurred for the three
months ended March 31, 1999. These lease commissions are included in other
assets and 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 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 in the Partnership or 6.22% of the total outstanding units.
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 $1,338,000, are less than the reserve requirement of approximately
$1,760,000 at March 31, 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 either of the three months ended March 31, 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 described in the
summary of significant accounting policies 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 segment:
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 three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands). The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segments.
1999 Residential Commercial Other Totals
Rental income $ 780 $ 299 $ -- $ 1,079
Other income 27 1 7 35
Interest expense 177 24 -- 201
Depreciation 198 87 -- 285
General and administrative expense -- -- 53 53
Segment profit (loss) 37 1 (46) (8)
Total assets 5,590 1,845 927 8,362
Capital expenditures for
investment properties 126 8 -- 134
1998
Rental income $ 755 $ 309 $ -- $ 1,064
Other income 29 7 10 46
Interest expense 177 31 -- 208
Depreciation 186 85 -- 271
General and administrative expense -- -- 48 48
Segment profit (loss) 1 36 (38) (1)
Total assets 5,836 2,107 611 8,554
Capital expenditures for
investment properties 42 27 -- 69
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 the 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 as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. 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, plaintiffs filed an amended complaint. The General Partner has filed
demurrers to the amended complaint which were heard during February 1999. No
ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, will be material to the
Partnership's overall operations.
The Partnership is unaware of any 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 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.
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 three months ended March 31, 1999 and 1998:
1999 1998
Aspen Ridge Apartments
West Chicago, Illinois 95% 94%
Sutton Place Apartments
Corpus Christi, Texas 94% 92%
51 North High Street Building
Columbus, Ohio 100% 100%
Results of Operations
The Partnership's net loss for the three months ended March 31, 1999 was
approximately $8,000 as compared to approximately $1,000 for the three months
ended March 31, 1998. The increase in net loss was due to an increase in total
expenses, which was partially offset by an increase in total revenues. The
increase in total revenues was due to an increase in rental income, which was
partially offset by a decrease in other income. The increase in rental income
is primarily attributable to the increase in average rental rates at all three
of the Partnership's investment properties and an increase in occupancy at the
Partnership's residential properties. This increase in rental income was
partially offset by a decrease in other income as a result of a decrease in
tenant reimbursement income due to a decrease in miscellaneous tenant charges
and operating expense recovery income at 51 North High Street, the Partnership's
commercial property.
Total expenses increased primarily due to an increase in operating expense and
to a lesser extent an increase in depreciation expense and general and
administrative expense, which was partially offset by a decrease in property
taxes and to a lesser extent interest expense. Operating expense increased due
to increases in property expenses and administrative expenses. Property
expenses increased primarily due to an increase in electricity bills at 51 North
High and Aspen Ridge Apartments due to the timing of payments. The decrease in
property taxes is attributable to a refund of taxes at Sutton Place from 1997
payments.
General and administrative expense increased as a result of an increase in legal
costs associated with the legal case as noted in "Note F - Legal Proceedings".
Depreciation expense increased due to an increase in property improvement
expenditures at all three of the Partnership's investment properties. Interest
expense decreased slightly due to a decrease in mortgage principal. Included in
general and administrative expenses for the three months ended March 31, 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 March 31, 1999, the Partnership had cash and cash equivalents of
approximately $1,277,000 as compared to approximately $753,000 at March 31,
1998. Cash and cash equivalents increased approximately $100,000 during the
three months ended March 31, 1999 from the Partnership's year end, primarily due
to approximately $265,000 of cash provided by operating activities, which was
partially offset by approximately $20,000 of cash used in financing activities
and approximately $145,000 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 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 $1,338,000, are less than the reserve requirement of approximately
$1,760,000 at March 31, 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 property 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 made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$210,000 of capital improvements over the near term. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $266,000
for 1999 consisting of HVAC condensing unit replacement, parking lot, and
swimming pool repairs. As of March 31, 1999, approximately $112,000 has been
incurred consisting primarily of appliance and floor covering replacements,
interior building improvements and exterior painting.
Sutton Place Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$169,000 of capital improvements over the near term. The Partnership has
budgeted, but is not limited to, approximately $192,000 for 1999 consisting of
HVAC condensing unit replacement, parking lot repairs and swimming pool repairs.
As of March 31, 1999, approximately $14,000 has been incurred consisting
primarily of appliance and floor covering replacements.
51 North High Building
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$300,000 of capital improvements over the near term. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $53,000
for 1999 consisting of tenant improvements and interior and exterior repairs.
As of March 31, 1999 approximately $8,000 has been incurred consisting primarily
of tenant improvements.
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 current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $10,947,000 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 three months ended
March 31, 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 Invested
Capital requirement.
Potential Tender Offer
On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real
estate investment trust, whose Class A Common Shares are listed on the New York
Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a
Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP")
acquired indirect control of the General Partner. AIMCO and its affiliates
currently own 32.31% of the limited partnership interests in the Partnership.
AIMCO is presently considering whether it will engage in an exchange offer for
the additional limited partnership interests in the Partnership. There is a
substantial likelihood that, within a short period of time, AIMCO OP will offer
to acquire limited partnership interests in the Partnership for cash or
preferred units or common units of limited partnership interests in AIMCO OP.
While such an exchange offer is possible, no definite plans exist as to when or
whether to commence such an exchange offer, or as to the terms of any such
exchange offer, and it is possible that none will occur.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-QSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
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 mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, 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
March 31, 1999, had completed approximately 75% of 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. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.
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.
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 the testing process is
expected to be completed by July 31, 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 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
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. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
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 continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
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 $2.8 million ($0.6 million expensed
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 the 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 as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. 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, plaintiffs filed an amended complaint. The General Partner has filed
demurrers to the amended complaint which were heard during February 1999. No
ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, 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 for the quarter ended March 31, 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/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: May 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties V 1999 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,277
<SECURITIES> 0
<RECEIVABLES> 396
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,721
<DEPRECIATION> (15,458)
<TOTAL-ASSETS> 8,362
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,947
0
0
<COMMON> 0
<OTHER-SE> (3,313)
<TOTAL-LIABILITY-AND-EQUITY> 8,362
<SALES> 0
<TOTAL-REVENUES> 1,114
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 201
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
