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 June 30, 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)
June 30, 1999
Assets
Cash and cash equivalents $ 1,252
Receivables and deposits 337
Restricted escrows 227
Other assets 267
Investment properties:
Land $ 1,969
Buildings and related personal property 19,918
21,887
Less accumulated depreciation (15,728) 6,159
$ 8,242
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 40
Tenant security deposit liabilities 66
Accrued property taxes 397
Other liabilities 132
Mortgage notes payable 10,906
Partners' Deficit
General partner $ (21)
Special limited partners (50)
Limited partners (179,537.20 units
issued and outstanding) (3,228) (3,299)
$ 8,242
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 Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Rental income $1,061 $1,058 $2,140 $2,122
Other income 49 59 84 105
Total revenues 1,110 1,117 2,224 2,227
Expenses:
Operating 472 552 958 1,016
General and administrative 52 51 105 99
Depreciation 270 278 555 549
Interest 201 213 402 421
Property taxes 101 122 198 242
Total expenses 1,096 1,216 2,218 2,327
Net income (loss) $ 14 $ (99) $ 6 $ (100)
Net income (loss) allocated to
general partner (.2%) $ -- $ -- $ -- $ --
Net income (loss) allocated to
limited partners (99.8%) 14 (99) 6 (100)
Net income (loss) $ 14 $ (99) $ 6 $ (100)
Net income (loss) per limited
partnership unit: $ .08 $ (.55) $ .03 $ (.56)
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 income for the six months
ended June 30, 1999 -- -- -- 6 6
Partners' deficit at
June 30, 1999 179,537.20 $ (21) $ (50) $ (3,228) $(3,299)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net income (loss) $ 6 $ (100)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 555 549
Amortization of lease commission,
loan costs, and debt forgiveness (4) 8
Change in accounts:
Receivables and deposits 60 144
Other assets (21) 3
Accounts payable (17) (38)
Tenant security deposit liabilities 12 (3)
Accrued property taxes (63) (67)
Other liabilities (9) (28)
Net cash provided by operating activities 519 468
Cash flows from investing activities:
Property improvements and replacements (300) (278)
Net (deposits to) withdrawals from restricted escrows (45) 59
Lease commissions (58) (5)
Proceeds from sale of investments -- 100
Net cash used in investing activities (403) (124)
Cash flows from financing activities:
Payments on mortgage notes payable (41) (41)
Net cash used in financing activities (41) (41)
Net increase in cash and cash equivalents 75 303
Cash and cash equivalents at beginning of period 1,177 574
Cash and cash equivalents at end of period $1,252 $ 877
Supplemental disclosure of cash flow information:
Cash paid for interest $ 385 $ 399
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 six month periods ended June 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.
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 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 six months ended June 30, 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 $84,000 and $80,000 for the
six months ended June 30, 1999 and 1998, respectively. For the six months ended
June 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 $2,000 and $36,000 for the six months ended June 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
$48,000 and $59,000 for the six months ended June 30, 1999 and 1998,
respectively. Included in these reimbursements is approximately $6,000 and
$1,000 of construction oversight reimbursement for the six months ended June 30,
1999 and 1998, respectively. These reimbursements are included in operating and
general and administrative expenses.
During the six months ended June 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 incurred for the six
months ended June 30, 1999. These lease commissions are included in other
assets and amortized over the term of the respective leases.
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 55,455.45 (28.07%) 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 4,853.70 units.
As a result, AIMCO and its affiliates currently own 63,500.50 units of limited
partnership interest in the Partnership representing 35.37% 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.
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.
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 $1,323,000, are less than the reserve requirement of approximately
$1,760,000 at June 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 six month periods ended June 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 of the Partnership as
described 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 six months ended June 30, 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 $ 1,544 $ 596 $ -- $ 2,140
Other income 67 2 15 84
Interest expense 353 49 -- 402
Depreciation 397 158 -- 555
General and administrative expense -- -- 105 105
Segment profit (loss) 54 42 (90) 6
Total assets 5,550 1,816 876 8,242
Capital expenditures for
investment properties 288 12 -- 300
1998
Rental income $ 1,499 $ 623 $ -- $ 2,122
Other income 73 14 18 105
Interest expense 354 67 -- 421
Depreciation 376 173 -- 549
General and administrative expense -- -- 99 99
Segment (loss) profit (47) 28 (81) (100)
Total assets 5,676 2,035 802 8,513
Capital expenditures for
investment properties 199 79 -- 278
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, the plaintiffs have 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 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 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 six months ended June 30, 1999 and 1998:
1999 1998
Aspen Ridge Apartments
West Chicago, Illinois 95% 93%
Sutton Place Apartments
Corpus Christi, Texas 93% 91%
51 North High Street Building
Columbus, Ohio 99% 100%
Results of Operations
The Registrant's net income for the three and six months ended June 30, 1999 was
approximately $14,000 and $6,000, respectively, as compared to a net loss of
approximately $99,000 and $100,000 for the three and six months ended June 30,
1998. The increase in net income for the three and six months ended June 30,
1999 is attributable to a decrease in total expenses which was slightly offset
by a decrease in total revenues.
Total expenses decreased for the three and six months ended June 30, 1999 as
compared to the comparable periods in 1998 primarily as a result of decreases in
both operating expenses and property tax expense and to a lesser extent a
decrease in interest expense. Operating expense decreased due to a decrease in
insurance and maintenance expense. Insurance expense decreased at all the
investment properties due to a change in insurance carriers during the current
year. Maintenance expense decreased as a result of a decrease in interior
building repairs and landscaping at all of the Partnership's investment
properties. Property taxes decreased due to a refund of taxes at Sutton Place
from 1997 payments and to a decrease in the assessment value of 51 North High
Street.
Included in general and administrative expenses for the six months ended June
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 June 30, 1999, the Partnership had cash and cash equivalents of approximately
$1,252,000 as compared to approximately $877,000 at June 30, 1998. Cash and
cash equivalents increased approximately $75,000 during the six months ended
June 30, 1999 from the Partnership's year end, primarily due to approximately
$519,000 of cash provided by operating activities, which was partially offset by
approximately $41,000 of cash used in financing activities and approximately
$403,000 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 $1,323,000, are less than the reserve requirement of approximately
$1,760,000 at June 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 made 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, painting
and interior building improvements, parking lot, and swimming pool repairs. As
of June 30, 1999, approximately $187,000 has been incurred consisting primarily
of appliance and floor covering replacements, interior building improvements,
exterior painting and pool improvements. As of June 30, 1999 the exterior
painting is substantially complete.
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 next few years. The Partnership has
budgeted, but is not limited to, approximately $192,000 for 1999 which include
certain of the required improvements and consist of HVAC condensing unit
appliance replacement, and floor covering replacements, structural improvements,
parking lot repairs and swimming pool repairs. As of June 30, 1999,
approximately $101,000 has been incurred consisting primarily of appliance and
floor covering replacements, HVAC condensing unit replacements, structural
improvements and parking lot improvements.
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 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 repairs. As of June 30, 1999
approximately $12,000 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 $10,906,000 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 six months ended
June 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 Invested
Capital requirement.
Tender Offer
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 55,455.45 (28.07%) 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 4,853.70 units.
As a result, AIMCO and its affiliates currently own 63,500.50 units of limited
partnership interest in the Partnership representing 35.37% 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.
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 June 30, 1999, had completed approximately 90% 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
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
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 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
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 no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 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
June 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 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 July,
1999. The Managing Agent has updated data transmission standards with all of the
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 September 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 $2.9 million ($0.7 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, the plaintiffs have 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 June 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/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: August 4, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties V Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,252
<SECURITIES> 0
<RECEIVABLES> 337
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,887
<DEPRECIATION> (15,725)
<TOTAL-ASSETS> 8,242
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,906
0
0
<COMMON> 0
<OTHER-SE> (3,299)
<TOTAL-LIABILITY-AND-EQUITY> 8,242
<SALES> 0
<TOTAL-REVENUES> 2,224
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 402
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
