FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 0-14099
CONSOLIDATED CAPITAL PROPERTIES VI
(Name of small business issuer in its charter)
California 94-2940204
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip code)
(864) 239-1000
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $1,794,000.
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market exists for the limited
partnership interests of the Registrant, and, therefore, no aggregate market
value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Consolidated Capital Properties VI (the "Partnership" or "Registrant") was
organized on May 23, 1984, as a limited partnership under the California Uniform
Limited Partnership Act. The general partner of the Partnership is ConCap
Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The
General Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"). The Partnership Agreement provides that the Partnership is to
terminate on December 31, 2015 unless terminated prior to such date.
On December 7, 1984, the Partnership offered pursuant to a Registration
statement filed with the Securities and Exchange Commission $50,000,000 of
Limited Partnership Interest (the "Units"). The Units represent equity
interests in the Partnership and entitle the holders thereof to participate in
certain allocations and distributions of the Partnership. The sale of Units
closed on December 6, 1985, with 181,808 Units sold at $250 each, or gross
proceeds of approximately $45,500,000 to the Partnership. Since its initial
offering, the Registrant has not received, nor are limited partners required to
make, additional capital contributions.
The Registrant is engaged in the business of operating and holding real
properties for investment. By the end of fiscal 1987, the Partnership had
acquired seven properties and a 75% interest in a joint venture with an
affiliated partnership which acquired one property. The Registrant continues to
own and operate one of these properties, (see "Item 2. Description of
Properties").
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the registrant's property. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner in
such market area, could have a material effect on the rental market for the
apartments at the Registrant's properties and the rents that may be charged for
such apartments. While the General Partner and its affiliates are a significant
factor in the United States in the apartment industry, competition for the
apartments is local. In addition, various limited partnerships have been formed
by the General Partner and/or affiliates to engage in business which may be
competitive with the Registrant.
A further description of the Partnership's business is included in "Item 6.
Management's Discussion and Analysis or Plan of Operation" included in this Form
10-KSB.
The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the General Partner.
Upon the Partnership's formation in 1984, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Group II ("CCG"), a California general partnership, was
the non-corporate general partner. In 1988, through a series of transactions,
Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In
December 1988, CCEC filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI
acquired CCEC's general partner interests in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships") and CEI
replaced CCEC as managing general partner in all 16 partnerships. The selection
of CEI as the sole managing general partner was approved by a majority of the
limited partners in the Partnership and in each of the Affiliated Partnerships
pursuant to a solicitation of the Limited Partners dated August 10, 1990. As
part of this solicitation, the Limited Partners also approved an amendment to
the Partnership Agreement limiting changes of control of the Partnership and
approved conversion of the general partner interest of the non-corporate general
partner, CCG, to that of a special limited partner ("Special Limited Partner")
without voting and other rights of a limited partner except for the economic
interest previously held as a general partner. Pursuant to this amendment to
the Partnership Agreement, the non-corporate general partner interest of CCG was
converted to that of a Special Limited Partner and CEI became the sole general
partner of the Partnership on December 31, 1991.
Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty,
Inc. In December 1994, the parent of GII Realty, Inc., entered into a
transaction (the "Insignia Transaction") in which an affiliate of Insignia
Financial Group, Inc. ("Insignia"), acquired an option (exercisable in whole or
in part from time to time) to purchase all of the stock of GII Realty, Inc. and,
pursuant to a partial exercise of such option, acquired 50.5% of that stock. As
a part of the Insignia Transaction, the Insignia affiliate also acquired all of
the outstanding stock of Partnership Services, Inc., an asset management entity,
and Insignia acquired all of the outstanding stock of Coventry Properties, Inc.,
a property management entity. In addition, confidentiality, non-competition, and
standstill arrangements were entered into between certain of the parties. Those
arrangements, among other things, prohibit GII Realty's former sole shareholder
from purchasing Partnership Units for a period of three years. On October 24,
1995, the Insignia affiliate exercised the remaining portion of its option to
purchase all of the remaining outstanding capital stock of GII Realty, Inc.
Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside of the control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
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 Insignia Properties Trust ("IPT"), the entity which
controls 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.
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth the Partnership's investment in property:
Date of
Property Purchase Type of Ownership Use
Colony of Springdale Apartments 02/20/87 Fee ownership subject Apartment -
Springdale, Ohio to first mortgage. (1) 261 units
(1) Property is held by a limited partnership in which the Registrant owns a
100% interest.
Schedule of Property:
Set forth below for the Registrant's property is the gross carrying value,
accumulated depreciation, depreciable life, method of depreciation and Federal
tax basis.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
Colony of Springdale $10,061 $ 3,989 5-30 years S/L $ 5,465
See "Note A" included in "Item 7. Financial Statements" for a description of the
Partnership's depreciation policy.
Schedule of Property Indebtedness:
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1998 Rate Amortized Date Maturity
(in thousands) (in thousands)
Colony of Springdale
1st mortgage $ 4,341 9.50% 25 years 05/01 $ 4,152
(1) See "Item 7. Financial Statements _ Note H" for information with respect to
the Registrant's ability to prepay these loans and other specific details
about the loans.
Rental Rates and Occupancy:
Average annual rental rate and occupancy for 1998 and 1997 for the property:
Average Annual Average
Rental Rates Occupancy
Property 1998 1997 1998 1997
(per unit)
Colony of Springdale $6,790 $6,517 93% 88%
The increase in occupancy at the Colony of Springdale is due to the improved
curb appeal of the property.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. The Partnership's property is subject to competition from
other residential apartment complexes in the area. The General Partner believes
that the property is adequately insured. The property is an apartment complex
which leases units for lease terms of one year or less. No residential tenant
leases 10% or more of the available rental space. The property is in good
physical condition, subject to normal depreciation and deterioration as is
typical for assets or this type and age.
Real Estate Taxes and Rates:
Real estate taxes and the tax rate in 1998 for the property was:
1998 1998
Taxes Rate
(in thousands)
Colony of Springdale $ 114 4.48%
Capital Improvements:
During the year ended December 31, 1998, the Partnership completed approximately
$227,000 of capital improvements at the property. These improvements consisted
of parking lot repairs, roof repairs, new air conditioning units, and carpeting.
These improvements were funded from operating cash flow and Partnership
reserves. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the Managing
General Partner on interior improvements, it is estimated that the property
requires approximately $344,000 of capital improvements over the near term.
Capital improvements planned for 1999 consist of, but are not limited to,
appliances, landscaping and outdoor lighting, asphalt repairs, roof replacement,
and carpeting. These improvements are expected to cost approximately $359,000.
The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and partnership
reserves.
ITEM 3. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The 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 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 as well as a
recently announced agreement between Insignia and AIMCO. 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, to be material to the Partnership's overall
operations.
In May 1998, the Partnership and its General Partner were named as respondents
in a Petition in Los Angeles Superior Court. The petition, brought by a limited
partner of the Partnership, seeks performance by the General Partner of certain
alleged contractual obligations under the Partnership Agreement and compliance
with certain alleged statutory requirements. In July 1998, a settlement was
reached and the petition dismissed.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1998, no matters were submitted to a vote
of the Unitholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Partnership, a publicly-held limited partnership, offered and sold 181,808
limited partnership units aggregating $45,500,000. The Partnership currently
has 3,679 holders of record owning an aggregate of 181,300 Units. Affiliates of
the General Partner owned 42,028 units or 23.181% at December 31, 1998. No
public trading market has developed for the Units, and it is not anticipated
that such a market will develop in the future.
During the year ended December 31, 1998 a distribution of $500,000 ($2.76 per
limited partnership unit) was paid from surplus funds from the sale of Celina
Plaza in October 1997. No distributions were paid during 1997. Future cash
distributions will depend on the levels of net cash generated from operations,
refinancings, property sales and the availability of cash reserves as discussed
in "Note D _ Commitment" in "Item 7. Financial Statements". The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations after required capital expenditures to permit any distributions to
its partners in 1999 or subsequent periods. In addition, the Partnership is
restricted from making distributions if the working capital reserve requirement
is not met by the property.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of 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.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
RESULTS OF OPERATIONS
The Partnership realized a net loss of approximately $101,000 for the year ended
December 31, 1998, compared to net income of approximately $3,359,000 for the
year ended December 31, 1997. The increase in net loss for the year ended
December 31, 1998, is primarily attributable to the gain of approximately
$3,660,000 realized on the sale of Celina Plaza, in 1997, as discussed below.
Celina Plaza incurred net operating losses of approximately $13,000 and $82,000
for the years ended December 31, 1998 and 1997, respectively. Partially
offsetting the increase in net loss was a decrease in general and administrative
expenses. The decline in general and administrative expenses is due to a
decrease in reimbursements to the General Partner in 1998 due to the sale of
Celina Plaza. Included in general and administrative expenses at both December
31, 1998 and 1997 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.
The Partnership realized a net loss from its remaining property of approximately
$88,000 and $220,000 for the years ended December 31, 1998 and 1997,
respectively. This decrease in net loss at the remaining property is primarily
due to the increase in rental income. The increase in rental income resulted
from an increase in occupancy, and average annual rental rates. Additionally,
stricter tenant qualification procedures were instituted in 1997 which reduced
bad debt expense. Also contributing to the decrease in net loss is an increase
in other income primarily due to an increase in interest income earned on higher
average cash balances during 1998. Partially offsetting these increases was an
increase in maintenance expenses resulting from major landscaping and exterior
building improvements performed during 1998.
On October 20, 1997, the Partnership sold Celina Plaza Apartments, located in El
Paso, Texas, to an unaffiliated party. The sales price of the property was
$6,600,000 and the sale resulted in net proceeds of approximately $6,456,000,
after payment of closing costs. The net proceeds were used to pay accrued taxes
and to pay-off the mortgage debt secured by this property. Excess proceeds
after such payments amounted to approximately $779,000 to the Partnership. The
Partnership recognized a gain on the sale of approximately $3,660,000 during the
year ended December 31, 1997.
As part of the ongoing business plan of the Registrant, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Registrant from increases in expenses. As part of this plan, the
General Partner attempts to protect the Registrant 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 December 31, 1998, the Registrant had cash and cash equivalents of
approximately $1,862,000 as compared to approximately $1,949,000 at December 31,
1997. The decrease in cash and cash equivalents is due to approximately
$566,000 of cash used in financing activities which was partially offset by
approximately $382,000 of cash provided by operating activities and
approximately $97,000 of cash provided by investing activities. Cash used in
financing activities consisted of principal payments made on the mortgage
encumbering the Registrant's property and distributions paid to limited
partners. Cash provided by investing activities consisted of proceeds from the
sale of the registrant's investment in Treasury bills which was partially offset
by property improvements and replacements. The Registrant invests its working
capital reserves in a money market account.
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 asset
and other operating needs of the Registrant and to comply with Federal, state,
and local legal and regulatory requirements. The Registrant has budgeted, but
is not limited to approximately $359,000 in capital improvements for the
Registrant's property in 1999. Budgeted capital improvements at Colony of
Springdale include outdoor lighting, appliances, landscaping, asphalt repair,
carpeting and roof replacement. The 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 Registrant's
distributable cash flow, if any, may be adversely effected at least in the short
term.
The Partnership is required to maintain working capital reserves for
contingencies of not less than 5% of Net Invested Capital as defined in the
Partnership Agreement. In the event expenditures are made from these reserves,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, consisting of cash and cash equivalents,
tenant security deposits, investments and reserves for capital improvements and
contingencies totaling approximately $2,106,000 are more than the reserve
requirement of approximately $2,070,000 at December 31, 1998.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $4,341,000 is amortized over 300 months with a
balloon payment of approximately $4,152,000 due on May 31, 2001. The General
Partner will attempt to refinance such indebtedness or sell the property prior
to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Registrant will risk losing such property through
foreclosure.
A cash distribution from surplus cash of approximately $500,000 from proceeds of
the sale of Celina Plaza in 1997 was made during the year ended December 31,
1998. No distributions were made in 1997. The Registrant's distribution policy
is reviewed on a quarterly basis. There can be no assurance, however, that the
Registrant will generate sufficient funds from operations after required capital
expenditures to permit further distributions to its partners in 1999 or
subsequent periods.
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 and 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
December 31, 1998, 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 March
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 March 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
March 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 March 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 December 31, 1998 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
December 31, 1998 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 April 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 our 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.
ITEM 7. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL PROPERTIES VI
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1998
Consolidated Statements of Operations - Years ended December 31, 1998
and 1997
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Properties VI
We have audited the accompanying consolidated balance sheet of Consolidated
Capital Properties VI as of December 31, 1998, and the related consolidated
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the two years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Properties VI at December 31, 1998, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 3, 1999
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED BALANCE SHEET
December 31, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,862
Receivables and deposits 258
Restricted escrows 68
Other assets 64
Investment property (Note H & I):
Land $ 916
Buildings and personal property 9,145
10,061
Less accumulated depreciation (3,989) 6,072
$ 8,324
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 11
Tenant security deposit liabilities 68
Accrued property taxes 118
Other liabilities 78
Mortgage note payable (Note H) 4,341
Partners' Capital (Deficit)
General partner $ 1
Special limited partners (43)
Limited partners (181,300 units issued
and 181,330 outstanding) 3,750 3,708
$ 8,324
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1998 1997
Revenues:
Rental income $1,600 $2,525
Other income 194 235
Gain on sale of property -- 3,660
Total revenues 1,794 6,420
Expenses:
Operating 851 1,324
General and administrative 129 168
Depreciation 360 660
Interest 440 680
Property taxes 115 229
Total expenses 1,895 3,061
Net (loss) income $ (101) $3,359
Net income allocated to general partner (0.2%) $ -- $ 7
Net (loss) income allocated to limited
partners (99.8%) (101) 3,352
$ (101) $3,359
Net (loss) income per limited partnership unit $ (.56) $18.49
Distribution per limited partnership unit $ 2.76 $ --
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453
Partners' capital (deficit)
at December 31, 1996 181,300 $ (6) $ (61) $ 1,017 $ 950
Amortization of timing
difference (Note E) -- -- 9 (9) --
Net income for the year ended
December 31, 1997 -- 7 -- 3,352 3,359
Partners' capital (deficit)
at December 31, 1996 181,300 1 (52) 4,360 4,309
Amortization of timing
difference (Note E) -- -- 9 (9) --
Distributions paid to partners -- -- -- (500) (500)
Net loss for the year ended
December 31, 1998 -- -- -- (101) (101)
Partners' capital (deficit)
at December 31, 1998 181,300 $ 1 $ (43) $ 3,750 $3,708
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1998 1997
Cash flows from operating activities:
Net (loss) income $ (101) $ 3,359
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 360 660
Amortization of loan costs and discounts 25 126
Gain on sale of property -- (3,660)
Loss on disposition of property 20 --
Change in accounts:
Receivables and deposits 91 (114)
Other assets 16 (9)
Accounts payable (49) (143)
Tenant security deposit liabilities 13 (33)
Accrued taxes -- 5
Other liabilities 7 (157)
Net cash provided by operating activities 382 34
Cash flows from investing activities:
Property improvements and replacements (227) (167)
Proceeds from sale of property -- 6,456
Proceeds from sale of investments 302 --
Dividends received from investments -- 3
Net withdrawals from (deposits to) restricted
escrows 22 (22)
Net cash provided by investing activities 97 6,270
Cash flows from financing activities:
Payments on mortgage note payable (66) (371)
Repayment of mortgage note payable -- (5,462)
Distribution paid to limited partners (500) --
Net cash used in financing activities (566) (5,833)
Net (decrease) increase in cash and cash
equivalents (87) 471
Cash and cash equivalents at beginning of period 1,949 1,478
Cash and cash equivalents at end of period $ 1,862 $ 1,949
Supplemental disclosure of cash flow information:
Cash paid for interest $ 416 $ 698
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Consolidated Capital Properties VI, a California limited partnership (the
"Partnership" or "Registrant"), was formed on May 23, 1984, to acquire and
operate commercial and residential properties. The General Partner of the
Partnership is ConCap Equities, Inc. (the "General Partner" or "CEI"). The
General Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO") (see "Note B _ Transfer of Control"). The directors and officers of
the General Partner also serve as executive officers of AIMCO. The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2015
unless terminated prior to such date. The Partnership operates one apartment
property located in Ohio.
At the time of the Partnership's formation, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Group II ("CCG"), a California general partnership, was
the non-corporate general partner. In 1988, through a series of transactions,
Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In
December 1988, CCEC filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, ConCap
Equities, Inc. (the "General Partner" or "CEI") acquired CCEC's general partner
interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing
general partner in all 16 partnerships. The selection of CEI as the sole
managing general partner was approved by a majority of the Limited Partners in
the Partnership and in each of the Affiliated Partnerships pursuant to a
solicitation of the Limited Partners dated August 10, 1990. As part of this
solicitation, the Limited Partners also approved an amendment to the Partnership
Agreement to limit changes of control of the Partnership.
Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty,
Inc. In December 1994, the parent of GII Realty, Inc., entered into a
transaction (the "Insignia Transaction") in which an affiliate of Insignia
Financial Group, Inc. ("Insignia"), acquired an option (exercisable in whole or
in part from time to time) to purchase all of the stock of GII Realty, Inc. and,
pursuant to a partial exercise of such option, acquired 50.5% of that stock. As
a part of the Insignia Transaction, the Insignia affiliate also acquired all of
the outstanding stock of Partnership Services, Inc., an asset management entity
and Insignia acquired all of the outstanding stock of Coventry Properties, Inc.,
a property management entity. In addition, confidentiality, non-competition, and
standstill arrangements were entered into between certain of the parties. Those
arrangements, among other things, prohibit GII Realty's former sole shareholder
from purchasing Partnership Units for a period of three years. On October 24,
1995, the Insignia affiliate exercised the remaining portion of its option to
purchase all of the remaining outstanding capital stock of GII Realty, Inc.
Consolidation
The Partnership's financial statements include the accounts of Colony of
Springdale Associates, Ltd. ("Colony Associates"), which holds fee title to the
Colony of Springdale Apartments. The results of its operations are included in
the Partnership's consolidated financial statements. All intercompany
transactions between the Partnership and Colony Associates have been eliminated.
Uses of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Investment Properties
Investment properties consist of one apartment complex and are stated at cost.
Acquisition fees are capitalized as a cost of real estate. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", the Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. Costs of apartment
properties that have been permanently impaired have been written down to
appraised value. No adjustments for impairment of value were recorded in the
years ended December 31, 1998 or 1997.
Depreciation
Depreciation is provided by the straight-line method over the estimated lives of
the apartment property and related personal property. For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 15 years for additions prior to March 16, 1984, 18 years for additions
after March 15, 1984 and before May 9, 1985, and 19 years for additions after
May 8, 1985, and before January 1, 1987, and (2) for personal property over 5
years for additions prior to January 1, 1987. As a result of the Tax Reform Act
of 1986, for additions after December 31, 1986, the modified accelerated cost
recovery method is used for depreciation of (1) real property over 27 1/2 years
and (2) personal property additions over 7 years.
Cash and Cash Equivalents
Includes cash on hand and in banks, money market funds and certificates of
deposit with original maturities less than 90 days. At certain times, the
amount of cash deposited at a bank may exceed the limit on insured deposits.
Loan Costs
Net Loan costs of approximately $60,000 are included in other assets and are
being amortized on a straight-line basis over the life of the loans.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on its rental payments.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Leases
The Partnership generally leases apartment units for twelve month terms or less.
The Partnership recognizes income as earned on its leases. In addition, the
General Partner's policy is to offer rental concessions during particularly slow
months or in response to heavy competition from similar complexes in the area.
Concessions are charged against rental income as incurred.
Allocation of Profits, Gains and Losses
Profits, gains and losses of the Partnership are allocated between general and
limited partners in accordance with the provisions of the Partnership Agreement.
The Partnership Agreement, as amended, and as described more fully in "Note E",
provides for net income and net losses for both financial and tax reporting
purposes to be allocated 99.8% to the Limited Partners and .2% to the General
Partner.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information ("Statement
131"), which is effective for years beginning after December 15, 1997. Statement
131 established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers
(see "Note K" for disclosure).
Advertising Costs
The Partnership expenses the cost of advertising as incurred. Advertising costs
of approximately $45,000 in 1998 and approximately $67,000 in 1997 were charged
to expense as incurred and are included in operating expenses.
Reclassifications
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 ultimately acquired a 100%
ownership interest in Insignia Properties Trust ("IPT"), the entity which
controls 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 - RELATED PARTY TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
the reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following expenses were paid or accrued to an affiliate of the
General Partner during the years ended December 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees
(included in operating expenses) $ 86 $152
Reimbursements for services of affiliates
(included in investment property and operating
and general and administrative expenses ) (1) 62 110
(1) Included in "reimbursements for services of affiliates" is approximately
$1,000, of reimbursements for construction oversight costs for each year
ended December 31, 1998 and 1997.
During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Registrant's
property as compensation for providing property management services. The
Registrant paid to such affiliates $86,000 and $152,000 for the years ended
December 31, 1998 and 1997 respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $62,000 and
$110,000 for the years ended December 31, 1998 and 1997, respectively.
During the year ended December 31, 1997, an affiliate of Insignia received
approximately $100,000 in reimbursements related to the sale of Celina Plaza,
(See "Note G").
The Partnership Agreement also provides for a special management fee equal to 9%
of the total distributions from operations made to the Limited Partners to be
paid to the General Partner for executive and administrative management
services. No such fees were paid or accrued in 1998 or 1997.
AIMCO currently owns, through its affiliates, a total of 42,028 limited
partnership units or 23.181%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner, who received payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations was not significant.
NOTE D - COMMITMENT
The Partnership is required to maintain working capital reserves for
contingencies of not less than 5% of Net Invested Capital as defined in the
Partnership Agreement. In the event expenditures are made from these reserves,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, consisting of cash and cash equivalents,
tenant security deposits, investments and reserves for capital improvements and
contingencies totaling approximately $2,106,000 are more than the reserve
requirement of approximately $2,070,000 at December 31, 1998.
NOTE E - CHANGE IN STATUS OF NON-CORPORATE GENERAL PARTNER
During the year ended December 31, 1991, the Partnership Agreement was amended
to convert the general partner interests held by the non-corporate general
partner, Consolidated Capital Group II ("CCG"), to that of special limited
partners ("Special Limited Partners"). The Special Limited Partners do not have
a vote and do not have any of the other rights of a Limited Partner except the
right to inspect the Partnership's books and records; however, the Special
Limited Partners retained the economic interest in the Partnership which they
previously owned as a general partner.
ConCap Equities, Inc. ("CEI") became the sole general partner of the Partnership
effective December 31, 1991. In connection with CCG's conversion, a special
allocation of gross income was made to the Special Limited Partners in order to
eliminate its tax basis negative capital account.
After the conversion, the various Special Limited Partners transferred portions
of their interests to CEI so that CEI now holds a .2% interest in all allocable
items of income, loss and distribution. The differences between the Special
Limited Partners' capital accounts for financial statement and tax reporting
purposes are being amortized to the Limited Partners' capital accounts as the
components of the timing differences which created the balance reverse.
NOTE F - DISTRIBUTIONS
During the year ended December 31, 1998, the Partnership declared and paid a
cash distribution to the limited partners in the amount of $500,000. The
distribution was from surplus funds from the sale of Celina Plaza in October
1997. No distributions were paid in 1997.
NOTE G - SALE OF PROPERTY
On October 20, 1997, the Partnership sold Celina Plaza Apartments, located in El
Paso, Texas, to an unaffiliated party. The sales price of the property was
$6,600,000 and the sale resulted in net proceeds of approximately $6,456,000,
after payment of closing costs. The net proceeds were used to pay accrued taxes
and to pay-off the mortgage debt secured by this property. Excess proceeds after
such payments amounted to approximately $779,000 to the Partnership. The
Partnership recognized a gain on the sale of approximately $3,660,000 during the
year ended December 31, 1997.
NOTE H - MORTGAGE NOTE PAYABLE
The principle terms of mortgage note payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1998 Interest Rate Date Maturity
(in thousands) (in thousands)
Colony of Springdale
1st mortgage $ 4,341 $ 40 9.50% 05/01 $ 4,152
The mortgage note payable is non-recourse and secured by pledge of the apartment
property and by pledge of revenues from the apartment property. The note has a
prepayment penalty requirement if repaid prior to maturity. Further the
property may not be sold subject to existing indebtedness.
The estimated fair value of the Partnership's aggregate debt is approximately
$4,341,000. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.
Scheduled principal payments of mortgage note payable subsequent to December 31,
1998 are as follows (in thousands):
1999 $ 73
2000 80
2001 4,188
Total $ 4,341
NOTE I - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
Colony of Springdale
Springdale, Ohio $ 4,341 $ 909 $ 8,358 $ 794
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1998
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Colony of Springdale $ 916 $ 9,145 $ 10,061 $ 3,989 2/20/87 5-30
Springdale, Ohio
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation"
Years Ended December 31,
1998 1997
(in thousands)
Investment Property
Balance at beginning of year $ 9,866 $16,664
Property improvements 227 167
Disposals of property (32) (6,965)
Balance at End of Year $10,061 $ 9,866
Accumulated Depreciation
Balance at beginning of year $ 3,641 $ 7,150
Additions charged to expense 360 660
Disposals of property (12) (4,169)
Balance at end of year $ 3,989 $ 3,641
The aggregate cost of the investment property for Federal income tax purposes at
December 31, 1998 and 1997 is approximately $9,189,000 and $8,938,000,
respectively. The accumulated depreciation taken for Federal income tax
purposes at December 31, 1998 and 1997 is approximately $3,724,000 and
$3,380,000, respectively.
NOTE J - INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
consolidated financial statements of the Partnership.
The following is a reconciliation of reported net income or loss and Federal
taxable income or loss (in thousands, except unit data):
1998 1997
Net (loss) income as reported $ (101) $ 3,359
Add (deduct):
Depreciation differences 16 116
Unearned income (11) 19
Gain on sale -- 94
Other -- 4
Write-off of debt discounts -- (666)
Accruals and prepaids ( 2) 5
Loss on disposal 20 --
Federal taxable (loss) income $ (78) $ 2,931
Federal taxable (loss) income
per limited partnership unit $ (.41) $ 15.49
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 3,708
Land and buildings 264
Accumulated depreciation (872)
Syndication and distribution costs 4,989
Other 280
Net assets - Federal tax basis $ 8,369
NOTE K - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues
As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", the Partnership has one reportable segment: residential
properties. The Partnership's residential property segment consists of one
apartment complex in Ohio. The Partnership rents apartment units to people for
terms that are typically twelve months or less.
Measurement of segment profit or loss
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those described in the
summary of significant accounting policies.
Factors management used to identify the enterprise's reportable segment
Segment information for the years 1998 and 1997 (in thousands) is shown in the
tables below. The "Other" column includes partnership administration related
items and income and expense not allocated to the reportable segment.
1998 Residential Other Totals
Rental income $ 1,600 $ -- $ 1,600
Other income 97 97 194
Interest expense 440 -- 440
Depreciation 360 -- 360
General and administrative expense -- 129 129
Segment loss (55) (46) (101)
Total assets 6,145 2,179 8,324
Capital expenditures for investment
property 227 -- 227
1997 Residential Other Totals
Rental income $ 2,525 $ -- $ 2,525
Other income 163 72 235
Interest expense 680 -- 680
Depreciation 646 14 660
General and administrative expense -- 168 168
Gain on disposal of assets 3,660 -- 3,660
Segment profit (loss) 3,469 (110) 3,359
Total assets 6,489 2,531 9,020
Capital expenditures for investment
properties 167 -- 167
NOTE L - 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 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 as well as a
recently announced agreement between Insignia and AIMCO. 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, to be material to the Partnership's overall
operations.
In May 1998, the Partnership and its General Partner were named as respondents
in a Petition in Los Angeles Superior Court. The petition, brought by a limited
partner of the Partnership, seeks performance by the General Partner of certain
alleged contractual obligations under the Partnership Agreement and compliance
with certain alleged statutory requirements. In July 1998, a settlement was
reached and the petition dismissed.
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 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Consolidated Capital Properties VI (the "Partnership" or the "Registrant") has
no officers or directors. ConCap Equities, Inc. (the "General Partner" or CEI")
manages and controls the Registrant and has general responsibility and authority
in all matters affecting its business.
The name of the directors and executive officers of the General Partner, their
age and the nature of all positions with CEI presently held by them are set
forth below. There are no family relationships between or among any officers and
directors.
Name Age Position
Patrick J. Foye 41 Executive Vice President and Director
Timothy R. Garrick 42 Vice President _ Accounting and Director
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council.
He received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President-Accounting and Director of the General Partner since October 1, 1998.
Prior to that date, Mr. Garrick served as Vice President-Accounting Services of
Insignia Financial Group since June of 1997. From 1992 until June of 1997, Mr.
Garrick served as Vice President of Partnership Accounting and from 1990 to 1992
as an Asset Manager for Insignia Financial Group. From 1984 to 1990, Mr.
Garrick served in various capacities with U.S. Shelter Corporation. From 1979
to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney. Mr. Garrick
received his B.S. Degree from the University of South Carolina and is a
Certified Public Accountant.
ITEM 10. EXECUTIVE COMPENSATION
No direct compensation was paid or payable by the Partnership to the directors
or officers for the year ended December 31, 1998, nor was any direct
compensation paid or payable by the Partnership to the directors or officers of
the General Partner for the year ended December 31, 1997. The Partnership has
no plans to pay any such remuneration to any directors or officers of the
General Partner in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as provided below, as of December 31, 1998, no person was known to CEI to
own of record or beneficially more than five percent of the Units of the
Partnership.
Number of Percent
Name and Address Units Of Total
Insignia Properties, L.P. 42,028 23.181%
Insignia Properties LP is indirectly ultimately owned by AIMCO. It's business
address is 55 Beattie Place, Greenville, SC 29602.
No director or officer of the General Partner owns any Units.
As of December 31, 1998, the following persons were known to CEI to be the
beneficial owners of more than 5 percent (5%) of its common stock:
Number of Percent
Name and Address CEI Shares Of Total
Insignia Properties Trust 100,000 100%
55 Beattie Place
Greenville, SC 29602
Insignia Properties Trust is an affiliate of AIMCO (See "Item 1").
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 23.181% of the limited partnership interests in the Partnership.
AIMCO is presently considering whether it will engage in an exchange offer for
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 partnerships 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-KSB 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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
the reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following expenses were paid or accrued to an affiliate of the
General Partner during the years ended December 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees $ 86 $152
Reimbursements for services of affiliates (1) 62 110
(1) Included in "reimbursements for services of affiliates" is approximately
$1,000, of reimbursements for construction oversight costs for each year
ended December 31, 1998 and 1997.
During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Registrant's
property as compensation for providing property management services. The
Registrant paid to such affiliates $86,000 and $152,000 for the years ended
December 31, 1998 and 1997 respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $62,000 and $110,000 for the
years ended December 31, 1998 and 1997, respectively.
During the year ended December 31, 1997, an affiliate of Insignia received
approximately $100,000 in reimbursements related to the sale of Celina Plaza.
The Partnership Agreement also provides for a special management fee equal to 9%
of the total distributions from operations made to the Limited Partners to be
paid to the General Partner for executive and administrative management
services. No such fees were paid or accrued in 1998 or 1997.
AIMCO currently owns, through its affiliates, a total of 42,028 limited
partnership units or 23.181%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner, who received payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations was not significant.
Conversion of Non-Corporate General Partner; Special Allocation
In the year ended December 31, 1991, the Partnership Agreement was amended to
convert the general partner interest held by the non-corporate general partner,
CCG, to that of a special limited partner ("Special Limited Partner"). The
Special Limited Partner does not have a vote and does not have any of the other
rights of a Limited Partner except the right to inspect the Partnership's books
and records; however, the Special Limited Partner will retain the economic
interest in the Partnership which it previously owned as general partner. CEI
became the sole general partner of the Partnership effective as of December 31,
1991. In connection with CCG's conversion, a special allocation of gross income
was made to the Special Limited Partner in order to eliminate its tax basis
negative capital account.
After the conversion, the various owners of interests in the Special Limited
Partner transferred portions of their interests to CEI so that CEI now holds a
.2% interest in all allocable items of income, loss and distribution. The
difference between the Special Limited Partners' capital accounts for financial
statement and tax reporting purposes is being amortized to the Limited Partners'
capital account as the components of the timing differences which created the
balance reverse.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K filed during the fourth quarter of 1998:
Current Report on Form 8-K dated on October 1, 1998 and filed on
October 16, 1998 disclosing change in control of Registrant from
Insignia Financial Group, Inc. to AIMCO.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES VI
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Patrick J. Foye Executive Vice President Date: March 29, 1999
Patrick J. Foye and Director
/s/ Timothy R. Garrick Vice President - Accounting Date: March 29, 1999
Timothy R. Garrick and Director
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT incorporated by reference to Exhibit 2.1 filed
with the Registrant's Current Report on Form 8-K dated October 1, 1998
3 Certificates of Limited Partnership as amended to date
10.1 Bill of Sale and Assignment dated October 23, 1990, by and between
CCEC and ConCap Services Company (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1990)
10.2 Assignment and Assumption Agreement dated October 23, 1990, by and
between CCEC and ConCap Management Limited Partnership ("CCMLP")
(Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990)
10.3 Property Management Agreement No. 119 dated April 9, 1991, by and
between Colony Springdale Associates and CCMLP. (Incorporated by
reference to the Annual Report on Form 10-K for the year ended
December 31, 1991)
10.4 Assignment and Agreement as to Certain Property Management Services
dated April 9, 1991, by and between CCMLP and ConCap Capital Company.
(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 1991)
10.5 Investor Services Agreement dated October 23, 1990, by and between the
Partnership and CCEC (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990)
10.6 Assignment and Assumption Agreement (Investor Services Agreement)
dated October 23, 1990, by and between CCEC and ConCap Services
Company. (Incorporated by reference to the Annual Report on Form 10-K
for the year ended December 31, 1990)
10.7 Letter of Notice dated December 20, 1991, from Partnership Services,
Inc. ("PSI") to the Partnership regarding the change in ownership and
dissolution of ConCap Services Company whereby PSI assumed the
Investor Services Agreement. (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991)
10.8 Financial Services Agreement dated October 23, 1990, by and between
the Partnership and CCEC (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990)
10.9 Assignment and Assumption Agreement (Financial Services Agreement)
dated October 23, 1990, by and between CCEC and ConCap Capital Company
(Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990)
10.10 Letter of Notice dated December 20, 1991, from PSI to the Partnership
regarding the change in ownership and dissolution of ConCap Capital
Company whereby PSI assumed the Financial Services Agreement.
(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 1991)
10.11 Property Management Agreement No. 421 dated May 13, 1993, by and
between the Partnership and Coventry Properties, Inc. (Incorporated
by reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993)
10.12 Assignment and Assumption Agreement (Property Management Agreement
No. 421) dated May 13, 1993, by and between Coventry Properties, Inc.
R&B Apartment Management Company, Inc. and Partnership Services, Inc.
(Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993)
10.13 Assignment and Agreement as to Certain Property Management Services
dated May 13, 1993, by and between Coventry Properties, Inc. and
Partnership Services, Inc. (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993)
10.14 Property Management Agreement No. 515 dated June 1, 1993, by and
between the Partnership and Coventry Properties, Inc.
10.15 Assignment and Agreement as to Certain Property Management Services
dated November 17, 1993, by and between Coventry Properties, Inc. and
Partnership Services, Inc.
10.16 Stock and Asset Purchase Agreement, dated December 8, 1994 (the
"Gordon Agreement"), among MAE-ICC, Inc. ("MAE-ICC"), Gordon Realty
Inc. ("Gordon"), GII Realty, Inc. ("GII Realty"), and certain other
parties. (Incorporated by reference to Form 8-K dated December 8,
1994)
10.17 Exercise of the Option (as defined in the Gordon Agreement) dated
December 8, 1994, between MAE-ICC and Gordon. (Incorporated by
reference to Form 8-K dated December 8, 1994)
10.18 Exercise of the remaining portion of the Option (as defined in the
Gordon Agreement) dated December 8, 1994, between MAE-ICC and Gordon.
(Incorporated by reference to Form 8-K dated October 24, 1995)
10.19 Contract to Purchase and Sell Property made and entered into as of
August 13, 1997, but effective October 20, 1997, by and between
Consolidated Capital Properties VI, a California limited partnership,
and The Vandenburg Organization, a Texas corporation regarding Celina
Plaza Apartments
10.20 Assignment and assumption of Leases dated October 13, 1997, by and
between Consolidated Capital Properties VI, a California limited
partnership and The Vandenburg Organization, a Texas corporation,
regarding Celina Plaza Apartments
10.21 Blanket Conveyance, Bill of Sale and Assignment dated October 13,
1997, by and between Consolidated Capital Properties VI, a California
limited partnership and The Vandenburg Organization, a Texas
corporation, regarding Celina Plaza Apartments
11 Statement regarding computation of Net Income per Limited Partnership
Unit (Incorporated by reference to Note 1 of Item 8 - Financial
Statements of this Form 10-K)
16.1 Letter, Dated August 12, 1992, from Ernst & Young to the Securities
and Exchange Commission regarding change in certifying accountant.
(Incorporated by reference to Form 8-K dated August 6, 1992)
16.2 Letter dated May 9, 1995 from the Registrant's former independent
accountant regarding its concurrence with the statements made by the
Registrant regarding a change in the certifying accountant.
(Incorporated by reference to Form 8-K dated May 3, 1995)
27 Financial data schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties VI 1998 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000755908
<NAME> CONSOLIDATED CAPITAL PROPERTIES VI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,862
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,061
<DEPRECIATION> 3,989
<TOTAL-ASSETS> 8,324
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,341
0
0
<COMMON> 0
<OTHER-SE> 3,708
<TOTAL-LIABILITY-AND-EQUITY> 8,324
<SALES> 0
<TOTAL-REVENUES> 1,794
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101)
<EPS-PRIMARY> (.56)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
