FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-14099
CONSOLIDATED CAPITAL PROPERTIES VI
(Exact name of small business issuer as specified in its charter)
California 94-2940204
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Partnership 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 VI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1999
Assets
Cash and cash equivalents $ 1,977
Receivables and deposits 157
Restricted escrows 85
Other assets 65
Investment property:
Land $ 916
Buildings and related personal property 9,424
10,340
Less accumulated depreciation (4,244) 6,096
$ 8,380
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 106
Tenant security deposit liabilities 78
Accrued property taxes 91
Other liabilities 71
Mortgage note payable 4,288
Partners' Capital (Deficit)
General partner $ 1
Special limited partners' (37)
Limited partners (181,300 units issued and
outstanding) 3,782 3,746
$ 8,380
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 414 $ 407 $ 1,260 $ 1,185
Other income 42 47 117 156
Total revenues 456 454 1,377 1,341
Expenses:
Operating 225 243 548 667
General and administrative 42 33 126 101
Depreciation 68 92 255 266
Interest 109 108 327 328
Property taxes 29 33 83 89
Total expenses 473 509 1,339 1,451
Net (loss) income $ (17) $ (55) $ 38 $ (110)
Net (loss) income allocated
to general partner (.2%) $ -- $ -- $ -- $ --
Net (loss) income allocated
to limited partners (99.8%) (17) (55) 38 (110)
$ (17) $ (55) $ 38 $ (110)
Net (loss) income per limited
partnership unit $ (0.09) $ (0.30) $ 0.21 $ (0.61)
Distributions per limited
partnership unit $ -- $ -- $ -- $ 2.76
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
<S> <C> <C> <C> <C> <C>
Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453
Partners' capital (deficit)
at December 31, 1998 181,300 $ 1 $ (43) $ 3,750 $ 3,708
Amortization of timing
difference -- -- 6 (6) --
Net income for the nine months
ended September 30, 1999 -- -- -- 38 38
Partners' capital (deficit)
at September 30, 1999 181,300 $ 1 $ (37) $ 3,782 $ 3,746
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income (loss) $ 38 $ (110)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 255 266
Amortization of loan costs 19 19
Loss on disposal of property -- 20
Change in accounts:
Receivables and deposits 101 209
Other assets (20) (1)
Accounts payable 95 (36)
Tenant security deposit liabilities 10 10
Accrued property taxes (27) (26)
Other liabilities (7) 5
Net cash provided by operating activities 464 356
Cash flows from investing activities:
Property improvements and replacements (279) (165)
Proceeds from sale of investments -- 302
Net (deposits to) withdrawals from restricted escrows (17) 45
Net cash (used in) provided by investing activities (296) 182
Cash flows from financing activities:
Payments on mortgage notes payable (53) (49)
Distributions paid to limited partners -- (500)
Net cash used in financing activities (53) (549)
Net increase (decrease) in cash and cash equivalents 115 (11)
Cash and cash equivalents at beginning of period 1,862 1,949
Cash and cash equivalents at end of period $ 1,977 $ 1,938
Supplemental disclosure of cash flow information:
Cash paid for interest $ 308 $ 306
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES VI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties VI (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. ("CEI" or the
"General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 1999, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
Principles of Consolidation
The Partnership's 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 interpartnership
transactions between the Partnership and Colony Associates 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 acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.
NOTE C - 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 nine months ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $ 68 $ 63
Reimbursement for services of affiliates (included in
investment property and operating and general and
administrative and expenses) 44 48
During the nine months ended September 30, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from the
Partnership's property as compensation for providing property management
services. The Partnership paid to such affiliates approximately $68,000 and
$63,000 for each of the nine months ended September 30, 1999 and 1998,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $44,000 and $48,000 for the
nine months ended September 30, 1999 and 1998, respectively. These amounts
include approximately $1,000 of reimbursements for construction oversight costs
for the nine months ended September 30, 1998. No such fees were paid in 1999.
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 62,624.65 (approximately 34.54% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $16 per unit. The offer expired on July 30,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 6,602.00 units.
As a result, AIMCO and its affiliates currently own 51,623 units of limited
partnership interest in the Partnership representing approximately 28.47% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO (see "Note H - Legal Proceedings").
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 $2,220,000 exceed the reserve requirement
of approximately $2,070,000 at September 30, 1999.
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 general partner.
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
In the first quarter of 1998, the Partnership declared and paid a cash
distribution to the limited partners in the amount of $500,000 ($2.76 per
limited partnership unit). The distribution was from surplus funds from the
sale of Celina Plaza in October 1997. No distributions have been paid in 1999.
NOTE G - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
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 tenants 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 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 segments:
Segment information for the nine months ended September 30, 1999 and 1998 (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.
1999 Residential Other Totals
Rental income $ 1,260 $ -- $ 1,260
Other income 70 47 117
Interest expense 327 -- 327
Depreciation 255 -- 255
General and administrative expense -- 126 126
Segment profit (loss) 117 (79) 38
Total assets 6,568 1,812 8,380
Capital expenditures for
investment property 279 -- 279
1998 Residential Other Totals
Rental income $ 1,185 $ -- $ 1,185
Other income 72 84 156
Interest expense (income) 331 (3) 328
Depreciation 226 -- 226
General and administrative expense -- 101 101
Segment loss (96) (14) (110)
Total assets 6,447 1,867 8,314
Capital expenditures for
investment property 165 -- 165
NOTE H - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The complaint seeks monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June
25, 1998, the General Partner filed a motion seeking dismissal of the action.
In lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement ("Stipulation"), settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the general partner will make tender offers for all
outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The General Partner does not anticipate that costs
associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
NOTE I - SUBSEQUENT EVENT - REFINANCING
On October 25, 1999, the Partnership refinanced the mortgage encumbering Colony
of Springdale Apartments. Interest on the old mortgage was 9.5%. The
refinancing replaced indebtedness of $4,247,000 with a new mortgage in the
amount of $5,600,000. Payments of approximately $46,111 are due on the first day
of each month until the loan natures on November 1, 2019. The prior note was
scheduled to mature in May 2001. The lender also required a repair escrow of
approximately $135,000 to be established. The loss on early extinguishment of
debt is material to the Partnership and will be recognized during the fourth
quarter 1999.
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 Partnership from time to time.
The discussion of the Partnership'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 Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment property consists of one apartment complex, Colony
of Springdale Apartments, located in Springdale, Ohio. The average occupancy
for the nine month periods ended September 30, 1999 and 1998, was 94% and 93%,
respectively.
Results of Operations
The Partnership realized net income of approximately $38,000 compared to a net
loss of approximately $110,000 for each of the nine months ended September 30,
1999 and 1998, respectively. For the three months ended September 30, 1999, the
Partnership realized a net loss of approximately $17,000 versus a net loss of
approximately $55,000 for the comparable period in 1998. This increase in net
income for the nine months ended September 30, 1999, and the decrease in net
loss for the three months ended September 30, 1999, is primarily due to an
increase in total revenues and a decrease in total expenses. The increase in
total revenues is due to an increase in rental income which was partially offset
by a decrease in other income. The increase in rental income resulted from an
increase in rental rates and occupancy, as noted above. This was partially
offset by the decrease in other income resulting from lower cash balances in
interest bearing accounts in 1999. The decrease in total expenses is primarily
due to a decrease in operating expenses which was partially offset by an
increase in general and administrative expenses. The decrease in operating
expenses is due to decreases in property, maintenance, and insurance expenses.
The decrease in property expense is primarily due to a decrease in salaries in
1999. The decrease in maintenance expense is due to the receipt of insurance
proceeds relating to a fire at Colony of Springdale. In May of 1999, a fire
occurred which destroyed one apartment unit and caused smoke damage to two
additional units. Insurance proceeds were received during the nine months ended
September 30, 1999 and the repairs were completed during the third quarter of
1999. The decrease in insurance expense is due to a decrease in premiums
resulting from a change of insurance carrier late in 1998. The increase in
general and administrative expenses is due to an increase in professional fees
incurred during the second quarter of 1999. Included in general and
administrative expenses at both September 30, 1999 and 1998, are management
reimbursements to the General Partner allowed under the Partnership Agreement.
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 its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $1,977,000 as compared to approximately $1,938,000 at September
30, 1998. For the nine months ended September 30, 1999, cash and cash
equivalents increased by approximately $115,000 from the Partnership's year
ended December 31, 1998. The increase in cash and cash equivalents is due to
approximately $464,000 of cash provided by operating activities which was
partially offset by approximately $296,000 of cash used in investing activities
and approximately $53,000 of cash used in financing activities. Cash used in
investing activities consisted primarily of property improvements and
replacements and net deposits to restricted escrows maintained by the mortgage
lender. Cash used in financing activities consisted of principal payments made
on the mortgage encumbering the Partnership's property. The Partnership 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. Capital improvements planned for
the Partnership's property are discussed below.
During the nine month period ended September 30, 1999, the Partnership completed
approximately $279,000 of capital improvements at the property. These
improvements consisted of floor coverings, roof replacements, heating upgrades,
landscape improvements, and interior and exterior improvements. These
improvements were funded from operating cash flow and replacement reserves.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates by the General Partner on interior
improvements, it is estimated that the property requires approximately $344,000
of capital improvements over the next few years. Capital improvements planned
for 1999 which include certain of the required improvements and consist of, but
are not limited to, appliances, landscaping and outdoor lighting, asphalt
improvements, roof replacement, and carpeting. These improvements are expected
to cost approximately $359,000.
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 Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's 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 $2,220,000 are more than the reserve
requirement of approximately $2,070,000 at September 30, 1999.
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 $4,288,000 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 and/or sell the property
prior to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing such property through
foreclosure.
A cash distribution from surplus cash of approximately $500,000 ($2.76 per
limited partnership unit) from proceeds of the sale of Celina Plaza in 1997 was
made during the year ended December 31, 1998. No distributions were made in
1999. The Partnership's distribution policy is reviewed on an annual basis.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of the debt
maturity, refinancing and/or property sale. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit distributions to its partners in 1999 or
subsequent periods.
Tender Offer
On June 2, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 62,624.65 (approximately 34.54% of
the total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $16 per unit. The offer expired on July 30,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 6,602.00 units.
As a result, AIMCO and its affiliates currently own 51,623 units of limited
partnership interest in the Partnership representing approximately 28.47% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO (see "Item 1. Financial Statements, Note H - Legal
Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
General Partner filed a motion seeking dismissal of the action. In lieu of
responding to the motion, the plaintiffs have filed an amended complaint. The
General Partner filed demurrers to the amended complaint which were heard
February 1999. Pending the ruling on such demurrers, settlement negotiations
commenced. On November 2, 1999, the parties executed and filed a Stipulation of
Settlement ("Stipulation"), settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. The Court has preliminarily approved the Settlement and scheduled a
final approval hearing for December 10, 1999. In exchange for a release of all
claims, the Stipulation provides that, among other things, an affiliate of the
general partner will make tender offers for all outstanding limited partnership
interests in 49 partnerships, including the Registrant, subject to the terms and
conditions set forth in the Stipulation, and has agreed to establish a reserve
to pay an additional amount in settlement to qualifying class members (the
"Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will
make an application for attorneys' fees and reimbursement of expenses, to be
paid in part by the partnerships and in part from the Settlement Fund. The
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the 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/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties VI 1999 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000755908
<NAME> CONSOLIDATED CAPITAL PROPERITES VI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,977
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,340
<DEPRECIATION> 4,244
<TOTAL-ASSETS> 8,380
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,288
0
0
<COMMON> 0
<OTHER-SE> 3,746
<TOTAL-LIABILITY-AND-EQUITY> 8,380
<SALES> 0
<TOTAL-REVENUES> 1,377
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 327
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38
<EPS-BASIC> .21<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
