FORM 10-Q--Quarterly Report Under Section 13 or 15 (d)
Of the Securities Exchange Act of 1934
(As last amended by Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
or
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period.........to.........
Commission file number 0-14187
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
(Exact name of small business issuer as specified in its charter)
California 94-2940208
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (803) 239-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Cash and cash equivalents $ 5,131 $ 3,642
Note and interest receivable 5,900 7,701
Securities available for sale 506 3,176
Other assets 919 339
Due from affiliates -- 59
Investment properties:
Land 10,365 8,902
Building and related personal property 44,721 38,236
55,086 47,138
Less accumulated depreciation (9,307) (7,459)
45,779 39,679
Net real estate assets of property
in-substance foreclosed -- 7,314
$ 58,235 $ 61,910
Liabilities and Partners' Capital (Deficit)
Notes payable and accrued interest $ 11,768 $ 12,318
Accounts payable and accrued expenses 679 300
Tenant security deposits 348 328
Accrued taxes 480 235
13,275 13,181
Partners' Capital (Deficit)
General partner (392) (355)
Limited partners (383,033 units outstanding) 45,352 49,084
44,960 48,729
$ 58,235 $ 61,910
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 3,107 $ 2,154 $ 8,923 $ 6,316
Interest income on investment
in master loan to affiliate -- 330 -- 968
Interest on note receivable -- 137 275 412
Interest and dividend income
on investments 78 92 254 252
Total revenues 3,185 2,713 9,452 7,948
Expenses:
Operating 1,705 1,101 4,435 3,199
General and administrative 199 120 633 448
Depreciation and amortization 633 522 1,854 1,567
Interest 280 272 900 796
Write-down on note receivable -- -- 1,755 --
Total expenses 2,817 2,015 9,577 6,010
Other income -- -- -- 77
Net income (loss) $ 368 $ 698 $ (125) $ 2,015
Net income (loss) allocated
to general partners (1%) $ 4 $ 7 $ (1) $ 20
Net income (loss) allocated
to limited partners (99%) 364 691 (124) 1,995
$ 368 $ 698 $ (125) $ 2,015
Net income (loss) per
limited partnership unit $ .96 $ 1.81 $ (.32) $ 5.21
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
,caption>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 383,033 $ 1 $95,758 $95,759
Partners' capital (deficit) at
December 31, 1993 383,033 $ (314) $53,102 $52,788
Distributions -- (36) (3,493) (3,529)
Net income for the nine months
ended September 30, 1994 -- 20 1,995 2,015
Partners' capital (deficit) at
September 30, 1994 383,033 $ (330) $51,604 $51,274
Partners' capital (deficit) at
December 31, 1994 383,033 $ (355) $49,084 $48,729
Distributions -- (36) (3,608) (3,644)
Net loss for the nine months
ended September 30, 1995 -- (1) (124) (125)
Partners' capital (deficit) at
September 30, 1995 383,033 $ (392) $45,352 $44,960
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (125) $ 2,015
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 1,848 1,567
Amortization of lease commissions and
loan costs 31 55
Write-down on note receivable 1,755 --
Change in accounts:
Other assets (611) (77)
Due from affiliates 59 18
Accounts payable and accrued expenses 380 (516)
Tenant security deposit liabilities 20 5
Accrued taxes 244 65
Accrued interest 43 --
Net cash provided by
operating activities 3,644 3,132
Cash flows from investing activities:
Property improvements and replacements (634) (90)
Cash invested in securities available
for sale (11,251) (1,704)
Cash received from securities available
for sale 13,921 1,896
Interest reduction on note receivable 46 --
Net cash provided by
investing activities 2,082 102
Cash flows from financing activities:
Payments on mortgage notes payable (593) (305)
Cash distributions to partners (3,644) (3,512)
Net cash used in financing
activities (4,237) (3,817)
Net increase in cash and cash equivalents 1,489 (583)
Cash and cash equivalents at beginning of period 3,642 1,440
Cash and cash equivalents at end of period $ 5,131 $ 857
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 832 $ 741
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. 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 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, 1995, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the fiscal year ended December
31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Related Party Transactions
Consolidated Capital Institutional Properties/3 ("Partnership") paid property
management fees based upon collected gross rental revenues for property
management services as noted below for the nine month periods ended September
30, 1995, and September 30, 1994. For the nine months ended September 30, 1994,
a portion of such property management fees were paid to an unaffiliated property
management company for day-to-day property management services and a portion was
paid to Partnership Services, Inc. ("PSI") for advisory services related to
day-to-day property operations for all of the Partnership's properties. In
addition, for the nine months ended September 30, 1994, Coventry Properties Inc.
("Coventry"), an affiliate of the General Partner, was paid a management fee
under the same fee arrangement as the unaffiliated property management
companies for day-to-day property management services provided to two of the
Partnership's properties. Affiliates of Insignia Financial Group, Inc.
("Insignia"), an affiliate of the General Partner, assumed day-to-day
management responsibilities for all of the Partnership's properties in late
December 1994. Fees paid to affiliates of Insignia during the nine months
ended September 30, 1995, and fees paid to Coventry and PSI during the nine
months ended September 30, 1994, are reflected in the following table:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Property management fees $436 $195
Property leasing commissions 11 --
Note B - Related Party Transactions - (continued)
The Partnership Agreement ("Agreement") also provides for reimbursement to
the General Partner and its affiliates for costs incurred in connection with
the administration of Partnership activities. The General Partner and its
current and former affiliates (including Coventry), received reimbursements as
reflected in the following table:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Reimbursement for services of affiliates $346 $230
As of September 30, 1995, the Partnership had accrued $22,956 payable to an
affiliate of Insignia. These reimbursements related to the potential
refinancings of several of the Partnership's investment properties.
On July 1, 1995, the Partnership began insuring its properties under a master
policy through an agency and 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 current year's master policy. The agent assumed the
financial obligations to the affiliate of the General Partner, who receives
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 is not significant.
Note C - Commitment
The Partnership is required by the Agreement to maintain working capital
reserves of not less than 5% of Net Invested Capital, as defined in the
Agreement. In the event expenditures are made from this reserve, operating
revenue shall be allocated to such reserve to the extent necessary to maintain
the foregoing level. Reserves, including cash and securities available for sale
totalling approximately $5.6 million were greater than the reserve requirement
of approximately $4.1 million at September 30, 1995.
Note D - Other Income
In 1991, the Partnership (and simultaneously other affiliated partnerships)
entered claims in Southmark's Chapter 11 bankruptcy proceeding. These claims
related to Southmark's activities while it exercised control (directly, or
indirectly through its affiliates) over the Partnership. The U.S. Bankruptcy
Court set the Partnership's and the affiliated partnerships' allowed claim at
$11 million, in the aggregate. In March 1994, the Partnership received $67,791
in cash, 1,237 shares of Southmark Corporation Redeemable Series A Preferred
Stock and 9,406 shares of Southmark Corporation New Common Stock with an
aggregate market value on the date of receipt of $9,104 representing the
Partnership's share of the recovery, based on its pro rata share of the claims
filed.
Note E - Net Investment in Master Loan
In November 1994, the Partnership entered into a settlement agreement with
Equity Partners/3 ("EP/3") whereby the Williamsburg Manor Apartments were deeded
in lieu of foreclosure to the Partnership and foreclosure proceedings were
initiated by the Partnership on the Sandpiper I and II Apartments, the remaining
properties which collateralized the Master Loan. As of September 30, 1994, the
Partnership had recognized income on the investment in Master Loan of $968,000.
Note F - In-Substance Foreclosure
As a result of the facts that: (1) EP/3 has no equity in the Sandpiper I & II
Apartments, considering the current estimated fair value of the property; (2)
proceeds for repayment of the portion of the Master Loan collateralized by the
Sandpiper I & II Apartments can be expected to come only from the operations or
sale of the property; and (3) EP/3 effectively abandoned control of the
Sandpiper I & II Apartments when EP/3 and the Partnership executed the
settlement agreement in November 1994, whereby EP/3 agreed to transfer to the
Partnership the full and unrestricted right to possession, management, and
control of the property and not to contest, hinder or delay a judicial
foreclosure action initiated by the Partnership, CCIP/3 has deemed the
Sandpiper I & II Apartments in-substance foreclosed as of November 30, 1994.
Accordingly, the net Master Loan receivable collateralized by the Sandpiper I &
II Apartments is presented as "Net real estate assets of property
in-substance foreclosed" in the accompanying financial statements for 1994.
Foreclosure proceedings were completed on June 16, 1995.
Note G - Notes Payable
The Tamarac Village Apartments, located in Denver, Colorado, secures
approximately $2.8 million of first mortgage debt that matured in June of 1995.
The General Partner is negotiating with the lender to extend the maturity of
the mortgage debt. No assurance can be given that the General Partner will be
successful in negotiations with the lender.
The Lamplighter Park Apartments, located in Bellevue, Washington, secures
approximately $4.6 million of first mortgage debt that matured in June of 1995.
On June 30, 1995 an extension agreement was reached which extends the maturity
of this mortgage debt until June 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of nine apartment complexes
and one commercial property. The following table sets forth the average
occupancy of the properties for the nine months ended September 30, 1995 and
1994:
Average
Occupancy
Property 1995 1994
Cedar Rim Apartments
Renton, Washington 88% 90%
City Heights Apartments
Seattle, Washington 83% 92%
Corporate Center Office Complex
Tampa, Florida 99% 96%
Hidden Cove by the Lake Apartments
Belleville, Michigan 96% 94%
Lamplighter Park Apartments
Belleview, Washington 94% 95%
Park Capitol Apartments
Salt Lake City, Utah 96% 98%
Sandpiper I & II Apartments
St. Petersburg, Florida 87% 98%
Tamarac Village I, II, III & IV Apartments
Denver, Colorado 89% 92%
Williamsburg Manor Apartments
Cary, North Carolina 97% 100%
The decrease in occupancy at City Heights is attributable to water damage to
sixunits causing move-outs. The damage was caused by a poor drainage system
between the buildings. The decrease in occupancy at Sandpiper I & II is due to
the General Partner's efforts to evict tenants who were chronically delinquent
in making their rent payments. The decrease in occupancy at Williamsburg Manor
is related to rent increases implemented in first quarter 1995 and low interest
rates which are prompting tenants to purchase homes.
The Partnership's net loss for the nine months ended September 30, 1995, was
approximately $125,000 as compared to net income of $2,015,000 for the nine
months ended September 30, 1994. The Partnership realized net income of
$368,000 for the three months ended September 30, 1995, as compared to $698,000
for the three months ended September 30, 1994. The decrease in net income for
the nine months ended September 30, 1995, is primarily attributable to the
write-down recorded on the note receivable related to South City Business
Center during the second quarter. This property was previously sold and a note
receivable was recorded by the Partnership. It has been determined that this
note receivable is impaired and was written down to the estimated value of the
property. The General Partner is currently pursuing foreclosure of the
property. An affiliate of the General Partner was appointed receiver and the
foreclosure proceedings are expected to be finalized during the first quarter of
1996. Also, for the three and nine month periods ended September 30, 1995,
operating expenses, depreciation, and interest expense increased due to
the addition of Williamsburg Manor Apartments which was acquired through a deed
in lieu of foreclosure transaction and Sandpiper I & II which was acquired
through in-substance foreclosure in November 1994. The final foreclosure on
Sandpiper I & II was completed on June 16, 1995. As a result of the
transactions described above, the Master Loan was settled in full in 1994.
Accordingly, no related interest income was recorded in 1995. Also,
contributing to the net loss in 1995 was an increase in general and
administrative expenses due to the combined efforts of the Dallas and Greenville
offices during the transition period that ended June 30, 1995.
These increased costs were incurred to minimize any disruption in the year-end
reporting function including the financial reporting and K-1 preparation and
distribution. Administrative expenses began decreasing in the third quarter of
1995 as the transition efforts are now complete. Offsetting these items was
increased rental revenue related to the addition of Williamsburg Manor
Apartments and Sandpiper I & II through the transactions described above.
Other income recorded in the nine months ended September 30, 1994, related to
the receipt of its pro rata share of the claims filed in Southmark's Chapter 11
proceedings.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At September 30, 1995, the Partnership reported cash of approximately
$5,131,000 versus approximately $857,000 for the same period in 1994. Net cash
provided from operations increased primarily due to the increase in accounts
payable and accrued taxes. Net income decreased in 1995, as noted above, but
was offset by an increase in depreciation and the write-down on the note
receivable. Net cash provided by investing activities increased primarily due
to the maturity of securities available for sale. Finally, the increase in cash
used in financing activities is primarily attributable to an increase in
distributions to partners and payments on mortgage notes payable.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. The notes payable
indebtedness of $11,768,000 has maturity dates ranging from 1995 to 2004 at
which time the individual properties will be refinanced or sold. The notes
payable indebtedness related to Lamplighter Park Apartments, which was due in
June 1995, was extended on June 30, 1995, to June 30, 1997. The General Partner
is currently negotiating to refinance the note on Tamarac Village, which was due
in June 1995. Such assets are currently thought to be sufficient for any near-
term needs of the partnership. Distributions of $1,804,000 or $4.71 per Unit
were made to the limited partners in March and September 1995. Matching
distributions of $18,000 were made to the General Partner in March and
September 1995. Future cash distributions will depend on the levels of net
cash generated from operations, property sales, and the availability of cash
reserves.
PART II - OTHER INFORMATION
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, 1995.
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 INSTITUTIONAL
PROPERTIES/3
By: CONCAP EQUITIES, INC.
General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 8, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule cointains summary financial information extracted from
Consolidated Capital Institutional Properties/3 1995 Third Quarter 10-Q and is
qualified in its entirety by reference to such 10-Q.
</LEGEND>
<CIK> 0000768890
<NAME> CCIP/3
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,131
<SECURITIES> 506
<RECEIVABLES> 5,900
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 55,086
<DEPRECIATION> (9,307)
<TOTAL-ASSETS> 58,235
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,768
<COMMON> 0
0
0
<OTHER-SE> 44,960
<TOTAL-LIABILITY-AND-EQUITY> 58,235
<SALES> 0
<TOTAL-REVENUES> 9,452
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 900
<INCOME-PRETAX> (125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> 0
<FN>
<F1>
The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
