FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 June 30, 1997
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from.........to.........
Commission file number 0-14187
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
(Exact name of registrant 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 (864) 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
(in thousands, except unit data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited) (Note)
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 10,389 $ 15,813
Restricted - tenant security deposits 456 432
Accounts receivable 458 416
Investments 105 109
Escrows for taxes and insurance 426 347
Restricted escrows 1,979 2,174
Other assets 1,084 1,059
Investment properties:
Land 12,371 12,371
Building and related personal property 50,155 49,450
62,526 61,821
Less accumulated depreciation (14,016) (12,634)
48,510 49,187
$ 63,407 $ 69,537
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 330 $ 580
Tenant security deposits 456 434
Accrued taxes 296 183
Other liabilities 435 519
Mortgage notes payable 30,525 30,525
32,042 32,241
Partners' Capital (Deficit)
General partner's (440) (443)
Limited partners'(383,033 units outstanding) 31,805 37,739
31,365 37,296
$ 63,407 $ 69,537
<FN>
Note:The balance sheet at December 31, 1996, has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Financial Statements
</TABLE>
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 3,447 $ 3,221 $ 6,805 $ 6,232
Other income 329 209 719 450
Gain on casualty event (5) -- 16 --
Total revenues 3,771 3,430 7,540 6,682
Expenses:
Operating 1,142 1,056 2,269 2,205
General and administrative 140 161 261 321
Maintenance 478 539 941 959
Depreciation 703 674 1,394 1,336
Interest 579 363 1,158 732
Property taxes 211 210 443 427
Total expenses 3,253 3,003 6,466 5,980
Net income $ 518 $ 427 $ 1,074 $ 702
Net income allocated
to general partners (1%) $ 5 $ 4 $ 11 $ 7
Net income allocated
to limited partners (99%) 513 423 1,063 695
$ 518 $ 427 $ 1,074 $ 702
Net income per limited
partnership unit $ 1.34 $ 1.10 $ 2.78 $ 1.81
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 383,033 $ 1 $95,758 $95,759
Partners' (deficit) capital at
December 31, 1995 383,033 $ (407) $43,868 $43,461
Distributions to partners -- (18) (4,302) (4,320)
Net income for the six months
ended June 30, 1996 -- 7 695 702
Partners' (deficit) capital
at June 30, 1996 383,033 $ (418) $40,261 $39,843
Partners' (deficit) capital
at December 31, 1996 383,033 $ (443) $37,739 $37,296
Distributions to partners -- (8) (6,997) (7,005)
Net income for the six months
ended June 30, 1997 -- 11 1,063 1,074
Partners' (deficit) capital at
June 30, 1997 383,033 $ (440) $31,805 $31,365
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,074 $ 702
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,394 1,336
Amortization of lease commissions and
loan costs 71 28
Gain on casualty event (16) --
Loss on disposal of property 41 61
Change in accounts:
Restricted cash (24) (5)
Accounts receivable 77 137
Escrows for taxes and insurance (79) (139)
Other assets (94) 58
Accounts payable (379) (323)
Tenant security deposit liabilities 22 11
Accrued taxes 113 143
Other liabilities (84) 94
Net cash provided by operating activities 2,116 2,103
Cash flows from investing activities:
Property improvements and replacements (732) (651)
Deposits to restricted escrows (214) (12)
Receipts from restricted escrows 409 299
Cash received from borrower on foreclosed
property -- 74
Dividends received 4 --
Net cash used in investing activities (533) (290)
Cash flows from financing activities:
Payments on mortgage notes payable -- (93)
Loan costs paid (2) (86)
Distributions to partners (7,005) (4,320)
Net cash used in financing activities (7,007) (4,499)
Net decrease in cash and cash equivalents (5,424) (2,686)
Cash and cash equivalents at beginning of period 15,813 9,871
Cash and cash equivalents at end of period $10,389 $ 7,185
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,098 $ 683
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOW (Continued)
(Unaudited)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Acquisition
On February 14, 1996, Consolidated Capital Institutional Properties/3 foreclosed
on South City Business Center, the investment property collateralizing the note
receivable between Consolidated Capital Institutional Properties/3 and Lincoln
South City Business Center Limited Partnership. As of June 30, 1996, in
connection with this transaction, the following accounts had been adjusted by
the amounts noted (in thousands):
Investment properties $ 4,326
Notes receivable (4,400)
Casualty event
At June 30, 1997, as a result of a fire at Lake Villa, investment properties,
accounts receivable and accounts payable were adjusted $26,000, $119,000 and
$129,000, respectively for non-cash activity.
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Consolidated Capital
Institutional Properties/3 (the "Partnership") 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 ConCap Equities, Inc. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997. 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, 1996.
Presentation of Accounts
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - INVESTMENT PROPERTY ACQUIRED
During 1995, the debtor stopped making note payments on the note secured by the
South City Business Center. An affiliate of the General Partner was appointed
receiver in September 1995, and the foreclosure proceedings were completed on
February 14, 1996, at which time the Partnership assumed operations at the
property. The estimated net realizable value at the time of acquisition was
$4,400,000 including cash of $74,000 which the Partnership received along with
the South City assets of approximately $4,326,000.
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership has paid property management fees based on collected gross
rental revenues for property management services in each of the six month
periods ended June 30, 1997 and 1996. Property management fees of approximately
$361,000 and $321,000 were paid to affiliates of the General Partner for the six
months ending June 30, 1997 and 1996, respectively.
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with administration of
Partnership activities. Reimbursements for services of affiliates of
approximately $167,000 and $182,000 were paid to the General Partner and
affiliates for the six months ended June 30, 1997 and 1996. Additionally, the
Partnership paid $23,000 during each of the six month periods ended June 30,
1997 and 1996 to an affiliate of the General Partner for lease commissions at
the Partnership's commercial properties. These lease commissions are included in
other assets and are amortized over the term of the respective leases.
The Partnership insures 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 D - COMMITMENT
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital,
as defined in the Partnership Agreement. Cash, tenant security deposits and
investments, totaling approximately $11,000,000, were greater than the reserve
requirement of approximately $3,600,000 at June 30, 1997.
NOTE E - DISTRIBUTIONS
The Partnership made distributions of cash generated from operations of
approximately $838,000 and $1,823,000 for the six months ended June 30, 1997 and
1996. The Partnership also made distributions of cash from surplus funds of
approximately $6,161,000 and $2,497,000 for the six months ended June 30, 1997
and 1996.
In April of 1997, the Partnership paid state withholding taxes of $6,000 for
non-resident limited partners. This payment is reflected as a distribution to
the limited partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of eight apartment complexes and
two commercial properties. The following table sets forth the average occupancy
of the properties for each of the six months ended June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Cedar Rim Apartments 94% 92%
Renton, Washington
City Heights Apartments 95% 96%
Seattle, Washington
Corporate Center Office Complex 97% 94%
Tampa, Florida
Hidden Cove by the Lake Apartments 92% 92%
Belleville, Michigan
Lamplighter Park Apartments 95% 98%
Belleview, Washington
Park Capitol Apartments 98% 98%
Salt Lake City, Utah
Tamarac Village Apartments 94% 92%
Denver, Colorado
Williamsburg Manor Apartments 97% 95%
Cary, North Carolina
Sandpiper Apartments 95% 87%
St. Petersburg, Florida
South City Business Center 91% 86%
Chula Vista, California
The General Partner attributes the increase in occupancy at Corporate Center to
current tenant expansions and several new tenants in previously vacant units.
The occupancy increase at Sandpiper is due to interior and exterior renovations
and improved market conditions. South City Business Center's occupancy increase
is due to a stronger local market in 1997.
The Partnership realized net income of $1,074,000 for the six months ended June
30, 1997 compared to $702,000 for the six months ended June 30, 1996. Net
income for the three months ended June 30, 1997 was $518,000 compared to
$427,000 for the three months ended June 30, 1996. The increase in net income
for the six month period ended June 30, 1997 is primarily attributable to
increased rental income resulting from improved occupancy and increased rental
rates at several properties. In addition, interest and other income increased
as a result of increased tenant charges at various properties as well as greater
interest earned on increased cash balances. Total revenues were positively
affected by South City's revenue for the full six months ended June 30, 1997
compared to the period from February 14, 1996, the date of South City's
acquisition, to June 30, 1996. Also contributing to the increase in net income
was a casualty gain of $16,000 relating to fire damage at Hidden Cove by the
Lake Apartments. The January fire damaged ten units in one building at the
complex. General and administrative expenses decreased due to a decrease in
professional fees and expense reimbursements. Partially offsetting these
changes was an increase in interest expense. The increase in interest expense
is due primarily to the refinancing of Tamarac Village and Lamplighter Park and
new debt on Hidden Cove, Cedar Rim and City Heights, whose debt balances
increased approximately $12,500,000 in November of 1996.
Included in maintenance expenses for the six months ended June 30, 1997 is
approximately $236,000 of major repairs and maintenance comprised primarily of
exterior renovations, major landscaping, exterior painting and swimming pool
repairs. For the six months ended June 30, 1996, approximately $391,000 of
major repairs and maintenance comprised primarily of exterior building
renovations, major landscaping, exterior painting and parking lot
rehabilitation is included in maintenance expenses.
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 June 30, 1997, the Partnership held cash and cash equivalents of $10,389,000
compared to $7,185,000 at June 30, 1996. Net cash provided by operating
activities increased primarily due to increased rental revenues and interest
income, partially offset by increased interest payments, as discussed above.
Net cash used in investing activities increased due to the funding of restricted
escrows required by the November 1996 refinancing. Net cash used in financing
activities increased due to increased distributions to partners during the six
months ended June 30, 1997 compared to 1996.
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. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The notes payable of approximately $30,525,000 have maturity dates ranging from
2003 to 2005, at which time the individual properties will be refinanced or
sold. The mortgage notes payable are nonrecourse and are secured by pledges of
the respective properties. All notes require prepayment penalties if repaid
prior to maturity and prohibit resale of the properties subject to existing
indebtedness. Distributions of approximately $7,005,000 and $4,320,000 were
made to the partners during the six months ended June 30, 1997 and 1996,
respectively. Future cash distributions will depend on the levels of net cash
generated from operations or property sales, if any, 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 June 30, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES/3
By: CONCAP EQUITIES, INC.
Its General Partner
By:/s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By:/s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties/3 1997 Second Quarter 10-Q and is qualified in
its entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000768890
<NAME> CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,389
<SECURITIES> 105
<RECEIVABLES> 458
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 62,526
<DEPRECIATION> (14,016)
<TOTAL-ASSETS> 63,407
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,525
0
0
<COMMON> 0
<OTHER-SE> 31,365
<TOTAL-LIABILITY-AND-EQUITY> 63,407
<SALES> 0
<TOTAL-REVENUES> 7,540
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,158
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,074
<EPS-PRIMARY> 2.78<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
