FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1997
or
[ ] 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 0-14187
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, including area code (864) 239-1000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.[X]
291,947.5 of the partnership's 383,033 Limited Partnership Units ("Units") are
held by non-affiliates. The aggregate market value of Units held by non-
affiliates is not determinable since there is no public trading market for Units
and transfers of Units are subject to certain restrictions.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Consolidated Capital Institutional Properties/3 (the "Registrant" or
"Partnership") was organized on May 23, 1984, as a limited partnership under the
California Uniform Limited Partnership Act. On July 23, 1985, the Partnership
registered with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933 (File No. 2-97664) and commenced a public offering for
sale of $200,000,000 of 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 terminated
on May 15, 1987, with 383,033 units sold for $250 each, or gross proceeds of
$95,758,250 to the Partnership. The Partnership subsequently filed a Form 8-A
Registration Statement with the SEC and registered its Units under the
Securities Exchange Act of 1934 (File No. 0-14187).
The general partner of the Partnership is ConCap Equities, Inc. ("CEI" or the
"General Partner"), a Delaware corporation. The principal place of business for
the Partnership and for the General Partner is One Insignia Financial Plaza,
Greenville, South Carolina 29602.
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership was formed, for the benefit of its Limited
Partners (herein so called and together with the General Partner shall be called
the "Partners"), to lend funds to ConCap Equity Partners/3, ConCap Equity
Partners/4, and ConCap Equity Partners/5 ("EP/3", "EP/4" and "EP/5",
respectively). EP/3, EP/4 and EP/5 represent California limited
partnerships in which certain of the partners were former shareholders and
former management of Consolidated Capital Equities Corporation ("CCEC"), the
former corporate general partner of the Partnership.
Through December 31, 1994, the Partnership had made twelve (12) specific loans
against a Master Loan agreement and advanced a total of $67,300,000. EP/3 used
$17,300,000 of the loaned funds to purchase two (2) apartment complexes and one
(1) office building. EP/4 used $34,700,000 of the loaned funds to purchase four
(4) apartment complexes and one (1) office building, which was subsequently sold
in 1989. EP/5 used $15,300,000 of the loaned funds to purchase two (2)
apartment complexes and two (2) office buildings. Through a series of
transactions, the Partnership has acquired all of EP/3, EP/4 and EP/5's
properties in full settlement of their liability under the Master Loan. For a
brief description of the properties owned by the Partnership refer to Item 2 -
Description of Properties.
As of December 31, 1997, the Partnership's working capital reserves are greater
than 5% of Net Invested Capital as required by the Partnership Agreement. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations," for a discussion of Partnership liquidity and capital
resources. Also, see "Item 8 - Financial Statements and Supplementary Data,"
for the amounts of revenue and operating profit or loss generated by the
Partnership's operations for its last three years.
Prior to 1989, the Partnership had loaned $17,300,000 to EP/3, $34,700,000 to
EP/4 and $15,300,000 to EP/5, subject to non-recourse notes with participation
interests (collectively referred to as the "Master Loan"), pursuant to a Master
Loan Agreement dated February 26, 1986, between the Partnership and EP/3, EP/4
and EP/5. The Partnership secured the Master Loan with deeds of trust or
mortgages on real properties and by the assignment and pledge of promissory
notes from the partners of EP/3, EP/4 and EP/5. In November 1994, the
Partnership entered into an agreement with EP/3 whereby one property was
deeded in lieu of foreclosure to the Partnership and foreclosure proceedings
were instituted by the Partnership on the other asset which collateralized the
Master Loan. The Partnership assumed a note payable of approximately $1,200,000
in exchange for full settlement of EP/3's liability under the Master Loan.
During 1992, the Partnership foreclosed on the last remaining EP/4 apartment
complex in full settlement of EP/4's liability under the Master Loan.
Previously, the Partnership foreclosed on three of EP/4's apartment complexes
and EP/4's interest in one note receivable secured by the office building sold
in 1989, and acquired EP/5's two apartment complexes and two office buildings
through a transfer of ownership in full settlement of EP/5's liability under the
Master Loan.
During 1993, the major tenant who occupied 95% of the Sutter D Office Building,
one of the three EP/3 properties collateralizing the Master Loan, did not renew
its lease and vacated the building. EP/3 was unable to replace the tenant under
terms that were economically viable for the property and defaulted on the
approximately $2,100,000 third party mortgage debt secured by the Sutter D
Office Building. During 1994, the Sutter D Office Building serving as collateral
for the Master Loan was posted for foreclosure by the first lienholder. This
foreclosure had no gain or loss effect to the Partnership.
In November 1994, the Partnership entered into a settlement with 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 collateralizing the
Master Loan. The Partnership also assumed a note payable of approximately
$1,200,000 in exchange for full settlement of EP/3's liability for the Master
Loan and recognized a net loss of approximately $413,000 on the settlement of
the Master Loan at December 31, 1994.
As a result of the fact that: (1) EP/3 had no equity in the Sandpiper I & II
Apartments, considering the then estimated fair value of the property;
(2) proceeds for repayment of the portion of the Master Loan collateralized by
the Sandpiper I & II Apartments were 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 deemed the Sandpiper I &
II Apartments in-substance foreclosed at November 30, 1994. Foreclosure
proceedings were initiated in 1994 and completed in 1995. As a result of the
transactions described above, the Master Loan was settled in full during 1994.
At December 31, 1997, the Partnership owned eight apartment complexes located in
Florida, North Carolina, Washington, Michigan, Utah and Colorado, one office
building located in Florida and one shopping center in California, which range
in age from 12 to 29 years old. These properties are hereinafter referred to as
the "Partnership Properties".
Upon the Partnership's formation in 1984, CCEC, a Colorado corporation, was the
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 ("Chapter 11"). 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 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
part of the Insignia Transaction, the Insignia affiliate also 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. As
of December 31, 1997, Insignia Properties Trust, an affiliate of Insignia, owned
100% of the outstanding stock of CEI. At December 31, 1997, Insignia Properties
L.P., an affiliate of Insignia, owned 43,220 Units of the Partnership.
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 145,000 of the outstanding
units of limited partnership interest in the Partnership, at $85 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 31, 1997 (the "Offer to Purchase") and the
related Assignment of Partnership Interest attached as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally
filed with the SEC on December 31, 1997. Because of the existing and potential
future conflicts of interest (described in the Partnership's Statements on
Schedule 14D-9 filed with the SEC), neither the Partnership nor the Managing
General Partner expressed any opinion as to the Offer to Purchase and made no
recommendation as to whether unit holders should tender their units in
response to the Offer to Purchase. In addition, because of these conflicts of
interest, including as a result of the Purchaser's affiliation with various
Insignia affiliates, the manner in which the Purchaser votes its limited partner
interests in the Partnership may not always be consistent with the best
interests of the other limited partners. Subsequent to December 31, 1997,
Insignia Properties, L.P. acquired an additional 47,865.5 units as a result of
the aforementioned tender offer.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis of financial condition and Results of Operations"
included in "Item 7." of this Form 10-K.
The Registrant has no employees. Management and administrative services are
performed by the General Partner and by affiliates of Insignia. The real estate
business is highly competitive, and the Partnership is not a significant factor
in this industry.
The Registrant's properties are subject to competition from similar properties
in the vicinities in which they are located. In addition, various limited
partnerships have been formed by related parties to engage in businesses which
may be competitive with the Registrant.
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.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the Registrant's investment in properties:
Date of
Property Purchase Type of Ownership Use
Cedar Rim 4/12/91 Fee ownership subject Apartment
New Castle, Washington to first mortgage. 104 units
City Heights 4/13/90 Fee ownership subject Apartment
Seattle, Washington to first mortgage. 105 units
Corporate Center 4/13/90 Fee ownership. Commercial
Tampa, Florida 108,000 s.f.
Hidden Cove by the Lake 3/23/90 Fee ownership subject Apartment
Belleville, Michigan to first mortgage. 120 units
Lamplighter Park 4/12/91 Fee ownership subject Apartment
Bellevue, Washington to first mortgage. 174 units
Park Capitol 4/13/90 Fee ownership subject Apartment
Salt Lake City, Utah to first mortgage. 135 units
Tamarac Village 6/10/92 Fee ownership subject Apartment
I,II,III,IV to first mortgage. 564 units
Denver, Colorado
Williamsburg Manor 11/30/94 Fee ownership subject Apartment
Cary, North Carolina to first mortgage. 183 units
Sandpiper I & II 11/30/94 Fee ownership subject Apartment
St. Petersburg, Florida to first mortgage. 276 units
South City Business 2/14/96 Fee ownership. Commercial
Center, Chula Vista, 169,000 s.f.
California
SCHEDULE OF PROPERTIES (IN THOUSANDS):
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Cedar Rim $ 4,842 $1,657 3-20 yrs S/L $ 4,801
City Heights 4,874 1,685 3-20 yrs S/L 4,711
Corporate Center 3,464 1,417 5-20 yrs S/L 3,731
Hidden Cove 5,410 2,202 3-20 yrs S/L 4,226
Lamplighter Park 8,073 2,015 3-20 yrs S/L 6,907
Park Capitol 2,918 1,204 5-20 yrs S/L 2,308
Tamarac Village 14,479 3,311 5-20 yrs S/L 12,156
Williamsburg Manor 6,927 825 5-22 yrs S/L 6,243
Sandpiper I & II 7,842 921 5-22 yrs S/L 7,080
South City 4,497 237 5-25 yrs S/L 4,381
$63,326 $15,474 $ 56,544
<FN>
See "Note A" of the Notes to Financial Statements included in "Item 8" for a
description of the Partnership's depreciation policy.
</FN>
</TABLE>
SCHEDULE OF MORTGAGES (IN THOUSANDS):
Principal Principal
Balance At Stated Balance
December 31, Interest Maturity Due At
Property 1997 Rate Date Maturity
Cedar Rim $ 2,000 7.33% 11/01/03 $2,000
City Heights 2,600 7.33% 11/01/03 2,600
Hidden Cove 2,200 7.33% 11/01/03 2,200
Lamplighter Park 3,500 7.33% 11/01/03 3,500
Park Capitol 2,725 6.95% 12/01/05 2,725
Tamarac Village 9,400 7.33% 11/01/03 9,400
Williamsburg Manor 4,150 6.95% 12/01/05 4,150
Sandpiper I & II 3,950 6.95% 12/01/05 3,950
$30,525
The mortgage loans on each of the properties mature at various times with
balloon payments due at maturity. Throughout the mortgage terms, interest only
payments are required. The mortgage notes payable are nonrecourse and are
secured by pledge of the Partnership's properties and by pledge of revenues from
the respective properties. The notes require prepayment penalties if repaid
prior to maturity and prohibit resale of the properties subject to existing
indebtedness.
In December 1995, three of the Partnership's investment properties, Williamsburg
Manor, Park Capitol, and Sandpiper I and II, obtained refinancing. Total
proceeds from the refinancings totaled $10,825,000. For the terms of these
mortgage notes, see table above. Loan costs of approximately $360,000 were
incurred by the properties as a result of the refinancings, and are included in
other assets on the balance sheet. Park Capitol was charged a prepayment penalty
due to the early payoff of the old debt which resulted in the extraordinary loss
on refinancing of $18,000 for December 31, 1995.
During 1995, the Partnership had two notes payable, originally maturing in
January 1995, which were extended to June 1995. The Lamplighter Park Apartments
note payable was approximately $4,600,000, and the Tamarac Village note payable
was approximately $2,800,000. On June 30, 1995, an extension agreement was
reached on the indebtedness secured by Lamplighter Park Apartments, which
extended the maturity of this mortgage debt to June 30, 1997. This property's
debt was refinanced in November of 1996. In December 1995, the indebtedness
secured by Tamarac Village was paid in full.
In November of 1996, five of the Partnership's investment properties, Cedar Rim,
City Heights, Hidden Cove, Lamplighter Park and Tamarac Village, obtained
initial financing or refinanced existing notes. Proceeds from this transaction
totaled $19,700,000. For the terms of these mortgage notes, see table above.
Loan costs of $579,000 were incurred by the properties as a result of the
refinancings, and are included in other assets on the balance sheet.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average Annual
Rental Rates (1) Occupancy
Property 1997 1996 1997 1996
Cedar Rim $ 9,324 $ 8,837 96% 94%
City Heights 10,085 9,591 96% 96%
Corporate Center 5.71 5.68 99% 94%
Hidden Cove 8,469 8,258 91% 94%
Lamplighter Park 8,804 7,925 95% 96%
Park Capitol 7,708 7,276 97% 98%
Tamarac Village 7,006 6,659 94% 94%
Williamsburg Manor 8,569 8,200 97% 95%
Sandpiper I & II 6,963 6,736 95% 91%
South City 6.60 5.38 89% 88%
(1) The average annual rental rates for Corporate Center and South City are per
square foot. The rates are per unit for the apartment complexes.
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.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. The Partnership's properties are subject to competition
from other residential apartment complexes and commercial buildings in the area.
The General Partner believes that all of the properties are adequately insured.
The multifamily residential properties' lease terms are for one year or less.
No residential tenant leases 10% or more of the available rental space.
The following is a schedule of lease expirations for the years 1998 - 2007:
<TABLE>
<CAPTION>
Corporate Number of % of Gross
Center Expirations Square Feet Annual Rent Annual Rent
(in thousands)
<S> <C> <C> <C> <C>
1998 9 37,920 $ 206 34.7%
1999 9 34,720 201 33.9%
2000 6 18,230 108 18.2%
2001 2 9,600 63 10.6%
2002 1 2,400 16 2.6%
2003 - 2007 0 0 0 0
</TABLE>
Number of % of Gross
South City Expirations Square Feet Annual Rent Annual Rent
(in thousands)
1998 19 28,137 $ 199 19.2%
1999 14 25,698 192 18.5%
2000 10 32,122 192 18.4%
2001 2 3,467 27 2.6%
2002 1 2,650 25 2.7%
2003 - 2007 1 8,808 51 4.9%
No tenant at South City occupies 10% or more of the leasable square feet.
The following schedule reflects information on tenants occupying 10% or more of
the leasable square feet for Corporate Center:
Nature of Square Footage Annual Rent Lease
Business Leased Per Sq. Ft. Expiration
Retailer 12,000 $5.55 11/30/98
Soil Testing 11,940 4.96 02/28/99
SCHEDULE OF REAL ESTATE TAXES (IN THOUSANDS) AND RATES:
1997 1997
Taxes Rate
Cedar Rim $ 65 1.36%
City Heights 75 1.31%
Corporate Center 63 2.50%
Hidden Cove 65 4.54%
Lamplighter Park 81 1.25%
Park Capitol 41 .80%
Tamarac Village 147 .84%
Williamsburg Manor 75 1.22%
Sandpiper I & II 174 2.45%
South City 74 1.29%
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Partnership believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended December 31, 1997, no matter was submitted to a vote of
the Unit holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
As of December 31, 1997, the number of holders of record of Limited Partnership
Units was 18,280. No public trading market has developed for the Units, and it
is not anticipated that such a market will develop in the future.
The Partnership made distributions of cash generated from operations of
approximately $2,438,000, $4,821,000 and $3,644,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The Partnership also made distributions
of cash from surplus funds of approximately $11,569,000 and $2,497,000 for the
years ended December 31, 1997 and 1996, respectively. Future distributions will
depend on the levels of cash generated from operations, refinancings, property
sales and the availability of cash reserves as discussed in "Note H -
Commitment" in "Item 7" of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in "Item 8 - Financial
Statements and Supplementary Data."
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
STATEMENTS OF OPERATIONS 1997 1996 1995 1994 1993
(in thousands, except per unit data)
<S> <C> <C> <C> <C> <C>
Revenues $ 15,173 $ 14,047 $ 12,708 $ 10,814 $ 10,441
Costs and expenses (13,237) (12,894) (14,314) (10,929) (11,381)
Income (loss) from operations 1,936 1,153 (1,606) (115) (940)
Net gain (loss) on sales of securities -- -- -- (1) --
Net gain (loss) on acquisition of
real estate -- -- -- (413) --
Settlement costs -- -- -- -- (201)
Income (loss) before
extraordinary item 1,936 1,153 (1,606) (529) (1,141)
Extraordinary item -- -- (18) -- --
Net income (loss) $ 1,936 $ 1,153 $ (1,624)$ (529)$ (1,141)
Net income (loss) per Limited
Partnership Unit:
Income (loss) from operations $ 5.00 $ 2.98 $ (4.15)$ (.30)$ (2.43)
Net gain (loss) on acquisition of
real estate -- -- -- (1.07) --
Settlement costs -- -- -- -- (.52)
Income (loss) before
extraordinary item 5.00 2.98 (4.15) (1.37) (2.95)
Extraordinary item -- -- (.05) -- --
Net income (loss) $ 5.00 $ 2.98 $ (4.20)$ (1.37)$ (2.95)
Distributions per Limited
Partnership Unit $ 36.13 $ 18.98 $ 9.42 $ 9.12 $ 7.20
Limited Partnership
Units outstanding 383,033 383,033 383,033 383,033 383,033
</TABLE>
AS OF DECEMBER 31,
BALANCE SHEETS 1997 1996 1995 1994 1993
(in thousands)
Total assets $ 57,086 $ 69,537 $ 62,863 $ 61,910 $ 65,628
Notes payable $ 30,525 $ 30,525 $ 17,995 $ 12,318 $ 11,541
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
1997 Compared with 1996
The Partnership realized net income of $1,936,000 for the year ended December
31, 1997 compared to $1,153,000 for the year ended December 31, 1996. The
increase in net income is primarily attributable to increased rental income
resulting from improved occupancy and increased rental rates at several
properties. In addition, other income increased as a result of increased tenant
charges, including lease cancellation, application, and cleaning fees, as well
as greater interest income earned on increased average cash balances. Total
revenues were positively affected by South City's revenue for the full year
ended December 31, 1997 compared to the period from February 14, 1996, the date
of South City's acquisition, to December 31, 1996. General and administrative
expenses decreased for the year ended December 31, 1997, due to a decrease in
professional fees and expense reimbursements.
Also contributing to the increase in net income is a decrease in operating
expense. Included in operating expense for the year ended December 31, 1997 is
approximately $719,000 of major repairs and maintenance compared to
approximately $1,234,000 for the year ended December 31, 1996. The decrease in
major repairs and maintenance is due to various rehabilitation projects in 1996
at Williamsburg Manor, Lamplighter, Cedar Rim, and City Heights. At
Williamsburg Manor, exterior renovation involving siding, gutter and shutter
repairs, as well as exterior painting, accounted for approximately $257,000 of
the operating expenses. At Lamplighter, approximately $119,000 was spent on
exterior painting. At Cedar Rim, 1996 expenditures included an exterior
building rehabilitation project of approximately $125,000 for repairs to
exterior lighting, balconies, painting, and siding and parking lot repairs of
approximately $30,000. At City Heights, $91,000 was spent on exterior painting
during 1996. The 1997 extraordinary expenses are comprised primarily of exterior
building improvements, exterior painting, gutter repair, parking lot
rehabilitation and major landscaping. Partially offsetting these changes were
increases in interest expense and depreciation 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.
Depreciation expense increased due to the increase in the depreciable asset base
at several of the Partnership's properties from capital additions of
approximately $1,692,000 and $1,699,000 during 1997 and 1996, respectively.
1996 Compared with 1995
The Partnership realized net income for the year ended December 31, 1996, of
$1,153,000 compared to a net loss of $1,624,000 for the year ended December 31,
1995. The increase in net income is primarily attributable to the write-down
recorded in 1995 of the note receivable between the Partnership and Lincoln
South City Business Center Limited Partnership. This note receivable was
subsequently foreclosed on in February 1996. In addition, rental income
increased due to improved occupancy and increased rental rates at several
properties. Also contributing was a casualty gain of $114,000 relating to fire
damages at the Lamplighter Park Apartments. The October fire damaged 12 units
in one building at the complex. General and administrative expenses decreased
due to lower expense reimbursements related to the combined efforts of the
Dallas and Greenville partnership administration staffs during the transition
period in 1995. The increased costs related to the transition efforts were
incurred to minimize any disruption in the year-end reporting function including
the financial reporting and K-1 preparation and distribution.
Offsetting these changes were increases in operating and depreciation expenses,
which are due in part to the acquisition of South City Business Center. The
increase in operating expenses was also impacted by increased repair and
maintenance expenditures resulting from efforts to increase the curb appeal of
several of the Partnership's properties. Depreciation expense increased due to
an increase in the depreciable asset base at several of the Partnership's
properties from capital additions of approximately $1,699,000 and $1,401,000
during 1996 and 1995, respectively, and the addition of South City as a
depreciable asset. The decrease in other income resulted primarily from no
interest income being recognized on the South City note receivable in 1996 while
$275,000 of interest income was recorded in 1995. The increase in interest
expense is due primarily to the refinancing of Williamsburg Manor, Park Capitol
and Sandpiper I and II, whose debt balances increased approximately $6,000,000
through the refinancings, partially offset by the retirement of the third
mortgage secured by Tamarac Village in December 1995.
The borrower on the note receivable secured by the South City Business Center
placed the property under Chapter 11 protection in September 1992. In April
1993, the Bankruptcy Court approved the borrower's reorganization plan pursuant
to which the General Partner and the borrower agreed to a restructure agreement.
During 1995, the debtor stopped making note payments on the South City note in
June and officially defaulted on the note in August. The Partnership obtained
an appraisal of the collateral and it was determined that this note receivable
was impaired. Accordingly, during 1995, the Partnership recorded a write-down of
$3,255,000 related to South City Business Center to adjust the note balance to
the estimated net realizable value of the collateral. An affiliate of the
General Partner was appointed receiver in September 1995, and the foreclosure
proceedings were finalized during the first quarter of 1996.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At December 31, 1997, the Partnership held unrestricted cash of approximately
$5,054,000 compared to approximately $15,813,000 at December 31, 1996. The net
decrease in cash and cash equivalents for the year ended December 31, 1997 is
$10,759,000 compared to a net increase of $5,942,000 for the year ended December
31, 1996. Net cash provided by operations increased primarily due to increased
rental revenues and interest income, and decreased operating expenses, partially
offset by increased interest payments, as discussed above. Net cash used in
investing activities decreased due to the 1996 funding of restricted escrows
required by the 1996 refinancings. Net cash used in financing activities
increased due to higher distributions to the partners during 1997 compared to
1996 and the 1996 net proceeds from the mortgage refinancings which were
included in net cash provided by financing activities.
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 $30,525,000 have maturity dates ranging from 2003 to 2005
at which time the individual properties will be refinanced or sold.
Distributions of approximately $14,007,000 and $7,318,000 were made to the
partners during 1997 and 1996, respectively. Future cash distributions will
depend on the levels of net cash generated from operations, property sales, and
the availability of cash reserves.
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. 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, totaling approximately $5.2 million at December
31, 1997, were greater than the reserve requirement of approximately $3.4
million.
In December 1995, three of the Partnership's properties, Williamsburg Manor,
Sandpiper I and II, and Park Capitol, were successfully refinanced. Total
proceeds from the refinancings totaled $10,825,000. The extraordinary loss on
refinancing of approximately $18,000 resulted from a prepayment penalty charged
for the early payoff of the original debt secured by Park Capital. In November
of 1996, five of the Partnership's investment properties, Cedar Rim, City
Heights, Hidden Cove, Lamplighter Park and Tamarac Village, obtained initial
financing or refinanced existing notes. Proceeds from this transaction totaled
$19,700,000. Throughout the mortgage term, interest-only payments are made on
the financed properties. Loan costs of $941,000 were incurred by the properties
as a result of the refinancings.
The General Partner has received a nonbinding letter of intent from an
unaffiliated party interested in pursuing the purchase of Lamplighter Park
Apartments. The General Partner is currently evaluating the terms of the offer
and plans to make a decision with regard to the sale before March 31, 1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this annual report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance, or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this annual report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young, LLP, Independent Auditors
Balance Sheets - December 31, 1997 and 1996
Statements of Operations - Years Ended December 31, 1997, 1996 and 1995
Statements of Changes in Partners' Capital (Deficit) - Years Ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows - Years Ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
Schedules are not submitted because either they are not applicable or the
information required is included in the Financial Statements, including the
notes thereto.
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Institutional Properties/3
We have audited the accompanying balance sheets of Consolidated Capital
Institutional Properties/3 as of December 31, 1997 and 1996, and the related
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the three years in the period ended December 31, 1997. 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 financial position of Consolidated Capital
Institutional Properties/3 as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
January 23, 1998
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
BALANCE SHEETS
(in thousands, except unit data)
Years Ended December 31,
1997 1996
Assets
Cash and cash equivalents $ 5,054 $ 15,813
Receivables and deposits 960 1,196
Investments (Note C) 105 109
Restricted escrows 2,141 2,174
Other assets 974 1,058
Investment properties: (Notes A, F, and M)
Land 12,371 12,371
Buildings and related personal property 50,955 49,450
63,326 61,821
Less accumulated depreciation (15,474) (12,634)
47,852 49,187
$ 57,086 $ 69,537
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 172 $ 580
Tenant security deposits 460 434
Accrued taxes 264 183
Other liabilities 440 519
Mortgage notes payable (Note F) 30,525 30,525
31,861 32,241
Partners' Capital (Deficit)
General partner's (589) (443)
Limited partners' (383,033 units outstanding) 25,814 37,739
25,225 37,296
$ 57,086 $ 69,537
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Rental income $ 13,874 $ 12,981 $ 11,362
Interest and other income 1,307 952 1,346
Gain (loss) on casualty events (Note D) (8) 114 --
Total revenues 15,173 14,047 12,708
Expenses:
Operating 6,680 7,092 5,857
General and administrative 501 618 714
Depreciation 2,852 2,741 2,505
Interest 2,316 1,573 1,212
Property taxes 888 870 771
Write-down of note receivable (Note E) -- -- 3,255
Total expenses 13,237 12,894 14,314
Income (loss) before extraordinary item 1,936 1,153 (1,606)
Extraordinary loss from refinancing (Note F) -- -- (18)
Net income (loss) $ 1,936 $ 1,153 $ (1,624)
Net income (loss) allocated to general
partner (1%) $ 19 $ 12 $ (16)
Net income (loss) allocated to limited
partners (99%) 1,917 1,141 (1,608)
$ 1,936 $ 1,153 $ (1,624)
Net income (loss) per Limited Partnership Unit:
Income (loss) before extraordinary item $ 5.00 $ 2.98 $ (4.15)
Extraordinary item -- -- (.05)
Net income (loss) $ 5.00 $ 2.98 $ (4.20)
Distributions per Limited Partnership Unit $ 36.13 $ 18.98 $ 9.42
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the Years Ended December 31, 1997, 1996 and 1995
(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
Balance at December 31, 1994 383,033 $ (355) $ 49,084 $ 48,729
Net loss for the year ended
December 31, 1995 -- (16) (1,608) (1,624)
Distributions to partners -- (36) (3,608) (3,644)
Balance at December 31, 1995 383,033 (407) 43,868 43,461
Net income for the year ended
December 31, 1996 -- 12 1,141 1,153
Distributions to partners -- (48) (7,270) (7,318)
Balance at December 31, 1996 383,033 (443) 37,739 37,296
Net income for the year ended
December 31, 1997 -- 19 1,917 1,936
Distributions to partners -- (165) (13,842) (14,007)
Balance at December 31, 1997 383,033 $ (589) $ 25,814 $ 25,225
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,936 $ 1,153 $(1,624)
Adjustments to reconcile net income (loss) net
to net cash provided by operating activities:
Depreciation 2,852 2,741 2,505
Amortization of lease commissions
and loan costs 146 68 34
Loss (gain) on casualty event 8 (114) --
Loss on disposal of property 41 149 11
Write-down of note receivable -- -- 3,255
Interest reduction on note receivable -- -- 46
Changes in accounts:
Receivables and deposits 236 (36) (587)
Other assets (60) (9) (107)
Accounts payable (408) (201) 402
Tenant security deposit liability 26 23 42
Property taxes 81 6 (58)
Other liabilities (79) 140 158
Net cash provided by
operating activities 4,779 3,920 4,077
Cash flows from investing activities:
Property improvements and replacements (1,692) (1,699) (1,401)
Net receipts from (deposits to)
restricted escrows 33 (986) (1,188)
Purchase of investments -- -- (11,251)
Proceeds from sales of investments -- -- 14,318
Net cash received in foreclosure -- 74 --
Net insurance proceeds from casualty events 126 -- --
Dividends received 4 -- --
Net cash (used in) provided by
investing activities $ (1,529) $(2,611) $ 478
Cash flows from financing activities:
Payments on mortgage notes payable $ -- $ (158) $ (448)
Proceeds from refinancing -- 19,700 10,825
Repayment of mortgage debt -- (7,012) (4,699)
Loan costs paid (2) (579) (360)
Partners' distributions (14,007) (7,318) (3,644)
Net cash (used in) provided by
financing activities (14,009) 4,633 1,674
Net (decrease) increase in cash and
cash equivalents (10,759) 5,942 6,229
Cash and cash equivalents at beginning of year 15,813 9,871 3,642
Cash and cash equivalents at end of year $ 5,054 $15,813 $ 9,871
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 2,196 $ 1,372 $ 1,139
<FN>
At December 31, 1996, in connection with a fire at Lamplighter Park, investment
properties, receivables and deposits, and accounts payable were adjusted
$134,000, $265,000 and $269,000, respectively, for non-cash activity.
Also, notes receivable and property improvements and replacements were adjusted
by $4,400,000 and $4,383,000 to reflect the acquisition of South City through
foreclosure of the note receivable (see Note G).
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A - ORGANIZATION OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Consolidated Capital Institutional Properties/3 (the
"Partnership"), a California limited partnership, was formed on May 23, 1984, to
lend funds through non-recourse notes with participation interests (the "Master
Loan"). The loans were made to, and the real properties that secure the Master
Loan were purchased and owned by, ConCap Equity Partners/3, ConCap Equity
Partners/4, and ConCap Equity Partners/5, ("EP/3", "EP/4", and "EP/5",
respectively), California limited partnerships in which certain of the partners
were former shareholders and former management of Consolidated Capital Equities
Corporation ("CCEC"). The Partnership entered into a Master Loan Agreement with
EP/3, EP/4, and EP/5, pursuant to which the aggregate principal would not exceed
the net amount raised by the Partnership's offering of approximately
$96,000,000.
Upon the Partnership's formation in 1984, CCEC, a Colorado corporation, was the
corporate general partner. In December 1988, CCEC filed for reorganization under
Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). In 1990, as
part of CCEC's reorganization plan, ConCap Equities, Inc., a Delaware
corporation (the "General Partner" or "CEI") acquired CCEC's general partner
interests in the Partnership and in 15 other affiliated public limited partner-
ships and replaced CCEC as managing general partner in all 16 partnerships.
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
part of the Insignia Transaction, the Insignia affiliate also 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. As
of December 31, 1997, Insignia Properties Trust, an affiliate of Insignia, owned
100% of the outstanding stock of CEI. At December 31, 1997, Insignia
Properties, L.P., an affiliate of Insignia, owned 43,220 Units of the
Partnership.
The Partnership operates eight apartment properties and two commercial
properties located throughout the United States.
The principal place of business for the Partnership and for the General Partner
is One Insignia Financial Plaza, Greenville, South Carolina, 29602.
Cash and Cash Equivalents: The Partnership considers all highly liquid
investments with a maturity, when purchased, of three months or less to be cash
equivalents. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
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. The security deposits are refunded when the tenant
vacates, provided the tenant has not damaged its space and is current on its
rental payments.
Restricted Escrows: As a result of the refinancing of Williamsburg Manor,
Sandpiper I & II and Park Capitol in 1995 and Lamplighter Park, Tamarac Village,
Hidden Cove, Cedar Rim, and City Heights in 1996, the following reserves were
established:
Capital Improvement Reserve - As part of the refinancings, the properties
deposited $1,416,000 in 1996 and $843,000 in 1995 with the mortgage companies to
establish a Capital Reserve designated for certain capital improvements. At
December 31, 1997, this reserve totaled approximately $1,400,000.
Replacement Reserve - As a result of the refinancings, each property will
make monthly deposits to establish and maintain a Replacement Reserve designated
for repairs and replacements at the properties. At December 31, 1997, this
reserve totaled approximately $741,000.
Note Receivable Impairment: In 1995, the Partnership adopted "Statement of
Financial Accounting Standards ("SFAS") No. 114, Accounting By Creditors for
Impairment of a Loan." Under the new standard, the provision for credit losses,
related to loans that are identified for evaluation in accordance with FASB
Statement No. 114, is based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. During 1995, it was determined that the note
secured by the South City Business Center was impaired. Accordingly, during
1995, the Partnership recorded a write-down of $3,255,000 ($1,500,000 in the
fourth quarter) on the note receivable to adjust the note balance to the
estimated net realizable value of the collateral. See "Note E - Notes and
Interest Receivable" regarding the 1996 foreclosure proceedings.
Investment Properties: Investment properties are stated at cost. Costs of
properties that have been permanently impaired have been reduced to the
estimated fair market value. Acquisition fees are capitalized as a cost of real
estate. During 1995, the Partnership adopted "SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recognized 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. The adoption of "SFAS
No. 121" did not have a material effect on the Partnership's financial
statements.
Depreciation: Buildings and improvements are depreciated using the straight-
line method over the estimated useful lives of the assets, ranging from 3 to 25
years. Tenant improvements are depreciated over the terms of the related leases.
Leases: The Partnership leases its residential properties under short-term
operating leases. Lease terms are generally one year or less in duration. The
Partnership expects that in the normal course of business these leases will be
renewed or replaced by other leases.
The Partnership leases certain commercial space to tenants under various lease
terms. For leases containing fixed rental increases during their term, rents are
recognized on a straight-line basis over the terms of the leases. For all other
leases, rents are recognized over the terms of the leases as earned.
Interest Recognition on Notes Receivable: The Partnership's policy is to cease
accruing interest on notes receivable that have been delinquent for 60 days or
more. In addition, interest income is only accrued to the extent collateralized
by the net realizable value of the subject property.
Loan Costs: Loan costs of approximately $2,000, $579,000 and $360,000 were
capitalized in 1997, 1996 and 1995, respectively (in conjunction with property
refinancings). At December 31, 1997 and 1996, a total of $941,000 and $939,000
less accumulated amortization of $171,000 and $51,000, respectively, are
included in other assets. Loan costs are amortized on a straight-line basis
over the life of the loans.
Income Taxes: No provision has been made in the financial statements for
Federal income taxes because, under current law, no Federal income taxes are
paid directly by the Partnership. The partners are responsible for their
respective shares of Partnership net income or loss.
Allocation of Net Income and Net Loss: The Partnership Agreement provides for
net income and net losses for both financial and tax reporting purposes to be
allocated 99% to the Limited Partners and 1% to the general partner.
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.
Use 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.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was $242,000, $292,000, and
$273,000 during the years ended December 31, 1997, 1996 and 1995, respectively.
Reclassifications: Certain reclassifications have been made to the 1996 and
1995 information to conform to the 1997 presentation.
NOTE B - 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 Limited Partnership Agreement ("Partnership Agreement") provides for
payments to affiliates for property management services based on a percentage of
revenue. The Partnership Agreement also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with
administration of Partnership activities. The following payments were paid to
affiliates of the General Partner during each of the years ending December 31,
1997, 1996 and 1995 (in thousands):
1997 1996 1995
Property management fees (included in
operating expenses) $ 737 $ 658 $ 572
Reimbursement for services
of affiliates, including $33,000,
$27,000, and $32,000 of construction
services reimbursements in 1997,
1996, and 1995, respectively
(included in investment properties,
general and administrative expenses
and operating expenses) 374 403 429
Additionally, the Partnership paid $36,000, $32,000 and $14,000 during the years
ended December 31, 1997, 1996 and 1995, respectively, 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 terms of the respective leases. The Partnership also paid
$98,000 to affiliates of Insignia for reimbursements of costs related to the
loan refinancings in November of 1996. These costs were capitalized as loan
costs and are being amortized over the term of the loans.
A director of Insignia Financial Group, Inc. is affiliated with a professional
legal association that received fees in connection with the 1996 refinancing of
certain of the Partnership's properties (see "Note F"). These fees totaled
$60,000 and have been capitalized as loan costs and are being amortized over the
term of the loans.
From the period July 1995 to August 1997, the Partnership insured 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 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 is not significant.
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 145,000 of the outstanding
units of limited partnership interest in the Partnership, at $85 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 31, 1997 (the "Offer to Purchase") and the
related Assignment of Partnership Interest attached as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally
filed with the Securities and Exchange Commission on December 31, 1997. Because
of the existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the Managing General Partner
expressed any opinion as to the Offer to Purchase and made no recommendation as
to whether unit holders should tender their units in response to the Offer to
Purchase. In addition, because of these conflicts of interest, including as a
result of the Purchaser's affiliation with various Insignia affiliates, the
manner in which the Purchaser votes its limited partner interest in the
Partnership may not always be consistent with the best interests of the other
limited partners. Subsequent to December 31, 1997, Insignia Properties, L.P.
acquired an additional 47,865.5 units in the Partnership as a result of the
aforementioned tender offer.
NOTE C - SECURITIES AVAILABLE FOR SALE
The Partnership accounts for its securities available for sale ("Securities") in
accordance with "SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities." As the fair value of the securities held by the Partnership
approximate their cost, any unrealized gains or losses are immaterial and,
therefore, have not been recorded in the accompanying financial statements. Any
such adjustment would be recorded directly to partners' capital (deficit) and
would not be reflected in the statement of operations. The cost of securities
sold is determined using the specific identification method.
Investments stated at cost, consisted of the following at December 31, 1997 and
1996, (in thousands):
DESCRIPTION COST MATURITY
1997 1996
Commercial Paper $100 $100 May 1998
Equity Securities 5 9 N/A
$105 $109
NOTE D - CASUALTY EVENTS
In October 1996, a fire damaged twelve units at the Lamplighter Park Apartments.
The unit where the fire started suffered extensive damage, and as a result, the
asset and related accumulated depreciation were written off in 1996. At
December 31, 1996, an insurance proceeds receivable was recorded, as well as a
miscellaneous payable representing the estimated cost of restoring the damaged
units. The net gain recognized in 1996 relating to this fire was $114,000. In
1997, the restoration was completed, and additional unanticipated charges were
incurred. The net effect of these charges was a casualty loss of approximately
$24,000 being recognized in 1997 relating to the 1996 fire. The 1997 loss was
recorded as a reduction to the gain on casualty items on the Partnership's
statement of operations.
In 1997, a fire at Hidden Cove by the Lake Apartments damaged ten units in one
building at the complex. The units affected suffered primarily smoke and water
damages, and the restoration was completed in the second quarter of 1997. A
casualty gain of $16,000 was recognized in 1997 as a result of this fire.
NOTE E - NOTES AND INTEREST RECEIVABLE
The borrower on the note receivable secured by the South City Business Center
placed the property under Chapter 11 protection in September 1992. In April
1993, the Bankruptcy Court approved the borrower's reorganization plan pursuant
to which the General Partner and the borrower agreed to a restructure agreement.
During 1995, the debtor stopped making note payments on the South City note in
June and officially defaulted on the note in August. The Partnership obtained
an appraisal of the collateral and it was determined that this note receivable
was impaired. Accordingly, during 1995, the Partnership recorded a write-down of
$3,255,000 related to South City Business Center to adjust the note balance to
the estimated net realizable value of the collateral. An affiliate of the
General Partner was appointed receiver in September 1995, and the foreclosure
proceedings were finalized during the first quarter of 1996.
NOTE F - MORTGAGE NOTES PAYABLE
Notes payable at December 31, 1997, consist of the following (in thousands):
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
1997 Interest Rate Date Maturity
Property
<S> <C> <C> <C> <C> <C>
Cedar Rim $ 2,000 $ 12 7.33% 11/01/03 $ 2,000
City Heights 2,600 16 7.33% 11/01/03 2,600
Hidden Cove 2,200 14 7.33% 11/01/03 2,200
Lamplighter Park 3,500 21 7.33% 11/01/03 3,500
Park Capitol 2,725 16 6.95% 12/01/05 2,725
Tamarac Village 9,400 57 7.33% 11/01/03 9,400
Williamsburg Manor 4,150 24 6.95% 12/01/05 4,150
Sandpiper I & II 3,950 23 6.95% 12/01/05 3,950
$30,525 $ 183
</TABLE>
In December 1995, three of the Partnership's investment properties, Williamsburg
Manor, Park Capitol, and Sandpiper I and II, obtained refinancing. Total
proceeds from the refinancings totaled $10,825,000. This debt accrues interest
at a rate of 6.95% per year, matures on December 1, 2005, and requires balloon
payments at maturity for the full principal amount. Throughout the mortgage
term, interest only payments are made. Loan costs of approximately $360,000
were incurred by the properties as a result of the refinancings, and are
included in other assets on the balance sheet. Park Capitol was charged a
prepayment penalty due to the early payoff of the old debt which resulted in the
extraordinary loss on refinancing of $18,000 for December 31, 1995.
During 1995, the Partnership had two notes payable, originally maturing in
January 1995, which were extended to June 1995. Lamplighter Park Apartments
secured approximately $4.6 million, and Tamarac Village secured approximately
$2.8 million. On June 30, 1995, an extension agreement was reached on the
indebtedness secured by Lamplighter Park Apartments, which extended the maturity
of this mortgage debt to June 30, 1997. This property's debt was refinanced in
November of 1996. In December 1995, the indebtedness secured by Tamarac Village
was paid in full.
In November of 1996, five of the Partnership's investment properties, Cedar Rim,
City Heights, Hidden Cove, Lamplighter Park and Tamarac Village, obtained
initial financing or refinanced existing notes. Proceeds from this transaction
totaled $19,700,000. The debt accrues interest at a rate of 7.33% per year,
matures on November 1, 2003, and requires balloon payments at maturity for the
full principal amount. Throughout the mortgage term, interest-only payments are
made. Loan costs of $579,000 were incurred by the properties as a result of the
refinancings, and are included in other assets on the balance sheet.
The mortgage notes payable are non-recourse and are secured by pledge of the
respective properties. Also, all notes require prepayment penalties if repaid
prior to maturity and prohibit resale of the properties subject to existing
indebtedness.
NOTE G - SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITY
On February 14, 1996, the Partnership foreclosed on South City Business Center,
the investment property collateralizing the note receivable between the
Partnership and Lincoln South City Business Center Limited Partnership. In
connection with this transaction, the following accounts were adjusted by the
amounts noted in 1996 (in thousands):
Accounts receivable $ 15
Security deposit liability (72)
Investment properties 4,383
Note receivable (4,400)
No gain or loss was recorded upon the foreclosure due to the carrying value of
the note receivable being adjusted to the value of the underlying collateral
during 1995.
NOTE H - 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. Reserves, including cash and
securities available for sale, totaling approximately $5.2 million, were greater
than the reserve requirement of $3.4 million at December 31, 1997.
NOTE I - PARTNERS' EQUITY (DEFICIT)
Net profits, net losses, and distributions are allocated 99% to the Limited
Partners and 1% to the general partner.
The Partnership made distributions of cash generated from operations of
approximately $2,438,000, $4,821,000 and $3,644,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The Partnership also made distributions
of cash from surplus funds of approximately $11,569,000 and $2,497,000 for the
years ended December 31, 1997 and 1996, respectively.
NOTE J - OPERATING LEASES
Tenants of the Partnership's commercial properties are responsible for payment
of their proportionate share of real estate taxes. Insurance, common area
maintenance expenses and a portion of the real estate taxes are paid directly by
the Partnership. The Partnership is then reimbursed by the tenants for their
proportionate share of the real estate taxes.
The future minimum rental payments to be received under operating leases that
have initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1997, are as follows (in thousands):
1998 $ 1,088
1999 678
2000 320
2001 131
2002 68
Thereafter 255
$ 2,540
NOTE K - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
(in thousands)
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Cedar Rim $ 2,000 $ 778 $ 4,322 $ 864
New Castle, Washington (1,122)
City Heights 2,600 1,197 4,238 598
Seattle, Washington (1,159)
Corporate Center -- 1,071 2,949 544
Tampa, Florida (1,100)
Hidden Cove by the Lake 2,200 184 4,416 855
Belleville, Michigan (45)
Lamplighter Park 3,500 2,458 5,167 806
Bellevue, Washington (358)
Park Capitol 2,725 280 2,100 538
Salt Lake City, Utah
Tamarac Village 9,400 2,464 10,536 1,635
I, II, III, & IV (156)
Denver, Colorado
Williamsburg Manor 4,150 1,281 5,124 522
Cary, North Carolina
Sandpiper I & II 3,950 1,463 5,851 528
St. Petersburg, Florida
South City Business Center -- 2,006 2,376 115
Chula Vista, California
Totals $30,525 $13,182 $47,079 $ 3,065
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
Gross Amount At Which Carried
at December 31, 1997
Buildings
And Related Date of
Personal Accumulated Construc- Date Depreciable
Description Land Property Total Depreciation tion Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Cedar Rim $ 618 $ 4,224 $ 4,842 $ 1,657 1980 4/12/91 3 - 20
City Heights 942 3,932 4,874 1,685 1985 4/13/90 3 - 20
Corporate Center 782 2,682 3,464 1,417 1982 4/13/90 5 - 20
Hidden Cove 184 5,226 5,410 2,202 1972 3/23/90 3 - 20
Lamplighter Park 2,351 5,722 8,073 2,015 1968 4/12/91 3 - 20
Park Capitol 280 2,638 2,918 1,204 1974 4/13/90 5 - 20
Tamarac Village 2,464 12,015 14,479 3,311 1978 6/10/92 5 - 20
Williamsburg 1,281 5,646 6,927 825 1970 11/30/94 5 - 22
Manor
Sandpiper 1,463 6,379 7,842 921 1976/1985 11/30/94 5 - 22
South City 2,006 2,491 4,497 237 1974/1976 2/14/96 5 - 25
$12,371 $50,955 $63,326 $15,474
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995
(in thousands)
INVESTMENT PROPERTIES:
Balance at beginning of year $ 61,821 $ 55,835 $ 58,109
Additions 1,558 1,833 1,401
Acquisition through foreclosure -- 4,383 --
Allocation of valuation reserve -- -- (3,657)
Disposal of property (53) (230) (18)
Balance at end of year $63,326 $61,821 $ 55,835
(in thousands)
ACCUMULATED DEPRECIATION:
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995
Balance at beginning of year $12,634 $ 9,958 $ 7,459
Depreciation of real estate 2,852 2,741 2,505
Disposal of property (12) (65) (6)
Balance at end of year $15,474 $12,634 $ 9,958
The aggregate cost for Federal income tax purposes is:
1997 $56,544
1996 $57,213
1995 $53,180
NOTE L - INCOME TAXES
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable
income (loss) (in thousands, except unit data):
1997 1996 1995
Net income as reported $ 1,936 $ 1,153 $ (1,624)
Add (deduct):
Fixed asset write-offs and casualty
gain 25 35 3,266
Loss on foreclosure -- (7,732) --
Depreciation differences 568 661 709
Change in prepaid rental income 240 (89) 115
Other 99 77 (169)
Federal taxable income (loss) $ 2,868 $ (5,895) $ 2,297
Federal taxable income (loss) per
limited partnership unit $ 7.41 $ (15.24) $ 5.94
The tax basis of the Partnership's assets and liabilities is approximately
$21,000,000 greater than the assets and liabilities as reported in the financial
statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with Ernst & Young, LLP regarding the 1997, 1996 or
1995 audits of the Partnership's financial statements.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no officers or directors. The General Partner manages and
controls the Registrant and has general responsibility and authority in all
matters affecting its business.
The names of the directors and executive officers of ConCap Equities, Inc.
("CEI"), the Partnership's Managing General Partner, their ages and the nature
of all positions with CEI presently held by them are set forth below:
Name Age Position
William H. Jarrard, Jr. 51 President and Director
Ronald Uretta 41 Vice President and Treasurer
Martha L. Long 38 Controller
Robert D. Long, Jr. 30 Vice President
Daniel M. LeBey 32 Vice President and Secretary
Kelley M. Buechler 40 Assistant Secretary
William H. Jarrard, Jr. has been President and Director of the General Partner
since December 1996. He has acted as Senior Vice President of Insignia
Properties Trust ("IPT"), an affiliate of the General Partner, since May 1997.
Mr. Jarrard previously acted as Managing Director - Partnership Administration
of Insignia Financial Group, Inc. ("Insignia") from January 1991 through
September 1997 and served as Managing Director - Partnership Administration and
Asset Management of Insignia from July 1994 until January 1996.
Ronald Uretta has been Vice President and Treasurer of the General Partner since
December 1996 and Insignia's Treasurer since January 1992. Since August 1996,
he has also served as Insignia's Chief Operating Officer. He has also served as
Insignia's Secretary from January 1992 to June 1996 and as Insignia's Chief
Financial Officer from January 1992 to August 1996.
Martha L. Long has been Controller of the General Partner since December 1996
and Senior Vice President - Finance and Controller of Insignia since January
1997. In June 1994, Ms. Long joined Insignia as its Controller, and was
promoted to Senior Vice President - Finance in January 1997. Prior to that
time, she was Senior Vice President and Controller of the First Savings Bank, in
Greenville, SC.
Robert D. Long, Jr. has been Vice President of the General Partner since January
2, 1998. Mr. Long joined Metropolitan Asset Enhancement, L.P. ("MAE"), an
affiliate of Insignia, in September 1993. Since 1994 he has acted as Vice
President and Chief Accounting Officer of the MAE subsidiaries. Mr. Long was an
accountant for Insignia until joining MAE in 1993. Prior to joining Insignia,
Mr. Long was an auditor for the State of Tennessee and was associated with the
accounting firm of Harsman Lewis and Associates.
Daniel M. LeBey has been Vice President and Secretary of the General Partner
since January 29, 1998 and Insignia's Assistant Secretary since April 30, 1997.
Since July 1996 he has also served as Insignia's Associate General Counsel.
From September 1992 until June 1996, Mr. LeBey was an attorney with the law firm
of Alston & Bird LLP, Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
December 1994 and Assistant Secretary of Insignia since 1991.
ITEM 11. EXECUTIVE COMPENSATION
No direct compensation was paid or payable by the Partnership to directors or
officers for the year ended December 31, 1997, nor was any direct compensation
paid or payable by the Partnership to 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. However, reimbursements and other payments have been made to the
Partnership's General Partner and its affiliates, as described in "Item 13"
below.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Except as provided below, as of March 1998, no person was known to CEI to
own of record or beneficially more than 5 percent of the Units of the
Partnership:
NUMBER OF PERCENT
NAME AND ADDRESS UNITS OF TOTAL
Insignia Properties, L.P. 91,085.5 23.8%
One Insignia Financial Plaza
Greenville, SC 29602
Insignia Properties, L.P. is an affiliate of Insignia (see "Item 1").
(b) Beneficial Owners of Management
Except as described in Item 12(a) above, neither CEI nor any of the
directors, officers or associates of CEI own any Units of the Partnership
of record or beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of January 1, 1998, the following persons were known to CEI to be the
beneficial owners of more than 5 percent of its common stock:
NUMBER OF PERCENT
NAME AND ADDRESS CEI SHARES OF TOTAL
Insignia Properties Trust 100,000 100%
One Insignia Financial Plaza
Greenville, SC 29602
Insignia Properties Trust is an affiliate of Insignia (see "Item 1").
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 145,000 of the outstanding
units of limited partnership interest in the Partnership, at $85 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 31, 1997 (the "Offer to Purchase") and the
related Assignment of Partnership Interest attached as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally
filed with the Securities and Exchange Commission on December 31, 1997. Because
of the existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the Managing General Partner
expressed any opinion as to the Offer to Purchase and made no recommendation as
to whether unit holders should tender their units in response to the Offer to
Purchase. Subsequent to December 31, 1997, Insignia Properties, L.P. acquired
an additional 47,865.5 units as a result of the aforementioned tender offer.
There are no arrangements known to the General Partner, the operation of which
may, at a subsequent date, result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the transactions described below, neither CEI nor any of its
directors, officers or associates, or any associates of any of them, has had any
interest in any other transaction to which the Partnership is a party.
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 Limited Partnership Agreement ("Partnership Agreement") provides for
payments to affiliates for property management services based on a percentage of
revenue. The Partnership Agreement also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with
administration of Partnership activities. The following payments were paid to
affiliates of the General Partner during each of the years ending December 31,
1997, 1996 and 1995 (in thousands):
1997 1996 1995
Property management fees $ 737 $ 658 $ 572
Reimbursement for services
of affiliates, including $33,000,
$27,000, and $32,000 of construction
services reimbursements in 1997,
1996, and 1995, respectively 374 403 429
Additionally, the Partnership paid $36,000, $32,000 and $14,000 during the years
ended December 31, 1997, 1996 and 1995, 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 terms of the
respective leases. The Partnership also paid $98,000 to affiliates of Insignia
for reimbursements of costs related to the loan refinancings in November of
1996. These costs were capitalized as loan costs and are being amortized over
the term of the loans.
A director of Insignia Financial Group, Inc. is affiliated with a professional
legal association that received fees in connection with the 1996 refinancing of
certain of the Partnership's properties (see "Note F"). These fees totaled
$60,000 and have been capitalized as loan costs and are being amortized over the
term of the loans.
From the period July 1995 to August 1997, the Partnership insured 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 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 is not significant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Balance Sheets as of December 31, 1997 and 1996
Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995
Statements of Changes in Partners' Capital (Deficit) for the Years Ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows for the Years Ended December 31, 1997,
1996 and 1995
Notes to Financial Statements
2. Schedules
All schedules are omitted because they are not required, are not
applicable or the financial information is included in the financial
statements or notes thereto.
3. Exhibits
S-K REFERENCE
NUMBER DOCUMENT DESCRIPTION
3 Certificates of Limited Partnership,
as amended.
10.3 Participating Note Master Loan
Agreement (Incorporated by reference
to Registration Statement of Partner-
ship (File No. 2-97664) filed July 23,
1985).
10.4 Participating Note Security Agreement
(Incorporated by reference to Registra-
tion Statement of Partnership (File No.
2-97664) filed July 23, 1985).
10.5 Form of Deed of Trust and Rider
(Incorporated by reference to Registra-
tion Statement of Partnership (File No.
2-97664) filed July 23, 1985).
10.6 Several Promissory Notes (Incor-
porated by reference to Registration
Statement of Partnership (File No.
2-97664) filed July 23, 1985).
10.7 Property Management Agreement No.
101 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).
10.8 Property Management Agreement No.
301 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 Property Management Agreement No.
315 dated April 12, 1991, by and
between the Partnership and CCMLP.
(Incorporated by reference to the
Annual Report on Form 10-K for the
year ended December 31, 1991).
10.10 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).
10.11 Assignment and Assumption 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).
10.12 Assignment and Agreement as to Certain
Property Management Services dated
October 23, 1990, by and between CCMLP
and ConCap Capital Company (Incorporated
by reference to the Quarterly Report
on Form 10-Q for the quarter ended
September 30, 1990).
10.13 Assignment and Agreement as to
Certain Property Management Services
dated April 12, 1991, by and between
CCMLP and ConCap Capital Company.
(Incorporated by reference to the
1991 Annual Report on Form 10-K for
the year ended December 31, 1991).
10.14 Assignment and Agreement dated October
23, 1990, by and between CCMLP and The
Hayman Company (100 Series of Property
Management Contracts) (Incorporated
by reference to the Quarterly Report
on Form 10-Q for the quarter ended
September 30, 1990).
10.15 Assignment and Agreement dated October
23, 1990, by and between CCMLP and
Metro ConCap, Inc. (300 Series of
Property Management Contracts) (Incor-
porated by reference to the Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1990).
10.16 Construction Management Cost Reim-
bursement Agreement dated January 1,
1991, by and between the Partnership
and Metro ConCap, Inc. (Incorporated
by reference to the Annual Report on
Form 10-K for the year ended December
31, 1991).
10.17 Construction Management Cost Reim-
bursement Agreement dated April 12,
1991, by and between the Partnership
and Metro ConCap, Inc. (Incorporated
by reference to the Annual Report on
Form 10-K for the year ended December
31, 1991).
10.18 Construction Management Cost Reim-
bursement Agreement dated January 1,
1991, by and between the Partnership
and The Hayman Company. (Incorporated
by reference to the Annual Report on
Form 10-K for the year ended
December 31, 1991).
10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 Assignment and Assumption Agreement
(Financial Services Agreement) dated
October 23, 1990, by and between CCEC
and ConCap Capital Company (Incorpor-
ated by reference to the Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1990).
10.24 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).
10.25 Joint Application for Approval of
Settlement Agreement dated August 10,
1990, between James W. Cunningham
(EP/4's Trustee) and the Partnership
(Incorporated by reference to the
Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990).
10.26 Property Management Agreement
No. 415 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)
10.27 Assignment and Assumption
Agreement (Property Management
Agreement No. 415) 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)
10.28 Assignment and Agreement as to
Certain Property Management
Services as related to Property
Management Agreement No. 415
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)
10.29 Property Management Agreement
No. 425 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)
10.30 Assignment and Assumption
Agreement (Property Management
Agreement No. 425) 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)
10.31 Assignment and Agreement as to
Certain Property Management
Services as related to Property
Management Agreement No. 425
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)
10.32 Property Management Agreement
No. 509 dated June 1, 1993, by
and between the Partnership
and Coventry Properties, Inc.
10.33 Assignment and Assumption Agree-
ment as to Certain Property
Management Services dated November
17, 1993, by and between Coventry
Properties, Inc. and Partnership
Services, Inc.
10.34 Multifamily Note dated November 30, 1995
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division
of Lehman Brothers Holdings Inc.(Incorporated
by reference to the Annual Report on Form 10-K
for the year ended December 31, 1995)
10.35 Multifamily Note dated November 30, 1995
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division
of Lehman Brothers Holdings Inc. (Incorporated
by reference to the Annual Report on Form 10-K
for the year ended December 31, 1995)
10.36 Multifamily Note dated November 30, 1995
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division
of Lehman Brothers Holdings Inc. (Incorporated
by reference to the Annual Report on Form 10-K
for the year ended December 31, 1995)
10.37 Multifamily Note dated November 1, 1996
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc. (Incorporated by
reference to the Annual Report on Form 10-K
for the year ended December 31, 1996)
10.38 Multifamily Note dated November 1, 1996
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc. (Incorporated by
reference to the Annual Report on Form 10-K
for the year ended December 31, 1996)
10.39 Multifamily Note dated November 1, 1996
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc. (Incorporated by
reference to the Annual Report on Form 10-K for
the year ended December 31, 1996)
10.40 Multifamily Note dated November 1, 1996
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc. (Incorporated by
reference to the Annual Report on Form 10-K
for the year ended December 31, 1996)
10.41 Multifamily Note dated November 1, 1996
between CCIP/3, a California limited
partnership, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc. (Incorporated by
reference to the Annual Report on Form 10-K
for the year ended December 31, 1996)
11 Statement regarding computation of
Net Income per Limited Partnership
Unit (Incorporated by reference to
Note 8 of Item 8 - Financial State-
ments of this Form 10-K)
16 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)
27 Financial Data Schedule.
28.1 Fee Owner's General Partnership
Agreement (Incorporated by reference
to Registration Statement of
Partnership (File No. 2-97664) filed
July 23, 1985).
28.2 Fee Owner's Certificate of Partnership
(Incorporated by reference to Regi-
stration Statement of Partnership
(File No. 2-97664) filed July 23, 1985).
(b) Reports on Form 8-K, filed during the fourth quarter of 1996: None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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,
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: March 12, 1998
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 dated indicated.
/s/William H. Jarrard, Jr. President March 12, 1998
William H. Jarrard, Jr.
/s/Ronald Uretta Vice President/Treasurer March 12, 1998
Ronald Uretta
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Institutional Properties 3 1997 Year-End 10-K and is qualified in its
entirety by reference to such 10-K filing.
</LEGEND>
<CIK> 0000768890
<NAME> CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 3
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,054
<SECURITIES> 0
<RECEIVABLES> 960
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 63,326
<DEPRECIATION> 15,474
<TOTAL-ASSETS> 57,086
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,525
0
0
<COMMON> 0
<OTHER-SE> 25,225
<TOTAL-LIABILITY-AND-EQUITY> 57,086
<SALES> 0
<TOTAL-REVENUES> 15,173
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,316
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,936
<EPS-PRIMARY> 5.00<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
