FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-14187
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
(Exact name of small business issuer as specified in its charter)
California 94-2940208
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
Assets
Cash and cash equivalents $ 4,165
Receivables and deposits 1,102
Restricted escrows 298
Other assets 565
Investment properties:
Land $ 8,641
Buildings and related personal property 45,923
54,564
Less accumulated depreciation (19,363) 35,201
$ 41,331
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 134
Tenant security deposit liabilities 325
Accrued property taxes 443
Other liabilities 406
Mortgage notes payable 27,925
Partners' (Deficit) Capital
General partner $ (720)
Limited partners (383,033 units outstanding) 12,818 12,098
$ 41,331
See Accompanying Notes to Financial Statements
<PAGE>
b)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 3,221 $ 3,041 $ 9,536 $ 8,987
Other income 343 285 892 739
Total revenues 3,564 3,326 10,428 9,726
Expenses:
Operating 1,133 1,138 3,377 3,467
General and administrative 238 154 557 477
Depreciation 715 715 2,154 1,991
Interest 533 523 1,580 1,571
Property taxes 201 162 566 498
Total expenses 2,820 2,692 8,234 8,004
Income from continuing operations 744 634 2,194 1,722
Income from discontinued operations -- 11 -- 176
Gain on sale of discontinued
operations -- 2 -- 2,302
Net income $ 744 $ 647 $ 2,194 $ 4,200
Net income allocated to general
partner (1%) $ 7 $ 6 $ 22 $ 42
Net income allocated to limited
partners (99%) 737 641 2,172 4,158
$ 744 $ 647 $ 2,194 $ 4,200
Per limited partnership unit:
Income from continuing operations $ 1.92 $ 1.64 $ 5.67 $ 4.45
Income from discontinued operations -- 0.03 -- 0.46
Gain on sale of discontinued
operations -- -- -- 5.95
Net income $ 1.92 $ 1.67 $ 5.67 $ 10.86
Distributions per limited
partnership unit $ 1.38 $ 21.76 $ 11.26 $ 47.35
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
c)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 383,033 $ 1 $95,758 $95,759
Partners' (deficit) capital
at December 31, 1999 383,033 $ (698) $14,960 $14,262
Distributions to partners -- (44) (4,314) (4,358)
Net income for the nine months
ended September 30, 2000 -- 22 2,172 2,194
Partners' (deficit) capital at
September 30, 2000 383,033 $ (720) $12,818 $12,098
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 2,194 $ 4,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,154 1,991
Amortization of lease commissions and loan costs 76 67
Gain on sale of investment property -- (2,302)
Loss on disposal of property -- 97
Change in accounts:
Receivables and deposits (549) 64
Other assets (54) 121
Accounts payable (179) 334
Due to affiliate (125) (465)
Tenant security deposit liabilities 44 (14)
Accrued property taxes 256 105
Other liabilities (44) 27
Net cash provided by operating activities 3,773 4,225
Cash flows from investing activities:
Property improvements and replacements (1,271) (1,360)
Net receipts from restricted escrows 570 103
Proceeds from sale of investment property -- 6,575
Net cash (used in) provided by investing activities (701) 5,318
Cash flows used in financing activities:
Distributions to partners (4,358) (11,419)
Net decrease in cash and cash equivalents (1,286) (1,876)
Cash and cash equivalents at beginning of period 5,451 13,993
Cash and cash equivalents at end of period $ 4,165 $ 12,117
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,504 $ 1,504
Supplemental disclosure of non-cash financing activity:
Distribution payable $ -- $ 6,900
At December 31, 1999 and September 30, 2000, accounts payable and property
improvements and replacements were adjusted by approximately $91,000.
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
e)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital
Institutional Properties/3 (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and/or
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
the administration of Partnership activities.
The following amounts were paid or accrued to the General Partner and affiliates
during each of the nine month periods ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $511 $479
Reimbursements for services of affiliates (included in
investment properties, general and administrative
expenses, and operating expenses) 368 257
Real estate brokerage commissions (included in gain on
sale of discontinued operations) -- 334
During the nine months ended September 30, 2000 and 1999, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all the
Partnership's residential properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$511,000 and $479,000 for management fees for the nine months ended September
30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $368,000 and $257,000 for the
nine month periods ended September 30, 2000 and 1999, respectively.
For acting as real estate broker in connection with the sale of South City
Business Center, the General Partner was paid a real estate commission of
approximately $209,000 during the nine months ended September 30, 1999. For
acting as real estate broker in connection with the sale of Corporate Center in
October 1999, the General Partner earned a real estate commission of
approximately $125,000. The commission was accrued at December 31, 1999 and paid
during 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 190,114.8 limited
partnership units in the Partnership representing 49.63% of the outstanding
units. A number of these units were acquired pursuant to tender offers made by
AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of 49.63% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Note D - Commitment
Until October 17, 2000, the Partnership was 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 were made from this reserve, operating revenue were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. Reserves, including cash and securities available for sale, totaling
approximately $4,200,000, were greater than the reserve requirement of
approximately $2,600,000 at September 30, 2000. During the third quarter, the
Partnership solicited the vote of the Limited Partners to approve an amendment
to the Partnership Agreement. The effect of the amendment was to change such
provision to require the Partnership to maintain reasonable reserves for normal
working capital and contingencies in an amount determined from time to time by
the General Partner in its sole discretion. The Solicitation Statement was
mailed to Limited Partners on September 16, 2000. Upon the expiration of the
solicitation period (close of business on October 16, 2000), the requisite
number of positive votes were received to effect this amendment.
Note E - Distributions
The Partnership paid distributions of cash generated from operations of
approximately $4,358,000 (approximately $4,314,000 to the limited partners or
$11.26 per limited partnership unit) for the nine months ended September 30,
2000. Subsequent to September 30, 2000, the General Partner declared a
distribution from operations of approximately $3,638,000 (approximately
$3,602,000 to the limited partners or $9.40 per limited partnership unit). The
Partnership distributed cash generated from operations of approximately
$5,632,000 (approximately $5,576,000 to the limited partners or $14.56 per
limited partnership unit) and approximately $5,787,000 (approximately $5,729,000
to the limited partners or $14.96 per limited partnership unit) of sales
proceeds from City Heights for the nine months ended September 30, 1999.
Subsequent to September 30, 1999, the General Partner paid a distribution from
operations of approximately $326,000 (approximately $323,000 to the limited
partners or $0.84 per limited partnership unit) and approximately $6,574,000
(approximately $6,508,000 to the limited partners or $16.99 per limited
partnership unit) from the sale proceeds from South City Business Center, both
of which were approved and accrued during the nine months ended September 30,
1999.
Note F - Discontinued Operations
In June 1999, South City Business Center, located in Chula Vista, California,
was sold to an unaffiliated party for $6,962,000. After payment of closing
expenses, the net sales proceeds received by the Partnership were approximately
$6,575,000. For financial statement purposes, the sale resulted in a gain of
approximately $2,302,000.
South City Business Center and Corporate Center which was sold in October 1999
to an unaffiliated third party were the last commercial properties in the
commercial segment of the Partnership. Due to the sale of the properties in June
1999 and October 1999, respectively, the income of both of the properties has
been classified as "Income from discontinued operations" for the three and nine
month periods ended September 30, 1999. Revenues of these properties were
approximately $907,000 for the nine months ended September 30, 1999 and
approximately $122,000 for the three months ended September 30, 1999. Income
from operations of these properties was approximately $176,000 for the nine
months ended September 30, 1999 and approximately $11,000 for the three months
ended September 30, 1999, respectively.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership had two reportable segments:
residential properties and commercial properties. The Partnership's residential
property segment consists of seven apartment complexes, one each in Colorado,
Florida, Michigan, North Carolina, and Utah and two in Washington. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less. The commercial property segment consisted of two business parks,
one located in Florida and one in California. These properties leased space to a
variety of businesses at terms ranging from month to month to ten years. On
October 4, 1999, the final commercial property held by the Partnership was sold
to an unrelated party. Therefore, the commerical segment is reflected as
discontinued operations.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those described in the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segments: The
Partnership's reportable segments are investment properties that offer different
products and services. The reportable segments are each managed separately
because they provide distinct services with different types of products and
customers.
Segment information for the three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below. The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segments (in thousands).
Nine Months Ended
September 30, 2000 Residential Other Totals
Rental income $ 9,536 $ -- $ 9,536
Other income 818 74 892
Interest expense 1,580 -- 1,580
Depreciation 2,154 -- 2,154
General and administrative
expenses -- 557 557
Segment profit (loss) 2,677 (483) 2,194
Total assets 26,199 15,132 41,331
Capital expenditures for
investment properties 1,180 -- 1,180
Three Months Ended
September 30, 2000 Residential Other Totals
Rental income $ 3,221 $ -- $ 3,221
Other income 308 35 343
Interest expense 533 -- 533
Depreciation 715 -- 715
General and administrative
expenses -- 238 238
Segment profit (loss) 947 (203) 744
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 8,987 $ -- $ -- $ 8,987
Other income 564 -- 175 739
Interest expense 1,571 -- -- 1,571
Depreciation 1,991 -- -- 1,991
General and administrative
expenses -- -- 477 477
Gain on sale of discontinued
operations -- 2,302 -- 2,302
Income from discontinued
operations -- 176 -- 176
Segment profit (loss) 2,024 2,478 (302) 4,200
Total assets 29,001 2,200 22,283 53,484
Capital expenditures for
investment properties 1,360 -- -- 1,360
Three Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 3,041 $ -- $ -- $ 3,041
Other income 233 -- 52 285
Interest expense 523 -- -- 523
Depreciation 715 -- -- 715
General and administrative
expenses -- -- 154 154
Gain on sale of discontinued
operations -- 2 -- 2
Income from discontinued
operations -- 11 -- 11
Segment profit (loss) 736 13 (102) 647
</TABLE>
Note H - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties at September 30, 2000 consist of seven
apartment complexes. The following table sets forth the average occupancy of the
properties for each of the nine month periods ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Cedar Rim 93% 93%
New Castle, Washington
Hidden Cove by the Lake 94% 90%
Belleville, Michigan
Lamplighter Park 97% 95%
Bellevue, Washington
Park Capital 95% 98%
Salt Lake City, Utah
Sandpiper I and II 97% 94%
St. Petersburg, Florida
Tamarac Village I, II, III, IV 97% 97%
Denver, Colorado
Williamsburg Manor 97% 96%
Cary, North Carolina
The General Partner attributes the occupancy increase at Hidden Cove by the Lake
to the rental of the damaged units from the ice storm in January 1999 that are
now repaired as well as increased marketing and advertising. The increase in
occupancy at Sandpiper I and II is due to increased marketing and advertising
and increased traffic in the area of the property. The decrease in occupancy at
Park Capital is due to increased competition due to new construction in the Salt
Lake City area.
Results of Operations
The Partnership had net income of approximately $2,194,000 for the nine months
ended September 30, 2000 compared to approximately $4,200,000 for the nine
months ended September 30, 1999. The Partnership had net income of approximately
$744,000 for the three months ended September 30, 2000 compared to approximately
$647,000 for the three months ended September 30, 1999. Net income decreased for
the nine month period ended September 30, 2000 due to the gain on sale
recognized from the sale of South City Business Center as well as a reduction in
income from this property and Corporate Center which was sold during the fourth
quarter of 1999. As the result of the sale of South City Business Center and
Corporate Center in 1999, as discussed below, the results of operations of these
two commercial properties were classified as "Income from discontinued
operations" on the statements of operations.
Excluding the results of the discontinued operations discussed above, the
Partnership had income from continuing operations of approximately $2,194,000
for the nine months ended September 30, 2000 compared to approximately
$1,722,000 for the nine months ended September 30, 1999. Excluding the results
of the discontinued operations, the Partnership had income from continuing
operations of approximately $744,000 for the three months ended September 30,
2000 compared to approximately $634,000 for the three months ended September 30,
1999. The increase in income from continuing operations for the three and nine
month periods ended September 30, 2000 is due to an increase in total revenues
partially offset by an increase in total expenses. Total revenues increased for
the comparable periods due to increases in both rental and other income. Rental
income increased due to increased average rental rates at all of the
Partnership's properties, increased occupancy primarily at Sandpiper I and II,
Hidden Cove by the Lake, and Lamplighter Park, and decreased concession costs at
Sandpiper I and II. These increases in rental income were partially offset by
decreased occupancy at Park Capital. Other income increased due to increased
utility income primarily at Tamarac Village which was partially offset by
decreased interest income of the Partnership due to lower average cash balances
in interest bearing accounts.
Total expenses increased for the nine month period ended September 30, 2000 due
primarily to increased depreciation, property tax, and general and
administrative expenses which were partially offset by decreased operating
expenses. Total expenses increased for the three month period ended September
30, 2000 due primarily to increased property tax and general and administrative
expenses. Depreciation expense increased for the nine months ended September 30,
2000 due to capital improvements completed during the past twelve months which
are now being depreciated. Property tax expense increased primarily due to an
increase in assessed values at Williamsburg Manor, Sandpiper I and II, and
Tamarac Village and a refund received during 1999 at City Heights, which was
sold in November 1998, of taxes paid in prior years. General and administrative
expenses increased due primarily to an increase in fees paid to the General
Partner. Included in general and administrative expenses at September 30, 2000
and 1999 are reimbursements to the General Partner allowed under the Partnership
Agreement associated with its management of the Partnership. In addition, costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are included. Operating expenses decreased for the nine month period primarily
due to decreased maintenance expenses at all the Partnership's properties during
2000. These decreases were partially offset by increased utility expenses and
manager salaries primarily at Tamarac Village.
In June 1999, South City Business Center, located in Chula Vista, California,
was sold to an unaffiliated party for $6,962,000. After payment of closing
expenses, the net sales proceeds received by the Partnership were approximately
$6,575,000. For financial statement purposes, the sale resulted in a gain of
approximately $2,302,000.
South City Business Center and Corporate Center which was sold in October 1999
to an unaffiliated third party were the last commercial properties in the
commercial segment of the Partnership. Due to the sale of the properties in June
1999 and October 1999, respectively, the income of both of the properties has
been classified as "Income from discontinued operations" for the three and nine
month periods ended September 30, 1999. Revenues of these properties were
approximately $907,000 for the nine months ended September 30, 1999 and
approximately $122,000 for the three months ended September 30, 1999. Income
from operations of these properties was approximately $176,000 for the nine
months ended September 30, 1999 and approximately $11,000 for the three months
ended September 30, 1999, respectively.
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 September 30, 2000, the Partnership held cash and cash equivalents of
approximately $4,165,000 compared to approximately $12,117,000 at September 30,
1999. The decrease in cash and cash equivalents for the nine months ended
September 30, 2000, from the Partnership's year ended December 31, 1999 was
approximately $1,286,000. This decrease is due to approximately $4,358,000 of
cash used in financing activities and approximately $701,000 of cash used in
investing activities which was partially offset by approximately $3,773,000 of
cash provided by operating activities. Cash used in financing activities
consisted of distributions to the partners. Cash used in investing activities
consisted of property improvements and replacements which was partially offset
by net receipts from restricted escrows. The Partnership invests its working
capital reserves in money market accounts.
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 properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Cedar Rim
During the nine months ended September 30, 2000, the Partnership completed
approximately $45,000 of capital improvements at the property, consisting
primarily of plumbing fixtures, carpet replacement, interior decorating,
building structural improvements, and appliances. These improvements were funded
primarily from the property's operating cash flow and replacement reserves. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $56,000, consisting primarily of
appliances, carpet and vinyl replacements, and plumbing upgrades. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Hidden Cove by the Lake
During the nine months ended September 30, 2000, the Partnership completed
approximately $85,000 of budgeted and non-budgeted capital improvements,
consisting primarily of building structural improvements, air conditioning unit
replacement, major landscaping, carpet replacement, heating upgrades, and
appliances. These improvements were funded from the property's replacement
reserves and operating cash flow. The Partnership has evaluated the capital
improvement needs of the property for the year. The amount budgeted is
approximately $47,000, consisting primarily of swimming pool upgrades, air
conditioning unit replacement, appliances, carpet replacement, and major
landscaping. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Lamplighter Park
During the nine months ended September 30, 2000, the Partnership completed
approximately $64,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, appliances, plumbing upgrades, and building structural
improvements. These improvements were funded from replacement reserves and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the property for the year. The amount budgeted is approximately $82,000,
consisting primarily of plumbing upgrades, carpet and vinyl replacement, and
heating improvements. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Park Capital
During the nine months ended September 30, 2000, the Partnership completed
approximately $132,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, parking lot enhancements, and light fixtures. These
improvements were funded from replacement reserves and operating cash flow. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $139,000, consisting primarily of
appliances, carpet and vinyl replacement, and parking lot enhancements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Tamarac Village
During the nine months ended September 30, 2000, the Partnership completed
approximately $550,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, interior decoration, parking lot upgrades, electrical
upgrades, major landscaping, pool enhancements, and plumbing upgrades. These
improvements were funded from replacement reserves and operating cash flow. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $952,000, consisting primarily of
carpet and vinyl replacement, structural improvements, and plumbing upgrades.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Williamsburg Manor
During the nine months ended September 30, 2000, the Partnership completed
approximately $86,000 of budgeted and non-budgeted capital improvements,
consisting primarily of air conditioning unit replacement, cabinet replacements,
carpet and vinyl replacement, counter top replacement, and appliances. These
expenditures were funded from replacement reserves and operating cash flow. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $60,000, consisting primarily of
appliances, air conditioning unit replacement, and carpet and vinyl
replacements. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Sandpiper I and II
During the nine months ended September 30, 2000, the Partnership completed
approximately $218,000 of capital improvements consisting primarily of air
conditioning unit replacement, carpet and vinyl replacement, plumbing upgrades,
structural improvements, roof replacement, and cabinet replacement. These
improvements were funded from replacement reserves. The Partnership has
evaluated the capital improvement needs of the property for the year. The amount
budgeted is approximately $353,000, consisting primarily of air conditioning
unit replacement, cabinet replacement, carpet and vinyl replacement, and
plumbing upgrades. Additional improvements may be considered and will depend on
the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are required, the Registrant's distributable cash flow, if
any, may be adversely affected.
Until October 17, 2000, the Partnership was 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 were made from this reserve, operating revenue were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. Reserves, including cash and securities available for sale, totaling
approximately $4,200,000, were greater than the reserve requirement of
approximately $2,600,000 at September 30, 2000. During the third quarter, the
Partnership solicited the vote of the Limited Partners to approve an amendment
to the Partnership Agreement. The effect of the amendment was to change such
provision to require the Partnership to maintain reasonable reserves for normal
working capital and contingencies in an amount determined from time to time by
the General Partner in its sole discretion. The Solicitation Statement was
mailed to Limited Partners on September 16, 2000. Upon the expiration of the
solicitation period (close of business on October 16, 2000), the requisite
number of positive votes were received to effect this amendment.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of $27,925,000 has maturity dates ranging from 2003 to 2005. The
General Partner will attempt to refinance such indebtedness and/or sell the
properties prior to such maturity dates. If the properties cannot be refinanced
or sold for a sufficient amount, the Registrant may risk losing such properties
through foreclosure.
During the nine months ended September 30, 2000, the Partnership declared and
paid distributions in the amount of approximately $4,358,000 (approximately
$4,314,000 to the limited partners or $11.26 per limited partnership unit) from
operations. Subsequent to September 30, 2000, the General Partner declared a
distribution from operations of approximately $3,638,000 (approximately
$3,602,000 to the limited partners or $9.40 per limited partnership unit).
During the nine months ended September 30, 1999, the Partnership made a
distribution in the amount of approximately $5,632,000 (approximately $5,576,000
to the limited partners or $14.56 per limited partnership unit) from operations
and approximately $5,787,000 (approximately $5,729,000 to the limited partners
or $14.96 per limited partnership unit) of sales proceeds from City Heights.
Subsequent to September 30, 1999, the General Partner paid a distribution from
operations of approximately $326,000 (approximately $323,000 to the limited
partners or $0.84 per limited partnership unit) and approximately $6,574,000
(approximately $6,508,000 to the limited partners or $16.99 per limited
partnership unit) from the sale proceeds from South City Business Center, both
of which were approved and accrued during the nine months ended September 30,
1999. Future cash distributions will depend on the levels of cash generated from
operations, timing of debt maturities, refinancings, and/or property sales, and
the availability of cash reserves. The Partnership's distribution policy is
reviewed on a quarterly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after required
capital expenditures to permit further distributions to its partners during the
remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to at least 5% of the limited partners' capital
contributions less distributions to limited partners and instead permit the
General Partner to determine reasonable reserve requirements of the Partnership.
The vote was sought pursuant to a Consent Solicitation that expired on October
16, 2000 at which time the amendment was approved by the requisite percent of
limited partnership interests. Upon expiration of the consent period, a total
number of 231,362.1 units had voted of which 220.242.9 units had voted in favor
of the amendment, 9,425.7 voted against the amendment and 1,693.5 units
abstained.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, 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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
