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 June 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)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 3,696
Receivables and deposits 905
Restricted escrows 641
Other assets 571
Investment properties:
Land $ 8,641
Buildings and related personal property 45,369
54,010
Less accumulated depreciation (18,648) 35,362
$ 41,175
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 215
Due to general partner 125
Tenant security deposit liabilities 315
Accrued property taxes 283
Other liabilities 422
Mortgage notes payable 27,925
Partners' (Deficit) Capital
General partner $ (721)
Limited partners (383,033 units outstanding) 12,611 11,890
$ 41,175
</TABLE>
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 Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Revenues: (Restated) (Restated)
<S> <C> <C> <C> <C>
Rental income $ 3,174 $ 2,981 $ 6,315 $ 5,946
Other income 340 212 549 454
Total revenues 3,514 3,193 6,864 6,400
Expenses:
Operating 1,019 1,085 2,244 2,329
General and administrative 166 178 319 323
Depreciation 723 650 1,439 1,276
Interest 524 524 1,047 1,048
Property taxes 186 179 365 336
Total expenses 2,618 2,616 5,414 5,312
Income from continuing operations 896 577 1,450 1,088
Income from discontinued operations -- 48 -- 165
Gain on sale of discontinued
operations -- 2,300 -- 2,300
Net income $ 896 $ 2,925 $ 1,450 $ 3,553
Net income allocated to general
partner (1%) $ 9 $ 29 $ 15 $ 36
Net income allocated to limited
partners (99%) 887 2,896 1,435 3,517
$ 896 $ 2,925 $ 1,450 $ 3,553
Per limited partnership unit:
Income from continuing operations $ 2.27 $ 1.49 $ 3.73 $ 2.81
Income from discontinued operations 0.05 0.13 0.02 0.43
Gain on sale of discontinued
operations -- 5.94 -- 5.94
Net income $ 2.32 $ 7.56 $ 3.75 $ 9.18
Distributions per limited
partnership unit $ 6.01 $ -- $ 9.88 $ 25.59
</TABLE>
See Accompanying Notes to Financial Statements
<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 -- (38) (3,784) (3,822)
Net income for the six months
ended June 30, 2000 -- 15 1,435 1,450
Partners' (deficit) capital at
June 30, 2000 383,033 $ (721) $12,611 $11,890
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,450 $ 3,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,439 1,429
Amortization of lease commissions and loan costs 44 68
Gain on sale of investment property -- (2,300)
Change in accounts:
Receivables and deposits (352) 129
Other assets (28) 15
Accounts payable (98) 95
Due to affiliate -- (256)
Tenant security deposit liabilities 34 (109)
Accrued property taxes 96 33
Other liabilities (28) 27
Net cash provided by operating activities 2,557 2,684
Cash flows from investing activities:
Property improvements and replacements (717) (902)
Net receipts from restricted escrows 227 38
Proceeds from sale of investment property -- 6,573
Net cash (used in) provided by investing activities (490) 5,709
Cash flows used in financing activities:
Distributions to partners (3,822) (9,900)
Net decrease in cash and cash equivalents (1,755) (1,507)
Cash and cash equivalents at beginning of period 5,451 14,189
Cash and cash equivalents at end of period $ 3,696 $12,682
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,003 $ 1,003
</TABLE>
At December 31, 1999 and June 30, 2000, accounts payable and property
improvements and replacements were adjusted by approximately $91,000.
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 six month periods ended June 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 six month periods ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $335 $315
Reimbursements for services of affiliates (included in
investment properties, general and administrative
expenses, and operating expenses) 171 166
Real estate brokerage commissions (included in gain on
sale of investment property) -- 209
<PAGE>
During the six months ended June 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 $335,000 and
$315,000 for management fees for the six months ended June 30, 2000 and 1999,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $171,000 and $166,000 for the
six month periods ended June 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 year ended December 31, 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. This amount is included in "Due to General Partner" on the
accompanying balance sheet. For acting as real estate broker in connection with
the sale of City Heights in November 1998, the General Partner earned a real
estate commission of approximately $465,000. The commission was accrued at
December 31, 1998, and was paid during the first quarter of 1999.
AIMCO and its affiliates currently own 178,282.4 limited partnership units in
the Partnership representing 46.55% 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. In this
regard, on July 24, 2000, an affiliate of AIMCO commenced a tender offer to
purchase any and all of the remaining partnership interests for a purchase price
of $106.00. Under the Partnership Agreement, unitholders holding a majority of
the Units are entitled to take action with respect to a variety of matters. As a
result of its ownership of 46.55% 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
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 $4.2 million, were greater
than the reserve requirement of approximately $2.6 million at June 30, 2000.
Note E - Distributions
The Partnership paid distributions of cash generated from operations of
approximately $3,822,000 (approximately $3,784,000 to the limited partners or
$9.88 per limited partnership unit) for the six months ended June 30, 2000. The
Partnership distributed cash generated from operations of approximately
$4,113,000 (approximately $4,072,000 to the limited partners or $10.63 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 six months ended June 30, 1999.
<PAGE>
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
$6,573,000. For financial statement purposes, the sale resulted in a gain of
approximately $2,300,000.
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 six
month periods ended June 30, 1999. Revenues of these properties were
approximately $785,000 for the six months ended June 30, 1999 and approximately
$344,000 for the three months ended June 30, 1999. Income from operations of
these properties was approximately $165,000 for the six months ended June 30,
1999 and approximately $48,000 for the three months ended June 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.
<PAGE>
Segment information for the three and six month periods ended June 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).
Six months ended
June 30, 2000 Residential Other Totals
Rental income $ 6,315 $ -- $ 6,315
Other income 510 39 549
Interest expense 1,047 -- 1,047
Depreciation 1,439 -- 1,439
General and administrative
expenses -- 319 319
Segment profit (loss) 1,730 (280) 1,450
Total assets 25,198 15,977 41,175
Capital expenditures for
investment properties 626 -- 626
Three months ended
June 30, 2000 Residential Other Totals
Rental income $ 3,174 $ -- $ 3,174
Other income 319 21 340
Interest expense 524 -- 524
Depreciation 723 -- 723
General and administrative
expenses -- 166 166
Segment profit (loss) 1,041 (145) 896
<PAGE>
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 5,946 $ -- $ -- $ 5,946
Other income 331 -- 123 454
Interest expense 1,048 -- -- 1,048
Depreciation 1,276 -- -- 1,276
General and administrative
expenses -- -- 323 323
Gain on sale of discontinued
operations -- 2,300 -- 2,300
Income from discontinued
operations -- 165 -- 165
Segment profit (loss) 1,288 2,465 (200) 3,553
Total assets 27,952 2,442 23,828 54,222
Capital expenditures for
investment properties 826 76 -- 902
</TABLE>
<TABLE>
<CAPTION>
Three months ended
June 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 2,981 $ -- $ -- $ 2,981
Other income 173 -- 39 212
Interest expense 524 -- -- 524
Depreciation 650 -- -- 650
General and administrative
expenses -- -- 178 178
Gain on sale of discontinued
operations -- 2,300 -- 2,300
Income from discontinued
operations -- 48 -- 48
Segment profit (loss) 716 2,348 (139) 2,925
</TABLE>
<PAGE>
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 will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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 June 30, 2000 consist of seven
apartment complexes. The following table sets forth the average occupancy of the
properties for each of the six month periods ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Cedar Rim 94% 92%
New Castle, Washington
Hidden Cove by the Lake 94% 87%
Belleville, Michigan
Lamplighter Park 97% 95%
Bellevue, Washington
Park Capital 95% 97%
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 96% 97%
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.
Results of Operations
The Partnership had net income of approximately $1,450,000 for the six months
ended June 30, 2000 compared to approximately $3,553,000 for the six months
ended June 30, 1999. The Partnership had net income of approximately $896,000
for the three months ended June 30, 2000 compared to approximately $2,925,000
for the three months ended June 30, 1999. Net income decreased for the three and
six month periods ended June 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 the
property as well as 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 $1,450,000
for the six months ended June 30, 2000 compared to approximately $1,088,000 for
the six months ended June 30, 1999. Excluding the results of the discontinued
operations, the Partnership had income from continuing operations of
approximately $896,000 for the three months ended June 30, 2000 compared to
approximately $577,000 for the three months ended June 30, 1999. The increase in
income from continuing operations for the three and six month periods ended June
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 and
decreased concession costs at Hidden Cove by the Lake and Sandpiper I and II.
Decreased occupancy at Park Capital and Williamsburg Manor was offset by
increased occupancy at Cedar Rim, Hidden Cove by the Lake, Lamplighter Park, and
Sandpiper I and II. Other income increased due to increased utility income at
Tamarac Village and increased interest income.
Total expenses increased for the three and six month periods ended June 30, 2000
due primarily to increased depreciation and property tax expenses which were
partially offset by decreased operating expenses. Depreciation expense increased
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 value at Cedar Rim and a refund received during 1999 at
City Heights, which was sold in November 1998, of taxes paid in prior years.
Operating expenses decreased primarily due to the decreased maintenance expenses
at all the Partnership's properties during 2000. These decreases were partially
offset by increased utility charges and manager salaries primarily at Tamarac
Village.
General and administrative expenses remained relatively constant. Included in
general and administrative expenses at June 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.
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
$6,573,000. For financial statement purposes, the sale resulted in a gain of
approximately $2,300,000.
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 six
month periods ended June 30, 1999. Revenues of these properties were
approximately $785,000 for the six months ended June 30, 1999 and approximately
$344,000 for the three months ended June 30, 1999. Income from operations of
these properties was approximately $165,000 for the six months ended June 30,
1999 and approximately $48,000 for the three months ended June 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.
<PAGE>
Liquidity and Capital Resources
At June 30, 2000, the Partnership held cash and cash equivalents of
approximately $3,696,000 compared to approximately $12,682,000 at June 30, 1999.
The decrease in cash and cash equivalents for the six months ended June 30,
2000, from the Partnership's year ended December 31, 1999 was approximately
$1,755,000. This decrease is due to approximately $3,822,000 of cash used in
financing activities and approximately $490,000 of cash used in investing
activities which was partially offset by approximately $2,557,000 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 six months ended June 30, 2000, the Partnership completed
approximately $31,000 of capital improvements at the property, consisting
primarily of sewer replacement, carpet replacement, interior decorating,
building structural improvements, and appliances. These improvements were funded
primarily from the property's operating cash flow. 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 six months ended June 30, 2000, the Partnership completed
approximately $65,000 of budgeted and non-budgeted capital improvements,
consisting primarily of building structural improvements, air conditioning unit
replacement, 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 six months ended June 30, 2000, the Partnership completed
approximately $48,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, appliances, plumbing upgrades, and other building
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.
<PAGE>
Park Capital
During the six months ended June 30, 2000, the Partnership completed
approximately $63,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, parking lot enhancements, and appliances. 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 $89,000, 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 six months ended June 30, 2000, the Partnership completed
approximately $196,000 of capital improvements, consisting primarily of carpet
and vinyl replacement, appliances, electrical upgrades, exterior painting, 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 six months ended June 30, 2000, the Partnership completed
approximately $51,000 of capital improvements, consisting primarily of air
conditioning unit replacement, cabinet replacements, carpet and vinyl
replacement, landscaping, and appliances. These expenditures were funded from
replacement reserves. 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 six months ended June 30, 2000, the Partnership completed
approximately $172,000 of capital improvements consisting primarily of sewer
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 $204,000, 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
form 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.
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 by 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. At June 30, 2000, reserves, including
cash and securities available for sale, totaling approximately $4.2 million were
greater than the reserve requirement of approximately $2.6 million.
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 six months ended June 30, 2000, the Partnership declared and paid
distributions in the amount of approximately $3,822,000 (approximately
$3,784,000 to the limited partners or $9.88 per limited partnership unit) from
operations. During the six months ended June 30, 1999, the Partnership made a
distribution in the amount of approximately $4,113,000 (approximately $4,072,000
to the limited partners or $10.63 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.
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 will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 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:
