FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
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, 1997
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period.........to.........
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(864) 239-1000
(Issuer'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 past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 2,199
Restricted - tenant security deposits 80
Investments 447
Accounts receivable, net of allowance of $148 24
Escrows for taxes and insurance 125
Restricted escrows 327
Other assets 338
Investment properties:
Land $ 1,571
Buildings and related personal property 11,202
12,773
Less accumulated depreciation (6,060) 6,713
$10,253
Liabilities and Partners' Capital
Accounts payable $ 115
Tenant security deposits 70
Accrued taxes 105
Other liabilities 59
Mortgage notes payable 2,325
Partners' (Deficit) Capital
General partner $ (170)
Corporate limited partner on behalf
of the Unitholders - (129,266 Units
issued and 128,810 outstanding) 7,749 7,579
$10,253
See Accompanying Notes to Financial Statements
b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 489 $ 531 $ 1,575 $1,554
Other income 61 41 158 129
Total revenues 550 572 1,733 1,683
Expenses:
Operating 171 166 495 487
General and administrative 58 70 173 223
Maintenance 96 59 228 188
Depreciation 125 128 369 383
Interest 45 44 137 139
Property taxes 34 39 112 125
Bad debt expense (16) 2 32 7
Total expenses 513 508 1,546 1,552
Gain on sale of investment
property (Note E) -- -- 437 --
Net income $ 37 $ 64 $ 624 $ 131
Net income allocated to
general partner (1%) $ -- $ 1 $ 6 $ 1
Net income allocated to
limited partners (99%) 37 63 618 130
Net income $ 37 $ 64 $ 624 $ 131
Net income per Unit of
Depository Receipt $ .29 $ .49 $ 4.80 $ 1.01
See Accompanying Notes to Financial Statements
c) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Unitholders
Units of
Units of Depository
Depository General Receipt
Receipt Partner (Note A) Total
<S> <C> <C> <C> <C>
Original capital contributions 129,266 $ 1 $ 32,317 $ 32,318
Partners' (deficit) capital
at December 31, 1996 128,810 $ (166) $ 8,121 $ 7,955
Distributions to partners -- (10) (990) (1,000)
Net income for the nine months
ended September 30, 1997 -- 6 618 624
Partners' (deficit) capital at
September 30, 1997 128,810 $ (170) $ 7,749 $ 7,579
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income $ 624 $ 131
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 369 383
Amortization of lease commissions, discounts
and loan costs 37 32
Gain on sale of investment property (437) --
Bad debt expense 32 7
Change in accounts:
Restricted cash (27) (2)
Accounts receivable (23) (27)
Escrows for taxes and insurance (58) (112)
Other assets (123) (12)
Accounts payable 11 (11)
Tenant security deposit liabilities 9 9
Accrued taxes 58 124
Other liabilities (23) 41
Net cash provided by operating
activities 449 563
Cash flows from investing activities:
Proceeds from sale of investment property 1,287 --
Property improvements and replacements (90) (39)
Deposits to restricted escrows (54) (17)
Withdrawals from restricted escrows 35 --
Net cash provided by (used in) investing
activities 1,178 (56)
Cash flows from financing activities:
Payments on notes payable -- (45)
Loan costs paid (11) --
Distributions to partners (1,000) (1,000)
Net cash used in financing activities (1,011) (1,045)
Net increase (decrease) in unrestricted cash and
cash equivalents 616 (538)
Unrestricted cash and cash equivalents at
beginning of period 1,583 1,967
Unrestricted cash and cash equivalents at
end of period $ 2,199 $ 1,429
Supplemental disclosure of cash flow information:
Cash paid for interest $ 128 $ 118
See Accompanying Notes to Financial Statements
e) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Johnstown/Consolidated Income
Partners (the "Partnership" or the "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, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the fiscal year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
Units of Depository Receipt
Johnstown/Consolidated Depository Corporation (the "Corporate Limited Partner"),
an affiliate of the General Partner, serves as a depository of certain Units of
Depository Receipt ("Units"). The Units represent economic rights attributable
to the limited partnership interests in the Partnership and entitle the holders
thereof ("Unitholders") to certain economic benefits, allocations and
distributions of the Partnership. For this reason, Partners' capital (deficit)
is herein represented as an interest of the Unitholder.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all of the Partnership
activities, as provided for in the partnership agreement.
The Partnership Agreement provides that the Partnership shall pay in monthly
installments to the General Partner, or an affiliate, a yearly asset management
fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans
outstanding at the end of the month preceding the installment payment; (ii) 1/8
of 1% of the market value of guaranteed mortgage-backed securities as of the end
of the Partnership quarter immediately preceding the installment payment; and
(iii) 5/8 of 1% of the purchase price of the properties plus improvements for
managing the Partnership's assets. In the event the property was not owned at
the beginning or end of the year, such fee shall be pro rated for the short-year
period of ownership. Under this provision, fees of approximately $73,000 were
paid to the General Partner and its affiliates for each of the nine months ended
September 30, 1997 and 1996, respectively, and are included in general and
administrative expenses.
The Partnership has paid property management fees based upon collected gross
rental revenues for property management services. Property management fees of
approximately $82,000 and $90,000 were paid to affiliates of the General Partner
for the nine months ended September 30, 1997 and 1996, respectively. These fees
are included in operating expenses.
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. Reimbursements for services of affiliates of
approximately $88,000 and $87,000 were paid to the General Partner and its
affiliates for each of the nine months ended September 30, 1997 and 1996,
respectively. Included in reimbursements for services of affiliates at
September 30, 1997, and September 30, 1996, is approximately $23,000 and $4,000
respectively, of construction oversight costs. Reimbursements of costs are
classified as general and administrative expenses, except construction oversight
costs, which are capitalized.
The Partnership has paid lease commissions of approximately $43,000 during the
nine months ended September 30, 1997, to an affiliate of the General Partner.
For the period January 1, 1996, to August 31, 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 current year's
master policy. The agent assumed the financial obligations to the affiliate of
the General Partner who receives payment on these obligations from the agent.
The amount of the Partnership's insurance premiums that accrued to the benefit
of the affiliate of the General Partner by virtue of the agent's obligations was
not significant.
Note C - 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
these reserves, operating revenue shall be allocated to such reserves to the
extent necessary to maintain the foregoing level. Reserves, including cash and
cash equivalents, tenant security deposits and investments totaling
approximately $2,726,000 at September 30, 1997, exceeded the Partnership's
reserve requirement of approximately $1,385,000.
Note D - Distributions
During the nine months ended September 30, 1997, the Partnership paid
distributions attributable to sales proceeds from the sale of the Florida #6
Mini-Warehouse (See "Note E") of approximately $1,000,000. During the nine
months ended September 30, 1996, the Partnership paid distributions attributable
to cash flow from operations of approximately $1,000,000.
Note E - Sale of Investment Property Held for Sale
In accordance with FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", at December 31,
1996, the Partnership classified the Florida #6 Mini-Warehouse as an investment
property held for sale. The property was recorded at the lower of its carrying
amount or its fair market value less costs to sell.
In May 1997, the Partnership sold its one-third undivided interest in the
Florida #6 Mini-Warehouse, located in Lauderhill, Florida, to an unaffiliated
party, Shurgard Storage Centers, Inc., a Delaware corporation. The
Partnership's share of the net proceeds was $1,287,000, after payment of closing
costs. The Partnership realized a gain of $437,000 on the sale during the
second quarter of 1997.
The sales transaction is summarized as follows (amounts in thousands):
Cash proceeds received $1,287
Net real estate (1) (850)
Gain on sale of investment property $ 437
(1) Real estate at cost, net of accumulated depreciation of $729,000.
Note F - Refinancing
In November 1996 the Partnership refinanced the mortgage note of approximately
$2,061,000, secured by the Cedar Brooke Apartments. Accordingly, this debt is
no longer regulated by the U.S. Department of Housing and Urban Development.
Under the terms of the financing agreement, the new mortgage indebtedness of
$2,325,000 requires monthly interest only payments at a stated interest rate of
7.33% with a balloon payment due November 1, 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of one apartment complex and two
commercial properties. The following table sets forth the average occupancy of
the properties for the nine months ended September 30, 1997 and 1996:
Average
Occupancy
1997 1996
Cedar Brooke Apartments
Independence, Missouri 97% 99%
Florida #11 Mini-Warehouse
Davie, Florida 99% 95%
Phoenix Business Campus
College Park, Georgia 66% 58%
The increase in occupancy at the Florida #11 Mini-Warehouse is due to the
improved curb appeal of the property, resulting from the exterior painting
project completed in 1996, and increased marketing efforts at the property. The
increase in average occupancy at the Phoenix Business Campus is due to a new
tenant that moved in the fourth quarter of 1996, occupying 14% of the total
square footage. The General Partner is currently searching for a tenant to
occupy the vacant space at Phoenix Business Campus, although no assurance can be
given at this time that the General Partner will be successful in leasing this
space.
The Partnership realized net income of $37,000 and $624,000 for the three and
nine months ended September 30, 1997, respectively, compared to net income of
$64,000 and $131,000 for the three and nine months ended September 30, 1996,
respectively. The increase in net income is primarily due to the gain realized
on the sale of the Partnership's one-third undivided interest in the Florida #6
Mini-Warehouse (see discussion below). Also attributing to the increase in net
income is an overall increase in revenues and a slight decrease in expenses for
the nine months ended September 30, 1997. The increase in rental income results
from rental rate increases at Cedar Brooke Apartments and occupancy increases at
the Florida #11 Mini-Warehouse and Phoenix Business Campus, as discussed above,
which are partially offset by the loss of rental income from the sale of the
Florida #6 Mini-Warehouse. The overall decrease in expenses for the nine month
period ended September 30, 1997, is attributable to the sale of the Florida #6
Mini-Warehouse and a decrease in general and administrative expenses. General
and administrative expenses decreased primarily as a result of decreased audit
fees and general partner reimbursements. The mortgage note secured by Cedar
Brooke Apartments was refinanced in November 1996 (See "Note F"). Accordingly,
the debt is no longer regulated by the U.S. Department of Housing and Urban
Development, which had required the property to have a separate audit.
Maintenance expense increased for the three and nine months ended September 30,
1997, due to an extensive garage repair project and related construction
oversight costs at Cedar Brooke Apartments. This increase was partially offset
by a decrease at Florida #11 Mini-Warehouse due to expenditures for exterior
painting in 1996.
Bad debt expense for the nine months ended September 30, 1997, results from an
increase in the reserve necessary at Phoenix Business Campus based on a review
of tenant accounts receivable.
In May 1997, the Partnership sold its one-third undivided interest in the
Florida #6 Mini-Warehouse, located in Lauderdale, Florida (see "Note E"). The
Partnership's share of the net proceeds was $1,287,000, after payment of closing
costs. As a result of the sale, the Partnership realized a gain on the sale of
$437,000 during the second quarter of 1997.
Included in maintenance expense is approximately $98,000 of major repairs and
maintenance, comprised primarily of exterior building improvements and
construction oversight costs related to the ongoing repair projects at Cedar
Brooke Apartments. For the nine months ended September 30, 1996, approximately
$67,000 of major repairs and maintenance, comprised primarily of exterior
painting and exterior building improvements, is included in maintenance expense.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At September 30, 1997, the Partnership held unrestricted cash and cash
equivalents of approximately $2,199,000, compared to approximately $1,429,000 at
September 30, 1996. Net cash provided by operating activities decreased, despite
an increase in net income, due to the timing of property tax payments and an
increase in lease commissions paid. Net cash provided by investing activities
increased as a result of proceeds received from the sale of the Partnership's
1/3 interest in the Florida #6 Mini-Warehouse. Net cash used in financing
activities is consistent with that of the prior year. Loan costs incurred in
1997 are related to the refinance of the mortgage note secured by Cedar Brooke
Apartments in November 1996.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment 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 mortgage indebtedness of $2,325,000, which carries a stated interest rate of
7.33% (interest only), matures in 2003, at which time the debt will either be
refinanced or the related property (Cedar Brooke Apartments) sold. During each
of the nine months ended September 30, 1997 and 1996, cash distributions of
$1,000,000 were paid to the partners. Future cash distributions will depend on
the levels of net cash generated from operations, capital expenditure
requirements, property sales and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the third quarter of fiscal year 1997:
None were filed during the quarter ended September 30, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: October 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Johnstown/Consolidated Income Partners 1997 Third Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000787621
<NAME> JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,199
<SECURITIES> 0
<RECEIVABLES> 24
<ALLOWANCES> 148
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,773
<DEPRECIATION> 6,060
<TOTAL-ASSETS> 10,253
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,325
0
0
<COMMON> 0
<OTHER-SE> 7,579
<TOTAL-LIABILITY-AND-EQUITY> 10,253
<SALES> 0
<TOTAL-REVENUES> 1,733
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 624
<INCOME-TAX> 0
<INCOME-CONTINUING> 624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 624
<EPS-PRIMARY> 4.80<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
