FORM 10-QSB--QUARTERLY 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, 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)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 3,156
Restricted - tenant security deposits 63
Investments 447
Accounts receivable, net of allowance of $144 12
Escrows for taxes and insurance 100
Restricted escrows 316
Other assets 231
Investment properties:
Land $ 1,571
Buildings and related personal property 11,141
12,712
Less accumulated depreciation (5,935) 6,777
$11,102
Liabilities and Partners' Capital
Accounts payable $ 16
Tenant security deposits 63
Accrued taxes 70
Other liabilities 86
Mortgage notes payable 2,325
Partners' (Deficit) Capital
General partner $ (160)
Corporate limited partner on behalf
of the Unitholders - (128,810 Units
issued and outstanding) 8,702 8,542
$11,102
See Accompanying Notes to Financial Statements
b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 533 $ 517 $ 1,086 $1,023
Other income 59 43 97 88
Total revenues 592 560 1,183 1,111
Expenses:
Operating 156 163 324 321
General and administrative 63 92 115 153
Maintenance 75 66 132 129
Depreciation 122 128 244 255
Interest 46 46 92 95
Property taxes 37 42 78 86
Bad debt expense 38 13 48 5
Total expenses 537 550 1,033 1,044
Gain on sale of investment
property 437 -- 437 --
Net income $ 492 $ 10 $ 587 $ 67
Net income allocated to
general partner (1%) $ 5 $ -- $ 6 $ 1
Net income allocated to
limited partners (99%) 487 10 581 66
Net income $ 492 $ 10 $ 587 $ 67
Net income per Unit of
Depository Receipt $ 3.78 $ .08 $ 4.51 $ .51
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
Net income for the six months
ended June 30, 1997 -- 6 581 587
Partners' (deficit) capital at
June 30, 1997 128,810 $ (160) $ 8,702 $ 8,542
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 587 $ 67
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 244 255
Amortization of lease commissions, discounts
and loan costs 24 24
Gain on sale of investment property (437) --
Bad debt expense 48 5
Change in accounts:
Restricted cash (10) (1)
Accounts receivable (32) 9
Escrows for taxes and insurance (33) (73)
Other assets 2 12
Accounts payable (88) 7
Tenant security deposit liabilities 2 1
Accrued taxes 23 84
Other liabilities 4 18
Net cash provided by operating
activities 334 408
Cash flows from investing activities:
Proceeds from sale of investment property 1,287 --
Property improvements and replacements (29) (27)
Deposits to restricted escrows (36) (12)
Withdrawals from restricted escrows 28 --
Net cash provided by (used in) investing
activities 1,250 (39)
Cash flows from financing activities:
Payments on notes payable -- (30)
Loan costs paid (11) --
Distributions to partners (--) (495)
Net cash used in financing activities (11) (525)
Net increase (decrease) in unrestricted cash and
cash equivalents 1,573 (156)
Unrestricted cash and cash equivalents at
beginning of period 1,583 1,967
Unrestricted cash and cash equivalents at
end of period $3,156 $1,811
Supplemental disclosure of cash flow information:
Cash paid for interest $ 85 $ 79
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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 six month periods ended June 30, 1997, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1997. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the
fiscal year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
Investments
Investments consisting primarily of U.S. Treasury Notes with original maturities
of more than ninety days are considered to be held-to-maturity securities.
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 $49,000 were
paid to the General Partner and its affiliates for each of the six months ended
June 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 in each of the six months ended
June 30, 1997 and 1996. Property management fees of approximately $57,000 and
$60,000 were paid to affiliates of the General Partner for the six months ended
June 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 $43,000 and $59,000 were paid to the General Partner and its
affiliates for each of the six months ended June 30, 1997 and 1996,
respectively. Reimbursements of costs are classified as general and
administrative expenses.
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current 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 accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
NOTE C - COMMITMENT
The Partnership is required by the Partnership Agreement to maintain working
capital 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
$3,666,000 at June 30, 1997, exceeded the Partnership's reserve requirement of
approximately $1,385,000.
NOTE D - DISTRIBUTIONS
For the six months ended June 30, 1996, the Partnership paid distributions
attributable to cash flow from operations of approximately $495,000. During the
six months ended June 30, 1997, no distributions were declared or paid.
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-Warehouses as an investment
property held for sale. The property was recorded at the lower of its carrying
amount or its fair 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 E - SALE OF INVESTMENT PROPERTY HELD FOR SALE
The following unaudited pro-forma information reflects the operations of the
Partnership for the six months ended June 30, 1997 and 1996, as if the Florida
#6 Mini-Warehouse had been sold January 1, 1996.
Pro-Forma Results of Operations
for the Six Months Ended June 30,
1997 1996
(in thousands)
(unaudited)
Revenues $1,109 $1,006
Net income $ 108 $ 19
Net income per Unit of
Depository Receipt $ .83 $ .15
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 six months ended June 30, 1997 and 1996:
Average Occupancy
1997 1996
Cedar Brooke Apartments 97% 99%
Independence, Missouri
Florida #1l Mini-Warehouse 99% 94%
Davie, Florida
Phoenix Business Campus 70% 58%
College Park, Georgia
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 Partnership realized net income of $492,000 and $587,000 for the three and
six months ended June 30, 1997, respectively, compared to net income of $10,000
and $67,000 for the three and six months ended June 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 decrease in expenses. The sale of the Florida #6
Mini-Warehouse in May of 1997 did not have a significant impact on the income of
the Partnership for the six months ended June 30, 1997, versus the six months
ended June 30, 1996. 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. General and
administrative expenses decreased primarily as a result of decreased audit fees.
The mortgage note secured by Cedar Brooke Apartments was refinanced in November
of 1996. 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.
Bad debt expense for the six months ended June 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 of $437,000
during the second quarter of 1997.
Included in maintenance expense is approximately $45,000 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 six months ended June 30, 1996, approximately $59,000
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 June 30, 1997, the Partnership held unrestricted cash and cash equivalents of
approximately $3,156,000, compared to approximately $1,811,000 at June 30, 1996.
Net cash provided by operating activities decreased, despite an increase in net
income, due to the timing of property tax payments and the paydown of accounts
payable. 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 decreased primarily as
a result of the absence of cash distributions to partners during the six months
ended June 30, 1997. During the six months ended June 30, 1996, the Partnership
distributed $495,000 to its partners. 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, matures in 2003, at which time the debt
will either be refinanced or the related property sold. Funds from the sale of
the Florida #6 Mini-Warehouse are anticipated to be distributed before the end
of 1997. 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 second quarter of fiscal year 1997:
Form 8-K dated May 12, 1997, as filed with the Securities and Exchange
Commission on May 19, 1997, in connection with the sale of its one-third
undivided interest in the Florida #6 Mini-Warehouse.
Form 8-K/A dated August 5, 1997, as filed with the Securities and
Exchange Commission on August 5, 1997, in connection with the sale of
its one-third undivided interest in the Florida #6 Mini-Warehouse.
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: August 6, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Johnstown/Consolidated Income Partners 1997 Second Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000759859
<NAME> JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,156
<SECURITIES> 0
<RECEIVABLES> 12
<ALLOWANCES> 144
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,712
<DEPRECIATION> 5,935
<TOTAL-ASSETS> 11,102
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,325
0
0
<COMMON> 0
<OTHER-SE> 8,542
<TOTAL-LIABILITY-AND-EQUITY> 11,102
<SALES> 0
<TOTAL-REVENUES> 1,183
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,033
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> 587
<INCOME-TAX> 0
<INCOME-CONTINUING> 587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 587
<EPS-PRIMARY> 4.51<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
