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 March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from.........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 (IRS Employer
incorporation or organization) (Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(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)
March 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,787
Receivables and deposits, net of allowance of $130 124
Restricted escrows 278
Other assets 333
Investment properties:
Land $ 1,571
Buildings and related personal property 11,547
13,118
Less accumulated depreciation (6,231) 6,887
$ 9,409
Liabilities and Partners' (Deficit) Capital
Accounts payable $ 196
Tenant security deposit liabilities 53
Accrued property taxes 43
Other liabilities 54
Notes payable 2,325
Partners' (Deficit) Capital
General partner $ (179)
Corporate limited partner on behalf
of the Unitholders - (128,810 Units
issued and outstanding) 6,917 6,738
<FN> $ 9,409
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
b)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $ 571 $ 551
Casualty gain 108 --
Other income 64 38
Total revenues 743 589
Expenses:
Operating 233 223
General and administrative 65 52
Depreciation 129 122
Interest 46 46
Property taxes 43 41
Bad debt (recovery) expense (15) 10
Total expenses 501 494
Net income $ 242 $ 95
Net income allocated to general partner (1%) $ 2 $ 1
Net income allocated to limited partners (99%) 240 94
$ 242 $ 95
Net income per Unit of Depositary Receipt $1.86 $ .73
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>
<captio>
Unitholders
Units of
Units of Depositary
Depositary General Receipt
Receipt Partner (Note A) Total
<S> <C> <C> <C> <>
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' (deficit) capital
at December 31, 1997 128,810 $ (171) $ 7,667 $ 7,496
Net income for the three months
ended March 31, 1998 -- 2 240 242
Distributions to partners -- (10) (990) (1,000)
Partners' (deficit) capital at
March 31, 1998 128,810 $ (179) $ 6,917 $ 6,738
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 242 $ 95
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 129 122
Amortization of lease commissions, discounts
and loan costs 16 12
Bad debt (recovery) expense (15) 10
Casualty gain (108) --
Change in accounts:
Receivables and deposits (22) (32)
Other assets (38) (24)
Accounts payable (25) (1)
Tenant security deposit liabilities (1) --
Accrued property taxes 43 (5)
Other liabilities (4) (22)
Net cash provided by operating activities 217 155
Cash flows from investing activities:
Property improvements and replacements (358) (17)
Net deposits to restricted escrows (17) (18)
Proceeds from insurance on casualty 175 --
Net cash used in investing activities (200) (35)
Cash flows from financing activities:
Loan costs paid -- (11)
Distributions to partners (1,000) --
Net cash used in financing activities (1,000) (11)
Net (decrease) increase in cash and cash equivalents (983) 109
Cash and cash equivalents at beginning of period 2,770 1,583
Cash and cash equivalents at end of period $ 1,787 $ 1,692
Supplemental disclosure of cash flow information:
Cash paid for interest $ 43 $ 43
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
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") 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 month period ended March 31,
1998, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 balances to conform to the
1998 presentation.
Units of Depositary Receipt
Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"),
an affiliate of the General Partner, serves as a depositary of certain Units of
Depositary Receipt ("Units"). The Units represent economic rights attributable
to the limited partnership interests in the Partnership and entitle the
Unitholders thereof ("Unitholders") to certain economic benefits, allocations
and distributions of the Partnership. For this reason, Partners' (deficit)
capital 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. The General Partner is wholly-owned by Insignia Properties Trust
("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). The
Partnership Agreement provides for certain payments to affiliates for services
and as reimbursement of certain expenses incurred on behalf of the Partnership.
The following transactions with affiliates of the General Partner were incurred
for the three months ended March 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating expenses) $ 29 $ 28
Leasing commissions (included in other assets) 31 6
Reimbursement for services of affiliates including $6,000
and $16,000 in construction services reimbursements in
1998 and 1997, respectively (included in investment
property and general and administrative and operating
expenses) 30 41
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 $24,000 were
paid to the General Partner and its affiliates for each of the three months
ended March 31, 1998 and 1997, respectively, and are included in general and
administrative expenses.
For the period January 1, 1997 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an insurer unaffiliated with the General Partner. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the master policy. The agent assumed the financial obligations
to the affiliate of the General Partner which received 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 was not significant.
On December 19, 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 39,000 units of the
outstanding units of limited partnership interest in the Partnership, at $68.00
per Unit, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated December 19, 1997, (the
"Offer to Purchase") and the related Assignment of Partnership Interest
attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer
Statement on Schedule 14D-1 originally filed with the Securities and Exchange
Commission on December 19, 1997. Because of the existing and potential future
conflicts of interest (described in the Partnership's Statements on Schedule
14D-9 filed with the Securities and Exchange Commission), neither the
Partnership nor the General Partner expressed any opinion as to the Offer to
Purchase and made no recommendation as to whether unit holders should tender
their units in response to the Offer to Purchase. During February 1998, the
tender offers were completed and an affiliate of Insignia purchased 13,985.5
units of limited partnership interest in the Partnership.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
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 revenues shall be allocated to such reserves to the extent
necessary to maintain the foregoing level. Reserves, including cash and cash
equivalents and tenant security deposits totaling approximately $1,841,000 at
March 31, 1998, exceeded the Partnership's reserve requirement of approximately
$1,385,000.
NOTE D - DISTRIBUTIONS
In March of 1998, the Partnership paid distributions attributable to cash flow
from operations of approximately $1,000,000. During the three months ended
March 31, 1997, no distributions were declared or paid.
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 three months ended March 31, 1998 and 1997:
Average Occupancy
1998 1997
Cedar Brooke Apartments
Independence, Missouri 96% 97%
Florida #11 Mini-Warehouse
Davie, Florida 97% 99%
Phoenix Business Campus
College Park, Georgia 75% 70%
The increase in occupancy at Phoenix Business Campus is due to the lease of
3,261 square feet, which was vacant until mid-November, 1997. Also, another
tenant increased its square footage by 5,592 square feet.
The Partnership realized net income of approximately $242,000 for the three
months ended March 31, 1998, compared to net income of approximately of $95,000
for the three months ended March 31, 1997. The increase in net income is
primarily due to an increase in revenues. Rental income increased as a result
of the increase in occupancy at Phoenix Business Campus and the increase in
rental rates at all of the investment properties. Additionally, there was an
increase in other income attributable to an increase in interest earned due to
higher cash balances held for the three months ended March 31, 1998 as compared
to the three months ended March 31, 1997. Also, for the three months ended March
31, 1998, there was a casualty gain related to a fire at Cedar Brooke Apartments
(see discussion below). Total expenses remained consistent for the three months
ended March 31, 1998 and 1997. General and administrative expenses increased
slightly due to an increase in reimbursements for services of affiliates. This
increase was partially offset by a recovery on bad debt at Phoenix Business
Campus.
In the fourth quarter of 1997, there was a fire at Cedar Brooke Apartments that
caused extensive damage to the clubhouse. Insurance proceeds of approximately
$175,000 were received and replacement efforts began during the three months
ended March 31, 1998. The Partnership recorded a casualty gain of approximately
$108,000 as a result of combining the proceeds received less the write off of
the undepreciated balance of the assets destroyed in the fire.
There were no significant expenditures for major repairs and maintenance during
the three months ended March 31, 1998. For the three months ended March 31,
1997, approximately $19,000 of major repairs and maintenance, comprised
primarily of construction oversight costs related to the ongoing repair projects
at Cedar Brooke Apartments, is included in operating expenses.
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 March 31, 1998, the Partnership held cash and cash equivalents of
approximately $1,787,000 compared to approximately $1,692,000 at March 31, 1997.
Cash and cash equivalents had a net decrease of approximately $983,000 for the
three months ended March 31, 1998 as compared to a net increase of approximately
$109,000 for the same period in 1997. Net cash provided by operating activities
increased primarily due to the increase in net income, as discussed above,
partially offset by a decrease in accounts payable caused by the timing of
payments. Net cash used in investing activities increased as a result of
increased property improvements and replacements due primarily to tenant
improvements at Phoenix Business Campus and also to the commencement of
reconstruction of the clubhouse at Cedar Brooke Apartments. The increase in
property improvements and replacements was partially offset by insurance
proceeds received. The increase in net cash used in financing activities is
attributed to the cash distribution to partners during the three months ended
March 31, 1998.
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 November 2003, at which time the debt will
either be refinanced or the related property (Cedar Brooke Apartments) sold.
The Partnership made a distribution to the partners of $1,000,000 in March 1998.
No cash distributions were declared or paid during the three months ended March
31, 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.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint 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 by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates as well as a recently announced agreement between
Insignia and Apartment Investment and Management Company. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. The General Partner was only recently served with the complaint
which it believes to be without merit, and intends to vigorously defend the
action.
In March 1998, the Partnership and its General Partner were named as defendants
in a lawsuit brought by a limited partner of the Partnership alleging that the
General Partner has failed to perform its contractual obligations under the
Partnership Agreement. The General Partner believes that there is no merit to
the suit and intends to vigorously defend it.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner believes that all such other
pending or outstanding litigation will be resolved without a material adverse
effect upon the business, financial conditions, or operations of the
Partnership.
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.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Partnership
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: May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Johnstown Consolidated Income Partners 1998 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,787
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 13,118
<DEPRECIATION> (6,231)
<TOTAL-ASSETS> 9,409
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,325
0
0
<COMMON> 0
<OTHER-SE> 6,738
<TOTAL-LIABILITY-AND-EQUITY> 9,409
<SALES> 0
<TOTAL-REVENUES> 743
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242
<EPS-PRIMARY> 1.86<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
