FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from.........to.........
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Name of small business issuer in its charter)
California 94-3004963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Depository Receipt
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $2,725,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. Market value
information for the Registrant's partnership interests is not available. Should
a trading market develop for these interests, it is the General Partner's belief
that the aggregate market value of the voting partnership interests would not
exceed $25,000,000.
PART I
ITEM 1. BUSINESS
Johnstown/Consolidated Income Partners (the "Partnership" or "Registrant") was
organized on January 9, 1986, as a limited partnership under the California
Revised Limited Partnership Act. On June 20, 1986, the Partnership registered
with the Securities and Exchange Commission ("SEC") under the Securities Act of
1933 (File No. 33-2637) and commenced a public offering for sale of $150,000,000
of Units. The Units represent economic rights attributable to the limited
partnership interests in the Partnership and entitle the holders thereof
(hereinafter referred to as "Unitholders") to the economic benefits attributable
to equity interests in the Partnership and to participate in certain
allocations and distributions of the Partnership. The limited partner of the
Partnership is Johnstown/Consolidated Depository Corporation (the "Corporate
Limited Partner"), an affiliate of the General Partner (as hereinafter defined).
The Corporate Limited Partner serves as depository for the Units pursuant to a
Depository Agreement entered into with the Partnership. The Partnership
subsequently filed a Form 8-A Registration Statement with the SEC and registered
the Units under the Securities Exchange Act of 1934 (File No. 0-16010). The sale
of Units closed on June 19, 1987, with 129,266 Units sold at $250 each, for
gross proceeds of approximately $32,300,000 to the Partnership. The Partnership
has retired a total of 456 Units which were returned to the Partnership by
Unitholders. The Partnership gave no consideration for the Units retired. The
Partnership may reacquire or retire any Units, at its absolute discretion, but
is under no obligation to do so.
By the end of fiscal year 1988, approximately 79% of the proceeds raised had
been invested in four (4) properties, five (5) mortgage loans, and approximately
$1,600,000 in guaranteed mortgage-backed securities ("MBS"). Of the remaining
21%, 11.8% was required for organizational and offering expenses and sales
commissions and 9.2% was retained in Partnership reserves for working capital as
required by the Partnership Agreement.
The General Partner of the Partnership is ConCap Equities, Inc., a Delaware
corporation (the "General Partner" or "CEI"). The principal place of business
for the Partnership and the General Partner is One Insignia Financial Plaza,
Greenville, South Carolina 29602. The General Partner and the Corporate
Limited Partner shall together be called the "Partners."
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership was formed for the benefit of its
Unitholders: (i) to acquire, own and operate existing income-producing
properties and newly constructed properties with income-producing capabilities
including office buildings, industrial properties, shopping centers, mobile home
parks and residential properties; (ii) to invest in mortgage loans originated
or purchased by the Partnership; and (iii) to invest in MBS's. As of December
31, 1997, the Partnership owned three properties. In years previous to 1997, the
Partnership liquidated its investments in MBSs, sold two properties (accepting a
note on one of the sales), received payment on two of the mortgage loans,
completed a judicial foreclosure on three properties which secured three
mortgage loans, and disposed of one property which was foreclosed upon by the
lender. In 1997, the Partnership sold its one third undivided interest in one
property.
As of December 31, 1997, the Partnership's working capital reserves are in
excess of the 5% of Net Invested Capital (as defined in the Partnership
Agreement) as required by the Partnership Agreement. See "Item 6 - Management's
Discussion and Analysis" for discussion of Partnership liquidity and capital
resources.
The real estate business is highly competitive. The Registrant's real property
investments are subject to competition from similar types of properties in the
markets in which they are located and the Partnership is not a significant
factor in its industry. In addition, various limited partnerships have been
formed by related parties to engage in business which may be competitive with
the Registrant.
The Registrant has no employees. Management and administrative services are
performed by affiliates of Insignia Financial Group, Inc. ("Insignia"), an
affiliate of the General Partner. The property manager is responsible for the
day-to-day operations of each property. The General Partner has also selected
affiliates of Insignia to provide real estate advisory and asset management
services to the Partnership. As advisor, such affiliates provide all
partnership accounting and administrative services, investment management, and
supervisory services over property management and leasing. For a further
discussion of property and partnership management, see "Item 12".
Upon the Partnership's formation in 1986, Consolidated Capital Equities
Corporation ("CCEC") was the sole General Partner of the Partnership, and
Johnstown/Consolidated Depository Corporation, a wholly-owned subsidiary of
CCEC, was the sole Limited Partner. In 1988, Southmark Corporation
("Southmark") gained control of CCEC. In December 1988, CCEC filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. As part
of its reorganization plan, CEI acquired CCEC's general partner interest in the
Partnership and in 15 other affiliated public limited partnerships (the
"Affiliated Partnerships") and replaced CCEC as managing general partner in all
16 partnerships. The selection of CEI as the sole managing general partner was
approved by a majority of the Unitholders in the Partnership and the limited
partners in each of the Affiliated Partnerships pursuant to a solicitation of
the Unitholders dated August 10, 1990. As part of this solicitation, the
Unitholders also approved an amendment to the Partnership Agreement to limit
changes of control of the Partnership.
Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty,
Inc. In December 1994, the parent of GII Realty, Inc., entered into a
transaction (the "Insignia Transaction") in which an affiliate of Insignia
acquired an option (exercisable in whole or in part from time to time) to
purchase all of the stock of GII Realty, Inc. and, pursuant to a partial
exercise of such option, acquired 50.5% of that stock. As a part of the
Insignia Transaction, the Insignia affiliate also acquired all of the
outstanding stock of Partnership Services, Inc., an asset management entity and
Insignia acquired all of the outstanding stock of Coventry Properties, Inc., a
property management entity. In addition, confidentiality, non-competition, and
standstill arrangements were entered into between certain of the parties. Those
arrangements, among other things, prohibit GII Realty's former sole shareholder
from purchasing Partnership Units for a period of three years. On October 24,
1995, the Insignia affiliate exercised the remaining portion of its option to
purchase all of the remaining outstanding capital stock of GII Realty, Inc. As
of December 31, 1997, Insignia Properties Trust, an affiliate of Insignia, owned
100% of the outstanding stock of CEI. As of December 31, 1997, Insignia
Properties, L.P., an affiliate of Insignia, owned 11,632 Units of the
Partnership. Subsequent to December 31, 1997, Insignia Properties, L.P.,
purchased an additional 13,985.5 Units of the Partnership.
ITEM 2. DESCRIPTION OF PROPERTY
The Partnership originally acquired four properties and funded five loans. At
December 31, 1997, the Partnership owns three properties. The following table
sets forth the properties held by the Partnership. Additional information about
the properties is found in "Item 7 - Financial Statements", "Note H - Investment
Properties and Accumulated Depreciation."
Date of
Property Purchase Type of Ownership Use
Cedar Brooke Apartments 02/27/87 Fee ownership subject Apartment
Independence, Missouri to first mortgage 158 units
Florida #11 Mini-Warehouse 10/15/90 Fee ownership Storage Center
Davie, Florida 64,240 sq.ft.
Phoenix Business Campus 08/26/86 Fee ownership Office Building
Atlanta, Georgia 79,854 sq.ft.
At December 31, 1996, the Partnership classified the Florida #6 Mini-Warehouse
as an investment property held for sale. In accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets to be Disposed of," 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 approximately $1,287,000, after
payment of closing costs. The Partnership realized a gain of approximately
$437,000 on the sale during the second quarter of 1997.
SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Cedar Brooke Apartments $ 4,158 $2,700 5-19 years S/L $ 2,532
Florida #11 Mini-
Warehouse 2,748 651 5-20 years S/L 2,354
Phoenix Business
Campus 6,186 2,842 5-28 years S/L 2,743
Totals $13,092 $6,193 $ 7,629
See "Note A" of the Notes to Financial Statements included in "Item 7" for a
description of the Partnership's depreciation policy.
SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)
Principal Principal
Balance At Balance
December 31, Interest Maturity Due At
Property 1997 Rate Date Maturity
Cedar Brooke Apartments
1st mortgage $ 2,325 7.33% 11/03 $ 2,325
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average
Rental Rates Occupancy
Property 1997 1996 1997 1996
Cedar Brooke Apartments $ 5,858/per unit $ 5,461/per unit 97% 98%
Florida #11 Mini-Warehouse 11.39/per sq. ft. 10.99/per sq. ft. 98% 96%
Phoenix Business Campus 7.72/per sq. ft. 7.52/per sq. ft. 67% 62%
The increase in average occupancy at the Phoenix Business Campus is due
primarily to a new tenant who took occupancy in the fourth quarter of 1997 that
occupies 22% of the total square footage.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other similar properties in the area. The General Partner
believes that all of the properties are adequately insured. With the exception
of the Phoenix Business Campus, the properties' lease terms are for one year or
less and no tenant leases 10% or more of the available rental space.
The following is a schedule of lease expirations for the years 1998-2007 (dollar
amounts in thousands):
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
Phoenix Business Campus
1998 2 12,424 $ 100 19.6%
1999 1 5,170 41 8.1%
2000 3 10,119 101 19.8%
2001 1 16,684 96 18.9%
2002 0 -- -- --
2003-2007 1 17,342 170 33.6%
The following schedule reflects information on tenants leasing 10% or more of
the leasable square footage for each property:
Phoenix Business Campus
Square
Nature of Footage Annual Rent/ Lease
Business Leased Square Foot Expiration
Computer software 17,342 $9.83 9-30-03
Airline services 8,434 $7.58 10-31-98
Mortgage lender 16,684 $5.76 9-30-01
SCHEDULE OF REAL ESTATE TAXES AND RATES:
Real estate taxes were (dollar amounts in thousands) and rates in 1997 for each
property:
1997 1997
Billing Rate
Cedar Brooke Apartments $46 6.1%
Florida #11 Mini-Warehouse 66 2.6%
Phoenix Business Campus (a) 50 1.2%
(a) The Partnership is currently appealing the increase in assessed values at
Phoenix Business Campus.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Partnership believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended December 31, 1997, no matters were submitted to a vote of
the Unitholders, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF DEPOSITORY RECEIPT AND RELATED
SECURITY HOLDER MATTERS
No established public trading market for the Units exists nor is one expected to
develop.
As of December 31, 1997, the approximate number of holders of Units of
Depository Receipt was 2,549.
In September 1997, the Partnership paid distributions attributable to sales
proceeds from the sale of Florida #6 Mini-Warehouse of approximately $990,000
or $7.69 per Unit to the Unitholders, along with a corresponding $10,000 General
Partner distribution. Cumulative distributions to Unitholders since the
inception of the Partnership totaled approximately $13,200,000 at December 31,
1997.
In March 1996, the Partnership paid distributions attributable to cash flow from
operations totaling approximately $490,000 or $3.81 per Unit to the Unitholders,
and a corresponding $5,000 General Partner distribution. In September 1996, the
Partnership paid distributions attributable to cash flow from operations
totaling approximately $500,000 or $3.88 per Unit to the Unitholders, and a
corresponding $5,000 distribution to the Partnership.
The Partnership made a distribution to the partners of $1,000,000 in March 1998.
The General Partner plans to make an additional distribution in the fourth
quarter of 1998. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
The Partnership realized net income of approximately $541,000 for the year ended
December 31, 1997, compared to a net loss of approximately $109,000 for the year
ended December 31, 1996. The increase in net income is due primarily to the
gain realized on the sale of the Partnership's one-third undivided interest in
the Florida #6 Mini-Warehouse (see discussion below). Offsetting the increase in
net income from the gain realized on the sale is a slight increase in total
expenses, partially offset by a slight increase in total revenues. The increase
in total revenues results from an increase in other income partially offset by a
decrease in rental income. The increase in other income resulted from the
receipt of a dividend from the investment in Southmark (as discussed in "Item 1.
Business") and an increase in interest earned on reserves at Cedar Brook
Apartments. Although rental income decreased due to the sale of the Florida #6
Mini-Warehouse, there were average rental rate increases at all three investment
properties and increases in occupancy at the Florida #11 Mini-Warehouse and
Phoenix Business Campus, as discussed in Item 2. - Schedule of Rental Rates and
Occupancy. The overall increase in total expenses for the year ended December
31, 1997, is attributable to an increase in operating expenses, partially offset
by the sale of the Florida #6 Mini-Warehouse and a decrease in general and
administrative expenses. Operating expense increased for the year ended
December 31, 1997, due to an extensive garage repair project and related
construction oversight costs and an exterior painting project at Cedar Brooke
Apartments. 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 1996 (as discussed below). 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 year ended December 31, 1997, results from 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 Lauderhill, Florida (see "Note L" in "Item
7."). The Partnership's share of the net proceeds was approximately $1,287,000,
after payment of closing costs. As a result of the sale, the Partnership
realized a gain on the sale of approximately $437,000 during the second quarter
of 1997.
In November of 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. The new mortgage indebtedness of $2,325,000 requires monthly
interest only payments at a stated rate of 7.33% with a balloon payment due at
maturity. A loss on refinancing of approximately $231,000 was realized in 1996.
This loss resulted from the write-off of unamortized mortgage discounts and loan
costs. As a result of the refinancing, a capital improvement reserve of
approximately $303,000 was established and approximately $90,000 of loan costs
were incurred in 1996, and an additional $11,000 of loan costs were incurred in
1997. The balance in the reserve account is approximately $262,000 at December
31, 1997.
Included in operating expense for the year ended December 31, 1997, is
approximately $206,000 of major repairs and maintenance comprised primarily of
exterior painting, exterior building improvements and construction oversight
costs related to the ongoing repair projects at Cedar Brook Apartments. For the
year ended December 31, 1996, approximately $107,000 of major repairs and
maintenance, comprised primarily of exterior painting and exterior building
improvements, is included in operating expenses.
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 tendered 13,985.5 units of limited
partnership interest in the Partnership.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At December 31, 1997, the Partnership held cash and cash equivalents of
approximately $2,770,000, compared to approximately $1,583,000 at December 31,
1996. The net increase in cash for the year ended December 31, 1997, was
approximately $1,187,000 compared to a net decrease in cash of approximately
$384,000 for the year ended December 31, 1996. Net cash provided by operating
activities decreased, despite an increase in net income, due to the timing of
property tax payments, an increase in lease commissions paid at Phoenix Business
Campus and the timing of payment of accounts payable. Net cash provided by
investing activities increased primarily as a result of proceeds received from
the sale of the Partnership's one-third interest in the Florida #6 Mini-
Warehouse and proceeds received from the sale of investments. Net cash used in
financing activities increased for 1997 as compared to 1996 due to the net
proceeds received from the refinancing of the mortgage encumbering Cedar Brooke
Apartments in 1996.
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 and tenant security deposits totaling approximately
$2,824,000 at December 31, 1997, exceeded the Partnership's reserve requirement
of approximately $1,339,000.
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 years ended December 31, 1997 and 1996, cash distributions of $1,000,000
were paid to the partners. The Partnership made a distribution to the partners
of $1,000,000 in March 1998. The General Partner plans to make an additional
distribution in the fourth quarter of 1998. 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 annual 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 annual 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.
ITEM 7. FINANCIAL STATEMENTS
JONHSTOWN/CONSOLIDATED INCOME PARTNERS
LIST OF FINANCIAL STATEMENTS
Report of Ernst and Young, LLP, Independent Auditors
Balance Sheet - December 31, 1997
Statements of Operations - Years ended December 31, 1997 and 1996
Statements of Changes in Partners' (Deficit) Capital - Years ended December
31, 1997 and 1996
Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Johnstown/Consolidated Income Partners
We have audited the accompanying balance sheet of Johnstown/Consolidated Income
Partners as of December 31, 1997, and the related statements of operations,
changes in partners' (deficit) capital and cash flows for each of the two years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Johnstown/Consolidated Income
Partners at December 31, 1997, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
January 23, 1998
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(in thousands, except unit data)
December 31, 1997
Assets
Cash and cash equivalents $ 2,770
Receivables and deposits, net of allowance
of $145 87
Restricted escrows 261
Other assets 311
Investment properties (Notes F and H):
Land $ 1,571
Buildings and related personal property 11,521
13,092
Less accumulated depreciation (6,193) 6,899
$10,328
Liabilities and Partners' Capital
Accounts payable $ 395
Tenant security deposits 54
Other liabilities 58
Mortgage note payable (Note F) 2,325
Partners' (Deficit) Capital
General partner $ (171)
Corporate limited partner on behalf
of the Unitholders - (129,266 Units
issued and 128,810 outstanding) 7,667 7,496
$10,328
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended
December 31,
1997 1996
Revenues:
Rental income $2,069 $2,093
Other income 219 167
Gain on sale of investment property (Note I) 437 --
Total revenues 2,725 2,260
Expenses:
Operating 1,062 881
General and administrative 238 293
Depreciation 502 514
Interest 184 191
Property taxes 169 163
Bad debt expense 29 96
Total expenses 2,184 2,138
Income before extraordinary item 541 122
Extraordinary loss on early
extinguishment of debt (Note E) -- (231)
Net income (loss) $ 541 $ (109)
Net income (loss) allocated to general partner (1%) $ 5 $ (1)
Net income (loss) allocated to limited partners (99%) 536 (108)
$ 541 $ (109)
Net income per Unit of Depository Receipt:
Income before extraordinary item 4.16 .94
Extraordinary loss on early
extinguishment of debt -- (1.78)
Net income (loss) per Unit of Depository Receipt: $ 4.16 $ (.84)
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
YEARS ENDED DECEMBER 31, 1997 AND 1996
(in thousands, except unit data)
Unitholders
Units of Units of
Depository General Depository
Receipt Partner Receipt Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' (deficit) capital
at December 31, 1995 128,810 $ (155) $ 9,219 $ 9,064
Distributions paid -- (10) (990) (1,000)
Net loss for the year ended
December 31, 1996 -- (1) (108) (109)
Partners' (deficit) capital at
December 31, 1996 128,810 (166) 8,121 7,955
Distributions paid -- (10) (990) (1,000)
Net income for the year ended
December 31, 1997 -- 5 536 541
Partners' (deficit) capital at
December 31, 1997 128,810 $ (171) $ 7,667 $ 7,496
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 541 $ (109)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 502 514
Amortization of lease commissions, discounts
and loan costs 56 43
Extraordinary loss on early extinguishment of debt -- 231
Gain on sale of investment property (437) --
Bad debt expense 29 96
Change in accounts:
Receivables and deposits 44 (24)
Other assets (122) (54)
Accounts payable 10 88
Tenant security deposit liabilities (7) 9
Accrued taxes (47) 47
Other liabilities (24) (8)
Net cash provided by operating activities 545 833
Cash flows from investing activities:
Proceeds from sale of investment property 1,287 --
Property improvements and replacements (128) (152)
Proceeds from sale of investments 447 --
Net receipts from (deposits to) restricted escrows 47 (189)
Net cash provided by (used in) investing
activities 1,653 (341)
Cash flows from financing activities:
Payments on mortgage note payable -- (50)
Repayment of mortgage note payable -- (2,061)
Proceeds from long-term borrowings -- 2,325
Loan costs paid (11) (90)
Distributions to partners (1,000) (1,000)
Net cash used in financing activities (1,011) (876)
Net increase (decrease) in cash and cash equivalents 1,187 (384)
Cash and cash equivalents at beginning of period 1,583 1,967
Cash and cash equivalents at end of period $ 2,770 $ 1,583
Supplemental disclosure of cash flow information:
Cash paid for interest $ 170 $ 164
Supplemental disclosure of non-cash investing activity:
Property improvements and replacements included
in accounts payable $ 281 $ --
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Johnstown/Consolidated Income Partners (the "Partnership" or "Registrant"), a
California limited partnership, was formed on January 9, 1986, to acquire and
operate commercial and residential properties and to invest in mortgage loans
and mortgage-backed securities. Consolidated Capital Equities Corporation
("CCEC"), the former general partner, and Johnstown/Consolidated Depository
Corporation (the "Corporate Limited Partner"), which serves as depository of
certain Units of Depository Receipt ("Units"), contributed $1,000 and $100,000,
respectively. The Units represent economic rights attributable to the limited
partnership interests in the Partnership and entitle the holders thereof
("Unitholders") to the economic benefits attributable to equity interests in the
Partnership and to participate in certain allocations and distributions of the
Partnership. For this reason, partners' capital (deficit) is herein represented
as an interest of the Unitholders. As of December 31, 1997, the Partnership
owned one residential and two commercial properties, all of which are located
near major urban areas in the United States.
At the time of the Partnership's formation, CCEC was the sole general partner of
the Partnership, and the Corporate Limited Partner was a wholly-owned subsidiary
of CCEC. In 1988, Southmark Corporation ("Southmark") gained control of CCEC.
In December 1988, CCEC filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. As part of its reorganization plan, ConCap Equities,
Inc. ("General Partner" or "CEI") acquired CCEC's general partner interest in
the Partnership and in 15 other affiliated public limited partnerships (the
"Affiliated Partnerships") and acquired the stock of the corporate limited
partner, replacing CCEC as managing general partner in all 16 partnerships.
Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty,
Inc. In December 1994, the parent of GII Realty, Inc., entered into a
transaction (the "Insignia Transaction") in which, an affiliate of Insignia
Financial Group, Inc. ("Insignia"), acquired an option (exercisable in whole or
in part from time to time) to purchase all of the stock of GII Realty, Inc. and,
pursuant to a partial exercise of such option, acquired 50.5% of that stock. As
a part of the Insignia Transaction, the Insignia affiliate also acquired all of
the outstanding stock of Partnership Services, Inc., an asset management entity
and Insignia acquired all of the outstanding stock of Coventry Properties, Inc.,
a property management entity. In addition, confidentiality, non-competition,
and standstill arrangements were entered into between certain of the parties.
Those arrangements, among other things, prohibit GII Realty's former sole
shareholder from purchasing Partnership Units for a period of three years. On
October 24, 1995, the Insignia affiliate exercised the remaining portion of its
option to purchase all of the remaining outstanding capital stock of GII Realty,
Inc. As of December 31, 1997, Insignia Properties Trust, an affiliate of
Insignia, owned 100% of the outstanding stock of CEI. At December 31, 1997,
Insignia Properties, L.P., an affiliate of Insignia, owned 11,632 Units of the
Partnership. Subsequent to December 31, 1997, Insignia Properties, L.P.
purchased an additional 13,985.5 Units of the Partnership.
The principal place of business for the Partnership and for the General Partner
is One Insignia Financial Plaza, Greenville, South Carolina, 29602.
Cash and cash equivalents:
Includes cash on hand and in banks, money market funds and certificates of
deposit with original maturities of 90 days or less. At certain times the amount
of cash deposited at a bank may exceed the limit on insured deposits.
Tenant security deposits: The Partnership requires security deposits from new
lessees for the duration of the lease and such deposits totaling $118,000 at
December 31, 1997, are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on its rental payments.
Depreciation
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 28 years.
Effective December 31, 1996, the Florida #6 Mini-Warehouse was classified as an
investment property held for sale and no additional depreciation expense was
recorded during the period the assets were held for sale. This property was
sold in May 1997, See Note L.
Investments
The Partnership accounts for its investments in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Investments, consisting primarily of
U.S. Treasury notes with original maturities more than ninety days, are
considered to be held-to-maturity securities. As the investments' fair value
approximate their cost, any unrealized gains or losses are immaterial and
therefore have not been recorded in the accompanying financial statements. The
cost of investments sold is determined using the specific identification method.
The investments matured as follows (dollar amounts in thousands):
Description Cost Maturity
U.S. Treasury Note $ 447 October 1997
Fair Value
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Investment Properties
Investment properties are stated at cost. Acquisition fees are capitalized as a
cost of real estate. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
the Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. For the years ended
December 31, 1997 and 1996, no adjustments for impairment of value were
recorded.
Investment Property Held for Sale
At December 31, 1996, the Partnership classified its one-third undivided
interest in the Florida #6 Mini-Warehouses as an investment property held for
sale. In accordance with SFAS Statment No. 121, the property was recorded at
the lower of its carrying amount or its fair value less costs to sell. For the
year ended December 31, 1996, the property realized total net income of
approximately $91,000.
In May 1997, the Partnership sold its one-third undivided interest in the
Florida #6 Mini-Warehouse, located in Lauderhill, Florida (see "Note I"). The
Partnership's share of the net proceeds was approximately $1,287,000, after
payment of closing costs. As a result of the sale, the Partnership realized a
gain on the sale of approximately $437,000 during the second quarter of 1997.
Rental Income
The Partnership leases its residential property and its commercial mini-
warehouse under short-term operating leases. Lease terms are generally one year
or less in duration. The Partnership expects that in the normal course of
business these leases will be renewed or replaced by other leases. The
commercial office property leases generally are from one to five years in
duration. Rental income is recognized on a straight-line basis over the life of
the applicable leases.
Deferred Loan Costs
Deferred loan costs of approximately $85,000 are amortized using the straight-
line method over the lives of the related mortgage notes. Unamortized deferred
loan costs are included in other assets.
Lease Commissions
Lease commissions are capitalized and amortized using the straight-line method
over the life of the applicable lease. Unamortized lease commissions are
included in other assets.
Allocation of Net Income and Net Loss
The Partnership Agreement provides for net income and net losses for both
financial and tax reporting purposes to be allocated 99% to the Unitholders and
1% to the General Partner.
Advertising Costs
The Partnership expenses the cost of advertising as incurred. Advertising
expense, which is included in operating expenses, was approximately $51,000 and
$39,000 for the years ended December 31, 1997 and 1996, respectively.
Units of Depository Receipt
The Corporate Limited Partner, an affiliate of the General Partner, serves as a
depository of the Units. The Units represent economic rights attributable to
the limited partnership interests in the Partnership and entitle the 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1996 balances to conform to the
1997 presentation.
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 following transactions with affiliates of the General Partner were incurred
in 1997 and 1996:
1997 1996
(in thousands)
Property management fees (included
in operating expenses) $108 $ 95
Reimbursement for services of
affiliates including $31,000
and $8,000 in construction
services reimbursements in 1997 and
1996, respectively (included in
investment property and general
and administrative and operating
expenses) 125 121
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 $98,000 were
paid to the General Partner and its affiliates for each of the years ended
December 31, 1997 and 1996, respectively, and are included in general and
administrative expenses.
During 1997, the Partnership paid, to an affiliate of the General Partner,
approximately $25,000 in reimbursements relating to the sale of the Florida #6
Mini-Warehouse.
The Partnership has paid leasing commissions of approximately $45,000 and $6,000
during the years ended December 31, 1997 and 1996, respectively, to an affiliate
of the General Partner. Leasing commissions are capitalized and amortized over
the lives of the respective leases. Unamortized leasing commissions are
included in other assets.
In addition, during 1996, the Partnership paid approximately $12,000 to
affiliates of the General Partner for reimbursement of services related to the
Cedar Brooke loan refinancing (see "Note E"). These charges have been
capitalized as loan costs and are being amortized over the life of the loan.
Unamortized loan costs are included in other assets.
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.
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 tendered 13,985.5 units of limited
partnership interest in 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 $2,824,000 at
December 31, 1997, exceeded the Partnership's reserve requirement of
approximately $1,385,000.
NOTE D - DISTRIBUTIONS
In September 1997, the Partnership paid distributions attributable to sales
proceeds from the sale of the Florida #6 Mini-Warehouse (See "Note L") of
approximately $990,000 or $7.69 per Unit to the Unitholders along with a
corresponding $10,000 General Partner distribution.
In March 1996, the Partnership paid distributions attributable to cash flow from
operations of approximately $490,000 or $3.81 per Unit to the Unitholders along
with a corresponding General Partner distribution of $5,000. In September 1996,
the Partnership paid distributions of approximately $500,000 or $3.88 per Unit
to the Unitholders, along with a corresponding General Partner distribution of
approximately $5,000.
NOTE E - REFINANCING
In November of 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. A loss on
refinancing of approximately $231,000 resulting from the write-off of
unamortized mortgage discounts and loan costs was realized in 1996. As a result
of the refinancing, a capital improvement reserve of approximately $303,000 was
established and approximately $90,000 of loan costs were incurred in 1996, and
an additional $11,000 of loan costs were incurred in 1997. These loan costs are
being amortized over the life of the loan. The balance in the capital
improvement reserve is approximately $262,000 at December 31, 1997.
NOTE F - MORTGAGE NOTE PAYABLE
The principle terms of the mortgage note payable are as follows (dollar amounts
in thousands):
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1997 Interest Rate Date Maturity
Cedar Brooke Apartments
1st mortgage $2,325 $14(a) 7.33% 11/03 $2,325
(a) Interest-only payment.
The estimated fair value of the Partnerships' debt approximates its carrying
value of $2,325,000. This value represents a general approximation of possible
value and is not necessarily indicative of the amounts the Partnership might pay
in actual market transactions. There are no scheduled maturities of principal
during the next five years. A balloon payment of $2,325,000 representing
principal is due in 2003. The mortgage note requires a prepayment penalty if
repaid prior to the maturity date.
NOTE G - OPERATING LEASES
Lessor
Tenants of Phoenix Business Campus are responsible for their own utilities and
maintenance of their space, and payment of their proportionate share of common
area maintenance, utilities, insurance and real estate taxes. Real estate
taxes, insurance, and common area maintenance expenses are paid directly by the
Partnership. The Partnership is then reimbursed by the tenants for their
proportionate share.
The future minimum rental payments at the Partnership's commercial property to
be received under operating leases that have initial or remaining noncancellable
lease terms in excess of one year as of December 31, 1997, are as follows (in
thousands):
Years Ending December 31,
1998 $ 454
1999 378
2000 348
2001 252
2002 - Thereafter 320
$ 1,752
NOTE H - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Written off)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands)
Cedar Brooke Apartments $2,325 $ 275 $ 4,040 $ (157)
Florida #11
Mini-Warehouse -- 979 1,741 28
Phoenix Business Campus -- 496 6,148 (458)
Totals $2,325 $1,750 $11,929 $ (587)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1997
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cedar Brooke Apartments $ 213 $ 3,945 $ 4,158 $2,700 2/27/87 5-19
Florida #11 Mini-Warehouse 979 1,769 2,748 651 10/15/90 5-20
Phoenix Business Campus 379 5,807 6,186 2,842 8/26/86 5-28
Totals $1,571 $11,521 $13,092 $6,193
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation" (in
thousands):
Years Ended December 31,
1997 1996
Investment Properties
Balance at beginning of year $12,683 $13,624
Property improvements 409 152
Reclassification of investment property
held for sale -- (1,093)
Balance at End of Year $13,092 $12,683
Accumulated Depreciation
Balance at beginning of year $ 5,691 $ 5,420
Additions charged to expense 502 514
Reclassification of investment property
held for sale -- (243)
Balance at end of year $ 6,193 $ 5,691
The aggregate cost of the Partnership's investment properties for Federal income
tax purposes at December 31, 1997 and 1996, respectively, is approximately
$13,934,000 and $14,596,000. The accumulated depreciation taken for Federal
income tax purposes at December 31, 1997 and 1996, respectively, is
approximately $6,305,000 and $5,828,000.
NOTE I - SALE OF INVESTMENT PROPERTY HELD FOR SALE
In accordance with SFAS 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 its one-third undivided interest in 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. The Partnership's share of the net proceeds was approximately
$1,287,000, after payment of closing costs. The Partnership realized a gain of
approximately $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 $243,000.
NOTE J - FIRE DAMAGE
In the fourth quarter of 1997, there was a fire at Cedar Brooke Apartments that
caused extensive damage to the clubhouse. Estimated insurance proceeds of
$200,000 to be received approximate the estimated costs to be incurred to
rebuild the clubhouse.
NOTE K - INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
The following is a reconciliation of reported net income or loss and Federal
taxable income (in thousands, except unit data):
1997 1996
Net income (loss) as reported $ 541 $ (109)
Add (deduct):
Depreciation differences (110) (99)
Unearned income (44) 26
Allowance for bad debt (95) --
Other 3 340
Gain on sale of property (85) --
Accruals and prepaids 21 30
Federal taxable income $ 231 $ 188
Federal taxable income
per Unit of Depository Receipt $ 1.78 $ 1.45
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 7,496
Land and buildings 842
Accumulated depreciation (112)
Syndication and distribution costs 3,825
Other 51
Net assets - Federal tax basis $12,102
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The Registrant has no officers or directors. Concap Equities, Inc. ("CEI" or the
"General Partner") manages and controls the Registrant and has general
responsibility and authority in all matters affecting its business.
The name of the directors and executive officers of the General Partner their
ages and the nature of all positions with CEI presently held by them are set
forth below. There are no family relationships between or among any officers and
directors.
Name Age Position
William H. Jarrard, Jr. 51 President & Director
Ronald Uretta 41 Vice President
& Treasurer
Martha L. Long 38 Controller
Robert D. Long, Jr. 30 Vice President
Daniel M. LeBey 32 Vice President
& Secretary
Kelley M. Buechler 40 Assistant Secretary
William H. Jarrard, Jr. has been President and Director of the General Partner
since December 1996. He has acted as Senior Vice President of Insignia
Properties Trust ("IPT"), parent of the Corporation, since May 1997. Mr.
Jarrard previously acted as Managing Director - Partnership Administration of
Insignia from January 1991 through September 1997 and served as Managing
Director - Partnership Administration and Asset Management from July 1994 until
January 1996.
Ronald Uretta has been Vice President and Treasurer of the General Partner since
January 1996 and Insignia's Treasurer since January 1992. Since August 1996, he
has also served as Chief Operating Officer. He has also served as Secretary
from January 1992 to June 1996 and as Insignia's Chief Financial Officer from
January 1992 to August 1996.
Martha L. Long has been Controller of the General Partner since December 1996
and Senior Vice President - Finance and Controller of Insignia since January
1997. In June 1994, Ms. Long joined Insignia as its Controller, and was
promoted to Senior Vice President - Finance in January 1997. Prior to that
time, she was Senior Vice President and Controller of the First Savings Bank, in
Greenville, SC.
Robert D. Long, Jr. has been Vice President of the General Partner since January
1998. Mr. Long joined Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate
of Insignia, in September 1993. Since 1994 he has acted as Vice President and
Chief Accounting Officer of the MAE subsidiaries. Mr. Long was an accountant
for Insignia until joining MAE in 1993. Prior to joining Insignia, Mr. Long was
an auditor for the State of Tennessee and was associated with the accounting
firm of Harsman Lewis and Associates.
Daniel M. LeBey has been Vice President and Secretary of the General Partner
since January 29, 1998 and Insignia's Assistant Secretary since April 30, 1997.
Since July 1996 he has also served as Insignia's Associate General Counsel.
From September 1992 until June 1996, Mr. LeBey was an attorney with the law firm
of Alston & Bird LLP, Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
December 1994 and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct compensation was paid or payable by the Partnership to directors or
officers for the year ended December 31, 1997, nor was any direct compensation
paid or payable by the Partnership to directors or officers of the General
Partner for the year ended December 31, 1997. The Partnership has no plans to
pay any such remuneration to any directors or officers of the General Partner in
the future.
See "Item 7 - Financial Statements, Note B - Related Party Transactions", for
amounts of compensation and reimbursement of salaries paid by the Partnership to
the General Partner and its affiliates and the former general partner and former
affiliates.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Except as provided below, at February 28, 1998, no person was known to CEI
to own of record or beneficially more than five percent of the Units of the
Partnership.
Number of Percent
Name and Address Units of total
Insignia Properties, LP 25,617.5 19.89%
One Insignia Financial Plaza
Greenville, SC 29602
Insignia Properties, L.P. is an affiliate of Insignia.
(b) Beneficial Owners of Management
Neither CEI nor any of the directors or officers or associates of CEI own
any Units of the Partnership of record or beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of December 1997, the following persons were known to CEI to be the
beneficial owners of more than 5 percent (5%) of its common stock:
NUMBER OF PERCENT
NAME AND ADDRESS CEI SHARES OF TOTAL
Insignia Properties Trust 100,000 100%
One Insignia Financial Plaza
Greenville, SC 29602
Insignia Properties Trust is an affiliate of Insignia. (See "Item 1")
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 following transactions with affiliates of the General Partner were incurred
in 1997 and 1996:
1997 1996
(in thousands)
Property management fees $108 $ 95
Reimbursement for services of
affiliates including $31,000
and $8,000 in construction
services reimbursements in 1997 and
1996, respectively 125 121
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 $98,000 were
paid to the General Partner and its affiliates for each of the years ended
December 31, 1997 and 1996, respectively.
During 1997, the Partnership paid, to an affiliate of the General Partner,
approximately $25,000 in reimbursements relating to the sale of the Florida #6
Mini-Warehouse.
The Partnership has paid leasing commissions of approximately $45,000 and $6,000
during the years end December 31, 1997 and 1996, respectively, to an affiliate
of the General Partner. Leasing commissions are capitalized and amortized over
the lives of the respective leases.
In addition, during 1996, the Partnership paid approximately $12,000 to
affiliates of the General Partner for reimbursement of services related to the
Cedar Brooke loan refinancing. These charges have been capitalized as loan
costs and are being amortized over the life of the loan.
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 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.
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 tendered 13,985.5 units of limited partnership
interest in the Partnership.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
See Exhibit Index contained herein for listing of exhibits.
(b) Reports on Form 8-K filed during the fourth quarter of 1997:
None.
SIGNATURES
In accordance with Section 13 or 15(d) 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/Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: March 16, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/William H. Jarrard, Jr. President/Director
William H. Jarrard, Jr.
/s/Ronald Uretta Vice President/Treasurer
Ronald Uretta
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION
3 Certificates of Limited Partnership, as
amended to date (Incorporated by refer-
ence to the Annual Report on Form 10-K
for the year ended December 31, 1991)
10.1 Property Management Agreement No. 114
dated October 23, 1990, by and between the
Partnership and CCEC (Incorporated by refer-
ence to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990).
10.2 Property Management Agreement No. 309
dated October 23, 1990, by and between the
Partnership and CCEC (Incorporated by refer-
ence to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990).
10.3 Bill of Sale and Assignment dated October
23, 1990, by and between CCEC and ConCap
Services Company (Incorporated by reference
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.4 Assignment and Assumption dated October
23, 1990, by and between CCEC and ConCap
Management Limited Partnership ("CCMLP")
(Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1990).
10.5 Assignment and Agreement as to Certain
Property Management Services dated October
23, 1990, by and between CCMLP and ConCap
Capital Company (Incorporated by reference
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.6 Assignment and Assumption Agreement dated
October 23, 1990, by and between CCMLP
and The Hayman Company (100 Series of
Property Management Contracts) (Incorporated
by reference to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1990).
10.7 Assignment and Assumption Agreement dated
October 23, 1990, by and between CCMLP and
Metro ConCap, Inc. (300 Series of Property
Management Contracts) (Incorporated by refer-
ence to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990).
10.8 Property Management Agreement No. 121 dated October 1,
1991, by and between the Partnership,
Johnstown/Consolidated Income Partners/2 ("JCIP/2") and
CCMLP (Incorporated by reference to the Annual Report on
Form 10-K for the year ended December 31, 1991).
10.9 Property Management Agreement No. 122 dated October 1,
1991, by and between the Partnership and CCMLP
(Incorporated by reference to the Annual Report on Form
10-K for the year ended December 31, 1991).
10.10 Assignment and Assumption Agreement dated October 1, 1991,
by and between CCMLP and The Hayman Company (Property
Management Agreements No. 121 and 122) (Incorporated by
reference to the Annual Report on Form 10-K for the year
ended December 31, 1991).
10.11 Assignment and Agreement as to Certain Property Management
Services dated October 1, 1991, by and between CCMLP and
ConCap Capital Company (Incorporated by reference to the
Annual Report on Form 10-K for the year ended December 31,
1991).
10.12 Assignment and Assumption Agreement dated September 1,
1991, by and between the Partnership, and JCIP Associates,
Ltd. (Incorporated by reference to the Annual Report on
Form 10-K for the year ended December 31, 1991).
10.13 Construction Management Cost Reimbursement Agreement dated
January 1, 1991, by and between the Partnership and Metro
ConCap Inc. (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991).
10.14 Construction Management Cost Reimbursement Agreement dated
January 1, 1991, by and between the Partnership and The
Hayman Company (the "Hayman Construction Management
Agreement") (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991).
10.15 Assignment and Assumption Agreement dated September 1,
1991, by and between the Partnership, and JCIP Associates,
Ltd. (Hayman Construction Management Agreement)
(Incorporated by reference to the Annual Report on Form
10-K for the year ended December 31, 1991).
10.16 Construction Management Cost Reimbursement Agreement dated
October 1, 1991, by and between the Partnership and The
Hayman Company (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991).
10.17 Construction Management Cost Reimbursement Agreement dated
October 1, 1991, by and between the Partnership,
Johnstown/Consolidated Income Partners/2 and The Hayman
Company (Incorporated by reference to the Annual Report on
Form 10-K for the year ended December 31, 1991).
10.18 Investor Services Agreement dated October 23, 1990 by and
between the Partnership and CCEC (Incorporated by
reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.19 Assignment and Assumption Agreement (Investor Services
Agreement) dated October 23, 1990, by and between CCEC and
ConCap Services Company (Incorporated by reference to the
Annual Report on Form 10-K for the year ended December 31,
1990).
10.20 Letter of Notice dated December 20, 1991, from Partnership
Services, Inc. ("PSI") to the Partnership regarding the
change in ownership and dissolution of ConCap Services
Company whereby PSI assumed the Investor Services
Agreement (Incorporated by reference to the Annual Report
on Form 10-K for the year ended December 31, 1991).
10.21 Financial Services Agreement dated October 23, 1990, by
and between the Partnership and CCEC (Incorporated by
reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.22 Financial Services Agreement dated October 23, 1990, by
and between the Partnership and CCEC (Incorporated by
reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.23 Letter of Notice dated December 20, 1991, from PSI to the
Partnership regarding the change in ownership and
dissolution of ConCap Capital Company whereby PSI assumed
the Financial Services Agreement (Incorporated by
reference to the Annual Report on Form 10-K for the year
ended December 31, 1991).
10.24 Property Management Agreement No. 502 dated February 16,
1993, by and between the Partnership and Coventry
Properties, Inc. (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1992).
10.25 Property Management Agreement No. 516 dated June 1, 1993,
by and between the Partnership and Coventry Properties,
Inc.
10.26 Property Management Agreement No. 517 dated June 1, 1993,
by and between the Partnership and Coventry Properties,
Inc.
10.27 Assignment and Agreement as to Certain Property Management
Services dated November 17, 1993, by and between Coventry
Properties, Inc. and Partnership Services, Inc.
10.28 Assignment and Agreement as to Certain Property Management
Services dated November 17, 1993, by and between Coventry
Properties, Inc. and Partnership Services, Inc.
10.29 Stock and Asset Purchase Agreement, dated December 8, 1994
(the "Gordon Agreement"), among MAE-ICC, Inc. ("MAE-ICC"),
Gordon Realty Inc. ("Gordon"), GII Realty, Inc. ("GII
Realty"), and certain other parties. (Incorporate by
reference to Form 8-K dated December 8, 1994)
10.30 Exercise of the Option (as defined in the Gordon
Agreement), dated December 8, 1994, between MAE-ICC and
Gordon. (Incorporated by reference to Form 8-K dated
December 8, 1994)
10.31 Exercise of the remaining portion of the option (as
defined in the Gordon Agreement), dated December 8, 1994,
between MAE-ICC and Gordon. (Incorporated by reference to
Form 8-K dated October 24, 1995)
10.32 Multifamily Note dated November 1, 1996, between
Johnstown/Consolidated Income Partners, a California
limited partnership, and Lehman Brokers Holdings Inc.d/b/a
Lehman Capital, A Division of Lehman Brothers Holdings,
Inc. (Incorporated by reference to the annual report on
Form 10-K for the year ended December 31, 1996)
10.33 Agreement for Purchase and Sale of Existing Facilities
dated March 19, 1997, executed by and between
Johnstown/Consolidated Income Partners and
Johnstown/Consolidated Income Partners/2, each a
California limited partnership and Shurgard Storage
Centers, Inc., a Delaware corporation, covering certain
real property situated in Broward County, Florida (the
"Property").
10.34 Special Warranty Deed dated May 8, 1997, executed by
Johnstown/Consolidated Income Partners and
Johnstown/Consolidated Income Partners/2, each a
California limited partnership in favor of Shurgard
Storage Center, Inc., a Delaware corporation.
10.35 Assignment of Rental Agreements dated May 8, 1997,
executed by Johnstown/Consolidated Income Partners and
Johnstown/Consolidated Income Partners/2, each a
California limited partnership and Shurgard Storage
Center, Inc., a Delaware corporation.
11 Statement regarding computations of Net Income per Limited
Partnership Unit (Incorporated by reference to Note 1 of
Item 8 - Financial Statements of this Form 10-K).
16.1 Letter, dated August 12, 1992, from Ernst & Young to the
Securities and Exchange Commission regarding change in
certifying accountant. (Incorporated by reference to Form
8-K dated August 6, 1992).
16.2 Letter dated May 9, 1995 from the Registrant's former
independent accountant regarding its concurrence with the
statements made by the Registrant regarding a change in
the certifying accountant. (Incorporated by reference to
Form 8-K dated May 3, 1995)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Johnstown/Consolidated Income Partners 1997 Year-End 10-KSB and is qualified
in its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000787621
<NAME> JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,770
<SECURITIES> 0
<RECEIVABLES> 87
<ALLOWANCES> 145
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 13,092
<DEPRECIATION> 6,193
<TOTAL-ASSETS> 10,328
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,325
0
0
<COMMON> 0
<OTHER-SE> 7,496
<TOTAL-LIABILITY-AND-EQUITY> 10,328
<SALES> 0
<TOTAL-REVENUES> 2,725
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 541
<EPS-PRIMARY> 4.16<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
