FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO 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 preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,424
Receivables and deposits 165
Restricted escrows 163
Other assets 71
Investment property:
Land $ 213
Buildings and related personal property 4,549
4,762
Less accumulated depreciation (3,131) 1,631
$ 3,454
Liabilities and Partners' (Deficit) Capital
Accounts payable $ 28
Tenant security deposit liabilities 39
Accrued property taxes 51
Other liabilities 106
Mortgage note payable 2,325
Partners' (Deficit) Capital
General partner $ (237)
Corporate limited partner on behalf of the
Unitholders - (128,810 units issued and
outstanding) 1,142 905
$ 3,454
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
b)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(Restated) (Restated)
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 274 $ 247 $ 819 $ 762
Other income 52 22 184 65
Total revenues 326 269 1,003 827
Expenses:
Operating 112 103 344 317
General and administrative 25 54 166 208
Depreciation 57 47 169 168
Interest 47 47 139 139
Property taxes 18 12 51 38
Total expenses 259 263 869 870
Income (loss) from continuing
operations 67 6 134 (43)
Income from discontinued
operations -- 133 -- 440
Loss on sale of discontinued
operations -- -- (71) --
Net income $ 67 $ 139 $ 63 $ 397
Net income allocated to general
partner (1%) $ 1 $ 1 $ 1 $ 4
Net income allocated to
limited partners (99%) 66 138 62 393
$ 67 $ 139 $ 63 $ 397
Per unit of depositary receipt:
Income (loss) from continuing
operations $ 0.51 $ 0.05 $ 1.03 $ (0.33)
Income from discontinued
operations -- 1.02 -- 3.38
Loss on sale of discontinued
operations -- -- (0.55) --
Net income per unit of
depositary receipt $ 0.51 $ 1.07 $ 0.48 $ 3.05
Distributions per unit of
depositary receipt $ -- $ 4.42 $ 71.82 $ 4.42
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
c)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Unitholders
Units of
Units of Depositary
Depositary General Receipt
Units Partner (Note A) Total
<S> <C> <C> <C> <C>
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' (deficit) capital
at December 31, 1999 128,810 $ (145) $10,331 $10,186
Distributions to partners -- (93) (9,251) (9,344)
Net income for the nine months
ended September 30, 2000 -- 1 62 63
Partners' (deficit) capital
at September 30, 2000 128,810 $ (237) $ 1,142 $ 905
See Accompanying Notes to Financial Statements
</TABLE>
d)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 63 $ 397
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 169 456
Amortization of lease commissions and loan costs 11 58
Loss on sale of discontinued operations 71 --
Change in accounts:
Receivables and deposits 7 (118)
Other assets 10 (20)
Accounts payable (102) 18
Tenant security deposit liabilities 4 3
Accrued property taxes (16) 67
Other liabilities (25) 1
Net cash provided by operating activities 192 862
Cash flows from investing activities:
Property improvements and replacements (63) (176)
Net receipts from (deposits to) restricted escrows 60 (27)
Lease commissions paid -- (11)
Net cash used in investing activities (3) (214)
Cash flows used in financing activities:
Distributions to partners (9,344) (575)
Net (decrease) increase in cash and cash equivalents (9,155) 73
Cash and cash equivalents at beginning of period 10,579 1,754
Cash and cash equivalents at end of period $ 1,424 $ 1,827
Supplemental disclosure of cash flow information:
Cash paid for interest $ 128 $ 128
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
e)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of the Johnstown/Consolidated
Income Partners (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999.
Certain reclassification have been made to the 1999 balances to conform to the
2000 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 Unitholders.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities,
as provided for in the Partnership Agreement. The Partnership Agreement provides
for (i) certain payments to affiliates for services and (ii) reimbursement of
certain expenses incurred by affiliates on behalf of the Partnership.
<PAGE>
The following expenses were paid or accrued to an affiliate of the General
Partner during the nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Asset management fees (included in general and
administrative expense) $ 29 $ 70
Property management fees (included in operating expenses
and income from discontinued operations) 44 75
Reimbursement for services of affiliates (included in
general and administrative expense) 40 33
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 $29,000 and
$70,000 were paid to the General Partner and its affiliates for the nine months
ended September 30, 2000 and 1999, respectively.
During the nine months ended September 30, 2000 and 1999, affiliates of the
General Partner were entitled to receive 5% of gross receipts from the
Partnership's residential property for providing property management services.
The Partnership paid to such affiliates approximately $44,000 and $41,000 for
the nine month periods ended September 30, 2000 and 1999, respectively. For the
nine months ended September 30, 1999, affiliates were entitled to receive
varying percentages of the gross receipts from the Partnership's Florida #11
Mini-Warehouses commercial property for providing property management services.
The Partnership paid to such affiliates approximately $34,000 for the nine
months ended September 30, 1999. These services were provided by an unrelated
party for Phoenix Business Center in 1999. Both the Florida #11 Mini-Warehouse
and Phoenix Business Center were sold during 1999, so no management fees were
paid for these properties during the nine months ended September 30, 2000.
An affiliate of the General Partner received reimbursement of accountable
administrative expense amounting to approximately $40,000 and $33,000 for the
nine months ended September 30, 2000 and 1999, respectively.
<PAGE>
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 65,129 units of depositary
receipt in the Partnership representing approximately 50.56% of the outstanding
units. A number of these units were acquired pursuant to tender offers made by
AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional units of depositary receipt
in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of approximately 50.56% of the outstanding units, AIMCO is in a
position to influence all voting decisions with respect to the Registrant. When
voting on matters, AIMCO and its affiliates would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the General Partner
because of their affiliation with the General Partner.
Note D - Commitment
Until October 17, 2000, the Partnership was 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 were made from this reserve, operating revenue were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. Reserves, including cash and securities available for sale, totaling
approximately $1,464,000, were greater than the reserve requirement of
approximately $955,000 at September 30, 2000. On September 16, 2000, the
Partnership solicited the vote of limited partners to amend the Partnership
Agreement to eliminate the requirement for the Partnership to maintain reserves
equal to at least 5% of the limited partner's capital contributions less
distributions to limited partners and instead permit the General Partner to
determine reasonable reserve requirements of the Partnership. The vote was
sought pursuant to a Consent Solicitation that expired on October 16, 2000 at
which time the amendment was approved by the requisite percent of limited
partnership interests. Upon expiration of the consent period, a total number of
87,404 units had voted of which 83,616 units had voted in favor of the
amendment, 2,268 units had voted against the amendment and 1,520 units had
abstained.
Note E - Distributions
During the nine months ended September 30, 2000, the General Partner declared
and paid distributions of approximately $9,344,000 (approximately $9,251,000 to
the limited partners or $71.82 per unit of depositary receipt). These
distributions consisted of sale proceeds from the sale of Phoenix Business
Center and Florida #11 Mini Warehouse of approximately $7,738,000 (approximately
$7,661,000 to the limited partners or $59.48 per unit of depositary receipt) and
approximately $1,606,000 (approximately $1,590,000 to the limited partners or
$12.34 per unit of depositary receipt) from operations. Subsequent to September
30, 2000, the General Partner approved a distribution from operations of
approximately $1,279,000 (approximately $1,266,000 to the limited partners or
$9.83 per unit of depositary receipt) from operations. During the nine months
ended September 30, 1999, a distribution of approximately $575,000
(approximately $569,000 to the limited partners or $4.42 per units of depositary
receipt) was paid from operations.
Note F - Sale of Discontinued Operations
The Partnership's two commercial properties, Florida #11 Mini Warehouse and
Phoenix Business Campus, were sold during November and December of 1999,
respectively. These were the only commercial properties owned by the Partnership
and represented one segment of the Partnership's operations. Due to the sale of
these properties, the results of the commercial segment have been shown as
income from discontinued operations and loss on sale of discontinued operations.
Total revenues for these properties were approximately $377,000 and $1,098,000
for the three and nine months ended September 30, 1999. No revenues were earned
by these properties during the three and nine months ended September 30, 2000.
Income from discontinued operations was approximately $133,000 and $440,000 for
the three and nine months ended September 30, 1999, respectively. The loss on
sale of discontinued operations during the nine months ended September 30, 2000
was due to additional legal fees and other costs relating to the property sales.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership had two reportable segments:
residential properties and commercial properties. The Partnership's residential
property segment consists of one apartment complex located in Independence,
Missouri. The Partnership rents apartment units to tenants for terms that are
typically twelve months or less. The commercial property segment consisted of an
office building located in Atlanta, Georgia, and a self-storage mini-warehouse
located in Davie, Florida. The two commercial properties held by the Partnership
were sold to unrelated parties during 1999. Therefore, the commercial segment is
reflected as discontinued operations (see "Note F - Sale of Discontinued
Operations" for further discussion regarding the commercial sales).
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those described in the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segments consisted of investment properties that
offered different products and services. The reportable segments were each
managed separately because they provided distinct services with different types
of products and customers.
Segment information for the three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below. The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segments (in thousands).
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 274 $ -- $ -- $ 274
Other income 29 -- 23 52
Interest expense 47 -- -- 47
Depreciation 57 -- -- 57
General and administrative
expense -- -- 25 25
Segment profit (loss) 69 -- (2) 67
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 819 $ -- $ -- $ 819
Other income 59 -- 125 184
Interest expense 139 -- -- 139
Depreciation 169 -- -- 169
General and administrative
expense -- -- 166 166
Loss on sale of discontinued
operations -- (71) -- (71)
Segment profit (loss) 175 (71) (41) 63
Total assets 2,210 -- 1,202 3,412
Capital expenditures for
investment property 63 -- -- 63
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 247 $ -- $ -- $ 247
Other income 13 -- 9 22
Interest expense 47 -- -- 47
Depreciation 47 -- -- 47
General and administrative
expense -- -- 54 54
Income from discontinued
operations -- 133 -- 133
Segment profit (loss) 51 133 (45) 139
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 762 $ -- $ -- $ 762
Other income 32 -- 33 65
Interest expense 139 -- -- 139
Depreciation 168 -- -- 168
General and administrative
expense -- -- 208 208
Income from discontinued
operations -- 440 -- 440
Segment profit (loss) 132 440 (175) 397
Total assets 2,215 6,474 915 9,604
Capital expenditures for
investment properties 100 76 -- 176
</TABLE>
Note H - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
nine month periods ended September 30, 2000 and 1999.
Average Occupancy
Property 2000 1999
Cedar Brooke Apartments 98% 97%
Independence, Missouri
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
2000 was approximately $67,000 and $63,000, respectively, as compared to net
income of approximately $139,000 and $397,000, respectively, for the three and
nine months ended September 30, 1999. The decrease in net income for the three
and nine months ended September 30, 2000 is primarily attributable to the
decrease in income from discontinued operations and the loss on sale of
discontinued operations. The Partnership's two commercial properties, Florida
#11 Mini Warehouse and Phoenix Business Campus, were sold during 1999. These
were the only commercial properties owned by the Partnership and represented one
segment of the Partnership's operations. Due to the sale of these properties,
the results of the commercial segment have been shown as income from
discontinued operations and loss on sale of discontinued operations. The
additional loss on sale of discontinued operations for the nine months ended
September 30, 2000 is due to an increase in the legal fees related to the sales
and tenant improvements completed prior to the sale.
The Partnership's income from continuing operations for the three and nine
months ended September 30, 2000 was approximately $67,000 and $134,000,
respectively, as compared to income (loss) from continuing operations of
approximately $6,000 and ($43,000), respectively, for the three and nine months
ended September 30, 1999. The increase in income from continuing operations for
the three and nine months ended September 30, 2000 is due to an increase in
total revenues. Total revenues increased due to increases in rental income and
other income. Rental income increased due to increases in the occupancy and
average rental rates at Cedar Brooke Apartments. Other income increased
primarily due to increased interest income due to higher average cash balances
in interest bearing accounts.
<PAGE>
Total expenses remained relatively constant for the three and nine months ended
September 30, 2000. Increases in operating and property tax expenses were offset
by a decrease in general and administrative expense. Operating expenses
increased primarily due to increases in insurance and payroll expenses. Property
tax expense increased due to an increase in the assessed value of Cedar Brooke
Apartments. Depreciation expense increased for the three months ended September
30, 2000 due to recent capital improvements at the Partnership's investment
property. General and administrative expenses decreased for the three and nine
months ended September 30, 2000 due to a decrease in fees paid to the General
Partner associated with the management of the Partnership. Included in general
and administrative expense for the nine months ended September 30, 2000 and 1999
are management reimbursements to the General Partner. In addition, costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property 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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $1,424,000 as compared to approximately $1,827,000 at September
30, 1999. For the nine months ended September 30, 2000, cash and cash
equivalents decreased by approximately $9,155,000 from the Partnership's year
ended December 31, 1999. The decrease in cash and cash equivalents is due to
approximately $9,344,000 of cash used in financing activities and approximately
$3,000 of cash used in investing activities, partially offset by approximately
$192,000 of cash provided by operating activities. Cash used in financing
activities consisted of distributions to the partners. Cash used in investing
activities consisted of property improvements and replacements, largely offset
by net receipts from escrow accounts maintained by the mortgage lender. The
Partnership invests its working capital reserves in a money market account.
Until October 17, 2000, the Partnership was 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 were made from this reserve, operating revenue were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. Reserves, including cash and securities available for sale, totaling
approximately $1,464,000, were greater than the reserve requirement of
approximately $955,000 at September 30, 2000. On September 16, 2000, the
Partnership solicited the vote of limited partners to amend the Partnership
Agreement to eliminate the requirement for the Partnership to maintain reserves
equal to at least 5% of the limited partner's capital contributions less
distributions to limited partners and instead permit the General Partner to
determine reasonable reserve requirements of the Partnership. The vote was
sought pursuant to a Consent Solicitation that expired on October 16, 2000 at
which time the amendment was approved by the requisite percent of limited
partnership interests. Upon expiration of the consent period, a total number of
87,404 units had voted of which 83,616 units had voted in favor of the
amendment, 2,268 units had voted against the amendment and 1,520 units had
abstained.
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 property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for the Partnership's property are discussed below.
The Partnership budgeted approximately $75,000 for capital improvements at Cedar
Brooke Apartments for the year 2000 consisting primarily of carpet and vinyl
replacement, roof replacements, parking lot enhancements, and appliance
replacements. During the nine months ended September 30, 2000, the Partnership
completed approximately $63,000 of capital improvements at Cedar Brooke
Apartments consisting primarily of carpet and vinyl replacement, appliance and
countertop replacements, and parking lot enhancements. These improvements were
funded from replacement reserves and operations. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. The
mortgage indebtedness on Cedar Brooke Apartments of $2,325,000, which carries a
stated interest rate of 7.33% (interest only), matures in 2003. The General
Partner will attempt to refinance such indebtedness and/or sell the property
prior to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing such property through
foreclosure.
During the nine months ended September 30, 2000, the General Partner declared
and paid distributions of approximately $9,344,000 (approximately $9,251,000 to
the limited partners or $71.82 per unit of depositary receipt). These
distributions consisted of sale proceeds from the sale of Phoenix Business
Center and Florida #11 Mini Warehouse of approximately $7,738,000 (approximately
$7,661,000 to the limited partners or $59.48 per unit of depositary receipt) and
approximately $1,606,000 (approximately $1,590,000 to the limited partners or
$12.34 per unit of depositary receipt) from operations. Subsequent to September
30, 2000, the General Partners approved a distribution from operations of
approximately $1,279,000 (approximately $1,266,000 to the limited partners of
$9.83 per unit of depositary receipt). During the nine months ended September
30, 1999, the Partnership distributed approximately $575,000 (approximately
$569,000 to the limited partners or $4.42 per unit of depositary receipt) from
operations. The Partnership's distribution policy is reviewed on a semi-annual
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves and the timing of the debt
maturity, refinancing and/or property sale. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit further distributions to its partners
during the remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
Item 4. Submission of Matters to a Vote of Security Holders
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to at least 5% of the limited partners' capital
contributions less distributions to limited partners and instead permit the
General Partner to determine reasonable reserve requirements of the Partnership.
The vote was sought pursuant to a Consent Solicitation that expired on October
16, 2000 at which time the amendment was approved by the requisite percent of
limited partnership interests. Upon expiration of the consent period, a total
number of 87,404 units had voted of which 83,616 units had voted in favor of the
amendment, 2,268 units had voted against the amendment and 1,520 units had
abstained.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 2000.
<PAGE>
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.
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 14, 2000
