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 June 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 1,311
Receivables and deposits 120
Restricted escrows 182
Other assets 78
Investment property:
Land $ 213
Buildings and related personal property 4,515
4,728
Less accumulated depreciation (3,074) 1,654
$ 3,345
Liabilities and Partners' (Deficit) Capital
Accounts payable $ 14
Tenant security deposit liabilities 40
Accrued property taxes 33
Other liabilities 95
Mortgage note payable 2,325
Partners' (Deficit) Capital
General partner $ (238)
Corporate limited partner on behalf of the
Unitholders - (128,810 units issued and
outstanding) 1,076 838
$ 3,345
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
b)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(Restated) (Restated)
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 271 $ 259 $ 545 $ 515
Other income 48 21 132 43
Total revenues 319 280 677 558
Expenses:
Operating 113 104 232 214
General and administrative 75 87 141 154
Depreciation 54 78 112 121
Interest 46 46 92 92
Property taxes 18 13 33 26
Total expenses 306 328 610 607
Income (loss) from continuing
operations 13 (48) 67 (49)
Income from discontinued
operations -- 153 -- 307
Loss on sale of discontinued
operations (36) -- (71) --
Net (loss) income $ (23) $ 105 $ (4) $ 258
Net income allocated to general
partner (1%) $ -- $ 1 $ -- $ 3
Net (loss) income allocated to
limited partners (99%) (23) 104 (4) 255
$ (23) $ 105 $ (4) $ 258
Per unit of depositary receipt:
Income (loss) from continuing
operations $ 0.10 $ (0.37) $ 0.51 $ (0.38)
Income from discontinued
operations -- 1.18 -- 2.36
Loss on sale of discontinued
operations (0.28) -- (0.54) --
Net (loss) income per unit of
depositary receipt $ (0.18) $ 0.81 $ (0.03) $ 1.98
Distributions per unit of
depositary receipt $ 10.33 $ -- $ 71.82 $ --
</TABLE>
See Accompanying Notes to Financial Statements
<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
Distribution to partners -- (93) (9,251) (9,344)
Net loss for the six months
ended June 30, 2000 -- -- (4) (4)
Partners' (deficit) capital
at June 30, 2000 128,810 $ (238) $ 1,076 $ 838
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (4) $ 258
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 112 312
Amortization of lease commissions and loan costs 7 40
Loss on sale of discontinued operations 71 --
Change in accounts:
Receivables and deposits 52 (67)
Other assets 7 (10)
Accounts payable (116) 10
Tenant security deposit liabilities 5 2
Accrued property taxes (34) 28
Other liabilities (36) (7)
Net cash provided by operating activities 64 566
Cash flows from investing activities:
Property improvements and replacements (29) (133)
Net receipts from (deposits to) restricted escrows 41 (13)
Lease commissions paid -- (11)
Net cash provided by (used in) investing activities 12 (157)
Cash flows used in financing activities:
Distribution to partners (9,344) --
Net (decrease) increase in cash and cash equivalents (9,268) 409
Cash and cash equivalents at beginning of period 10,579 1,754
Cash and cash equivalents at end of period $ 1,311 $ 2,163
Supplemental disclosure of cash flow information:
Cash paid for interest $ 85 $ 85
</TABLE>
See Accompanying Notes to Financial Statements
<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 six month periods ended June 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.
The following expenses were paid or accrued to an affiliate of the General
Partner during the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Asset management fees (included in general and
administrative expense) $ 47 $ 47
Property management fees (included in operating expenses
and income from discontinued operations) 29 50
Reimbursement for services of affiliates (included in
general and administrative expenses) 20 21
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 $47,000 were
paid to the General Partner and its affiliates for both the six months ended
June 30, 2000 and 1999.
During the six months ended June 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 $29,000 and $27,000 for the six month
periods ended June 30, 2000 and 1999. For the six months ended June 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 $23,000 for the six months ended June 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 six months
ended June 30, 2000.
An affiliate of the General Partner received reimbursement of accountable
administrative expense amounting to approximately $20,000 and $21,000 for the
six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 63,152 units of depositary receipt in the
Partnership representing approximately 49.03% 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. In this regard, on July 24, 2000, an affiliate of AIMCO commenced a
tender offer to purchase any and all of the remaining units of depository
receipt for a purchase price of $29.00 per unit. The offer is currently
scheduled to expire on August 21, 2000. Under the Partnership Agreement,
unitholders holding a majority of the Units are entitled to take action with
respect to a variety of matters. As a result of its ownership of approximately
49.03% of the outstanding units, AIMCO is in a position to significantly
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
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 $1,352,000
at June 30, 2000, exceed the Partnership's reserve requirement of approximately
$955,000.
Note E - Distributions
During the six months ended June 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. No distributions were declared or paid
during the six months ended June 30, 1999.
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
(loss) income from discontinued operations and loss on sale of discontinued
operations. Total revenues for these properties were approximately $371,000 and
$721,000 for the three and six months ended June 30, 1999. No revenues were
earned by these properties during the three and six months ended June 30, 2000.
Income from discontinued operations was approximately $153,000 and $307,000 for
the three and six months ended June 30, 1999, respectively. The loss on sale of
discontinued operations during the six months ended June 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 six month periods ended June 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).
<TABLE>
<CAPTION>
Three Months Ended
June 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 271 $ -- $ -- $ 271
Other income 20 -- 28 48
Interest expense 46 -- -- 46
Depreciation 54 -- -- 54
General and administrative
expense -- -- 75 75
Loss on sale of discontinued
operations -- (36) -- (36)
Segment profit (loss) 60 (36) (47) (23)
Six Months Ended
June 30, 2000 Residential Commercial Other Totals
(discontinued)
Rental income $ 545 $ -- $ -- $ 545
Other income 30 -- 102 132
Interest expense 92 -- -- 92
Depreciation 112 -- -- 112
General and administrative
expense -- -- 141 141
Loss on sale of discontinued
operations -- (71) -- (71)
Segment profit (loss) 106 (71) (39) (4)
Total assets 2,101 -- 1,244 3,345
Capital expenditures for
investment property 29 -- -- 29
Three Months Ended
June 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 259 $ -- $ -- $ 259
Other income 7 -- 14 21
Interest expense 46 -- -- 46
Depreciation 78 -- -- 78
General and administrative
expense -- -- 87 87
Income from discontinued
operations -- 153 -- 153
Segment profit (loss) 25 153 (73) 105
Six Months Ended
June 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 515 $ -- $ -- $ 515
Other income 19 -- 24 43
Interest expense 92 -- -- 92
Depreciation 121 -- -- 121
General and administrative
expense -- -- 154 154
Income from discontinued
operations -- 307 -- 307
Segment profit (loss) 81 307 (130) 258
Total assets 2,148 6,743 1,093 9,984
Capital expenditures for
investment properties 59 74 -- 133
</TABLE>
<PAGE>
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 will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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
six month periods ended June 30, 2000 and 1999.
Average Occupancy
Property 2000 1999
Cedar Brooke Apartments 98% 97%
Independence, Missouri
Results of Operations
The Partnership's net loss for the six months ended June 30, 2000, was
approximately $4,000 compared to net income of approximately $258,000 for the
six months ended June 30, 1999. The Partnership reported net loss for the three
months ended June 30, 2000 of approximately $23,000 as compared to net income of
approximately $105,000 for the corresponding period of 1999. The decrease in net
income for the three and six months ended June 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
(loss) income from discontinued operations and loss on sale of discontinued
operations. The additional loss on sale of discontinued operations for the six
months ended June 30, 2000 is due to an increase in the estimated legal fees
related to the sales and tenant improvements completed prior to the sale.
The Partnership's income from continuing operations for the six months ended
June 30, 2000 was approximately $67,000 compared to a loss from continuing
operations of approximately $49,000 for the six months ended June 30, 1999. The
Partnership's income from continuing operations for the three months ended June
30, 2000 was approximately $13,000 compared to a loss from continuing operations
of approximately $48,000 for the three months ended June 30, 2000. The increase
in income from continuing operations for the six months ended June 30, 2000 is
due to an increase in total revenues and a decrease in total expenses. The
increase in income from continuing operations for the three months ended June
30, 2000 is primarily due to an increase in total revenues. Total revenues
increased for the three and six month periods due to increases in rental income
and other income. Rental income increased due to increases in 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.
Total expenses decreased for the three month period ended June 30, 2000
primarily due to decreases in depreciation, and general and administrative
expenses. Total expenses for the six months ended June 30, 2000 remained
constant as decreases in depreciation and general and administrative expense
were offset by increased operating expense. Depreciation expense decreased due
to assets becoming fully depreciated at Cedar Brooke. General and administrative
expense decreased due to reduced professional fees associated with managing the
Partnership. Included in general and administrative expense for the six months
ended June 30, 2000 and 1999, are reimbursements to the General Partner allowed
under the Partnership Agreement associated with its management of the
Partnership. 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. Operating expense
increased for the six months ended June 30, 2000 due to increased payroll
expenses.
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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$1,311,000 as compared to approximately $2,163,000 at June 30, 1999. For the six
months ended June 30, 2000, cash and cash equivalents decreased by approximately
$9,268,000 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, partially offset by approximately $64,000 of cash provided
by operating activities and by approximately $12,000 of cash provided by
investing activities. Cash used in financing activities consisted of
distributions to the partners. Cash provided by investing activities consisted
of net receipts from escrow accounts maintained by the mortgage lender partially
offset by property improvements and replacements. The Partnership invests its
working capital reserves in a money market account.
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, consisting of cash
and cash equivalents and tenant security deposits totaling approximately
$1,352,000 at June 30, 2000, exceed the Partnership's reserve requirement of
approximately $955,000.
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 property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and 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 six months ended June 30, 2000, the Partnership
completed approximately $29,000 of capital improvements at Cedar Brooke
Apartments consisting primarily of carpet and vinyl replacement, appliance and
countertop replacements, and land improvements. These improvements were funded
from replacement reserves. 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 six months ended June 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. No distributions were declared or paid
during the six months ended June 30, 1999. The Partnership's distribution policy
is reviewed on an annual basis. Future cash distributions will depend on the
levels of net cash generated from operations, the availability of working
capital 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
and required working capital reserves 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 will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
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 June 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:
