10QSB 1 0001.txt SECOND QUARTER 2000 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 0-8639 CONSOLIDATED CAPITAL GROWTH FUND (Exact name of small business issuer as specified in its charter) California 94-2382571 (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 past 12 months (or for such shorter period that the Partnership 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) CONSOLIDATED CAPITAL GROWTH FUND BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 2000 Assets Cash and cash equivalents $ 657 Receivables and deposits 898 Restricted escrows 264 Other assets 486 Investment properties: Land $ 4,610 Buildings and related personal property 41,445 46,055 Less accumulated depreciation (28,101) 17,954 $20,259 Liabilities and Partners' Deficit Liabilities Accounts payable $ 170 Tenant security deposit liabilities 219 Accrued property taxes 366 Other liabilities 559 Mortgage notes payable 30,690 Partners' Deficit General partner $ (4,795) Limited partners (49,196 units issued and outstanding) (6,950) (11,745) $ 20,259 See Accompanying Notes to Financial Statements b) CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 Revenues: Rental income $ 2,846 $ 2,810 $ 5,605 $ 5,514 Other income 193 164 340 303 Total revenues 3,039 2,974 5,945 5,817 Expenses: Operating 1,135 1,020 2,274 2,234 General and administrative 164 175 312 249 Depreciation 617 528 1,221 1,051 Interest 559 559 1,117 1,117 Property taxes 177 152 352 305 Total expenses 2,652 2,434 5,276 4,956 Net income $ 387 $ 540 $ 669 $ 861 Net income allocated to general partner (1%) $ 4 $ 5 $ 7 $ 9 Net income allocated to limited partners (99%) 383 535 662 852 $ 387 $ 540 $ 669 $ 861 Net income per limited partnership unit $ 7.79 $ 10.87 $ 13.46 $ 17.32 Distribution per limited partnership unit $ 26.63 $ 15.61 $ 46.96 $ 15.61 See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL GROWTH FUND STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 49,196 $ 1 $49,196 $49,197 Partners' deficit at December 31, 1999 49,196 $ (4,779) $(5,302) $(10,081) Distribution to partners -- (23) (2,310) (2,333) Net income for the six months ended June 30, 2000 -- 7 662 669 Partners' deficit at June 30, 2000 49,196 $ (4,795) $ (6,950) $(11,745) See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 2000 1999 Cash flows from operating activities: Net income $ 669 $ 861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,221 1,051 Amortization of loan costs 39 39 Bad debt 98 56 Change in accounts: Receivables and deposits (602) (73) Other assets (15) (90) Accounts payable (97) 63 Tenant security deposit liabilities (22) (35) Accrued property taxes 343 147 Other liabilities 125 (16) Net cash provided by operating activities 1,759 2,003 Cash flows from investing activities: Property improvements and replacements (852) (522) Net withdrawals from (deposits to) restricted 95 (183) escrows Net cash used in investing activities (757) (705) Cash flows used in financing activities: Distributions to partners (2,333) (776) Net (decrease) increase in cash and cash (1,331) 522 equivalents Cash and cash equivalents at beginning of period 1,988 968 Cash and cash equivalents at end of period $ 657 $ 1,490 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,078 $ 1,078 See Accompanying Notes to Financial Statements e) CONSOLIDATED CAPITAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements of Consolidated Capital Growth Fund (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 Article 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 year ended December 31, 1999. 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 - Distributions Cash distributions of approximately $2,333,000 (approximately $2,310,000 of which was paid to the limited partners, $46.96 per limited partnership unit) were paid from operations during the six months ended June 30, 2000. Cash distribution of approximately $776,000 (approximately $768,000 of which was paid to the limited partners, $15.61 per limited partnership unit) were paid from operations during the six months ended June 30, 1999. Note D - Casualty Event In January 2000, The Lakes Apartments experienced a fire, which resulted in the destruction of twelve apartment units. It is estimated that the property incurred damages of approximately $174,000. As of June 30, 2000, insurance proceeds of approximately $169,000 have been received to cover the estimated damages and are being held in escrow by the mortgage lender until repairs are complete. Note E - 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 partnership activities. 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 General Partner and its affiliates received reimbursements and fees during the six months ended June 30, 2000 and 1999 as reflected in the following table: 2000 1999 (in thousands) Property management fees (included in operating expenses) $ 296 $ 295 Reimbursement for services of affiliates (included in general and administrative expense and investment properties) 114 107 Partnership management fees (included in general and administrative expense) 208 69 During the six months ended June 30, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $296,000 and $295,000 for the six months ended June 30, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $114,000 and $107,000 for the six months ended June 30, 2000 and 1999, respectively. The Partnership Agreement provides for a fee equal to 9% of the total distributions made to the limited partners from "cash available for distribution" (as defined in the Agreement) to be paid to the General Partner for executive and administrative management services. Affiliates of the General Partner received approximately $208,000 and $69,000 for the six months ended June 30, 2000 and 1999, respectively, for providing these services. AIMCO and its affiliates currently own 25,234.65 limited partnership units in the Partnership representing 51.294% 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 limited partnership interests 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. As a result of its ownership of 51.294% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO 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 F - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of four apartment complexes located in Florida (1), Kentucky (2), and North Carolina (1). The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment 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 segment consists of investment properties that offer similar products and services. Although each of the investment properties are managed separately, they have been aggregated into one segment as they provide services with similar 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 segment.
Three Months Ended June 30, 2000 Residential Other Totals (in thousands) Rental income $ 2,846 $ -- $ 2,846 Other income 190 3 193 Interest expense 559 -- 559 Depreciation 617 -- 617 General and administrative expense -- 164 164 Segment profit (loss) 548 (161) 387 Six Months Ended June 30, 2000 Residential Other Totals (in thousands) Rental income $ 5,605 $ -- $ 5,605 Other income 335 5 340 Interest expense 1,117 -- 1,117 Depreciation 1,221 -- 1,221 General and administrative expense -- 312 312 Segment profit (loss) 976 (307) 669 Total assets 20,150 109 20,259 Capital expenditures for investment properties 852 -- 852 Three Months Ended June 30, 1999 Residential Other Totals (in thousands) Rental income $ 2,810 $ -- $ 2,810 Other income 156 8 164 Interest expense 559 -- 559 Depreciation 528 -- 528 General and administrative expense -- 175 175 Segment profit (loss) 707 (167) 540 Six Months Ended June 30, 1999 Residential Other Totals (in thousands) Rental income $ 5,514 $ -- $ 5,514 Other income 288 15 303 Interest expense 1,117 -- 1,117 Depreciation 1,051 -- 1,051 General and administrative expense -- 249 249 Segment profit (loss) 1,095 (234) 861 Total assets 21,569 64 21,633 Capital expenditures for investment properties 522 -- 522
Note G - Legal Proceedings The Partnership is unaware of any pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 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 Registrant from time to time. The discussion of the Registrant'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 Registrant'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 properties consist of four apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended June 30, 2000 and 1999: Average Occupancy Property 2000 1999 Breckinridge Square 94% 95% Louisville, Kentucky Churchill Park 97% 97% Louisville, Kentucky The Lakes 86% 92% Raleigh, North Carolina Doral Springs (formerly Tahoe Springs) 96% 94% Miami, Florida The General Partner attributes the decrease in occupancy at The Lakes Apartments due to the fire at the property which occurred in January 2000 as discussed below. Results of Operations The Partnership's net income for the three and six months ended June 30, 2000 was approximately $387,000 and $669,000 as compared to approximately $540,000 and $861,000 for the three and six months ended June 30, 1999. The decrease in net income for the three and six months ended June 30, 2000 is due to an increase in total expenses partially offset by an increase in total revenues. Total revenues increased due to an increase in rental and other income. The increase in rental income is primarily attributed to an increase in average rental rates at all four of the Partnership's properties and an increase in occupancy at Doral Springs, which more than offset the decrease in occupancy at The Lakes and Breckinridge Square. Other income increased due to telephone rebates at all four properties and a cable rebate at Doral Springs plus an increase in interest income due to higher cash balances being held in interest bearing accounts. Total expenses increased for the three and six months ended June 30, 2000 primarily due to an increase in depreciation and, to a lesser extent, operating and property tax expenses. The increase in depreciation expense resulted from an increase in capital improvements performed at all of the investment properties during the past twelve months to improve the overall appearance and quality of the properties. The increase in operating expenses is primarily due to an increase in utilities, salaries, and related employee benefits. The increase in property tax expense is primarily due to increased tax billings due to an increase in the assessed value of the properties by the taxing authorities for Doral Springs Apartments and Churchill Park Apartments. In addition, general and administrative expenses increased for the six months ended June 30, 2000 primarily due to Partnership Management fees paid as a result of the distributions from operations made during the six months ended June 30, 2000, as required by the Partnership Agreement. Included in general and administrative expense at both June 30, 2000 and 1999 are management reimbursements to the General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with the 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 each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. 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 $657,000 compared to approximately $1,490,000 at June 30, 1999. The decrease in cash and cash equivalents of approximately $1,331,000 for the six months ended June 30, 2000, from the Partnership's calendar year end of December 31, 1999, is due to approximately $2,333,000 of cash used in financing activities and approximately $757,000 of cash used in investing activities, which was partially offset by approximately $1,759,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements which were slightly offset by net withdrawals from escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of partner distributions. The Partnership invests its working capital reserves in money market accounts. 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 Registrant and to comply with Federal, state, local, legal and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Breckinridge Square Apartments: For 2000 the Partnership has budgeted approximately $282,000 for capital improvements, consisting primarily of plumbing upgrades, floor covering and appliance replacements, water heaters, recreation facilities, and air conditioning upgrades. The Partnership completed approximately $169,000 in budgeted capital expenditures at Breckinridge Square Apartments as of June 30, 2000, consisting primarily of air conditioning upgrades, water heater replacements, plumbing upgrades and appliance and floor covering replacements. These improvements were funded primarily from operations. Churchill Park Apartments: For 2000 the Partnership has budgeted approximately $325,000 for capital improvements, consisting primarily of plumbing upgrades, appliances, and floor covering replacements. The Partnership completed approximately $143,000 in budgeted capital expenditures at Churchill Park Apartments as of June 30, 2000, consisting primarily of plumbing upgrades and appliance and floor covering replacements. These improvements were funded primarily from replacement reserves. The Lakes Apartments: For 2000 the Partnership has budgeted approximately $207,000 for capital improvements, consisting primarily of floor covering, appliance, and HVAC replacements. The Partnership completed approximately $325,000 in capital expenditures at The Lakes Apartments as of June 30, 2000, consisting primarily of floor covering, structural improvements, and appliance replacements. These improvements were funded primarily from operations. Of the $325,000 spent as of June 30, 2000, $153,000 is construction in progress due to the fire in January 2000, which damaged 12 units. It is estimated that the property incurred damages of approximately $174,000. As of June 30, 2000, insurance proceeds of approximately $169,000 have been received to cover the estimated damages and are being held in escrow by the mortgage lender until repairs are complete. Doral Springs Apartments: For 2000 the Partnership has budgeted approximately $341,000 for capital improvements, consisting primarily of fencing and equipment enhancements, swimming pool upgrades, floor covering and appliance replacements and elevator improvements. The Partnership completed approximately $215,000 in budgeted capital expenditures at Doral Springs Apartments as of June 30, 2000, consisting primarily of carpet and tile replacements, interior decorating enhancements, floor covering replacement and other building improvements. These improvements were funded primarily from operations. The additional capital expenditures will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $30,690,000 requires monthly interest only payments. These notes require balloon payments on November 1, 2003, and December 1, 2005. The General Partner may attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. Cash distributions of approximately $2,333,000 (approximately $2,310,000 of which was paid to the limited partners, $46.96 per limited partnership unit) were paid from operations during the six months ended June 30, 2000. A cash distribution of approximately $776,000 ($768,000 of which was paid to the limited partners, $15.61 per limited partnership unit) was paid from operations during the six months ended June 30, 1999. The Partnership's distribution policy is reviewed on a quarterly basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit any additional distributions to its partners during the remainder of 2000 or subsequent periods. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 2000. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL GROWTH FUND 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: August , 2000