-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MkOOcjYQSUfWTK7BfUsbxj2oPaQ3fKNH+ENGlEP61409iSa17FX+NSbfcjAK7/tK w1fzqKRqehd4vGOj0Dg81A== 0000711642-03-000432.txt : 20031113 0000711642-03-000432.hdr.sgml : 20031113 20031113171813 ACCESSION NUMBER: 0000711642-03-000432 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL GROWTH FUND CENTRAL INDEX KEY: 0000201529 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942382571 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-08639 FILM NUMBER: 03999205 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 ccgf.txt CCGF UNITED STATES 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, 2003 [ ] 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 registrant 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) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CAPITAL GROWTH FUND BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2003
Assets Cash and cash equivalents $ 427 Receivables and deposits 499 Restricted escrows 38 Other assets 173 Investment property: Land $ 946 Buildings and related personal property 16,098 17,044 Less accumulated depreciation (12,303) 4,741 $ 5,878 Liabilities and Partners' Deficit Liabilities Accounts payable $ 295 Tenant security deposit liabilities 80 Accrued property taxes 184 Other liabilities 349 Mortgage note payable 12,240 Partners' Deficit General partner $ (3,145) Limited partners (49,196 units issued and outstanding) (4,125) (7,270) $ 5,878 See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 Revenues: (Restated) (Restated) Rental income $ 735 $ 944 $ 2,229 $ 2,679 Other income 59 81 185 200 Casualty gain -- -- 33 -- Total revenues 794 1,025 2,447 2,879 Expenses: Operating 422 287 1,284 980 General and administrative 96 104 326 460 Depreciation 224 220 681 682 Property taxes 60 55 185 177 Interest 219 219 655 655 Total expenses 1,021 885 3,131 2,954 (Loss) income from continuing operations (227) 140 (684) (75) (Loss) income from discontinued operations (3,741) 241 (4,366) 639 Gain on sales of discontinued operations 26,048 -- 34,879 -- Net income $22,080 $ 381 $29,829 $ 564 Net income allocated to general partners $ 3,607 $ 4 $ 4,832 $ 6 Net income allocated to limited partners 18,473 377 24,997 558 $22,080 $ 381 $29,829 $ 564 Net (loss) income per limited partnership unit: (Loss) income from continuing operations $ (4.57) $ 2.82 $(13.76) $ (1.51) (Loss) income from discontinued operations (75.27) 4.84 (87.85) 12.85 Gain on sales of discontinued operations 455.34 -- 609.72 -- $375.50 $ 7.66 $508.11 $ 11.34 Distribution per limited partnership unit $240.89 $ -- $322.71 $ 30.59 See Accompanying Notes to Financial Statements
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, 2002 49,196 $(5,441) $(13,246) $(18,687) Distributions to partners -- (2,536) (15,876) (18,412) Net income for the nine months ended September 30, 2003 -- 4,832 24,997 29,829 Partners' deficit at September 30, 2003 49,196 $(3,145) $ (4,125) $ (7,270) See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2003 2002 Cash flows from operating activities: Net income $ 29,829 $ 564 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,388 1,730 Amortization of loan costs 40 51 Bad debt expense, net 253 239 Casualty gain (33) -- Loss on early extinguishment of debt 4,245 -- Gain on sale of discontinued operations (34,879) -- Change in accounts: Receivables and deposits (302) (613) Other assets (12) (79) Accounts payable (322) (17) Tenant security deposit liabilities (227) 36 Accrued property taxes 184 541 Other liabilities (56) 252 Net cash provided by operating activities 108 2,704 Cash flows from investing activities: Property improvements and replacements (713) (826) Net withdrawals from restricted escrows 163 272 Insurance proceeds received 39 -- Net proceeds from sales of investment properties 41,581 -- Net cash provided by (used in) investing activities 41,070 (554) Cash flows from financing activities: Principal payments on mortgage notes payable (177) (185) Distributions to partners (18,412) (1,520) Repayment of mortgage notes payable (22,716) -- Loan costs paid (5) -- Net cash used in financing activities (41,310) (1,705) Net (decrease) increase in cash and cash equivalents (132) 445 Cash and cash equivalents at beginning of period 559 644 Cash and cash equivalents at end of period $ 427 $ 1,089 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,539 $ 1,886 Supplemental disclosure of non-cash activity: Net proceeds from sale of investment properties has been adjusted by approximately $3,840,000 to reflect prepayment penalties paid by the buyer. See Accompanying Notes to Financial Statements
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 nine month periods ended September 30, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2003. 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, 2002. The General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying consolidated statements of operations have been restated as of January 1, 2002 to reflect the operations of Breckinridge Square, Doral Springs and Churchill Park Apartments (see Note C) as (loss) income from discontinued operations due to the sale of these properties during 2003. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all 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. Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $325,000 and $432,000 for the nine months ended September 30, 2003 and 2002, respectively, which is included in operating expenses and (loss) income from discontinued operations. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $240,000 and $266,000 for the nine months ended September 30, 2003 and 2002, respectively, which is included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $23,000 and $8,000 for the nine months ended September 30, 2003 and 2002, respectively. The construction management service fees are calculated based on a percentage of current year additions to investment properties. The Partnership Agreement provides for a fee equal to 9% of the total distributions from operations made to the limited partners from "cash available for distribution" (as defined in the Partnership Agreement) to be paid to the General Partner for executive and administrative management services. During the nine months ended September 30, 2003 and 2002, affiliates of the General Partner received approximately $28,000 and $135,000, respectively, for providing these services, which is included in general and administrative expenses. Pursuant to the Partnership Agreement and in connection with the sale of Breckinridge Square in January 2003, Churchill Park in July 2003, and Doral Springs in September 2003, the General Partner is entitled to a commission of up to 3% for its assistance in the sales of these investment properties. During the nine months ended September 30, 2003, approximately $603,000 was paid to the General Partner. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the nine months ended September 30, 2003 and 2002, the Partnership was charged by AIMCO and its affiliates approximately $127,000 and $135,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Sale of Investment Property On January 16, 2003, the Partnership sold Breckinridge Square to an unrelated third party for net proceeds of approximately $10,990,000 after payment of closing costs. The Partnership realized a gain of approximately $8,831,000 as a result of the sale. The Partnership used approximately $6,000,000 of the net proceeds to repay the mortgage encumbering the property. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $689,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations in the accompanying statements of operations. In accordance with SFAS 144, the accompanying statements of operations for the three and nine months ended September 30, 2002 have been restated to reflect the operations of Breckinridge Square as discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $175,000 and $1,537,000, respectively, of revenue generated by the property. On July 25, 2003, the Partnership sold Churchill Park to an unrelated third party for net proceeds of approximately $12,604,000 after payment of closing costs. The Partnership realized a gain of approximately $9,176,000 as a result of the sale. The Partnership used approximately $6,450,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $650,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations in the accompanying statements of operations. In accordance with SFAS 144, the accompanying statements of operations for the three and nine months ended September 30, 2002 have been restated to reflect the operations of Churchill Park as discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $1,357,000 and $1,661,000 respectively, of revenue generated by the property. On September 4, 2003, the Partnership sold Doral Springs to an unrelated third party for net proceeds of approximately $21,827,000 after payment of closing costs. The Partnership realized a gain of approximately $16,872,000 as a result of the sale. The Partnership used approximately $10,266,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $2,906,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations in the accompanying statements of operations. In accordance with SFAS 144, the accompanying statements of operations for the three and nine months ended September 30, 2002 have been restated to reflect the operations of Doral Springs as discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $2,136,000 and $2,411,000 respectively, of revenue generated by the property. Note D - Casualty Gain In December 2002, one of the Partnership's investment properties, The Lakes, incurred damages to its buildings as a result of a hailstorm. As a result of the damage, approximately $26,000 of fixed assets and $20,000 of accumulated depreciation were written off resulting in a net write off of approximately $6,000. The property received approximately $39,000 in proceeds from the insurance company to repair the damaged units. For financial statement purposes, a casualty gain of approximately $33,000 was recognized during the nine months ended September 30, 2003 as a result of the difference between the proceeds received and the net book value of the assets written off. Note E - 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. (the "Nuanes action") 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the General Partner the claims will not result in any material liability to the Partnership. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are 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 report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the nine months ended September 30, 2003 and 2002: Average Occupancy Property 2003 2002 The Lakes 84% 87% Raleigh, North Carolina The General Partner attributes the decrease in occupancy at The Lakes to increased competition from newer properties in the local area. Results of Operations The Partnership's net income for the three and nine months ended September 30, 2003 was $22,080,000 and $29,829,000, respectively, compared to net income of approximately $381,000 and $564,000 for the three and nine months ended September 30, 2002, respectively. The increase in net income for the three and nine month periods is due to the recognition of the gain on the sales of Breckinridge Square, Churchill Park, and Doral Springs Apartments. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying consolidated statements of operations have been restated as of January 1, 2002 to reflect the operations of Breckinridge Square, Churchill Park and Doral Springs Apartments as (loss) income from discontinued operations due to the sale of these properties during 2003. On January 16, 2003, the Partnership sold Breckinridge Square to an unrelated third party for net proceeds of approximately $10,990,000 after payment of closing costs. The Partnership realized a gain of approximately $8,831,000 as a result of the sale. The Partnership used approximately $6,000,000 of the net proceeds to repay the mortgage encumbering the property. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $689,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $175,000 and $1,537,000, respectively, of revenue generated by the property. On July 25, 2003, the Partnership sold Churchill Park to an unrelated third party for net proceeds of approximately $12,604,000 after payment of closing costs. The Partnership realized a gain of approximately $9,176,000 as a result of the sale. The Partnership used approximately $6,450,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $650,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $1,357,000 and $1,661,000 respectively, of revenue generated by the property. On September 4, 2003, the Partnership sold Doral Springs to an unrelated third party for net proceeds of approximately $21,827,000 after payment of closing costs. The Partnership realized a gain of approximately $16,872,000 as a result of the sale. The Partnership used approximately $10,266,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $2,906,000 as a result of unamortized loan costs being written off and prepayment penalties. This amount is included in loss from discontinued operations. Included in (loss) income from discontinued operations for the nine months ended September 30, 2003 and 2002 is approximately $2,136,000 and $2,411,000 respectively, of revenue generated by the property. Excluding the gain on sales and the discontinued operations, the Partnership's loss from continuing operations for the three months ended September 30, 2003 was approximately $227,000 compared to income from continuing operations of approximately $140,000 for the corresponding period in 2002. The Partnership's loss from continuing operations for the nine months ended September 30, 2003 and 2002 was approximately $684,000 and $75,000, respectively. The decrease in income from continuing operations for the three and nine month periods is due to a decrease in total revenue and an increase in total expenses. Total revenue decreased due to a decrease in rental income caused by decreases in occupancy and the average rental rates at The Lakes Apartments. In December 2002, one of the Partnership's investment properties, The Lakes, incurred damages to its buildings as a result of a hailstorm. As a result of the damage, approximately $26,000 of fixed assets and $20,000 of accumulated depreciation were written off resulting in a net write off of approximately $6,000. The Partnership received approximately $39,000 in proceeds from the insurance company to repair the damaged units. For financial statement purposes, a casualty gain of approximately $33,000 was recognized during the nine months ended September 30, 2003 as a result of the difference between the proceeds received and the net book value of the assets written off. Total expenses for the three and nine month periods increased due to an increase in operating expenses partially offset by a decrease in general and administrative expenses. Operating expenses increased due to increases in advertising, property, and maintenance expenses. Advertising expense increased due to increases in newspaper and periodical advertising at The Lakes Apartments. Property expenses increased due to the accrual for a projected OSHA penalty arising from various citations at The Lakes Apartments. Maintenance expense increased due to an increase in contract labor and repairs at The Lakes Apartments. General and administrative expense decreased due to a decrease in Partnership management fees that are only payable with distributions from operations. Included in general and administrative expense for the nine months ended September 30, 2003 and 2002 are management reimbursements to the General Partner as allowed under the Partnership Agreement. 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 in general and administrative expenses. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in 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, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2003, the Partnership had cash and cash equivalents of approximately $427,000 compared to approximately $1,089,000 at September 30, 2002. Cash and cash equivalents decreased approximately $132,000 from December 31, 2002 due to approximately $41,310,000 of cash used in financing activities partially offset by approximately $41,070,000 and $108,000 of cash provided by investing and operating activities, respectively. Cash used in financing activities consisted of the repayment of the mortgages encumbering Breckinridge Square, Churchill Park and Doral Springs Apartments, payment of loan costs, principal payments on the mortgage encumbering Doral Springs Apartments, and distributions to partners. Cash provided by investing activities consisted of proceeds from the sales of Breckinridge Square, Churchill Park and Doral Springs Apartments, net withdrawals from restricted escrows maintained by the mortgage lender, and insurance proceeds received, partially offset by property improvements and replacements. The Partnership invests its working capital reserves in interest bearing 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 Partnership and to comply with Federal, state, local, legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for the Partnership's remaining investment property is detailed below. Breckinridge Square Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $11,000 of capital improvements at Breckinridge Square Apartments, consisting primarily of appliance and floor covering replacements. These improvements were funded from operating cash flow. Breckinridge Square Apartments was sold in January 2003. Doral Springs Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $196,000 of capital improvements at Doral Springs Apartments, consisting primarily of electrical and plumbing fixtures upgrades, interior decoration, structural improvements, and floor covering replacements. These improvements were funded from operating cash flow. Doral Springs Apartments was sold in September 2003. Churchill Park Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $126,000 of capital improvements at Churchill Park Apartments, consisting primarily of appliance and floor covering replacements. These improvements were funded from operating cash flow. Churchill Park Apartments was sold in July 2003. The Lakes Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $380,000 of capital improvements at The Lakes, consisting primarily of swimming pool upgrades, lighting improvements, appliance replacements, maintenance equipment, building improvements, structural improvements, and floor covering replacements. These improvements were funded from operating cash flow and replacement reserves. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $49,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of structural upgrades and appliance and floor covering replacements. These improvements are part of a redevelopment project at the property. Additional capital 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. 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 Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering The Lakes Apartments is approximately $12,240,000 which requires monthly interest only payments. This note requires a balloon payment on December 1, 2005. The General Partner may 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. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2006. Accordingly, prior to such date the Partnership will need to either sell its investment property or extend the term of the Partnership. The Partnership distributed the following amounts during the nine months ended September 30, 2003 and 2002 (in thousands, except per unit data):
Per Limited Per Limited Nine Months Ended Partnership Nine Months Ended Partnership September 30, 2003 Unit September 30, 2002 Unit Operations $ 317 $ 6.38 $ 1,520 $ 30.59 Sale proceeds (1) 18,095 316.33 -- -- $18,412 $322.71 $ 1,520 $ 30.59 (1) Proceeds from the sales of Breckinridge Square, Churchill Park and Doral Springs Apartments.
The Partnership's cash available for distribution is reviewed on a monthly 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 sale. There can be no assurance that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit further distributions to its partners during the remainder of 2003 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 31,760.75 limited partnership units (the "Units") in the Partnership representing 64.56% of the outstanding Units at September 30, 2003. 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 acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 64.56% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment property is recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment property. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned and the Partnership fully reserves all balances outstanding over thirty days. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 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. (the "Nuanes action") 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the General Partner the claims will not result in any material liability to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 3.1, Certificate of Limited Partnership (incorporated by reference to Registration Statement of Registrant (File No. 2-57960) filed March 30, 1978, as amended to date). Exhibit 3.2, Agreement of Limited Partnership (Exhibit A to the Prospectus of Registrant dated February 25, 1977 is incorporated herein by reference). Exhibit 31.1, Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2, Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K filed during the quarter ended September 30, 2003: Current Report on Form 8-K dated July 29, 2003 and filed on August 13, 2003 disclosing the sale of Churchill Park Apartments. Current Report on Form 8-K dated September 4, 2003 and filed on September 18, 2003 disclosing the sale of Doral Springs Apartments. 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. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer Date: November 13, 2003 Exhibit 31.1 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Consolidated Capital Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/Patrick J. Foye Patrick J. Foye Executive Vice President of ConCap Equities Inc., equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Consolidated Capital Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer of ConCap Equities Inc., equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Consolidated Capital Growth Fund (the "Partnership"), for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Patrick J. Foye Name: Patrick J. Foye Date: November 13, 2003 /s/Paul J. McAuliffe Name: Paul J. McAuliffe Date: November 13, 2003 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----