-----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, Hk2Ok2nkUCdslbY36EquHudwNkIzLx2VX5nEVh4S4PlsijQoGd022gWk3wwVarqa i2TimLbTfIw/Z08tlZvQwg== 0000711642-04-000361.txt : 20041112 0000711642-04-000361.hdr.sgml : 20041111 20041112084609 ACCESSION NUMBER: 0000711642-04-000361 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041112 DATE AS OF CHANGE: 20041112 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: 041135371 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 UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 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 (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CAPITAL GROWTH FUND BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2004
Assets Cash and cash equivalents $ 156 Receivables and deposits 518 Restricted escrows 99 Other assets 124 Investment property: Land $ 946 Buildings and related personal property 16,482 17,428 Less accumulated depreciation (13,179) 4,249 $ 5,146 Liabilities and Partners' Deficit Liabilities Accounts payable $ 239 Tenant security deposit liabilities 89 Accrued property taxes 188 Other liabilities 264 Due to affiliates (Note B) 517 Mortgage note payable 12,240 Partners' Deficit General partner $ (3,148) Limited partners (49,196 units issued and outstanding) (5,243) (8,391) $ 5,146 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, 2004 2003 2004 2003 Revenues: Rental income $ 735 $ 735 $ 2,046 $ 2,229 Other income 63 59 178 185 Casualty gain (Note D) -- -- 34 33 Total revenues 798 794 2,258 2,447 Expenses: Operating 559 422 1,322 1,284 General and administrative 11 96 134 326 Depreciation 218 224 676 681 Property taxes 64 60 190 185 Interest 226 219 673 655 Total expenses 1,078 1,021 2,995 3,131 Loss from continuing operations (280) (227) (737) (684) Loss from discontinued operations (Note C) -- (3,741) -- (4,366) Gain on sale of discontinued operations (Note C) -- 26,048 -- 34,879 Net (loss) income $ (280) $22,080 $ (737) $29,829 Net (loss) income allocated to general partners $ (2) $ 3,607 $ (7) $ 4,832 Net (loss) income allocated to limited partners (278) 18,473 (730) 24,997 $ (280) $22,080 $ (737) $29,829 Net (loss) income per limited partnership unit: Loss from continuing operations $ (5.65) $ (4.57) $(14.84) $(13.76) Loss from discontinued operations -- (75.27) -- (87.85) Gain on sale of discontinued operations -- 455.34 -- 609.72 $ (5.65) $375.50 $(14.84) $508.11 Distribution per limited partnership unit $ -- $240.89 $ -- $322.71 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, 2003 49,196 $(3,141) $ (4,513) $ (7,654) Net loss for the nine months ended September 30, 2004 -- (7) (730) (737) Partners' deficit at September 30, 2004 49,196 $(3,148) $ (5,243) $ (8,391) See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2004 2003 Cash flows from operating activities: Net (loss) income $ (737) $ 29,829 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation 676 1,388 Amortization of loan costs 16 40 Bad debt expense, net 92 253 Casualty gain (34) (33) Loss on early extinguishment of debt -- 4,245 Gain on sale of discontinued operations -- (34,879) Change in accounts: Receivables and deposits (224) (302) Other assets (26) (12) Accounts payable (228) (322) Tenant security deposit liabilities 10 (227) Accrued property taxes 188 184 Due to affiliates 17 -- Other liabilities (92) (56) Net cash (used in) provided by operating activities (342) 108 Cash flows from investing activities: Property improvements and replacements (345) (713) Net (deposits to) withdrawals from restricted escrows (61) 163 Insurance proceeds received 40 39 Net proceeds from sales of investment properties -- 41,581 Net cash (used in) provided by investing activities (366) 41,070 Cash flows from financing activities: Advances from affiliates 500 -- Principal payments on mortgage notes payable -- (177) Distributions to partners -- (18,412) Repayment of mortgage notes payable -- (22,716) Loan costs paid -- (5) Net cash provided by (used in) financing activities 500 (41,310) Net decrease in cash and cash equivalents (208) (132) Cash and cash equivalents at beginning of period 364 559 Cash and cash equivalents at end of period $ 156 $ 427 Supplemental disclosure of cash flow information: Cash paid for interest $ 640 $ 1,539 Supplemental disclosure of non-cash activity: Net proceeds from sale of investment properties have 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, 2004, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB/A No. 1 for the year ended December 31, 2003. The General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the accompanying consolidated statements of operations for the three and nine months ended September 30, 2003 reflect the operations of Breckenridge Square, Churchill Park and Doral Springs Apartments as loss from discontinued operations due to their sales in January 2003, July 2003 and September 2003, respectively. Note B - Transactions with Affiliated Parties The Partnership has no employees and depends 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 the Partnership's properties for providing property management services. The Partnership paid to such affiliates approximately $109,000 and $325,000 for the nine months ended September 30, 2004 and 2003, respectively, which is included in operating expenses and loss from discontinued operations. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $92,000 and $240,000 for the nine months ended September 30, 2004 and 2003, respectively, which is included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services of approximately $7,000 and $23,000 for the nine months ended September 30, 2004 and 2003, respectively. The construction management service fees are calculated based on a percentage of additions to the investment properties. 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 Partnership Agreement) to be paid to the General Partner for executive and administrative management services. During the nine months ended September 30, 2003, affiliates of the General Partner received approximately $28,000 for providing these services, which is included in general and administrative expenses. No fees were earned or paid for the nine months ended September 30, 2004. 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 sale. During the nine months ended September 30, 2003, approximately $603,000 was paid to the General Partner. During the nine months ended September 30, 2004, an affiliate of the General Partner advanced the Partnership approximately $500,000 to assist in paying city taxes related to the sales of two investment properties and to fund replacement reserves at The Lakes Apartments. Interest was charged at the prime rate plus 2% (6.75% at September 30, 2004) and was approximately $17,000 for the nine months ended September 30, 2004. Advances and accrued interest are shown as due to affiliates on the accompanying balance sheet. The Partnership insures its property 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 property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the nine months ended September 30, 2004 and 2003, the Partnership was charged by AIMCO and its affiliates approximately $64,000 and $127,000, 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 a 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 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 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $175,000 of revenue generated by the property. On July 25, 2003 the Partnership sold Churchill Park to a 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $1,357,000 of revenue generated by the property. On September 4, 2003, the Partnership sold Doral Springs to a 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $2,136,000 of revenue generated by the property. Note D - Casualties In October 2003, the Partnership's investment property, The Lakes Apartments, incurred damage to four apartment units as a result of a fire. As a result of the damage, approximately $32,000 of fixed assets and $26,000 of accumulated depreciation were written off resulting in a net write off of approximately $6,000. During the nine months ended September 30, 2004, the property received approximately $40,000 in insurance proceeds from the insurance company to repair the damaged units. For financial statement purposes, a casualty gain of approximately $34,000 was recognized during the nine months ended September 30, 2004 as a result of the difference between the proceeds received and the net book value of the assets written off. 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 Septemebr 30, 2003 as a result of the difference between the proceeds received and the net book value of the assets written off. Note E - OSHA Settlement In 2003, the Partnership accrued approximately $100,000 related to a projected OSHA penalty arising from various citations at The Lakes Apartments. During the nine months ended September 30, 2004, the Partnership was able to settle the penalty for approximately $25,000. The reserve in excess of estimated legal costs was reversed and is reflected as a reduction in operating expenses for the nine months ended September 30, 2004. Note F - Contingencies 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 captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. 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 ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. The Court of Appeals heard oral argument on both appeals on September 22, 2004 and took the matters under submission. 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. On March 5, 2004 the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the General Partner. 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 defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission (the "SEC") is conducting a formal investigation relating to certain matters. Although the staff of the SEC is not limited in the areas that it may investigate, AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, capitalization of payroll and certain other costs, and tax credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict when the matter will be resolved. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. 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 remaining 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, 2004 and 2003: Average Occupancy Property 2004 2003 The Lakes 77% 84% Raleigh, North Carolina The General Partner attributes the decrease in occupancy at The Lakes Apartments to increased credit standards for tenants. The Partnership's financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. 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, 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. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership's financial results. Results of Operations The Partnership's net loss for the three and nine months ended September 30, 2004 was approximately $280,000 and $737,000, respectively, compared to net income of approximately $22,080,000 and $29,829,000 for the same periods in 2003. Net income decreased for the three and nine month periods due to the recognition of gains on the sales of Breckinridge Square, Churchill Park, and Doral Spring Apartments, partially offset by a decrease in loss from discontinued operations. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the accompanying consolidated statements of operations for the three and nine months ended September 30, 2003 reflect the operations of Breckinridge Square, Churchill Park, and Doral Spring Apartments as loss from discontinued operations due to their sales in January 2003, July 2003 and September 2003, respectively. On January 16, 2003, the Partnership sold Breckinridge Square to a 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 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 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $175,000 of revenue generated by the property. On July 25, 2003 the Partnership sold Churchill Park to a 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $1,357,000 of revenue generated by the property. On September 4, 2003, the Partnership sold Doral Springs to a 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. Included in loss from discontinued operations for the nine months ended September 30, 2003 is approximately $2,136,000 of revenue generated by the property. Excluding the impact of the gain on sale and the loss from discontinued operations, the Partnership realized a loss from continuing operations of approximately $280,000 and $737,000 for the three and nine month periods ended September 30, 2004, respectively, compared to a loss from continuing operations of approximately $227,000 and $684,000 for the corresponding periods in 2003. The increase in loss from continuing operations for the three month period is due to an increase in total expenses. The increase in loss from continuing operations for the nine month period is due to a decrease in total revenue partially offset by a decrease in total expenses. Total revenue decreased for the nine month period due to a decrease in rental income. Rental income decreased due to a decrease in occupancy at The Lakes Apartments. In October 2003, the Partnership's investment property, The Lakes Apartments, incurred damage to four apartment units as a result of a fire. As a result of the damage, approximately $32,000 of fixed assets and $26,000 of accumulated depreciation were written off resulting in a net write off of approximately $6,000. During the nine months ended September 30, 2004, the property received approximately $40,000 in insurance proceeds from the insurance company to repair the damaged units. For financial statement purposes, a casualty gain of approximately $34,000 was recognized during the nine months ended September 30, 2004 as a result of the difference between the proceeds received and the net book value of the assets written off. 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. Total expenses increased for the three month period due to an increase in operating expenses partially offset by a decrease in general and administrative expenses. Total expenses decreased for the nine month period due to a decrease in general and administrative expenses, partially offset by an increase in operating expenses. Operating expenses for both periods increased due to increases in advertising and property expenses, partially offset by a decrease in administrative expense. Advertising expenses increased due to an increase in leasing promotions at the investment property. Property expenses increased due to increases in payroll and related benefits, utilities and corporate unit expense at The Lakes Apartments. Administrative expenses decreased due to the accrual in 2003 for a projected OSHA penalty arising from various citations at The Lakes Apartments. The penalty was settled during the nine months ended September 30, 2004 for approximately $25,000 and the reserve in excess of the settlement and estimated legal costs was reversed. General and administrative expenses for both periods decreased due to decreases in the cost of services included in management reimbursements to the General Partner, as allowed under the Partnership Agreement and in Partnership management fees due to no cash from operations being distributed in 2004. For 2004 and 2003, 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. Liquidity and Capital Resources At September 30, 2004, the Partnership had cash and cash equivalents of approximately $156,000 compared to approximately $427,000 at September 30, 2003. Cash and cash equivalents decreased approximately $208,000 from December 31, 2003 due to approximately $342,000 and $366,000 of cash used in operating and investing activities, respectively, partially offset by approximately $500,000 of cash provided by financing activities. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrows maintained by the mortgage lender partially offset by insurance proceeds received. Cash provided by financing activities consisted of advances received from an affiliate of the General Partner. 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 properties 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. The General Partner monitors developments in the area of legal and regulatory compliance. For example, 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. Capital improvements planned for the Partnership's property are detailed below. The Lakes Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $345,000 of capital improvements at The Lakes Apartments, consisting primarily of major landscaping, interior decoration, interior lighting, fire safety equipment, exterior painting, casualty repairs and water heater, appliance and floor covering replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $9,000 in capital improvements during the remainder of 2004. 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 investment property of approximately $12,240,000 requires monthly interest only payments until December 1, 2005 at which time a balloon payment is due. 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 the property through foreclosure. The Partnership distributed the following amounts during the nine months ended September 30, 2004 and 2003 (in thousands, except per unit data):
Nine Months Ended Per Limited Nine Months Ended Per Limited September 30, Partnership September 30, Partnership 2004 Unit 2003 Unit Operations $ -- $ -- $ 317 $ 6.38 Sale proceeds (1) -- -- 18,095 316.33 $ -- $ -- $18,412 $322.71
(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 maturity, refinancing, and/or property sale. There can be no assurance that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit any distributions to its partners during the remainder of 2004 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 32,142.75 limited partnership units (the "Units") in the Partnership representing 65.34% of the outstanding Units at September 30, 2004. 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, unit holders 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 65.34% of the outstanding Units, AIMCO and its affiliates are in a position to control all such 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. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. 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 captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. 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 ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. The Court of Appeals heard oral argument on both appeals on September 22, 2004 and took the matters under submission. 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. On March 5, 2004 the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the General Partner. 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 defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations. ITEM 6. EXHIBITS See Exhibit Index attached. 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/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: November 12, 2004 EXHIBIT INDEX Exhibit 3 Certificate of Limited Partnership, as amended to date. 10.30 Multifamily Note dated November 30, 1995 between Consolidated Capital Growth Fund, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings, Inc. (Incorporate by reference to the Annual Report on Form 10-KSB for the year ended December 31, 1995). 10.32 Purchase and Sale Contract between Registrant and Brookside Properties, Inc., dated November 22, 2002. (Incorporate by reference to the Current Report on Form 8-K dated January 16, 2003 and filed January 27, 2003). 10.33 First Amendment to Purchase and Sale Contract between Registrant and Brookside Properties, Inc., dated November 22, 2002. (Incorporate by reference to the Current Report on Form 8-K dated January 16, 2003 and filed January 27, 2003). 10.34 Second Amendment to Purchase and Sale Contract between Registrant and Brookside Properties, Inc., dated November 22, 2002. (Incorporate by reference to the Current Report on Form 8-K dated January 16, 2003 and filed January 27, 2003). 10.35 Assignment of Purchase Agreement between Brookside Properties, Inc. and Breckinridge Multifamily, LLC, dated January 16, 2003. (Incorporate by reference to the Current Report on Form 8-K dated January 16, 2003 and filed January 27, 2003). 10.36 Purchase and Sale Contract between Registrant and Churchill Park Investors, LLC, dated May 7, 2003. (Incorporate by reference to the Current Report on Form 8-K dated July 29, 2003 and filed August 13, 2003). 10.37 Reinstatement and Amendment to Purchase and Sale Contract between Registrant and Churchill Park Investors, LLC dated June 24, 2003. (Incorporate by reference to the Current Report on Form 8-K dated July 29, 2003 and filed August 13, 2003). 10.38 Purchase and Sale Contract between Registrant and FF Realty, LLC, dated June 6, 2003. (Incorporate by reference to the Current Report on Form 8-K dated September 4, 2003 and filed September 18, 2003). 10.39 Reinstatement and Amendment to Purchase and Sale Contract between Registrant and FF Realty, LLC dated July 11, 2003. (Incorporate by reference to the Current Report on Form 8-K dated September 4, 2003 and filed September 18, 2003). 10.40 Second Amendment to Purchase and Sale Contract between Registrant and FF Realty, LLC dated August 15, 2003. (Incorporate by reference to the Current Report on Form 8-K dated September 4, 2003 and filed September 18, 2003). 10.41 Escrow Agreement between Registrant and FF Realty, LLC dated June 6, 2003. (Incorporate by reference to the Current Report on Form 8-K dated September 4, 2003 and filed September 18, 2003). 10.42 Assignment and Assumption of Real Estate Sales Agreement between FF Realty, LLC and Fairfield Doral Springs, LLC dated August 22, 2003. (Incorporate by reference to the Current Report on Form 8-K dated September 4, 2003 and filed September 18, 2003). 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. 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. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 31.1 CERTIFICATION I, Martha L. Long, 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer'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 small business issuer 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 small business issuer, 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 small business issuer'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 small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of ConCap Equities Inc., equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer'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 small business issuer 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 small business issuer, 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 small business issuer'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 small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Stephen B. Waters Stephen B. Waters Vice President 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, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, 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/Martha L. Long Name: Martha L. Long Date: November 12, 2004 /s/Stephen B. Waters Name: Stephen B. Waters Date: November 12, 2004 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-----