-----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, KfwdAeUA4F3mQ5cALp31WIVX/CJrOUOyr3wkg5c8cVUECNJ0fSpaARb+SLLqxnXk lAdyBhnWndcvuaar4LUUgg== 0000711642-99-000258.txt : 19991104 0000711642-99-000258.hdr.sgml : 19991104 ACCESSION NUMBER: 0000711642-99-000258 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991103 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: SEC FILE NUMBER: 000-08639 FILM NUMBER: 99740488 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 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-8639 CONSOLIDATED CAPITAL GROWTH FUND (Exact name of small business issuer as specified in its charter) California 94-2382571 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 12 months (or for such shorter period that the Partnership was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL GROWTH FUND BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1999 Assets Cash and cash equivalents $ 1,514 Receivables and deposits 731 Restricted escrows 509 Other assets 559 Investment properties: Land $ 4,610 Buildings and related personal property 39,803 44,413 Less accumulated depreciation (26,317) 18,096 $ 21,409 Liabilities and Partners' Deficit Liabilities Accounts payable $ 109 Tenant security deposit liabilities 266 Accrued property taxes 472 Other liabilities 407 Mortgage notes payable 30,690 Partners' Deficit General partner $ (4,784) Limited partners (49,196 units issued and outstanding) (5,751) (10,535) $ 21,409 See Accompanying Notes to Financial Statements b) CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 Revenues: Rental income $2,777 $ 2,684 $ 8,291 $ 7,923 Other income 152 199 455 548 Total revenues 2,929 2,883 8,746 8,471 Expenses: Operating 1,076 1,256 3,310 3,500 General and administrative 139 62 388 238 Depreciation 561 534 1,612 1,557 Interest 558 558 1,675 1,675 Property taxes 152 147 457 455 Total expenses 2,486 2,557 7,442 7,425 Net income $ 443 $ 326 $ 1,304 $ 1,046 Net income allocated to general partner (1%) $ 4 $ 3 $ 13 $ 10 Net income allocated to limited partners (99%) 439 323 1,291 1,036 $ 443 $ 326 $ 1,304 $ 1,046 Net income per limited partnership unit $ 8.92 $ 6.57 $ 26.24 $ 21.06 Distribution per limited partnership unit $ 13.86 $ 23.62 $ 29.47 $ 39.27 See Accompanying Notes to Financial Statements c) CONSOLIDATED CAPITAL GROWTH FUND STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 49,196 $ 1 $49,196 $49,197 Partners' deficit at December 31, 1998 49,196 $ (4,782) $(5,592) $(10,374) Distribution to partners -- (15) (1,450) (1,465) Net income for the nine months ended September 30, 1999 -- 13 1,291 1,304 Partners' deficit at September 30, 1999 49,196 $ (4,784) $ (5,751) $(10,535) See Accompanying Notes to Financial Statements d) CONSOLIDATED CAPITAL GROWTH FUND STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1999 1998 Cash flows from operating activities: Net income $ 1,304 $ 1,046 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,612 1,557 Amortization of loan costs 58 58 Bad debt 86 111 Change in accounts: Receivables and deposits (184) (244) Other assets (76) 44 Accounts payable (55) 29 Tenant security deposit liabilities (45) 23 Accrued property taxes 297 290 Other liabilities (16) 19 Net cash provided by operating activities 2,981 2,933 Cash flows from investing activities: Property improvements and replacements (1,106) (644) Net withdrawals from restricted escrows 136 125 Net cash used in investing activities (970) (519) Cash flows used in financing activities: Distributions to partners (1,465) (895) Net increase in cash and cash equivalents 546 1,519 Cash and cash equivalents at beginning of period 968 2,493 Cash and cash equivalents at end of period $ 1,514 $ 4,012 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,617 $ 1,617 Supplemental disclosure of non-cash activity Distribution payable $ -- $ 1,351 See Accompanying Notes to Financial Statements e) CONSOLIDATED CAPITAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Consolidated Capital Growth Fund (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1999. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998. Certain reclassifications have been made to the 1998 information to conform to the 1999 presentation. NOTE B - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. NOTE C - 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 reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of partnership activities. The General Partner and its affiliates received reimbursements and fees as reflected in the following table: 1999 1998 (in thousands) Property management fees (included in operating expenses) $ 446 $ 428 Reimbursement for services of affiliates (included in operating and general and administrative expense and investment properties) 173 150 Partnership management fees (included in general and administrative expense) 131 -- During the nine months ended September 30, 1999 and 1998, affiliates of the General Partner were entitled to receive 5% of gross receipts from the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $446,000 and $428,000 for the nine months ended September 30, 1999 and 1998, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $173,000 and $150,000 for the nine months ended September 30, 1999 and 1998, respectively. Included in these expenses for the nine months ended September 30, 1999 and 1998, is approximately $16,000 and $2,000, respectively, of reimbursements for construction oversight costs. The Partnership Agreement provides for a fee equal to 9% of the total distributions made to the limited partners from "cash available for distribution" to the limited partners (as defined in the Agreement) to be paid to the General Partner for executive and administrative management services. During the nine months ended September 30, 1999 affiliates of the General Partner received $131,000 for providing these services. There was no such cost incurred for the nine months ended September 30, 1998. On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 12,224.71 units of limited partnership interest in the Partnership (approximately 24.85% of the total outstanding units) for a purchase price of $310 per unit. The offer expired on July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 828.50 units. As a result, AIMCO and its affiliates currently own 23,082.15 units of limited partnership interest in the Partnership representing 46.92% of the total outstanding units. It is possible that AIMCO or its affiliate will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. NOTE D - SEGMENT REPORTING Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of four apartment complexes located in Florida, Kentucky (2), and North Carolina. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segment are the same as those described in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1998. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties are managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the nine month periods ended September 30, 1999 and 1998 is shown in the tables below. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 1999 Residential Other Totals (in thousands) Rental income $ 8,291 $ -- $ 8,291 Other income 439 16 455 Interest expense 1,675 -- 1,675 Depreciation 1,612 -- 1,612 General and administrative expense -- 388 388 Segment profit (loss) 1,676 (372) 1,304 Total assets 21,079 330 21,409 Capital expenditures for investment properties 1,106 -- 1,106 1998 Residential Other Totals (in thousands) Rental income $ 7,923 $ -- $ 7,923 Other income 454 94 548 Interest expense 1,675 -- 1,675 Depreciation 1,557 -- 1,557 General and administrative expense -- 238 238 Segment profit (loss) 1,190 (144) 1,046 Total assets 20,751 3,916 24,667 Capital expenditures for investment properties 644 -- 644 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of four apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 1999 and 1998: Average Occupancy Property 1999 1998 Breckinridge Square 95% 92% Louisville, Kentucky Churchill Park 97% 92% Louisville, Kentucky The Lakes 92% 91% Raleigh, North Carolina Doral Springs (formerly Tahoe Springs) 95% 93% Miami, Florida The General Partner attributes the increase in occupancy at Breckinridge Square and Churchill Park to aggressive and effective marketing campaigns during the last part of 1998 and into 1999. The increase in occupancy at Breckinridge Square and Churchill Park is also attributable to improved conditions in the apartment industry in the Louisville area. Results of Operations The Partnership's net income for the three and nine months ended September 30, 1999 was approximately $443,000 and $1,304,000 as compared to approximately $326,000 and $1,046,000 for the three and nine months ended September 30, 1998. The increase in net income for the three and nine months ended September 30, 1999 is due primarily to an increase in total revenue. Total revenue increased due to an increase in rental income, which was partially offset by a decrease in other income. The increase in rental income is primarily attributable to an increase in average rental rates and the increase in occupancy at all four of the Partnership's properties. The increase in net income for the nine months ended September 30, 1999 was partially offset by an increase in total expenses. Total expenses increased for the nine months ended September 30, 1999 primarily due to an increase in general and administrative expenses and to a lesser extent, an increase in depreciation expense. These increases were partially offset by a decrease in operating expense. The increase in net income for the three months ended September was partially due to a decrease in total expenses. Total expenses decreased due to a decrease in operating expense which was partially offset by an increase in general and administrative expense and depreciation expenses. Operating expense decreased primarily due to a decrease in maintenance and insurance expense. Maintenance expense decreased due to interior and exterior building improvements which were incurred during 1998. Insurance expense decreased at all four of the investment properties due to a change in the hazard insurance policy carrier during the third quarter of 1998. The decrease in operating expense is partially offset by an increase in advertising costs incurred to increase occupancy at all four of the Partnership's properties. The increase in depreciation expense resulted from an increase in capital improvements performed at all the investment properties during the past two years to improve the overall appearance and quality of the properties. General and administrative expense increased for the three and nine months ended September 30, 1999 due to Partnership management fees paid as a result of the May and September 1999 distributions from operations, as required by the Partnership Agreement. Included in general and administrative expenses at both September 30, 1999 and 1998 are management reimbursements to the General Partner 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. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources The Partnership had cash and cash equivalents of approximately $1,514,000 at September 30, 1999, compared to approximately $4,012,000 at September 30, 1998. The increase in cash and cash equivalents of approximately $546,000 for the nine months ended September 30, 1999 from the Partnership's year end is primarily due to approximately $2,981,000 of cash provided by operating activities, which was partially offset by approximately $1,465,000 of cash used in financing activities and approximately $970,000 of cash used in investing activities. Cash used in financing activities consisted of partner distributions. Cash used in investing activities consisted primarily of property improvements and replacements, which was partially offset by net withdrawals from escrow accounts maintained by the mortgage lender. The Partnership invests its working capital reserves in money market accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the various 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. Capital improvements planned for each of the Registrant's properties are detailed below. Breckinridge Square Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the General Partner on interior improvements, it is estimated that the property requires approximately $280,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $401,000 for 1999 at this property which includes certain of the required improvements and consist of interior and exterior building improvements. During the nine months ended September 30, 1999, the Partnership spent approximately $282,000 on capital improvements consisting primarily of roof replacements, structural and HVAC upgrades and floor covering and appliance replacements. The roof replacements are substantially complete at September 30, 1999. These improvements were funded from Partnership reserves and operations. Churchill Park Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the General Partner on interior improvements, it is estimated that the property requires approximately $280,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $226,000 for 1999 at this property which includes certain of the required improvements and consist of electrical upgrades along with parking lot, roof, appliance, floor covering, and sidewalk replacements. During the nine months ended September 30, 1999, the Partnership spent approximately $291,000 on capital improvements consisting primarily of floor covering and appliance replacement and HVAC, swimming pool and roof replacements. Both the HVAC improvements and swimming pool improvements are fully completed as of September 30, 1999. These improvements were funded from Partnership reserves and operations. The Lakes Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the General Partner on interior improvements, it is estimated that the property requires approximately $279,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $587,000 for 1999 at this property which includes certain of the required improvements and consist of electrical, HVAC and plumbing upgrades, floor covering, appliance and roof replacements. During the nine months ended September 30, 1999, the Partnership spent approximately $282,000 on capital improvements consisting primarily of floor covering and appliance replacement and HVAC improvements. These improvements were funded from Partnership reserves and operations. Doral Springs Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the General Partner on interior improvements, it is estimated that the property requires approximately $279,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $313,000 for 1999 at this property which includes certain of the required improvements and consist of improved exterior lighting, floor covering replacement, parking lot and stairwell improvements and landscape upgrades including new pool fencing. During the nine months ended September 30, 1999, the Partnership spent approximately $251,000 on capital improvements consisting primarily of swimming pool and parking lot improvements, landscaping, and floor covering replacement. The parking lot improvements are complete at September 30, 1999. These improvements were funded from Partnership reserves and operations. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $30,690,000 requires monthly interest only payments. These notes require balloon payments on November 1, 2003, and December 1, 2005. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership may risk losing such properties through foreclosure. Cash distributions of approximately $1,465,000 ($1,450,000 of which was paid to the limited partners, $29.47 per limited partnership unit) were paid from operations during the nine months ended September 30, 1999. Subsequent to the nine months ended September 30, 1999, cash distributions of approximately $689,000 ($682,000 of which was paid to the limited partners, $13.86 per limited partnership unit) was paid from operations. During the nine months ended September 30, 1998, the Partnership distributed approximately $2,246,000 ($1,932,000 of which was paid to the limited partners, $39.27 per limited partnership unit) from surplus cash to the limited partners. Payments were made by the Partnership to the Georgia Department of Revenue and the North Carolina Department of Revenue for withholding taxes related to income generated by the Partnership's investment properties located in these states. These payments were treated as distributions to the partners and are included in the distribution amounts above. The Partnership's distribution policy is reviewed on a semi-annual basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit further distributions to its partners in 1999 or subsequent periods. Tender Offer On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 12,224.71 units of limited partnership interest in the Partnership (approximately 24.85% of the total outstanding units) for a purchase price of $310 per unit. The offer expired on July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 828.50 units. As a result, AIMCO and its affiliates currently own 23,082.15 units of limited partnership interest in the Partnership representing 46.92% of the total outstanding units. It is possible that AIMCO or its affiliate will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Year 2000 Compliance The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Corporate General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or not completed in time, the Year 2000 issue could have a material impact on the operations of the Partnership. The Managing Agent's plan to resolve Year 2000 issues involves four phases: assessment, remediation, testing, and implementation. To date, the Managing Agent has fully completed its assessment of all the information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase Computer Hardware: During 1997 and 1998, the Managing Agent identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. In August 1998, the main computer system used by the Managing Agent became fully functional. In addition to the main computer system, PC-based network servers, routers and desktop PCs were analyzed for compliance. The Managing Agent has begun to replace each of the non-compliant network connections and desktop PCs and, as of September 30, 1999, had virtually completed this effort. The total cost to the Managing Agent to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million of which $1.3 million has been incurred to date. Computer Software: The Managing Agent utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. In April 1999 the Managing Agent embarked on a data center consolidation project that unifies its core financial systems under its Year 2000 compliant system. The estimated completion date for this project is October 1999. During 1998, the Managing agent began converting the existing property management and rent collection systems to its management properties Year 2000 compliant systems. The estimated additional costs to convert such systems at all properties, is $200,000, and the implementation and testing process was completed in June 1999. The final software area is the office software and server operating systems. The Managing Agent has upgraded all non-compliant office software systems on each PC and has upgraded virtually all of the server operating systems. Operating Equipment: The Managing Agent has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, the Managing Agent began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example elevators, heating, ventilating, and air conditioning systems, security and alarm systems, etc.). The Managing Agent has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non-compliance issues that put the Managing Agent at risk financially or operationally. A pre-assessment of the properties by the Managing Agent has indicated virtually no Year 2000 issues. A complete, formal assessment of all the properties by the Managing Agent was virtually completed by September 30, 1999. Any operating equipment that is found non-compliant will be repaired or replaced. The total cost incurred for all properties managed by the Managing Agent as of September 30, 1999 to replace or repair the operating equipment was approximately $75,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $125,000. The Managing Agent continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within its enterprise. Nature and Level of Importance of Third Parties and Their Exposure to the Year 2000 The Managing Agent has banking relationships with three major financial institutions, all of which have designated their compliance. The Managing Agent has updated data transmission standards with all of the financial institutions. All financial institutions have communicated that they are Year 2000 compliant and accordingly no accounts were required to be moved from the existing financial institutions. The Partnership does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems (external agent). To date, the Partnership is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Partnership's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant. The Managing Agent does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Costs to Address Year 2000 The total cost of the Year 2000 project to the Managing Agent is estimated at $3.5 million and is being funded from operating cash flows. To date, the Managing Agent has incurred approximately $2.9 million ($0.7 million expenses and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. The Partnership's portion of these costs are not material. Risks Associated with the Year 2000 The Managing Agent believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Managing Agent has not yet completed all necessary phases of the Year 2000 program. In the event that the Managing Agent does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios could include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Partnership. The Partnership could be subject to litigation for, among other things, computer system failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans Associated with the Year 2000 The Managing Agent has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 1999. 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. the General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: EX-27 2
5 The schedule contains summary financial information extracted from Consolidated Capital Growth Fund Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000201529 CONSOLIDATED CAPITAL GROWTH FUND 1,000 9-MOS DEC-31-1999 SEP-30-1999 1,514 0 731 0 0 0 44,413 26,317 21,409 0 30,690 0 0 0 (10,535) 21,409 0 8,746 0 0 7,442 0 1,675 0 0 0 0 0 0 1,304 26.24 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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