-----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, PBb6C93o+7pZGChyu677YRzcirxg5awh4zzfrcLVQkO0jgxi1TmLfTW8Kvc1WVHA toOH7fF+jAUNxSl2ED4Xbg== 0000317331-96-000001.txt : 19960327 0000317331-96-000001.hdr.sgml : 19960327 ACCESSION NUMBER: 0000317331-96-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL PROPERTIES III CENTRAL INDEX KEY: 0000317331 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942653686 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10273 FILM NUMBER: 96538562 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391591 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10KSB 1 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) (As last amended by 34-31905, eff. 4/26/93) FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1995 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period.........to......... Commission file number 0-10273 CONSOLIDATED CAPITAL PROPERTIES III (Name of small business issuer in its charter) California 94-2653686 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $4,555,000. State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of December 31, 1995. Market value information for the Registrant's partnership interests is not available. Should a trading market develop for these interests, it is management's belief that such trading would not exceed $25,000,000. PART I Item 1. Description of Business Consolidated Capital Properties III (the "Partnership") was organized on May 22, 1980, as a limited partnership under the California Uniform Limited Partnership Act. On November 25, 1980, the Partnership registered with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933 (File No. 2-68018) and commenced a public offering for sale of $60 million of Units, with the General Partner's right to increase the offering to $120 million. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The Partnership subsequently filed a Form 8-A Registration Statement with the SEC and registered its units under the Securities Exchange Act of 1934 (File No. 0-10273) in March 1982. The sale of Limited Partnership Units closed on December 17, 1981, with 158,945 Units sold at $500 each, or gross proceeds of $79.5 million to the Partnership. At the request of certain Limited Partners and in accordance with its Partnership Agreement (herein so called), the Partnership has retired a total of 309 Units. The Partnership gave no consideration for these units. By the end of fiscal 1985, approximately 71% of the monies raised had been invested in twenty-eight properties. Of the remaining 29%, 11% was required for organizational and offering expenses, sales commissions and acquisition fees, and 18% was retained in Partnership reserves for project improvements and working capital as required by the Partnership Agreement. The General Partner of the Partnership is ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The principal place of business for the Partnership and for the General Partner is One Insignia Financial Plaza, Greenville, South Carolina 29602. The Partnership's primary business and only industry segment is real estate related operations. The Partnership was formed to acquire, own, operate and ultimately dispose of income-producing real properties for the benefit of its partners. At December 31, 1995, the Partnership owns five properties as described in "Item 2 - Description of Property". Prior to 1995, the Partnership disposed of twenty-five (25) properties, two of which were reacquired through foreclosure. On September 25, 1995, the General Partner proxied the Limited Partners to modify the Partnership Agreement to eliminate the minimum working capital reserve requirement whereby reserves had been required to be greater than the 5% of Net Invested Capital. On October 31, 1995, the proposals were adopted with a majority of the outstanding units approving the proposals. See "Item 4 - - Submission of Matters To A Vote of Security Holders" and "Item 6 - Management's Discussion and Analysis or Plan of Operations", for a discussion of Partnership liquidity and capital resources. The real estate business is highly competitive. The Registrant's real property investments are subject to competition from similar types of properties in the vicinities in which they are located and the Partnership is not a significant factor in its industry. In addition, various limited partnerships have been formed by related parties to engage in business which may be competitive with the Registrant. The Registrant has no employees. Management and administrative services are performed by affiliates of Insignia Financial Group, Inc. ("Insignia"), an affiliate of the General Partner. The property manager is responsible for the day-to-day operations of each property. The General Partner has also selected affiliates of Insignia to provide real estate advisory and asset management services to the Partnership. As advisor, such affiliates provide all partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. For a further discussion of property and partnership management, see "Item 12". Upon the Partnership's formation in 1980, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the Limited Partners in the Partnership and in each of the Affiliated Partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership. All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which among other things, MAE-ICC, Inc., a wholly owned subsidiary of Metropolitan Asset Enhancement, L.P., ("MAE"), and an affiliate of Insignia acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As a part of the Insignia Transaction, MAE-ICC, Inc. also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity, and Insignia acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, MAE-ICC, Inc. exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. Item 2. Description of Property The Partnership originally acquired twenty-eight properties, of which twenty- five were disposed of in years prior to 1995, and subsequently reacquired two of these properties through foreclosure on notes receivable. At December 31, 1995, the Partnership held five income-producing properties, including one office building and four apartment complexes.
Date of Property Purchase Type of Ownership Use Mountain Plaza Apartments 12/02/81 Fee ownership Apartment - El Paso, Texas to first mortgage 188 units Professional Plaza 03/03/81 Fee ownership Office Bldg. - Office Building 72,559 sq.ft. Salt Lake City, Utah Ventura Landing Apartments 10/07/81 Fee ownership Apartment - Orlando, Florida to first mortgage 184 units Village Green Apartments 12/20/91 Fee ownership Apartment - Altamonte Springs, 164 units Florida West Chase Apartments 09/17/90 Fee ownership Apartment - Lexington, Kentucky 120 units
Schedule of Properties: (dollar amounts in thousands)
Gross Carrying Accumulated Useful Federal Property Value Depreciation Life Method Tax Basis Mountain Plaza $ 4,945 $ 4,228 5-19 years S/L $ 931 Apartments Professional Plaza 4,197 2,987 5-19 years S/L 1,790 Office Building Ventura Landing 4,720 4,020 5-19 years S/L 788 Apartments Village Green 2,581 726 3-15 years S/L 4,218 Apartments West Chase 2,082 806 5-15 years S/L 2,024 Apartments Totals $18,525 $12,767 $ 9,751
See "Note A" of the Financial Statements included in "Item 7" for a description of the Partnership's depreciation policy. Schedule of Mortgages: (dollar amounts in thousands) Principal Principal Balance At Balance December 31, Interest Maturity Due At Property 1995 Rate Date Maturity Mountain Plaza Apartments 1st mortgage $ 3,475 8.85% 09/00 $3,200 Ventura Landing Apartments 1st mortgage 3,191 9.75% 05/96 3,175 Totals $ 6,666 $6,375 Schedule of Rental Rates and Occupancy: Average Annual Average Rental Rates (1) Occupancy Property 1995 1994 1995 1994 Mountain Plaza Apartments $6,712 $6,743 76% 89% Professional Plaza Office 10.19 9.69 96% 96% Building Ventura Landing Apartments 5,658 5,804 92% 86% Village Green Apartments 5,743 5,699 93% 93% West Chase Apartments 5,891 5,914 90% 87% (1) The average annual rental rate for Professional Plaza is per square foot. The rate is per unit for the apartment properties. As noted under "Item 1. Description of Business," the real estate industry is highly competitive. The Partnership's properties are subject to competition from other properties in their area. The Managing General Partner believes that the Partnership's properties are adequately insured. The decrease in occupancy at the Mountain Plaza Apartments is due to the decline in the El Paso market resulting from military spending cuts. The increase in occupancy at the Ventura Landing Apartments is due to the improved image of the property resulting from upgrading the tenant population. The following is a schedule of lease expirations for the years 1996-2005: Number of % of Gross Expirations Square Feet Annual Rent Annual Rent Professional Plaza (in thousands) Office Building 1996 16 16,105 $156 21.7% 1997 15 25,420 264 36.7% 1998 13 21,153 215 30.0% 1999 0 0 0 0% 2000 2 4,118 51 7.0% 2001-2005 0 0 0 0%
(Two month-to-month leases contribute $29,000 to annual rental income for the Partnership from 2,632 sq. ft. of leased space) The following schedule reflects information on tenants leasing 10% or more of the leasable square footage for each property:
Square Footage Annual Rent Per Lease Nature of Business Leased Square Foot Expiration Professional Plaza Office Building Engineering Firm 9,536 $9.73 (1) (1) The tenant leases three spaces with lease expiration dates of 4/30/97, 5/31/97 and 1/31/98.
Schedule of Real Estate Taxes and Rates: Real estate taxes and rates in 1995 for each property were: (dollar amounts in thousands) 1995 1995 Taxes Rate Mountain Plaza Apartments $103 2.8% Professional Plaza Office 49 1.4% Building Ventura Landing Apartments 76 2.3% Village Green Apartments 66 2.1% West Chase Apartments 23 1.0% Item 3. Legal Proceedings In November 1994, Robert Lewis filed an alleged class action in the United States District Court for the Northern District of California seeking declaratory and injunctive relief, but not monetary damages in connection with a tender offer by LP 4 Acceptance Corporation for limited partnership units of the Partnership. The complaint named ConCap Equities, Inc., the general partner of the Partnership, LP 4 Acceptance Corporation and one other party as defendants. The tender offer was terminated in December 1994. In January 1995, the Plaintiff amended the complaint to add Insignia, MAE, and MAE-ICC, Inc. as additional defendants in connection with a new tender offer commenced by Insignia CCP III Acquisition L.L.C. but the added defendants were not properly served. The tender offer closed on January 20, 1995, and the offeror purchased the tendered units. Plaintiff Lewis filed a Stipulation for Dismissal of Case Without Prejudice in June of 1995 which requested the Court to dismiss the above action without prejudice and without costs to any party. The Court approved the stipulation on July 21, 1995. In November of 1994, C.E. and Berniece Patterson, each of whom is a limited partner of the Partnership, filed an action in the United States District Court for the Northern District of California seeking declaratory and injunctive relief, but not monetary damages, alleging, among other things, that a tender offer by LP 4 Acceptance Corporation for limited partnership units of the Partnership violated the federal securities laws and the partnership agreements and breached the general partner's fiduciary duties. The complaint named ConCap Equities, Inc., the general partner of the Partnership and others as defendants. These actions were filed by the Pattersons as individuals and were not class actions. The tender offer was terminated in December 1994. In December 1994, the complaint in this action was amended to include Insignia, MAE and MAE-ICC, Inc. and others as defendants in connection with a tender offer commenced in December 1994 by Insignia CCP III Acquisition, L.L.C. for limited partnership units of the Partnership. On January 20, 1995, the District Court denied Plaintiffs' motion for a preliminary injunction to enjoin the tender offer. The tender offer closed on January 20, 1995, and the offeror purchased the tendered units. C.E. and Berniece Patterson had also initiated other causes of action against two affiliated entities, which held limited partnership units in Consolidated Capital Properties IV and Consolidated Capital Properties VI regarding other tender offers. On March 31, 1995, the parties to the above referenced actions entered into a settlement agreement and a standstill agreement for all actions pursuant to which (i) Plaintiffs filed a notice of dismissal with respect to the first amended complaints in the actions; (ii) Plaintiffs and defendants released each other from all claims which were or could have been asserted in connection with the first amended complaints in the actions; (iii) Plaintiffs and MacKenzie Patterson, Inc. ("MacKenzie) will refrain from certain activities relating to the acquisition of limited partnership units in any partnership of which Insignia or any of its affiliates is a general partner; (iv) Plaintiffs and their affiliates granted to a subsidiary of Insignia a right of first refusal in connection with the sale of limited partnership interests in the Partnership by plaintiffs; and (v) Plaintiffs and their affiliates will assign to a subsidiary of Insignia irrevocable proxies to vote any limited partnership interests in Consolidated Capital Properties VI acquired by MacKenzie as a result of the tender offer by MacKenzie and affiliates to acquire limited partnership interests in Consolidated Capital Properties VI or thereafter. The Partnership is a defendant in a lawsuit filed on March 4, 1994 by an employee of the previous property management company alleging wrongful termination. The defendants are vigorously contesting the case. Based on the current status of the litigation, no determination can be made regarding the outcome or any possible estimates of losses, if any. The Partnership is not a party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary litigation routine to the Partnership's business (the "Proposals"). Item 4. Submission of Matters to a Vote of Security Holders On September 25, 1995, the General Partner proxied the Limited Partners to modify the Partnership Agreement. The General Partner formulated the Proposals as a means of increasing operational flexibility and improving Partnership operations. The Proposals seek to achieve these goals by amending the Partnership Agreement to modify certain existing capital reserve and property disposition limitations. Proposal 1 provides the General Partner with additional flexibility in establishing the timing and amount of distributions by eliminating the requirements that the Partnership maintain reserves equal to at least 5% of Invested Capital and distribute any net economic gains realized upon the sale of any Partnership assets within 90 days of the close of the fiscal year in which such gains are realized. Proposal 2 provides the General Partner with the authority to take advantage of certain property disposition opportunities by authorizing the General Partner to sell multiple properties that represent less than 50% of the net book value of all of the Partnership's properties as of the end of the most recently completed calendar quarter to the same purchaser or its affiliates in any six-month period or any single Partnership property, without obtaining Limited Partner approval. Importantly, Proposal 2 did not seek to modify the Partnership Agreement provision prohibiting Partnership property sales to the General Partner or its affiliates. This matter was open until October 25, 1995. In regards to Proposal 1, the unitholders voted 51% in favor of the matter, 9% opposed or abstained and 40% did not respond. In regards to Proposal 2, the unitholders voted 51% in favor of the matter, 9% opposed or abstained and 40% did not respond. Accordingly, the proposals were adopted with a majority of the outstanding units approving the proposals. PART II Item 5. Market for the Registrant's Units of Limited Partnership and Related Security Holder Matters (A) No established public trading market for the Partnership's Units exists nor is one expected to develop. (B) Title of Class Number of Unit Holders of Record Limited Partnership Units 7,641 as of December 31, 1995 (C) There were no distributions to the Limited Partners during 1994. In January 1995, the Partnership declared distributions, representing return of capital, totalling approximately $1,428,000 to the Partners. In December 1995, the Partnership declared and paid distributions, representing a return of capital, totalling approximately $905,000 to the Partners. Additionally, the Partnership declared and paid distributions in December of 1995, attributable to cash flow from operations, totalling approximately $640,000 to the Partners. See also "Item 6 - Management's Discussion and Analysis or Plan of Operations". (D) On January 20, 1995, an affiliate of the General Partner, Insignia CCP III Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for a cash price of $50.00 per Unit to Limited Partners of record as of December 15, 1994. Approximately 2,260 Limited Partners holding 36,951 Units (23.29% of total Units) accepted the Tender Offer and sold their Units to Insignia CCP III Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of approximately $1.8 million. Item 6. Management's Discussion and Analysis or Plan of Operations Results of Operations The Partnership realized a net loss from operations of $775,000 for the year ended December 31, 1995, compared to a net loss from operations of $1,443,000 for the year ended December 31, 1994. The decreased net loss is due primarily to the sale of the Cascadian and Mission Village Apartment properties and the foreclosure of the Sturbridge Square Apartment property in the second quarter of 1994. Rental income decreased for the year ended December 31, 1995, compared to the year ended December 31, 1994, due primarily to the property sales and foreclosure noted above. Lost revenues from foreclosed and sold properties represented 97% of the total change in rental income for the year ended December 31, 1995, partially offset by rental increases at the Partnership's properties. Interest and other income decreased for 1995, compared to 1994 due to decreased interest income from the Columns of Castleton note receivable, which was collected in March of 1995 (See "Note F" in the Notes to Consolidated Financial Statements). In 1994, the Partnership realized other income due to the receipt of the Partnership's prorata share of the claims filed in Southmark's Chapter 11 bankruptcy proceeding (See "Note C" in the Notes to the Consolidated Financial Statements). Property operations, depreciation and amortization and interest expense decreased for the year ended December 31, 1995, compared to the year ended December 31, 1994, due primarily to the disposition of Cascadian, Mission Village and Sturbridge Square in the second quarter of 1994. The decrease in interest expense was also impacted by the retirement of notes payable secured by the Professional Plaza Office Building and the Village Green Apartments in August 1995 (See "Note I" in the Notes to the Consolidated Financial Statements). Administrative expenses increased for the year ended December 31, 1995, compared to the year ended December 31, 1994, due to increased legal, printing and postage costs associated with the Partnership's required responses to various tender offers (See "Item 3. Legal Proceedings") and increased expense reimbursements related to the combined efforts of the Dallas and Greenville partnership administration staffs during the transition period in the first and second quarters of 1995. The reimbursements for the Dallas office amounted to approximately $142,000 during the year ended December 31, 1995. The increased costs related to the transition efforts were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. The General Partner expects recurring administrative expenses to be reduced now that the management transition is complete. At December 31, 1994, the Partnership was obligated under two mortgage notes payable aggregating $963,000, net of a $119,000 mortgage discount, secured by the Professional Plaza Office Building. The $734,000 first-lien note, with an original maturity of April 1996, and the $301,000 second-lien note, with an original maturity of November 2000, were paid off in August 1995, to retire debt with interest rates higher than the current market rate. The Partnership realized a loss of $110,000 on the transactions, resulting from $99,000 of non- cash expenses to amortize the remaining mortgage discounts associated with the retired notes and $11,000 of prepayment penalties paid on the early extinguishment of the debt. At December 31, 1994, the Partnership was obligated under a mortgage note payable in the amount of $615,000 secured by the Village Green Apartments. The $557,000 first lien note, with an original maturity of May 1997, was paid off in August 1995, to retire debt with interest rates higher than the current market rate. The Partnership realized a loss of $6,000 on the transaction resulting from prepayment penalties paid on the early extinguishment of the debt. In June of 1994, the Cascadian Apartments was sold for net sales proceeds of approximately $2,722,000 after repayment of $4,282,000 of related mortgage debt, which resulted in a gain of $5,229,000 for the year ended December 31, 1994 (See "Note G" in the Notes to the Consolidated Financial Statements in "Item 1"). Also in June of 1994, HUD foreclosed upon the Sturbridge Square Apartments which resulted in a gain of $6,964,000 on the disposition of the real estate and an extraordinary gain of $1,769,000 on the extinguishment of the related debt (See "Note H" in the Notes to the Consolidated Financial Statements). At December 31, 1993, the Partnership was obligated under a $1.3 million wraparound mortgage note secured by the Mission Village Apartments. The $758,000 underlying first- lien was repaid in July 1994. In August 1994, the Partnership sold Mission Village for net sales proceeds of approximately $1.6 million after closing costs and repayment of approximately $485,000 of related mortgage debt. The Partnership recognized a gain of approximately $1.4 million on the sale during the third quarter of 1994 (See "Note G" in the Notes to the Consolidated Financial Statements). 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 expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources As of December 31, 1995, the Partnership held cash and cash equivalents of $2,854,000 compared to $2,090,000 at December 31, 1994. Net cash provided by operating activities increased primarily due to the absence of negative cash flows from the properties disposed of in 1994, as discussed above. Net cash provided by investing activities increased due to increased sales proceeds from securities and the collection of the Columns of Castleton note receivable in March of 1995 (See "Note F" in the Notes to the Consolidated Financial Statements). The current year increase in cash provided by investing activities was partially offset by the receipt of non-recurring proceeds from the sale of Cascadian Apartments and Mission Village Apartments in 1994 (See "Note G" in Notes to the Consolidated Financial Statements). Net cash used in financing activities increased due to the Partners' distributions in January and December of 1995. The Partnership modified its Partnership Agreement in the fourth quarter of 1995 to eliminate the requirement that the Partnership maintain reserves equal to at least 5% of invested capital (See "Item 4 - Submission of Matters to a Vote of Security Holders"). Reserves, including cash and cash equivalents and securities available for sale totalling approximately $3 million at December 31, 1995, were deemed to be sufficient by the General Partner to fund the Partnership's liquidity requirements in 1995. 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 property to adequately maintain the physical assets and meet other operating needs of the partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $3.5 million secured by the Mountain Plaza Apartments matures in September of 2000 with a balloon payment due at maturity, at which time the property will either be refinanced or sold. The mortgage indebtedness of approximately $3.2 million secured by the Ventura Landing Apartments matures in May of 1996 with a balloon payment due at maturity. The Partnership is currently attempting to refinance this debt. Future cash distributions will depend on the levels of net cash generated from operations, capital expenditure requirements, property sales and the availability of cash reserves. During 1995, distributions in the amount of $2,973,000 were declared and paid. No cash distributions were made in 1994. On January 20, 1995, an affiliate of the General Partner, Insignia CCP III Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for a cash price of $50.00 per Unit from Limited Partners of record as of December 15, 1994. Approximately 2,260 Limited Partners holding 36,951 Units (23.29% of total Units) accepted the Tender Offer and sold their Units to Insignia CCP III Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of approximately $1.8 million. Item 7. Financial Statements CONSOLIDATED CAPITAL PROPERTIES III LIST OF FINANCIAL STATEMENTS Reports of Independent Auditors Consolidated Balance Sheet - December 31, 1995 Consolidated Statements of Operations - Years ended December 31, 1995 and 1994 Consolidated Statements of Changes in Partners Capital (Deficit) - Years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows - Years ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Properties III We have audited the accompanying consolidated balance sheet of Consolidated Capital Properties III as of December 31, 1995, and the related consolidated statements of operations, changes in partners capital (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership s management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties III as of December 31, 1995, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Greenville, South Carolina February 10, 1996 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Consolidated Capital Properties III: We have audited the accompanying consolidated statements of operations, partners' capital (deficit) and cash flows of Consolidated Capital Properties III (a California limited partnership) for the year ended December 31, 1994. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Consolidated Capital Properties III for the year ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ Arthur Andersen, LLP Dallas, Texas March 23, 1995 CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED BALANCE SHEET (in thousands, except for unit data) December 31, 1995 Assets Cash and cash equivalents: Unrestricted $2,854 Restricted-tenant security deposits 123 Prepaid and other assets 443 Investment properties: Land $ 1,828 Buildings and related personal property 16,697 18,525 Less accumulated depreciation (12,767) 5,758 $9,178 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable and accrued expenses $ 512 Notes and interest payable 6,718 Partners' Capital (Deficit) General partner $ (1,952) Limited partners (158,636 units and outstanding) 3,900 1,948 $9,178 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1995 1994 Revenues: Rental income $4,261 $ 5,927 Interest and other income 294 463 Total revenues 4,555 6,390 Expenses: Property operations 2,722 4,147 Depreciation and amortization 1,121 1,600 Interest 782 1,609 Administrative 705 477 Total expenses 5,330 7,833 Gain on sale of real estate (Note G) -- 6,624 Gain on disposition of real estate (Note H) 6,964 Loss on repayment of notes payable (Note I) (116) (222) (Loss) income before extraordinary item (891) 11,923 Extraordinary item (Note H) -- 1,769 Net (loss) income $ (891) $13,692 Net (loss) income allocated to general partners (4%) $ (36) $ 548 Net (loss) income allocated to limited partners (96%) (855) 13,144 Net (loss) income $ (891) $13,692 Net (loss) income per weighted average limited partnership unit: (Loss) income before extraordinary item $(5.39) $ 72.11 Extraordinary item -- 10.70 Net (loss) income $(5.39) $ 82.81 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 158,945 $ 1 $79,473 $79,474 Partners' (deficit) at December 31, 1993 158,790 $(2,438) $(5,442) $(7,880) Abandonment of limited partnership units (154) -- -- -- Net income for the year ended December 31, 1994 -- 548 13,144 13,692 Partners' capital (deficit) at December 31, 1994 158,636 (1,890) 7,702 5,812 Distributions paid -- (26) (2,947) (2,973) Net loss for the year ended December 31, 1995 -- (36) (855) (891) Partners' capital (deficit) at December 31, 1995 158,636 $(1,952) $ 3,900 $ 1,948 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except unit data)
Years Ended December 31, 1995 1994 Cash flows from operating activities: Net (loss) income $ (891) $13,692 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain on sale of real estate -- (6,624) Gain on disposition of real estate -- (6,964) Loss on repayment of notes payable 116 222 Extraordinary item -- (1,769) Depreciation and amortization of discounts, loan costs and lease commissions 1,166 1,695 Loss on disposal of property 38 -- Excess cash paid to HUD upon foreclosure -- (73) Change in accounts: Tenant security deposits (59) 53 Prepaids and other assets 82 416 Accounts payable and accrued expenses 76 (87) Note interest payable 52 (138) Net cash provided by operating activities 580 423 Cash flows from investing activities: Property improvements and replacements (378) (237) Purchase of securities available for sale (15,273) (3,266) Proceeds from sale of securities available for sale 18,292 2,215 Collection of note receivable 2,316 -- Proceeds from sale of real estate -- 4,310 Net cash provided by investing activities 4,957 3,022 Cash flows from financing activities: Prepayment penalty on mortgage notes payable (17) -- Payments on notes payable (191) (324) Repayment of notes payable (1,592) (2,577) Partners' distributions (2,973) -- Net cash used in financing activities (4,773) (2,901) Net increase in cash and cash equivalents 764 544 Cash and cash equivalents at beginning of period 2,090 1,546 Cash and cash equivalents at end of period $ 2,854 $ 2,090 Supplemental disclosure of cash flow information: Cash paid for interest $ 685 $ 1,660 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Note A - Organization and Summary of Significant Accounting Policies Organization Consolidated Capital Properties III, a California limited partnership (the "Partnership"), was formed on May 22, 1980, to acquire and operate commercial and residential properties. As of December 31, 1995, the Partnership owns four residential properties and one commercial property located in or near major urban areas in the United States. At the time of the Partnership's formation, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Management Company ("CCMC"), a California general partnership, was the non-corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. As part of CCEC's reorganization plan, ConCap Equities, Inc. (the "General Partner" or "CEI") acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. As part of the solicitation for approval of CEI as general partner, the limited partners also approved the conversion of CCMC from a general partner to a limited partner, thereby leaving CEI as the sole general partner of the Partnership. All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which among other things, MAE-ICC, Inc., a wholly owned subsidiary of Metropolitan Asset Enhancement, L.P., ("MAE") and an affiliate of Insignia acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As part of the Insignia Transaction, MAE-ICC, Inc. also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity, and Insignia acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, MAE-ICC, Inc. exercised the remaining portion of its option to purchase all of the remaining outstanding stock of GII Realty, Inc. Consolidation The Partnership's financial statements include the accounts of Sturbridge Partners, Ltd. (1994 only), ConCap Mountain Plaza Associates, Ltd., CCP III Associates, Ltd. and ConCap Village Green Associates, Ltd., four wholly-owned limited partnerships. All intercompany transactions have been eliminated. Investment Properties Prior to 1995, investment properties were carried at the lower of cost or estimated fair value, which was determined using the higher of the property's non-recourse debt amount, when applicable, or the net operating income of the investment property capitalized at a rate deemed reasonable for the type of property. During 1995, the Partnership adopted FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recorded on long- lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The effect of adoption was not material. Depreciation Buildings and improvements are depreciated on the straight-line basis over an estimated useful life of 3 to 19 years. Tenant improvements are depreciated over the term of the lease. Cash: Unrestricted - Unrestricted cash includes cash on hand, demand deposits, money market funds, and U.S. Treasury Bills with original maturities of three months or less. At certain times the amount of cash deposited at a bank may exceed the limit on insured deposits. Restricted cash - tenant security deposits - The Partnership requires security deposits from new lessees for the duration of the lease with such deposits being considered restricted cash. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Reclassification Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Fair Value In 1995, the Partnership implemented Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," which requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value. The carrying amount of the Partnership's cash and cash equivalents approximates fair value due to short- term maturities. The Partnership estimates the fair value of its fixed rate mortgages by discounted cash flow analysis, based on estimated borrowing rates currently available to the Partnership. Note A - Organization and Summary of Significant Accounting Policies (continued) Lease Commissions Lease commissions are capitalized and amortized using the straight-line method over the life of the applicable lease and are included in prepaid expenses and other assets. Loan Costs Loan costs are capitalized and amortized by the straight-line method over the lives of the related notes. The unamortized balance of the loan costs is included in prepaid expenses and other assets. Rental Income The Partnership leases its residential property under short-term operating leases. Lease terms are generally one year or less in duration. The Partnership expects that in the normal course of business these leases will be renewed or replaced by other leases. Commercial property leases vary from one to six years. Income Taxes No provision has been made in the financial statements for Federal income taxes. Under current law, no Federal income taxes are paid directly by the Partnership, however, the Partners are responsible for their respective shares of Partnership net income or loss. The Partnership reports certain transactions differently for tax than for financial statement purposes. The tax basis of the Partnership's assets and liabilities is approximately $12.8 million greater than the assets and liabilities as reported in the financial statements. Allocation of Net Income and Net Loss The Partnership Agreement provides for net income and net losses for both financial and tax reporting purposes to be allocated 96% to the Limited Partners and 4% to the General Partner. Advertising Costs Advertising costs of $75,000 in 1995, and $131,000 in 1994 are charged to expenses as incurred and are included in operating expenses. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Note B - Related Party Transactions The Partnership has paid the property management fees noted below based upon collected gross rental revenues ("Rental Revenues") for property management services for the years ended December 31, 1995 and 1994, respectively. For the year ended December 31, 1994, a portion of such property management fees equal to 4% of Rental Revenues was paid to the property management companies performing day-to-day property management services and a portion equal to 1% of Rental Revenues was paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day operations. Prior to July 1993, day-to-day property management services were provided to the Partnership properties by unaffiliated management companies. In July 1993, Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, assumed day-to-day property management responsibilities for two of the Partnership's properties under the same management fee arrangement as the unaffiliated management companies. Coventry assumed day-to-day property management responsibilities for one additional Partnership property in January 1994. An affiliate of the General Partner assumed day-to-day property management responsibilities for the remaining two properties in December 1994. In late December 1994, an affiliate of Insignia assumed day-to-day property management responsibilities for all of the Partnership's properties. Fees paid to Insignia and affiliates for the year ended December 31, 1995, and fees paid to PSI and Coventry for the year ended December 31, 1994, have been reflected below as compensation to related parties in the applicable periods: Years Ended December 31, 1995 1994 (in thousands) Property management fees $220 $172 The Limited Partnership Agreement ("Partnership Agreement") provides for a special management fee equal to 9% of the total distributions made to the limited partners to be paid to the General Partner for executive and administrative management services. The Partnership paid $55,000 to affiliates of the General Partner during 1995 under this provision of the Partnership Agreement. No such fees were paid or accrued in 1994. The Partnership Agreement also 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, which includes Coventry for the year ended December 31, 1994, received reimbursements as reflected below: Years Ended December 31, 1995 1994 (in thousands) Reimbursement for services of affiliates $279 $232 Note B - Related Party Transactions (continued) In 1995, the Partnership also paid fees of $24,000 to an affiliate of Insignia for leasing commissions on the lease of its commercial building. Of these costs, $4,000 was expensed and $20,000 was capitalized and will be amortized over the terms of the respective leases. On January 20, 1995, an affiliate of the General Partner, Insignia CCP III Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for a cash price of $50.00 per Unit to Limited Partners of record as of December 15, 1994. Approximately 2,260 Limited Partners holding 36,951 Units (23.29% of total Units) accepted the Tender Offer and sold their Units to Insignia CCP III Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of approximately $1.8 million. In July 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner, who receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. Note C - Other Income In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding. These claims related to Southmark Corporation's activities while it exercised control (directly or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the other affiliated partnerships' allowed claim at an aggregate $11 million. In March 1994, the Partnership received 1,168 shares of Southmark Corporation Redeemable Series A Preferred Stock and 8,545 shares of Southmark Corporation New Common Stock with an aggregate market value on the date of receipt of approximately $9,000 and $64,000 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. Note D - Commitment The Partnership modified its Partnership Agreement in the fourth quarter of 1995 to eliminate the requirement that the Partnership maintain reserves equal to at least 5% of invested capital as defined in the Partnership Agreement. Reserves, including cash and cash equivalents and securities available for sale totalling approximately $3 million at December 31, 1995, were deemed to be sufficient by the General Partner to fund the Partnership's liquidity requirements in 1995. Note E - Distributions In January of 1995, the General Partner declared and paid distributions, representing a return of capital, as defined in the partnership agreement of approximately $1,428,000. In December 1995, the General Partner declared and paid distributions, representing a return of capital, totalling approximately $905,000 to the Partners. Additionally, the Partnership declared and paid distributions in December 1995, attributable to cash flow from operations, totalling approximately $640,000 to the Partners. Note F - Collection of Note Receivable In October of 1988, the Partnership accepted a $2.1 million note receivable in connection with the sale of the Columns of Castleton Apartments. In March of 1995, the Partnership collected the outstanding balance of approximately $2.3 million, which represented the original principal balance, plus unpaid interest, in payment of the borrower's liability under the note agreement. Note G - Sale of Real Estate In August 1994, the Partnership sold the Mission Village Apartments for net sales proceeds of approximately $1.6 million, after closing costs and repayment of approximately $485,000 of related mortgage debt. The Partnership realized a gain of approximately $1.4 million on the sale during the third quarter of 1994. In June 1994, the Cascadian Apartments was sold for net sales proceeds of approximately $2.7 million after repayment of $4.3 million of related mortgage debt. The Partnership recognized a gain of approximately $5.2 million on the sale. Note G - Sale of Real Estate (continued) The two sales transactions are summarized as follows (amounts in thousands): Sales Value: Cash proceeds received $ 4,310 Debt discharged (a) 4,647 Total sales value 8,957 Net real estate (b) (2,239) Net other liabilities (94) Gain on sale of real estate $ 6,624 (a) Amount is net of unamortized mortgage discount. (b) Real estate at cost, net of accumulated depreciation of approximately $6.1 million. Note H - Disposition of Real Estate In November 1989, the Partnership ceased making debt service payments on the U.S. Department of Housing and Urban Development ("HUD") financed loan secured by the Sturbridge Square Apartments because cash flow from property operations did not support these scheduled payments, and in the General Partner's opinion, the property was leveraged in excess of its economic value. The General Partner informed HUD that it would cooperate with HUD's planned sale of the property, and in June 1994, the property was foreclosed upon by HUD. The Partnership recognized a gain of approximately $7 million on the disposition of the real estate and an extraordinary gain of approximately $1.8 million on extinguishment of the related debt. Note H - Disposition of Real Estate (continued) The following noncash investing and financing amounts (in thousands) were recorded in the consolidated financial statements at December 31, 1994: Net real estate (a) $(1,862) Net other assets 1 (1,861) Debt discharged (b) 10,594 Net gain on foreclosure $ 8,733 Gain on disposition of real estate (c) 6,964 Extraordinary gain on extinguishment of debt (d) 1,769 Net gain on foreclosure $ 8,733 (a) Amount is net of accumulated depreciation of approximately $6.6 million. (b) Amount includes accrued interest. (c) The gain on disposition of real estate represents the difference between the carrying value of the real estate and the estimated fair value of the property at disposition. The gain is included in "Gain on disposition of real estate" in the accompanying consolidated financial statements. (d) The gain on extinguishment of debt represents the difference between the estimated fair value of the property at foreclosure and the amount of debt, including accrued interest, extinguished. The gain is reflected as an extraordinary item in the accompanying consolidated financial statements. Note I - Repayment of Notes Payable At December 31, 1994, the Partnership was obligated under two mortgage notes payable aggregating $963,000, net of a $119,000 mortgage discount, secured by the Professional Plaza Office Building. The $734,000 first lien-note, with an original maturity of April 1996, and the $301,000 second-lien note, with an original maturity of November 2000, were paid off in August 1995, to retire debt with interest rates higher than the current market rate. The Partnership realized a loss of $110,000 on the transactions, resulting from $99,000 of non- cash expenses to amortize the remaining mortgage discounts associated with the retired notes and $11,000 of prepayment penalties paid on the early extinguishment of the debt. Note I - Repayment of Notes Payable (continued) At December 31, 1994, the Partnership was obligated under a mortgage note payable in the amount of $615,000 secured by the Village Green Apartments. The $557,000 first-lien note, with an original maturity of May 1997, was paid off in August 1995, to retire debt with interest rates higher than the current market rate. The Partnership realized a loss of $6,000 on the transaction resulting from prepayment penalties paid on the early extinguishment of the debt. At December 31, 1993, the Partnership was obligated under a $1.3 million wraparound mortgage note secured by the Mission Village Apartments. The $758,000 underlying first- lien note, originally maturing in July 1993, was extended for 12 months in exchange for a principal payment of $100,000, and was repaid in conjunction with the sale of the property noted in "Note G". The Partnership realized a loss of $222,000 on the note pay-off resulting from a non-cash expense to amortize the remaining mortgage discount associated with that portion of the retired debt. At December 31, 1993, the Partnership was obligated under two mortgage notes payable aggregating $2.5 million secured by The Village Green Apartments. One of the notes, a $1.8 million second-lien, was paid at par value at its maturity in August 1994. No gain or loss was realized on the transaction. Note J - Notes Payable (dollar amounts in thousands)
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 1995 Interest Rate Date Maturity Mountain Plaza Apartments 1st mortgage $3,475 $ 30 8.85% 09/00 $3,200 Ventura Landing Apartments 1st mortgage 3,191 30 9.75% 05/96 3,175 Totals $6,666(1) $ 60 $6,375 (1) The estimated fair values of the Partnership's aggregate debt is approximately $6,801,000. This value represents a general approximation of possible value and is not necessarily indicative of the amounts the Partnership might pay in actual market transactions.
Note J - Notes Payable (continued) (dollar amounts in thousands) Scheduled maturities of principal are as follows: Years Ending December 31, 1996 $3,241 1997 54 1998 60 1999 65 2000 3,246 Thereafter -- $6,666 Note K - Operating Leases (dollar amounts in thousands) The Partnership leases its residential properties under short-term operating leases. Lease terms are generally one year or less in duration. The Partnership expects that in the normal course of business these leases will be renewed or replaced by other leases. Commercial office property leases vary from one to six years. The future minimum rental payments at the Partnership's commercial property to be received under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 1995 are as follows: Years Ending December 31, 1996 $ 502 1997 326 1998 136 1999 51 2000 42 Thereafter -- $1,057 For leases with scheduled rental increases, rental income is recognized on a straight-line basis over the life of the applicable leases. There is no assurance that this income will continue at the same level when the leases expire. Note L - Investment Properties and Accumulated Depreciation (dollar amounts in thousands)
Initial Cost To Partnership Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition Mountain Plaza Apartments $3,475 $ 276 $ 3,406 $1,263 Professional Plaza Office Building -- 1,045 2,033 1,119 Ventura Landing Apartments 3,191 282 3,754 684 Village Green Apartments -- 125 2,375 81 West Chase Apartments -- 100 1,702 280 Totals $6,666 $1,828 $13,270 $3,427
Gross Amount At Which Carried At December 31, 1995 Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Mountain Plaza Apartments $ 276 $ 4,669 $ 4,945 $ 4,228 12/02/81 5-19 Professional Plaza Office 1,045 3,152 4,197 2,987 03/03/81 5-19 Ventura Landing Apartments 282 4,438 4,720 4,020 10/07/81 5-19 Village Green Apartments 125 2,456 2,581 726 12/20/91 3-15 West Chase Apartments 100 1,982 2,082 806 9/17/90 5-15 Totals $1,828 $16,697 $18,525 $12,767
Note L - Investment Properties and Accumulated Depreciation (continued) (dollar amounts in thousands) Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31, 1995 1994 Investment Properties Balance at beginning of year $ 18,204 $34,833 Property improvements: Property improvements 378 237 Dispositions through sales -- (8,385) Dispositions through foreclosure -- (8,481) Write-down of properties (57) -- Balance at End of Year $ 18,525 $18,204 Accumulated Depreciation Balance at beginning of year $ 11,671 $22,836 Additions charged to expense 1,116 1,600 Accumulated depreciation on real estate sold -- (6,146) Accumulated depreciation on real estate foreclosed -- (6,619) Accumulated depreciation on asset write-down (20) -- Balance at end of year $ 12,767 $11,671
The aggregate cost of the real estate for Federal income tax purposes at December 31, 1995 and 1994 is approximately $23,792,000 and $23,409,000. The accumulated depreciation taken for Federal income tax purposes at December 31, 1995 and 1994, is approximately $14,041,000 and $13,123,000, respectively. Note M - Abandoned Limited Partnership Units For the year ended December 31, 1994, the number of Limited Partnership Units decreased by 154 units, due to limited partners abandoning their units. In abandoning Limited Partnership Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. Note N - Contingency The Partnership is a defendant in a lawsuit filed on March 4, 1994 by an employee of the previous property management company alleging wrongful termination. The defendants are vigorously contesting the case. Based on the current status of the litigation, no determination can be made regarding the outcome or any possible estimates of losses, if any. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure As reported in the Partnership's Form 8-K filed May 10, 1995, as of May 3, 1995, Arthur Andersen L.L.P., the independent accountant previously engaged as the principal accountant to audit the financial statements of the Partnership was dismissed. As of the same date, the firm of Ernst & Young L.L.P. was engaged to provide that service for the Partnership. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act The Registrant has no officers or directors. The General Partner manages and controls the Registrant and has general responsibility and authority in all matters affecting its business. The name of the directors and executive officers of ConCap Equities Inc. ("CEI"), the Partnership's General Partner, as of December 31, 1995, their ages and the nature of all positions with CEI presently held by them are set forth below. There are no family relationships between or among any officers and directors. Name Age Position Carroll D. Vinson 55 President, Director Robert D. Long, Jr. 28 Controller, Chief Accounting Officer William H. Jarrard, Jr. 49 Vice President John K. Lines 36 Secretary Kelley M. Buechler 38 Assistant Secretary Carroll D. Vinson has been President of CEI since December 1994 and President of Metropolitan Asset Enhancement, L.P. ("MAE") subsidiaries since August 1994. Prior to that, during 1993 to August 1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (a regional CPA firm) and engaged in various other investment and consulting activities, which included portfolio acquisitions, asset dispositions, debt restructurings and financial reporting. Briefly, in early 1993, Mr. Vinson served as President and Chief Executive Officer of Angeles Corporation, a real estate investment firm. From 1991 to 1993 Mr. Vinson was employed by Insignia in various capacities including Managing Director-President during 1991. From 1986 to 1990, Mr. Vinson was President and Director of U.S. Shelter Corporation, a real estate services company, which sold substantially all of its assets to Insignia in December 1990. Robert D. Long, Jr. has been Controller and Chief Accounting Officer of CEI since December 1994 and Chief Accounting Officer and Controller of the MAE subsidiaries since February 1994. Prior to joining MAE in September 1993, Mr. Long served as a senior regional accountant with Insignia Management Group, Inc. since December 1991. From January 1991 until December 1991, Mr. Long was associated with the accounting firm of Harshman, Lewis and Associates. From July 1989 until January 1991, Mr. Long was an auditor for the State of Tennessee. He is a graduate of the University of Memphis. William H. Jarrard, Jr. has been Vice President of CEI since December 1994, Vice President of the MAE subsidiaries since January 1992, and Managing Director - Partnership Administration of Insignia since January 1991. During the five years prior to joining Insignia in 1991, he served in a similar capacity for U.S. Shelter. Mr. Jarrard is a graduate of the University of South Carolina and a certified public accountant. John K. Lines has been Secretary of CEI since December 1994, Secretary of the MAE subsidiaries since August 1994 and General Counsel and Secretary of Insignia since July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach, Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney with Banc One Corporation in Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was employed as an associate with Squire Sanders & Dempsey in Columbus, Ohio. Kelley M. Buechler has been Assistant Secretary of CEI since December 1994, Assistant Secretary of the MAE subsidiaries since January 1992, and Assistant Secretary of Insignia since January 1991. During the five years prior to joining Insignia in 1991, she served in a similar capacity for U.S. Shelter. Ms. Buechler is a graduate of the University of North Carolina. CEI is the general partner of the Partnership and 15 other Affiliated Partnerships as of December 31, 1995. Item 10. Executive Compensation No direct compensation was paid or payable by the Partnership to directors or officers for the year ended December 31, 1995, nor was any direct compensation paid or payable by the Partnership to directors or officers of the General Partner for the year ended December 31, 1995. The Partnership has no plans to pay any such remuneration to any directors or officers of the General Partner in the future. See "Item 7 - Financial Statements", Note B - Related Party Transactions, for amounts of compensation and reimbursement of salaries paid by the Partnership to the General Partner and its affiliates and the former general partner and former affiliates. Item 11. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as provided below, as of February, 1996, no person was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership. Number of Percent Name and Address Units Of Total Insignia CCPIII Acquisition, L.L.C. 36,951 23.29% One Insignia Financial Plaza Greenville, SC 29602 The Units reflected above were acquired by Insignia CCPIII Acquisition, L.L.C., an affiliate of the Partnership and CEI, pursuant to its offer dated January 20, 1995, to purchase Units for a purchase price of $50.00 per Unit (the "Tender Offer"). Insignia CCPIII Acquisition, L.L.C. is owned jointly by Insignia CCPIII Holding, Inc. (60%) and Koll Tender Corporation I (40%). As of February, 1996, no other person was known to CEI to own of record or beneficially more than 5 percent (5%) of the Units of the Partnership. (b) Beneficial Owners of Management Neither CEI nor any of the directors or officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of February, 1996, the following persons were known to CEI to be the beneficial owners of more than 5 percent (5%) of its common stock: Number of Percent Name and Address CEI Shares Of Total GII Realty, Inc. 100,000 100% One Insignia Financial Plaza Greenville, SC- 29602 GII Realty, Inc. is owned by MAE-ICC, Inc. (See "Item 1"). Item 12. Certain Relationships and Related Transactions Transactions with Current Management and Others Except for the transactions described below, neither CEI nor any of its directors, officers or associates, or any associates of any of them, has had any interest in any other transaction to which the Partnership is a party. Please refer to "Item 7 - Financial Statements, Note B - Related Party Transactions," for the amounts and items of permissible compensation and fees paid to the General Partner and its affiliates and other related parties for the last two years. The Partnership has paid property management fees based upon collected gross rental revenues ("Rental Revenues") for property management services in each of the years in the period ended December 31, 1995 and 1994, respectively. A portion of such property management fees equal to 4% of Rental Revenues has been paid to the property management companies performing day-to-day property management services and the portion equal to 1% of Rental Revenues has been paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day property operations. Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, assumed day-to-day property management responsibility for the Partnership's property under the same management fee arrangement as the unaffiliated management companies. In late December 1994, management of the Partnerships' properties was assumed by affiliates of Insignia. All of the above-referenced agreements with affiliates of CEI and related parties of the Partnership are subject to the conditions and limitations imposed by the Partnership Agreement. Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Exhibits: See Exhibit Index contained herein. Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K filed during the fourth quarter of 1995: A form 8-K dated October 24, 1995, was filed reporting a change in the ownership of GII Realty, Inc., the sole stockholder of the general partner of the Registrant. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL PROPERTIES III By: CONCAP EQUITIES, INC. General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Controller and Principal Accounting Officer Date: March 26, 1996 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/Carroll D. Vinson President Date: March 26, 1996 Carroll D. Vinson /s/Robert D. Long, Jr. Controller and Principal Date: March 26, 1996 Robert D. Long, Jr. Accounting Officer INDEX OF EXHIBITS EXHIBIT NO. DOCUMENT DESCRIPTION 3 Certificate of Limited Partnership, as amended to date. (Incorporated by refer- ence to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.1 Property Management Agreement No. 104 dated October 23, 1990, by and between the the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.2 Property Management Agreement No. 204 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.3 Property Management Agreement No. 305 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by refer- ence to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.4 Property Management Agreement No. 402 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by refer- ence to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.5 Bill of Sale and Assignment dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.6 Assignment and Assumption Agreement dated October 23, 1990, by and between CCEC and ConCap Management Limited Partnership ("CCMLP") (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.7 Assignment and Agreement as to Certain Property Management Services dated October 23, 1990, by and between CCMLP and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.8 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and The Hayman Company (100 Series of Property Management Contracts) (Incorporated by refer- ence to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.9 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and Horn-Barlow Companies (200 Series of Property Management Contracts) (Incorporated by refer- ence to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.10 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and Metro ConCap, Inc. (300 Series of Property Management Contracts) (Incorporated by refer- ence to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.11 Assignment and Assumption Agreement dated October 23, 1990, by and between R&B Realty Group (400 Series of Property Management Contracts) (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.12 Assignment and Assumption of Property Manage- ment Agreements dated August 1, 1991, by and between R & B Arizona Management Company, Inc. and R & B Apartment Management Company, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.13 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP III Associates, Ltd. (Property Management Agreement No. 305). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.14 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP III Associates, Ltd. (Property Management Agreement No. 104). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.15 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP III Associates, Ltd. (Property Management Agreement No. 204). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.16 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Horn-Barlow Companies (the "Horn- Barlow Construction Management Agreement"). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.17 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP III Associates, Ltd. (Horn-Barlow Construc- tion Management Agreement). (Incorporated by refer- ence to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.18 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Metro ConCap, Inc. (the "Metro Construction Management Agreement"). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.19 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partner- ship and CCP III Associates, Ltd. (Metro Construc- tion Management Agreement). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.20 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and The Hayman Company (the "Hayman Construction Management Agreement"). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.21 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partner- ship and CCP III Associates, Ltd. (Hayman Construction Management Agreement). (Incor- porated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.22 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and R & B Apartment Management Company, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.23 Investor Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.24 Assignment and Assumption Agreement (Investor Services Agreement) dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1990). 10.25 Letter of Notice dated December 20, 1991, from Partnership Services, Inc. ("PSI") to the Partnership regarding the change in ownership and dissolution of ConCap Services Company whereby PSI assumed the Investor Services Agreement. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.26 Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.27 Assignment and Assumption Agreement (Financial Services Agreement) dated October 23, 1990, by and between CCEC and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.28 Letter of Notice dated December 20, 1991, from PSI to the Partnership regarding the change in ownership and dissolution of ConCap Capital Company whereby PSI assumed the Financial Services Agreement. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.29 Property Management Agreement No. 416 dated May 13, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.30 Assignment and Assumption Agreement (Property Management Agreement No. 416) dated May 13, 1993, by and between Coventry Properties, Inc., R&B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.31 Assignment and Agreement as to Certain Property Management Services dated May 13, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.32 Property Management Agreement No. 418 dated May 13, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.33 Assignment and Assumption Agreement (Property Management Agreement No. 418) dated May 13, 1993, by and between Coventry Properties, Inc., R&B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.34 Assignment and Agreement as to Certain Property Management Services dated May 13, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.35 Property Management Agreement No. 426 dated June 30, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.36 Assignment and Assumption Agreement (Property Management Agreement No. 426) dated June 30, 1993, by and between Coventry Properties, Inc., R&B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.37 Assignment and Agreement as to Certain Property Management Services dated June 30, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.38 Property Management Agreement No. 510 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.39 Property Management Agreement No. 510A dated August 18, 1993, by and between the Partnership and Coventry Properties, Inc. 10.40 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.41 Property Management Agreement No. 511 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.42 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.43 Property Management Agreement No. 512 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.44 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.45 Stock and Asset Purchase Agreement, dated December 8, 1994 (the "Gordon Agreement"), among MAE-ICC, Inc. ("MAE-ICC"), Gordon Realty Inc. ("Gordon"), GII Realty, Inc. ("GII Realty"), and certain other parties. (Incorporated by reference to Form 8-K dated December 8, 1994) 10.46 Exercise of the Option (as defined in the Gordon Agreement), dated December 8, 1994, between MAE- ICC and Gordon. (Incorporated by reference to Form 8-K dated December 8, 1994) 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note 1 of Item 8 - Financial Statements of this Form 10-K). 16.1 Letter, dated August 12, 1992, from Ernst & Young to the Securities and Exchange Commission regarding change in certifying accountant. (Incorporated by reference to Form 8-K dated August 6 1992). 16.2 Letter dated May 9, 1995 from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant regarding a change in the certifying accountant. (Incorporated by reference to Form 8-K dated May 3, 1995) 19.1 Modified First Amended Plan of Reorganiza- tion for CCP/III Associates, Ltd., dated and filed March 24, 1992, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 19.2 Modified First Amended Disclosure Statement for the Modified First Amended Plan of Reor- ganization for CCP/III Associates, Ltd., dated and filed March 24, 1992, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 19.3 First Modification to Modified First Amended Plan of Reorganization for CCP/III Associates, Ltd., dated and filed April 22, 1992, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 19.4 Second Modification to Modified First Amended Plan of Reorganization for CCP/III Associates, Ltd., dated and filed April 29, 1992, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 19.5 Third Modification to Modified First Amended Plan of Reorganization for CCP/III Associates, Ltd., dated and filed April 29, 1992, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. (Incorporated by refer- ence to the Annual Report on Form 10-K for the year ended December 31, 1992). EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Captial Properties III 1995 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000317331 CONSOLIDATED CAPITAL PROPERTIES III 1,000 12-MOS DEC-31-1995 DEC-31-1995 2,854 0 0 0 0 0 18,525 12,767 9,178 0 6,718 0 0 0 1,948 9,178 0 4,555 0 0 5,330 0 782 0 0 0 0 0 0 (891) (5.39) 0 The Partnership has an unclassified balance sheet.
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