10KSB 1 ccp3.txt CCP3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________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.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) 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 Interests (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 the 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. $2,431,000 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, 2003. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. PART I Item 1. Description of Business Consolidated Capital Properties III (the "Partnership" or "Registrant") was organized on May 22, 1980 as a limited partnership under the California Uniform Limited Partnership Act. Commencing November 25, 1980, the Partnership offered, pursuant to a Registration Statement filed with the Securities and Exchange Commission, 120,000 units of limited partnership interest (the "Units"), with the general partner's right to increase the offering to 240,000 Units. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Limited Partnership Units closed on December 17, 1981, with 158,945 Units sold at $500 each, or gross proceeds of $79,473,000 to the Partnership. The original general partners contributed capital in the amount of $1,000 for a 4% interest in 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 363 Units. The Partnership gave no consideration for these units. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2010 unless terminated prior to such date. By the end of fiscal year 1985, approximately 71% of the proceeds 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. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. 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, Concap Equities, Inc. ("CEI" or "General Partner") 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. CEI is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership is engaged in the business of operating and holding real estate properties for investment. At December 31, 2003, the Partnership owned two apartment complexes. On September 29, 2003, the Partnership sold one of its investment properties, West Chase Apartments. Prior to 2001, the Partnership disposed of twenty-seven properties, two of which were reacquired through foreclosure. See "Item 2. Description of Properties" below for a description of the Partnership's remaining properties. The Registrant has no employees. Management and administrative services are provided by the General Partner and by agents retained by the General Partner. An affiliate of the General Partner has been providing such property management services. Risk Factors The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the General Partner, in such market area, could have a material effect on the rental market for the apartments at the Partnership's properties and the rents that may be charged for such apartments. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of the total apartment units in the United States and competition for the apartments is local. In addition, various limited partnerships have been formed by the General Partner and/or affiliates to engage in business which may be competitive with the Partnership. Laws benefiting disabled persons may result in the Partnership's incurrence of unanticipated expenses. Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. Likewise, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990 to be accessible to the handicapped. These and other Federal, state and local laws may require modifications to the Partnership's properties, or restrict renovations of the properties. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although the Partnership believes that the Partnership's properties are substantially in compliance with present requirements, the Partnership may incur unanticipated expenses to comply with the ADA and the FHAA. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand of similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Item 6 - Management's Discussion and Analysis or Plan of Operation" included in this Form 10-KSB. Item 2. Description of Properties The following table sets forth the Partnership's investments in properties: Date of Property Purchase Type of Ownership Use Ventura Landing Apartments 10/07/81 Fee ownership subject to Apartment Orlando, Florida a first mortgage 184 units Village Green Apartments 12/20/91 Fee ownership subject to Apartment Altamonte Springs, Florida a first mortgage (1) 164 units (1) Property is held by a limited partnership in which the Registrant owns a 99% interest. Sale of Property On September 29, 2003, the Partnership sold West Chase Apartments to an unrelated third party for a gross sale price of approximately $2,124,000. The net proceeds realized by the Partnership were approximately $1,651,000 after payment of closing costs of approximately $174,000 and a prepayment penalty of approximately $299,000 owed by the Partnership and paid by the buyer. The Partnership used approximately $1,047,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership realized a gain of approximately $1,058,000 for the year ended December 31, 2003. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $332,000 due to the write off of unamortized loan costs and a prepayment penalty. Schedule of Properties Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Depreciable Federal Property Value Depreciation Life Method Tax Basis (in thousands) (in thousands) Ventura Landing Apartments $ 6,131 $ 5,130 5-30 yrs S/L $ 1,144 Village Green Apartments 3,713 2,564 3-30 yrs S/L 3,347 Total $ 9,844 $ 7,694 $ 4,491
See "Note A - Organization and Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 7. Financial Statements" for a description of the Partnership's capitalization and depreciation policies. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Registrant's properties.
Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 2003 (1) Rate Amortized(2) Date Maturity (2) (in thousands) (in thousands) Ventura Landing Apartments $ 3,984 7.54% 20 yrs 07/21 $ -- Village Green Apartments 3,379 7.54% 20 yrs 08/21 -- Totals $ 7,363 $ --
(1) See "Note D - Mortgage Notes Payable" to the consolidated financial statements included in "Item 7. Financial Statements" for information with respect to the Registrant's ability to prepay these loans and other specific details about the loans. (2) The mortgage is scheduled to be fully amortized at maturity. Rental Rates and Occupancy Average annual rental rates and occupancy for 2003 and 2002 for each property are as follows:
Average Annual Average Annual Rental Rates Occupancy (per unit) Property 2003 2002 2003 2002 Ventura Landing Apartments $7,667 $7,754 95% 91% Village Green Apartments 7,205 7,296 94% 93%
The General Partner attributes the increase in occupancy at Ventura Landing Apartments to resident retention efforts and an aggressive marketing campaign at the property. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. Both of the properties are subject to competition from other residential apartment complexes in the area. The General Partner believes that the Partnership's properties are adequately insured. Each residential property is an apartment complex which leases units for terms of one year or less. No residential tenant leases 10% or more of the available rental space. Both of the properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates Real estate taxes and rates in 2003 for each property are as follows: 2003 2003 Billing Rate (in thousands) Ventura Landing Apartments $98 2.20% Village Green Apartments 80 1.97% Capital Improvements Village Green Apartments The Partnership completed approximately $83,000 in capital expenditures at Village Green Apartments for the year ended December 31, 2003, consisting primarily of structural improvements, air conditioning unit upgrades, swimming pool upgrades, and floor covering replacement. These improvements were funded from operations. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year and currently expects to budget approximately $90,000. Additional capital improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. West Chase Apartments Prior to its sale, the Partnership completed approximately $73,000 in capital expenditures at West Chase Apartments, consisting primarily of air conditioning unit upgrades, roof replacement, and floor covering replacement. These improvements were funded from operations. The Partnership sold West Chase Apartments on September 29, 2003 to an unrelated third party. Ventura Landing Apartments The Partnership completed approximately $102,000 in capital expenditures at Ventura Landing Apartments for the year ended December 31, 2003, consisting primarily of interior improvements, parking area upgrades, air conditioning upgrades, and floor covering replacement. These improvements were funded from operations. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year and currently expects to budget approximately $101,000. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. The capital improvements planned for the year 2004 at the Partnership's properties will be made only to the extent of cash available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. Item 3. Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the Court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the Settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the Court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the Court heard oral argument on the motions and denied them both in their entirety. On January 28, 2004, Objector filed his opening brief in his pending appeal. The General Partner is currently scheduled to file a brief in support of the order approving settlement and entering judgment thereto by April 23, 2004. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Discovery is currently underway. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. Item 4. Submission of Matters to a Vote of Security Holders The unit holders of the Partnership did not vote on any matter through solicitation of proxies or otherwise during the quarter ended December 31, 2003. PART II Item 5. Market for Partnership Equity and Related Partner Matters The Partnership, a publicly-held limited partnership, sold 158,945 Limited Partnership Units (the "Units") aggregating $79,473,000. In addition, the General Partner contributed a total of $1,000 to the Partnership. The Partnership currently has 4,562 holders of record owning an aggregate of 158,582 Units. Affiliates of the General Partner owned 83,491.50 Units or 52.65% at December 31, 2003. The Partnership distributed the following amounts during the years ended December 31, 2003 and 2002 (in thousands, except per unit data):
Per Limited Per Limited Year Ended Partnership Year Ended Partnership December 31, 2003 Unit December 31, 2002 Unit Operations $ -- $ -- $ 218 $ 1.31 Refinancing proceeds (1) -- -- 324 2.04 Sale proceeds (2) 303 1.91 -- -- $ 303 $ 1.91 $ 542 $ 3.35
(1) From previously undistributed proceeds from the 2001 refinancings of the mortgages encumbering Village Green Apartments and Ventura Landing Apartments. (2) From proceeds from the sale of West Chase Apartments. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in the year 2004 or subsequent periods. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 83,491.50 limited partnership units in the Partnership representing 52.65% of the outstanding Units at December 31, 2003. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 52.65% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Item 6. Management's Discussion and Analysis or Plan of Operation This item should be read in conjunction with "Item 7. Financial Statements" and other items contained elsewhere in this report. Results of Operations The Partnership's net income for the year ended December 31, 2003 was approximately $214,000, as compared to a net loss of approximately $199,000 for the year ended December 31, 2002. The increase in net income is due to the recognition of a gain from sale of discontinued operations during 2003, partially offset by an increase in loss from discontinued operations. On September 29, 2003, the Partnership sold West Chase Apartments to an unrelated third party for a gross sale price of approximately $2,124,000. The net proceeds realized by the Partnership were approximately $1,651,000 after payment of closing costs of approximately $174,000 and a prepayment penalty of approximately $299,000 owed by the Partnership and paid by the buyer. The Partnership used approximately $1,047,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership realized a gain of approximately $1,058,000, which is shown as a gain from sale of discontinued operations on the consolidated statements of operations included in "Item 7. Financial Statements". The property's operations, losses of approximately $506,000 and $13,000 for the years ended December 31, 2003 and 2002, respectively, are shown as loss from discontinued operations. Included in loss from discontinued operations are revenues of approximately $474,000 and $716,000 for the years ended December 31, 2003 and 2002, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $332,000 for the year ended December 31, 2003, due to the write off of unamortized loan costs and a prepayment penalty, which is also included in loss from discontinued operations. The Partnership's loss from continuing operations for the year ended December 31, 2003 was approximately $338,000, as compared to approximately $186,000 for the year ended December 31, 2002. The increase in loss from continuing operations is due to an increase in total expenses, partially offset by a slight increase in total revenues. The increase in total expenses is due to increases in operating, depreciation and general and administrative expenses, partially offset by a decrease in interest expense. Property tax expense remained relatively constant for the comparable periods. The increase in operating expenses is primarily due to increases in advertising expenses at Ventura Landing Apartments, payroll related expenses at both of the Partnership's investment properties and contract maintenance expense at both properties. The increase in depreciation expense is due to property improvements and replacements placed into service at the properties during the past twelve months. The decrease in interest expense is a result of scheduled principal payments which reduced the carrying balance of the mortgages encumbering the Partnership's properties. General and administrative expenses increased primarily due to an increase in the costs of services included in the management reimbursements to the General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses for the years ended December 31, 2003 and 2002 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. The increase in total revenues is due to an increase in rental income, partially offset by a decrease in other income. The increase in rental income is primarily due to the increase in occupancy at both of the Partnership's investment properties and a decrease in bad debt expense at Ventura Landing Apartments, partially offset by a decrease in the average rental rate at both investment properties and increased concessions at Ventura Landing Apartments. The decrease in other income is primarily due to decreases in late charges and lease cancellation fees at Ventura Landing Apartments. 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, the General Partner may use rental concessions and rental reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 2003, the Partnership had cash and cash equivalents of approximately $52,000, compared to approximately $88,000 at December 31, 2002. The decrease in cash and cash equivalents of approximately $36,000 is due to approximately $1,600,000 of cash used in financing activities, partially offset by approximately $1,393,000 of cash provided by investing activities and approximately $171,000 of cash provided by operating activities. Cash used in financing activities consisted of the repayment of the mortgage encumbering West Chase Apartments, distributions to partners, payments of principal made on the mortgages encumbering the Partnership's properties, and payments on advances from the General Partner, partially offset by an advance received from the General Partner. Cash provided by investing activities consisted of net proceeds received from the sale of West Chase Apartments, partially offset by property improvements and replacements. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. The Partnership is currently evaluating the capital improvement needs of the properties for the upcoming year and currently expects to budget approximately $191,000. Additional improvements may be considered during 2004 and will depend on the physical condition of the properties as well as anticipated cash flow generated by the properties. 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 assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering the Partnership's investment properties of approximately $7,363,000 requires monthly payments of principal and interest until the loans mature between July and August 2021, at which time the loans are scheduled to be fully amortized. The Partnership distributed the following amounts during the years ended December 31, 2003 and 2002 (in thousands, except per unit data):
Per Limited Per Limited Year Ended Partnership Year Ended Partnership December 31, 2003 Unit December 31, 2002 Unit Operations $ -- $ -- $ 218 $ 1.31 Refinancing proceeds (1) -- -- 324 2.04 Sale proceeds (2) 303 1.91 -- -- $ 303 $ 1.91 $ 542 $ 3.35
(1) From previously undistributed proceeds from the 2001 refinancings of the mortgages encumbering Village Green Apartments and Ventura Landing Apartments. (2) From proceeds from the sale of West Chase Apartments. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in the year 2004 or subsequent periods. Other In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 83,491.50 limited partnership units in the Partnership representing 52.65% of the outstanding Units at December 31, 2003. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 52.65% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates A summary of the Partnership's significant accounting policies is included in "Note A - Organization and Summary of Significant Accounting Policies" which is included in the consolidated financial statements in "Item 7. Financial Statements". Management believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership's operating results and financial condition. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership's accounting policies in many areas. The following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. Item 7. Financial Statements CONSOLIDATED CAPITAL PROPERTIES III LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheet - December 31, 2003 Consolidated Statements of Operations - Years ended December 31, 2003 and 2002 Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2003 and 2002 Consolidated Statements of Cash Flows - Years ended December 31, 2003 and 2002 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, 2003, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the two years in the period ended December 31, 2003. 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties III at December 31, 2003, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina February 27, 2004 CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 2003
Assets Cash and cash equivalents $ 52 Receivables and deposits 49 Other assets 344 Investment properties (Notes D and F): Land $ 407 Buildings and related personal property 9,437 9,844 Less accumulated depreciation (7,694) 2,150 $ 2,595 Liabilities and Partners' Deficit Liabilities Accounts payable $ 149 Tenant security deposit liabilities 61 Other liabilities 187 Due to affiliate 71 Mortgage notes payable (Note D) 7,363 Partners' Deficit General partners $(1,878) Limited partners (158,582 units issued and Outstanding) (3,358) (5,236) $ 2,595 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data)
Years Ended December 31, 2003 2002 (Restated) Revenues: Rental income $ 2,214 $ 2,102 Other income 217 299 Total revenues 2,431 2,401 Expenses: Operating 1,241 1,114 General and administrative 307 260 Depreciation 454 435 Interest 593 605 Property taxes 174 173 Total expenses 2,769 2,587 Loss from continuing operations (338) (186) Loss from discontinued operations (506) (13) Gain from sale of discontinued operations 1,058 -- Net income (loss) (Note E) $ 214 $ (199) Net income (loss) allocated to general partners (4%) $ 9 $ (8) Net income (loss) allocated to limited partners (96%) 205 (191) $ 214 $ (199) Per limited partnership unit: Loss from continuing operations $ (2.05) $ (1.13) Loss from discontinued operations (3.07) (0.07) Gain from sale of discontinued operations 6.41 -- Net income (loss) $ 1.29 $ (1.20) Distributions per limited partnership unit $ 1.91 $ 3.35 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' 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, 2001 158,582 $(1,869) $(2,537) $ (4,406) Distributions to partners -- (10) (532) (542) Net loss for the year ended December 31, 2002 -- (8) (191) (199) Partners' deficit at December 31, 2002 158,582 (1,887) (3,260) (5,147) Distributions to partners -- -- (303) (303) Net income for the year ended December 31, 2003 -- 9 205 214 Partners' deficit at December 31, 2003 158,582 $(1,878) $(3,358) $(5,236) See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2003 2002 Cash flows from operating activities: Net income (loss) $ 214 $ (199) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain from sale of discontinued operations (1,058) -- Depreciation 590 620 Loss on early extinguishment of debt 332 -- Amortization of loan costs 27 31 Bad debt expense 143 305 Change in accounts: Receivables and deposits (73) (362) Other assets (38) 7 Accounts payable 27 15 Tenant security deposit liabilities (8) (11) Due to affiliate 71 -- Other liabilities (56) (3) Net cash provided by operating activities 171 403 Cash flows from investing activities: Proceeds from sale of discontinued operations 1,651 -- Property improvements and replacements (258) (286) Insurance proceeds received -- 173 Net withdrawals from restricted escrows -- 178 Net cash provided by investing activities 1,393 65 Cash flows from financing activities: Repayment of mortgage note payable (1,047) -- Payments on mortgage notes payable (216) (208) Distributions to partners (303) (542) Advances from affiliate 70 34 Payments on advances from affiliate (104) -- Net cash used in financing activities (1,600) (716) Net decrease in cash and cash equivalents (36) (248) Cash and cash equivalents at beginning of period 88 336 Cash and cash equivalents at end of period $ 52 $ 88 Supplemental disclosure of cash flow information: Cash paid for interest $ 637 $ 663 At December 31, 2001, receivables and deposits and cash flow from investing activities were adjusted by approximately $173,000 for non-cash activity related to insurance proceeds which were held on deposit with the mortgage lender and received during the year ended December 31, 2002. At December 31, 2003, proceeds from sale of discontinued operations has been adjusted by approximately $299,000 in connection with prepayment penalties paid by the buyer of West Chase Apartments. See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Note A - Organization and Summary of Significant Accounting Policies Organization: Consolidated Capital Properties III, a California limited partnership (the "Partnership" or "Registrant") was formed on May 22, 1980, to acquire and operate commercial and residential properties. The general partner responsible for management of the Partnership's business is ConCap Equities, Inc. (the "General Partner" or "CEI"). The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2010 unless terminated prior to such date. As of December 31, 2003, the Partnership owned two residential properties in Florida. 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, 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 the general partner to a limited partner, thereby leaving CEI as the sole general partner of the Partnership. Principles of Consolidation: The Partnership's financial statements include the accounts of ConCap Village Green Associates, Ltd. The Partnership owns a 99% interest in this partnership, and it has the ability to control the major operating and financial policies of this partnership. All intercompany transactions have been eliminated. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Allocation of Profits, Gains, and Losses: 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 partners. Upon the sale or other disposition, or refinancing, of any asset of the Partnership, the distributable net proceeds shall be distributed as follows: First, to the partners in proportion to their interests until the limited partners have received proceeds equal to their original capital investment applicable to the property; Second, to the limited partners until the limited partners have received distributions from all sources equal to their 12% cumulative return; Third, concurrent with limited partner distributions, 4% to the general partners subordinated and deferred until the limited partners have received 100% of their capital contributions; Thereafter, 86% to the limited partners in proportion to their interests and 14% to the general partners. Investment Properties: Investment properties consist of two apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. Expenditures in excess of $250 that maintain an existing asset which has a useful life of more than one year are capitalized as capital replacement expenditures and depreciated over the estimated useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of investment properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in the years ended December 31, 2003 or 2002. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for real property over 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27.5 years and (2) personal property additions over 5 years. Cash and Cash Equivalents: Includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $24,000 at December 31, 2003 that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair values due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity at the Partnership's incremental borrowing rate, was approximately $8,155,000 at December 31, 2003. Loan Costs: Loan costs of approximately $338,000, less accumulated amortization of approximately $65,000, are included in other assets and are being amortized using the effective interest method over the life of the loans. Amortization expense, which is included in interest expense, is expected to be approximately $25,000 in 2004, $24,000 for both of the years 2005 and 2006, $23,000 in 2007, and $22,000 in 2008. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income attributable to leases monthly as it is earned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $92,000 and $72,000 for the years ended December 31, 2003 and 2002, respectively, were charged to operating expense as incurred. Recent Accounting Pronouncements: Effective January 1, 2002, the Partnership adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as discontinued operations on the statement of operations. As a result, the accompanying statements of operations have been restated as of January 1, 2002 to reflect the operations of West Chase Apartments as loss from discontinued operations. West Chase Apartments was sold to an unrelated third party on September 29, 2003. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates of the General Partner on behalf of the Partnership. Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $146,000 and $150,000 for the years ended December 31, 2003 and 2002, respectively, which are included in operating expenses and loss from discontinued operations. Affiliates of the General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $237,000 and $155,000 for the years ended December 31, 2003 and 2002, respectively. For the year ended December 31, 2003 the first three quarters were based on estimated amounts and in the fourth quarter of 2003, the reimbursements of accountable administrative expenses were adjusted based on actual costs (see "Note G"). Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $18,000 and $7,000 for the years ended December 31, 2003 and 2002, respectively. The construction management service fees are calculated based on a percentage of current additions to investment properties. These amounts are included in general and administrative expenses, investment properties, and gain from sale of discontinued operations. At December 31, 2003 approximately $71,000 of such fees were owed and are included in due to affiliate. The Partnership Agreement provides for a special management fee equal to 9% of the total distributions made to the limited partners from cash flow from operations to be paid to the General Partner for executive and administrative management services. During the year ended December 31, 2002, fees of approximately $20,000 were paid to the General Partner. This amount is included in general and administrative expenses. During the year ended December 31, 2003, no special management fees were paid as no distributions from cash flow from operations were made. During the years ended December 31, 2003 and 2002, an affiliate of the General Partner advanced the Partnership approximately $70,000 and $34,000 to fund operations and payment of property taxes, respectively. Interest on the advances was charged at the prime rate plus 2%. Interest expense for the years ended December 31, 2003 and 2002 was approximately $3,000 and less than $1,000, respectively. During the year ended December 31, 2003, the Partnership repaid the advances of approximately $104,000 and the associated accrued interest of approximately $3,000 from proceeds from the sale of West Chase Apartments. As of December 31, 2003, there were no outstanding advances or associated accrued interest payable to affiliates of the General Partner. Subsequent to December 31, 2003 an affiliate of the General Partner advanced approximately $51,000 to the Partnership to pay audit fees. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the years ended December 31, 2003 and 2002, the Partnership was charged by AIMCO and its affiliates approximately $39,000 and $48,000, respectively, for insurance coverage and fees associated with policy claims administration. Pursuant to the Partnership Agreement, the General Partner is entitled to receive a commission equal to 3% of the aggregate disposition price of sold properties. The Partnership paid a commission of $108,000 to the General Partner related to the sale of Professional Plaza in 1999. This amount is subordinate to the limited partners receiving their original capital contributions plus a cumulative preferred return of 6% per annum of their adjusted capital investment, as defined in the Partnership Agreement. If the limited partners have not received these returns when the Partnership terminates, the General Partner will be required to return this amount to the Partnership. There was no commission paid to the General Partner related to the sale of West Chase Apartments in 2003. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 83,491.50 limited partnership units in the Partnership representing 52.65% of the outstanding Units at December 31, 2003. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 52.65% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Note C - Disposition of Investment Property On September 29, 2003, the Partnership sold West Chase Apartments to an unrelated third party for a gross sale price of approximately $2,124,000. The net proceeds realized by the Partnership were approximately $1,651,000 after payment of closing costs of approximately $174,000 and a prepayment penalty of approximately $299,000 owed by the Partnership and paid by the buyer. The Partnership used approximately $1,047,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership realized a gain of approximately $1,058,000, which is shown as a gain from sale of discontinued operations on the accompanying consolidated statements of operations. The property's operations, losses of approximately $506,000 and $13,000 for the years ended December 31, 2003 and 2002, respectively, are shown as loss from discontinued operations. Included in loss from discontinued operations are revenues of approximately $474,000 and $716,000 for the years ended December 31, 2003 and 2002, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $332,000 due to the write off of unamortized loan costs and a prepayment penalty, which is also included in loss from discontinued operations on the accompanying consolidated statements of operations. Note D - Mortgage Notes Payable The terms of mortgage notes payable are as follows:
Principal Monthly Principal Balance At Payment Stated Balance December Including Interest Maturity Due At 31, Property 2003 Interest Rate Date Maturity (in thousands) (in thousands) Ventura Landing Apartments $3,984 $ 34 7.54% 07/21 $ -- Village Green Apartments 3,379 29 7.54% 08/21 -- Total $7,363 $ 63 $ --
The mortgage notes payable are nonrecourse and are secured by pledge of the Partnership's properties and by pledge of revenues from the respective rental properties. Also, the loans require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2003 are as follows (in thousands): 2004 $ 208 2005 225 2006 242 2007 261 2008 281 Thereafter 6,146 $7,363 Note E - Income Taxes The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net income (loss) and Federal taxable income (loss) (in thousands, except per unit data): 2003 2002 Net income (loss) as reported $ 214 $ (199) (Deduct) add: Deferred revenue and other liabilities (37) 40 Depreciation differences 58 23 Prepayment penalty (299) -- Gain on sale of property (592) -- Other 99 (20) Federal taxable loss $ (557) $ (156) Federal taxable loss per limited partnership unit $ (3.37) $ (0.94) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets at December 31, 2003 (in thousands): Net liabilities as reported $(5,236) Differences in basis of assets and liabilities Investment properties at cost 3,098 Accumulated depreciation (757) Other assets and liabilities 239 Syndication costs 8,692 Net assets - Federal tax basis $ 6,036 Note F - Investment Properties and Accumulated Depreciation Initial Cost To Partnership (in thousands)
Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) Ventura Landing Apartments $ 3,984 $ 282 $ 3,754 $ 2,095 Village Green Apartments 3,379 125 2,375 1,213 Totals $ 7,363 $ 407 $ 6,129 $ 3,308
Gross Amount At Which Carried At December 31, 2003 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life (in thousands) Ventura Landing $ 282 $ 5,849 $ 6,131 $ 5,130 10/07/81 5-30 yrs Apartments Village Green Apartments 125 3,588 3,713 2,564 12/20/91 3-30 yrs Totals $ 407 $ 9,437 $ 9,844 $ 7,694
Reconciliation of "investment properties and accumulated depreciation": Years Ended December 31, 2003 2002 (in thousands) Investment Properties Balance at beginning of year $12,394 $12,108 Property improvements 258 286 Sale of investment property (2,808) -- Balance at end of year $ 9,844 $12,394 Accumulated Depreciation Balance at beginning of year $ 9,074 $ 8,454 Additions charged to expense 590 620 Sale of investment property (1,970) -- Balance at end of year $ 7,694 $ 9,074 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2003 and 2002 is approximately $12,942,000 and $15,908,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2003 and 2002 is approximately $8,451,000 and $9,414,000, respectively. Note G - Fourth-Quarter Adjustment The Partnership's policy is to record management reimbursements to the General Partner as allowed under the Partnership Agreement on a quarterly basis, using estimated financial information furnished by an affiliate of the General Partner. For the first three quarters of 2003, these reimbursements of accountable administrative expenses were based on estimated amounts. During the fourth quarter of 2003, the Partnership recorded an adjustment to management reimbursements to the General Partner of approximately $71,000 due to a difference in the estimated costs and the actual costs incurred. The actual management reimbursements to the General Partner for the year ended December 31, 2003 were approximately $219,000, as compared to the estimated management reimbursements to the General Partner for the nine months ended September 30, 2003 of approximately $111,000. Note H - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the Court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the Settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the Court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the Court heard oral argument on the motions and denied them both in their entirety. On January 28, 2004, Objector filed his opening brief in his pending appeal. The General Partner is currently scheduled to file a brief in support of the order approving settlement and entering judgment thereto by April 23, 2004. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Discovery is currently underway. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. Item 8A. Controls and Procedures (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2003 that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act The Registrant has no directors or officers. The general partner of the Registrant is ConCap Equities, Inc (the "General Partner"). The names and ages of, as well as the positions and offices held by, the directors and officers of the General Partner are set forth below. There are no family relationships between or among any officers or directors. Peter K. Kompaniez 59 Director Martha L. Long 44 Director and Senior Vice President Harry G. Alcock 41 Executive Vice President Miles Cortez 60 Executive Vice President, General Counsel and Secretary Patti K. Fielding 40 Executive Vice President Paul J. McAuliffe 47 Executive Vice President and Chief Financial Officer Thomas M. Herzog 41 Senior Vice President and Chief Accounting Officer Peter K. Kompaniez has been Director of the General Partner since February 2004. Mr. Kompaniez has been Vice Chairman of the Board of Directors of AIMCO since July 1994 and was appointed President in July 1997. Mr. Kompaniez has also served as Chief Operating Officer of NHP Incorporated after it was acquired by AIMCO in December 1997. Effective April 1, 2004, Mr. Kompaniez resigned as President of AIMCO. Mr. Kompaniez will continue in his role as Director of the General Partner and Vice Chairman of AIMCO's Board and will serve AIMCO on a variety of special and ongoing projects in an operating role. Martha L. Long has been a Director and Senior Vice President of the General Partner since February 2004. Ms. Long has been with AIMCO since October 1998 and has served in various capacities. From 1998 to 2001, Ms. Long served as Senior Vice President and Controller of AIMCO and the General Partner. During 2002 and 2003, Ms. Long served as Senior Vice President of Continuous Improvement for AIMCO. Harry G. Alcock was appointed Executive Vice President of the General Partner in February 2004 and has been Executive Vice President and Chief Investment Officer of AIMCO since October 1999. Prior to October 1999 Mr. Alcock served as a Vice President of AIMCO from July 1996 to October 1997, when he was promoted to Senior Vice President-Acquisitions where he served until October 1999. Mr. Alcock has had responsibility for acquisition and financing activities of AIMCO since July 1994. Miles Cortez was appointed Executive Vice President, General Counsel and Secretary of the General Partner in February 2004 and of AIMCO in August 2001. Prior to joining AIMCO, Mr. Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver law firm, from December 1997 through September 2001. Patti K. Fielding was appointed Executive Vice President - Securities and Debt of the General Partner in February 2004 and of AIMCO in February 2003. Ms. Fielding previously served as Senior Vice President - Securities and Debt of AIMCO from January 2000 to February 2003. Ms. Fielding is responsible for securities and debt financing and the treasury department. Ms. Fielding joined AIMCO in February 1997 and served as Vice President - Tenders, Securities and Debt until January 2000. Paul J. McAuliffe has been Executive Vice President and Chief Financial Officer of the General Partner since April 2002. Mr. McAuliffe has served as Executive Vice President of AIMCO since February 1999 and was appointed Chief Financial Officer of AIMCO in October 1999. From May 1996 until he joined AIMCO, Mr. McAuliffe was Senior Managing Director of Secured Capital Corp. Thomas M. Herzog was appointed Senior Vice President and Chief Accounting Officer of the General Partner in February 2004 and of AIMCO in January 2004. Prior to joining AIMCO in January 2004, Mr. Herzog was at GE Real Estate, serving as Chief Accounting Officer & Global Controller from April 2002 to January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior to joining GE Real Estate, Mr. Herzog was at Deloitte & Touche LLP from 1990 until 2000, including a two-year assignment in the real estate national office. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that Martha L. Long meets the requirement of an "audit committee financial expert". The directors and officers of the General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing. Item 10. Executive Compensation Neither the directors nor the officers of the General Partner received any remuneration from the Registrant. Item 11. Security Ownership of Certain Beneficial Owners and Management Except as noted below, no person or entity was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership Units of the Registrant as of December 31, 2003. Entity Number of Units Percentage Cooper River Properties, LLC (an affiliate of AIMCO) 17,056.00 10.76% AIMCO IPLP, L.P. (an affiliate of AIMCO) 39,831.50 25.12% AIMCO Properties, L.P. (an affiliate of AIMCO) 26,604.00 16.77% Cooper River Properties LLC and AIMCO IPLP, L.P. (formerly known as Insignia Properties, L.P.) are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, South Carolina 29602. AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO and its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237. No director or officer of the General Partner owns any Units. Item 12. Certain Relationships and Related Transactions The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates of the General Partner on behalf of the Partnership. Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $146,000 and $150,000 for the years ended December 31, 2003 and 2002, respectively, which are included in operating expenses and loss from discontinued operations on the consolidated statements of operations included in "Item 7. Financial Statements". Affiliates of the General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $237,000 and $155,000 for the years ended December 31, 2003 and 2002, respectively. For the year ended December 31, 2003 the first three quarters were based on estimated amounts and in the fourth quarter of 2003, the reimbursements of accountable administrative expenses were adjusted based on actual costs. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $18,000 and $7,000 for the years ended December 31, 2003 and 2002, respectively. The construction management service fees are calculated based on a percentage of current additions to investment properties. These amounts are included in general and administrative expenses, investment properties, and gain from sale of discontinued operations. At December 31, 2003 approximately $71,000 of such fees were owed and are included in due to affiliate on the consolidated financial statements included in "Item 7. Financial Statements". The Partnership Agreement provides for a special management fee equal to 9% of the total distributions made to the limited partners from cash flow from operations to be paid to the General Partner for executive and administrative management services. During the year ended December 31, 2002, fees of approximately $20,000 were paid to the General Partner. This amount is included in general and administrative expenses on the consolidated statements of operations included in "Item 7. Financial Statements". During the year ended December 31, 2003, no special management fees were paid as no distributions from cash flow from operations were made. During the years ended December 31, 2003 and 2002, an affiliate of the General Partner advanced the Partnership approximately $70,000 and $34,000 to fund operations and payment of property taxes, respectively. Interest on the advances was charged at the prime rate plus 2%. Interest expense for the years ended December 31, 2003 and 2002 was approximately $3,000 and less than $1,000, respectively. During the year ended December 31, 2003, the Partnership repaid the advances of approximately $104,000 and the associated accrued interest of approximately $3,000 from proceeds from the sale of West Chase Apartments. As of December 31, 2003, there were no outstanding advances or associated accrued interest payable to affiliates of the General Partner. Subsequent to December 31, 2003 an affiliate of the General Partner advanced approximately $51,000 to the Partnership to pay audit fees. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the years ended December 31, 2003 and 2002, the Partnership was charged by AIMCO and its affiliates approximately $39,000 and $48,000, respectively, for insurance coverage and fees associated with policy claims administration. Pursuant to the Partnership Agreement, the General Partner is entitled to receive a commission equal to 3% of the aggregate disposition price of sold properties. The Partnership paid a commission of $108,000 to the General Partner related to the sale of Professional Plaza in 1999. This amount is subordinate to the limited partners receiving their original capital contributions plus a cumulative preferred return of 6% per annum of their adjusted capital investment, as defined in the Partnership Agreement. If the limited partners have not received these returns when the Partnership terminates, the General Partner will be required to return this amount to the Partnership. There was no commission paid to the General Partner related to the sale of West Chase Apartments in 2003. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 83,491.50 limited partnership units in the Partnership representing 52.65% of the outstanding Units at December 31, 2003. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 52.65% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: See Exhibit Index. b) Reports on Form 8-K filed during the quarter ended December 31, 2003: Current Report on Form 8-K dated September 29, 2003 and filed on October 3, 2003, disclosing the sale of West Chase Apartments to an unrelated third party. Item 14. Principal Accountant Fees and Services The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2004. Audit Fees. The Partnership paid to Ernst & Young LLP audit fees of approximately $47,000 and $42,000 for 2003 and 2002, respectively. Tax Fees. The Partnership paid to Ernst & Young LLP fees for tax services for 2003 and 2002 of approximately $16,000 and $19,000, respectively. 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/Martha L. Long Martha L. Long Senior Vice President By: /s/Thomas M. Herzog Thomas M. Herzog Senior Vice President and Chief Accounting Officer Date: March 26, 2004 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/Peter K. Kompaniez Director Date: March 26, 2004 Peter K. Kompaniez /s/Martha L. Long Director and Senior Vice Date: March 26, 2004 Martha L. Long President /s/Thomas M. Herzog Senior Vice President Date: March 26, 2004 Thomas M. Herzog and Chief Accounting Officer EXHIBIT INDEX Exhibit Number 3.1 Certificate of Limited Partnership, as amended to date (Exhibit 3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991, is incorporated herein by reference). 3.2 Partnership Agreement dated May 22, 1980 is incorporated by reference to Exhibit A to the Prospectus of the Registration dated August 17, 1981 as filed with the Commission pursuant to Rule 424(b) under the Act. 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). 10.12 Assignment and Assumption Agreement 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 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 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 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"). 10.17 Assignment and Assumption Agreement dated September 1, 1991, by and between CCP III Associates, Ltd. (Horn-Barlow Construction Management Agreement). (Incorporated by reference 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 Partnership and CCP III Associates, Ltd. (Metro Construction 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 Partnership and CCP III Associates, Ltd. (Hayman Construction Management Agreement). (Incorporated 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 (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. ("RSI") 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). 10.45 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). 10.50 Multifamily Note dated December 1, 1999 between CCP III, a California limited partnership, and GMAC Commercial Mortgage Corporation (West Chase Apartments note is filed with 10-KSB dated December 31, 1999). 10.51 Multifamily Note dated June 27, 2001 between Consolidated Capital Properties III, a California limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001). 10.52 Multifamily Note dated July 23, 2001 between ConCap Village Green Associates, Ltd., a Texas limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001). 10.53 Purchase and Sale Contract between Consolidated Capital Properties III and West Chase Apartments, LLC, dated August 13, 2003 (incorporated by reference to the Current Report on Form 8-K dated September 29, 2003). 19.1 Modified First Amended Plan of Reorganization 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 Reorganization 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, Inc., 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, Inc., 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, Inc., 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). 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this annual report on Form 10-KSB of Consolidated Capital Properties III; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 26, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of ConCap Equities, Inc., equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Thomas M. Herzog, certify that: 1. I have reviewed this annual report on Form 10-KSB of Consolidated Capital Properties III; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 26, 2004 /s/Thomas M. Herzog Thomas M. Herzog Senior Vice President and Chief Accounting Officer of ConCap Equities, Inc., equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10-KSB of Consolidated Capital Properties III (the "Partnership"), for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Thomas M. Herzog, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Martha L. Long Name: Martha L. Long Date: March 26, 2004 /s/Thomas M. Herzog Name: Thomas M. Herzog Date: March 26, 2004 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.