-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TTJNiGY9FJdM6lcxmez7TOkLQNHUzz5q6Cr2/dWgllI9ximkXRKWo/8kvGFkUdg9 4Ur+S/b10W4ZPOrH8NHuzg== 0000352983-95-000001.txt : 19951119 0000352983-95-000001.hdr.sgml : 19951119 ACCESSION NUMBER: 0000352983-95-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CENTRAL INDEX KEY: 0000352983 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942744492 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10831 FILM NUMBER: 95592503 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No. 312905, eff. 04/26/93.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-10831 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (Exact name of registrant as specified in its charter) California 94-2744492 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Registrant's telephone number (803) 239-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES BALANCE SHEET (Unaudited) (in thousands, except unit data)
September 30, December 31, 1995 1994 Assets Cash and cash equivalents $ 5,433 $ 1,554 Securities available for sale 5,264 8,329 Prepaid expenses and other assets 178 276 Due from affiliates -- 935 Net investment in master loan to affiliate 92,319 91,786 Investment properties: Land 1,053 1,053 Building and related personal property 5,236 5,202 6,289 6,255 Less accumulated depreciation (1,821) (1,505) 4,468 4,750 $107,662 $107,630 Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 62 $ 55 Tenant security deposits 33 47 Distributions payable 324 324 419 426 Partners' Capital (Deficit) General partner (293) (294) Limited partners (199,052 and 199,045 units outstanding at September 30, 1995, and December 31, 1994, respectively) 107,536 107,498 107,243 107,204 $107,662 $107,630
[FN] See Accompanying Notes to Financial Statements b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Rental income $ 360 $ 333 $1,117 $ 974 Interest income on investment in Master Loan to affiliate 967 752 2,503 1,661 Interest and dividend income on investments 146 174 364 509 Reduction of allowance for possible losses 533 -- 533 -- Total revenues 2,006 1,259 4,517 3,144 Expenses: Property operations 198 171 528 455 Depreciation 106 106 316 313 Administrative 168 88 607 347 Total expenses 472 365 1,451 1,115 Other income -- -- -- 56 Casualty gain -- -- 9 -- Net income $1,534 $ 894 $3,075 $2,085 Net income allocated to general partner (1%) $ 15 $ 9 $ 31 $ 21 Net income allocated to limited partners (99%) 1,519 885 3,044 2,064 $1,534 $ 894 $3,075 $2,085 Net income per limited partnership unit $ 7.63 $ 4.45 $15.29 $10.38
[FN] See Accompanying Notes to Financial Statements c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 200,342 $ 1 $200,342 $200,343 Partners' capital (deficit) at December 31, 1993 199,046 $ (287) $108,220 $107,933 Distributions -- (37) (3,686) (3,723) Net income for the nine months ended September 30, 1994 (1) 20 2,065 2,085 Partners' capital (deficit) at September 30, 1994 199,045 $ (304) $106,599 $106,295 Partners' capital (deficit) at December 31, 1994 199,045 $ (294) $107,498 $107,204 Distributions -- (30) (3,006) (3,036) Net income for the nine months ended September 30, 1995 7 31 3,044 3,075 Partners' capital (deficit) at September 30, 1995 199,052 $ (293) $107,536 $107,243
[FN] See Accompanying Notes to Financial Statements d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 1995 1994 Cash flows from operating activities: Net income $ 3,075 $ 2,085 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 316 313 Casualty gain (9) -- Reduction of allowance for possible losses (533) -- Change in accounts: Prepaid expenses and other assets 97 44 Interest receivable on master loan -- (221) Due from affiliates 935 -- Accounts payable and accrued expenses 17 (99) Tenant security deposits (14) (11) Net cash provided by operating activities 3,884 2,111 Cash flows from investing activities: Property improvements and replacements (34) (28) Purchase of securities available for sale (2,115) (3,392) Proceeds from sale of securities available for sale 5,180 5,320 Advances on master loan -- (40) Net cash provided by investing activities 3,031 1,860 Cash flows used in financing activities: Distributions (3,036) (3,717) Net cash used in financing activities (3,036) (3,717) Net increase in cash and cash equivalents 3,879 254 Cash and cash equivalents at beginning of period 1,554 222 Cash and cash equivalents at end of period $ 5,433 $ 476
[FN] See Accompanying Notes to Financial Statements e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1995. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1994. Investment in Master Loan Beginning in 1995, the Partnership adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan." Under the new standard, the 1995 allowance for credit losses related to loans that are identified for evaluation in accordance with Statement 114 is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Prior to 1995, the allowance for credit losses related to these loans was based on undiscounted cash flows or the fair value of the collateral for collateral dependent loans. Accounting Change - Investments In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Partnership adopted Statement 121 at September 30, 1995, and the adoption had no effect on the financial statements of the Partnership. Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Note B - Related Party Transactions Consolidated Capital Institutional Properties ("Partnership") paid property management fees based upon collected gross rental revenues for property management services as noted below for the nine month periods ended September 30, 1995 and 1994. For the nine months ended September 30, 1994, a portion of such property management fees were paid to Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, for day-to-day property management services and a portion was paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day property operations. In late December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day property management responsibilities for all of the Partnership's properties. Fees paid to affiliates of Insignia during the nine months ended September 30, 1995, and fees paid to Coventry and PSI for the nine months ended September 30, 1994, are reflected in the following table: For the Nine Months Ended September 30, 1995 1994 (in thousands) Property management fees $51 $48 The Partnership Agreement ("Agreement") also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its current and former affiliates, which includes Coventry for the nine months ended September 30, 1994, received reimbursements as reflected in the following table: For the Nine Months Ended September 30, 1995 1994 (in thousands) Reimbursement for services of affiliates $253 $159 At September 30, 1995, the Partnership had accrued approximately $15,000 of reimbursements to Insignia Mortgage & Investment Company ("IMIC") related to refinancing costs, which is included in Reimbursement for services of affiliates above. On July 1, 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The agent assumed the financial obligations to the affiliate of the General Partner, who receives payments on these obligations from the agent. The amount of the partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. Note C - Net Investment in Master Loan The net investment in master loan consists of the following: September 30, 1995 December 31, 1994 (in thousands) Master Loan funds advanced $124,116 $124,116 Accrued deferred basic interest 5,289 5,289 Accrued additional interest 4,829 4,829 Collection reserve (6,548) (6,548) 127,686 127,686 Less: allowance for possible loss (35,367) (35,900) Net investment in Master Loan $ 92,319 $ 91,786 At September 30, 1995, the recorded investment in Master Loan is considered to be impaired under Statement 114. The Partnership measured the impairment of the loan based upon the fair value of the collateral due to the fact repayment of the loan is expected to be provided solely by the collateral. For the nine months ended September 30, 1995, the Partnership recorded approximately $533,000 in income based upon an increase in the fair value of the collateral. Interest due to the Partnership pursuant to the terms of the Master Loan Agreement, but not recognized in the income statements, totaled approximately $20.2 and $18.6 million for the nine months ended September 30, 1995 and 1994, respectively. At September 30, 1995, and December 31, 1994, such cumulative unrecognized interest totalling approximately $130 million and $110.8 million was not included in the balance of the investment in Master Loan. In February 1994, the Partnership advanced $40,000 to Consolidated Capital Equity Partners, L.P. ("CCEP") as an advance on the Master Loan. CCEP then advanced $40,000 to New Carlton House Partners as an advance on the note receivable secured by the Carlton House Apartment and Office Building ("Carlton House") to pay the remaining balance of 1993 property taxes. Note D - Other Income In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding. These claims related to Southmark Corporation's activities while it exercised control (directly, or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the affiliated partnerships' allowed claim at $11 million, in the aggregate. In March 1994, the Partnership received 909 shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,651 shares of Southmark Corporation New Common Stock with an aggregate market value on the date of receipt of $6,690 and $49,847 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. Note E - Commitment The Partnership is required by the Agreement to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital, as defined in the Agreement. In the event expenditures are made from this reserve, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash and cash equivalents and securities available for sale, totalling approximately $10.7 million, were greater than the reserve requirement of approximately $8.0 million at September 30, 1995. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of this property for the nine months ended September 30, 1995 and 1994: Average Occupancy Property 1995 1994 The Loft Apartments Raleigh, North Carolina 91% 96% The General Partner attributes the decrease in occupancy to increased market competition and increased rental rates. The Partnership's net income for the nine months ended September 30, 1995, was approximately $3,075,000 as compared to approximately $2,085,000 for the nine months ended September 30, 1994. The Partnership realized net income of approximately $1,534,000 for the three months ended September 30, 1995, as compared to net income of approximately $894,000 for the three months ended September 30, 1994. The increase in net income for the three and nine month periods ended September 30, 1995, is due primarily to the reduction of the allowance for possible losses of the Master Loan as determined under SFAS 114 and an increase in interest income on the investment in Master Loan. Also, increasing net income is an increase in rental income due to higher rental rates which more than offset the increase in vacancy loss. Also, the increase in net income for the nine months ended September 30, 1995, is attributable to $9,000 in casualty income related to insurance proceeds from prior year damages. Offsetting these increases in net income is a decrease in interest and dividend income on investments due to lower investment balances as compared to the prior year. For the three months ended September 30, 1995, interest income on the Master Loan increased due to an additional payment that was made to the Partnership although no payment was required (interest payments are required based on the cash flow of the properties collateralized by the Master Loan). Also, property operations expenses for the three and nine months ended September 30, 1995, increased due to higher maintenance expenses. The increase in maintenance expenses is the result of increased interior and exterior painting and other miscellaneous maintenance work being done at the property. Administrative expenses increased for the three and nine months ended September 30, 1995. For the three months ended September 30, 1995, this increase was a result of increased insurance costs and printing costs related to printing additional 10-K's for investors. The increase for the nine months ended September 30, 1995, is due to the items noted above and to expenses related to the combined efforts of the Dallas and Greenville offices during the transition period that ended June 30, 1995. The increased costs related to the transition efforts were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. These expenses decreased in the third quarter of 1995 as the transition efforts were completed. Other income realized in the nine months ended September 30, 1994, is due to the receipt of its pro rata share of the claims filed in Southmark's Chapter 11 bankruptcy proceedings. (See Note D). As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At September 30, 1995, the Partnership reported cash of approximately $5,433,000 versus approximately $476,000 for the corresponding period in 1994. Net cash provided by operating activities increased primarily due to an increase in net income, a decrease in the amount due from affiliates, and a decrease in interest receivable on the Master Loan offset partially by the reduction of the allowance for possible losses of the Master Loan. The decrease in amounts due from affiliates is the result of the Master Loan interest payment received from Consolidated Capital Equity Partners, L.P. during the nine months ended September 30, 1995. Net cash provided by investing activities increased primarily due to a decrease in the purchase of securities available for sale. Net cash used in financing activities decreased due to a decrease in distributions as compared to the prior year. The Partnership and CCEP are discussing the financing of certain capital improvements that are planned for various properties owned by CCEP which are collateral for the Master Loan. Also, they are discussing certain transactions concerning the Carlton House Note, which CCEP holds. The note held by CCEP is collateral for the Master Loan. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. Distributions of approximately $1,485,000 or $7.46 per Unit were made to the limited partners in both September and March 1995. A matching distribution of approximately $15,000 was made to the General Partner for each distribution. In July 1995, a distribution of approximately $36,000 was made to pay the limited partners' income taxes due to the State of North Carolina for income generated by the Partnership's investment property located in North Carolina and a matching distribution of approximately $350 was made to the General Partner. Future cash distributions will depend on the levels of cash generated from operations, Master Loan interest income, capital expenditure requirements, property sales, and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: S-K Reference Number Description 27 Financial Data Schedule is filed as an exhibit to this report. 28.1 Consolidated Capital Equity Partners, L.P., unaudited financial statements for the nine months ended September 30, 1995 and 1994. (b) Reports on Form 8-K: None filed during the quarter ended September 30, 1995. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES By: CONCAP EQUITIES, INC. General Partner By:/s/ Carroll D. Vinson Carroll D. Vinson President By:/s/ Robert D. Long, Jr. Robert D. Long, Jr. Controller and Principal Accounting Officer Date: November 14, 1995 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Captial Institutional Properties 1995 Third Quarter 10-Q and is qualified in its entirety be reference to such 10-Q. 0000352983 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 1,000 9-MOS DEC-31-1995 SEP-30-1995 5,433 5,264 92,319 0 0 0 6,289 (1,821) 107,662 0 0 0 0 0 107,243 107,662 0 4,517 0 0 1,451 0 0 3,075 0 3,075 0 0 0 3,075 15.29 0 The Registrant has an unclassified balance sheet.
EX-28.1 3 EXHIBIT 28.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 EXHIBIT 28.1 (Continued) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands)
September 30, December 31, 1995 1994 Assets Cash $ 2,229 $ 3,393 Securities available for sale -- 195 Prepaid expenses and other assets 3,000 1,254 Investments in limited partnerships 1,508 2,508 Investment properties: Land 10,452 10,831 Building and related personal equipment 92,882 93,660 103,334 104,491 Less accumulated depreciation (67,149) (63,288) 36,185 41,203 Real estate assets of property in-substance foreclosed 21,251 20,722 Less accumulated depreciation (1,906) (1,122) 19,345 19,600 $ 62,267 $ 68,153 Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 3,131 $ 2,038 Mortgage notes and interest payable 4,250 4,700 Master loan and interest payable 258,653 238,486 Due to affiliates 51 969 266,085 246,193 Partners' Capital (Deficit) General partner (2,038) (1,780) Limited partners (201,780) (176,260) (203,818) (178,040) $ 62,267 $ 68,153
[FN] See Accompanying Notes to Consolidated Financial Statements EXHIBIT 28.1 (Continued) b) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Rental income $ 6,695 $ 5,766 $ 18,824 $ 16,964 Interest and distribution income on investments 43 34 101 50 Total revenues 6,738 5,800 18,925 17,014 Expenses: Property operations 4,606 4,277 12,225 11,814 Depreciation and amortization 1,655 1,589 4,862 4,568 Interest 7,655 6,945 22,985 20,629 Administrative 169 261 843 650 Write-down of investment properties and investment in limited partnerships 3,814 -- 3,814 -- Total expenses 17,899 13,072 44,729 37,661 Loss on disposition of property (10) -- (19) -- Casualty gain -- -- 45 -- Net loss $(11,171) $(7,272) $(25,778) $(20,647) Net loss allocated to general partner (1%) $ (112) $ (73) $ (258) $ (206) Net loss allocated to limited partners (99%) (11,059) (7,199) (25,520) (20,441) $(11,171) $(7,272) $(25,778) $(20,647)
[FN] See Accompanying Notes to Consolidated Financial Statements EXHIBIT 28.1 (Continued) c) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) For the Nine Months Ended September 30, 1995 and 1994 (in thousands)
General Limited Partners Partners Total Partners' deficit at December 31, 1993 $ (1,507) $(149,178) $(150,685) Net loss for the nine months ended September 30, 1994 (206) (20,441) (20,647) Partners' deficit at September 30, 1994 $ (1,713) $(169,619) $(171,332) Partners' deficit at December 31, 1994 $ (1,780) $(176,260) $(178,040) Net loss for the nine months ended September 30, 1995 (258) (25,520) (25,778) Partners' deficit at September 30, 1995 $ (2,038) $(201,780) $(203,818)
[FN] See Accompanying Notes to Consolidated Financial Statements EXHIBIT 28.1 (Continued) d) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 1995 1994 Cash flows from operating activities: Net loss $(25,778) $(20,647) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,862 4,568 Loss on disposition of property 19 -- Write-down of investment properties and investment in limited partnerships 3,814 -- Casualty gain (45) -- Change in accounts: Prepaid expenses and other assets (1,817) (247) Accounts payable and accrued expenses 1,151 428 Interest on master loan 20,167 18,606 Due to affiliates (918) 230 Interest payable 11 -- Net cash provided by operating activities 1,466 2,938 Cash flows from investing activities: Property improvements and replacements (2,365) (1,736) Proceeds from sale of real estate -- 130 Proceeds from sale of securities available for sale 195 -- Purchase of securities available for sale -- (195) Net cash used in investing activities (2,170) (1,801) Cash flows used in financing activities: Advances on Master Loan -- 40 Payments on notes payable (460) (480) Net cash used in financing activities (460) (440) Net (decrease) increase in cash (1,164) 697 Cash at beginning of period 3,393 2,429 Cash at end of period $ 2,229 $ 3,126 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,721 $ 1,837
[FN] See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1995. Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Consolidation Consolidated Capital Equity Partners, L.P. ("Partnership") owns a 75% interest in a limited partnership ("Western Can, Ltd.") which owns 444 De Haro, an office building in San Francisco, California. The Partnership's investment in Western Can, Ltd. is consolidated in the Partnership's financial statements. No minority interest liability has been reflected for the 25% minority interest because Western Can, Ltd. has a net capital deficit and no minority liability exists with respect to the Partnership. The assets and liabilities at September 30, 1995, and December 31, 1994, and operations for the nine months ended September 30, 1995 and 1994, of Carlton House are consolidated in the Partnership's financial statements pursuant to accounting guidelines regarding notes receivable in-substance foreclosed. Investments in Limited Partnerships The investments in limited partnerships represent certain interest in three affiliated limited partnerships that were contributed by EP's general partners to the Partnership. These investments are stated at the lower of estimated fair value of the interests at the time of contribution to the Partnership or the current estimated fair value of the interests. The Partnership wrote this investment down $1 million to its estimated fair value during the third quarter of 1995. Accounting Change - Investments In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Partnership adopted Statement 121 at September 30, 1995. Note B - Related Party Transactions The Partnership paid property management fees based upon collected gross rental revenues for property management services in each of the nine month periods ended September 30, 1995 and 1994. For the nine months ended September 30, 1994, a portion of such property management fees were paid to the property management companies performing day-to-day property management services and a portion was paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day property operations. Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, provided day-to-day property management responsibilities for four of the Partnership's properties under the same management fee arrangement as the unaffiliated management companies. In late December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day property management responsibilities for all of the Partnership's properties. Fees paid to affiliates of Insignia during the nine months ended September 30, 1995, and fees paid to Coventry and PSI for the nine months ended September 30, 1994, are reflected in the following table. Also, the Partnership is subject to an Investment Advisory Agreement between the Partnership and an affiliate of ConCap Holdings, Inc. ("CHI"). This agreement provides for an annual fee, payable in monthly installments, to an affiliate of CHI for advising and consulting services for the Partnership's properties. Advisory fees paid pursuant to this agreement are reflected in the following table: For the Nine Months Ended September 30, 1995 1994 (in thousands) Property management fees $966 $326 Investment advisory fees 199 193 Lease commissions 186 70 Property management fees increased for the nine months ended September 30, 1995, compared to the nine months ended September 30, 1994, due to the fact that all but four of the Partnership's investment properties were managed by unaffiliated management companies during the nine months ended September 30, 1994. All of the Partnership's investment properties were managed by an affiliate of Insignia during the nine months ended September 30, 1995. The Partnership Agreement ("Agreement") also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its current and former affiliates, which includes Coventry, received reimbursements for the nine months ended September 30, 1995 and 1994, as reflected in the following table: For the Nine Months Ended September 30, 1995 1994 (in thousands) Reimbursement for services of affiliates $362 $227 Note B - Related Party Transactions (continued) Reimbursements for services of affiliates increased during the nine months ended September 30, 1995, compared to the nine months ended September 30, 1994, due to increased expense reimbursements related to the combined efforts of the Dallas and Greenville offices during the transition period that ended June 30, 1995. These increased costs related to the transition efforts which were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. Administrative expenses began decreasing in the third quarter of 1995 as the transition efforts are now complete. In addition to the compensation and reimbursements described above, interest payments are made to and loan advances are received from Consolidated Capital Institutional Properties ("CCIP") pursuant to the Master Loan Agreement, which is described more fully in the 1994 Annual Report. Such interest payments totalled approximately $2.5 million and approximately $1.5 million for the nine months ended September 30, 1995 and 1994, respectively. The Partnership received advances under the Master Loan Agreement totalling $40,000 in February 1994. (See further discussion in Note C). No advances under the Master Loan Agreement were made during the nine months ended September 30, 1995. On July 1, 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner, who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. Note C - Master Loan and Accrued Interest Payable The Master Loan principal and accrued interest payable balances at September 30, 1995, and December 31, 1994, are $258.7 million and $238.5 million, respectively. Terms of Master Loan Agreement Under the terms of the Master Loan Agreement, interest accrues at a fluctuating rate per annum adjusted annually on July 15 by the percentage change in the U.S. Department of Commerce Implicit Price Deflator for the Gross National Product subject to an interest rate ceiling of 12.5%. The interest rates for each of the three and nine month periods ended September 30, 1995 and 1994 was 12.5%. Interest payments are currently payable quarterly in an amount equal to "Excess Cash Flow", generally defined in the Master Loan Agreement as net cash flow from operations after third-party debt service. If such Excess Cash Flow payments are less than the current accrued interest during the quarterly period, the unpaid interest is added to principal, compounded annually, and is payable at the loan's maturity. If such Excess Cash Flow payments are greater than the currently payable interest, the excess amount is applied to the principal balance of the loan. Any net proceeds from sale or refinancing of any of the Partnership's properties are paid to CCIP under the terms of the Master Loan Agreement. The Master Loan Agreement matures in November 2000. Note C - Master Loan and Accrued Interest Payable - continued Effective January 1, 1993, the Partnership and CCIP amended the Master Loan Agreement to stipulate that Excess Cash Flow would be computed net of capital improvements. Such expenditures were formerly funded from advances on the Master Loan from CCIP to the Partnership. This amendment and change in the definition of Excess Cash Flow has had the effect of reducing Master Loan payments to CCIP by the amount of the Partnership's capital expenditures since such amounts were previously excluded from Excess Cash Flow. The amendment will have no effect on the computation of interest expense on the Master Loan for the Partnership. In February 1994, the Partnership advanced approximately $589,000 to New Carlton House Partners ("NCHP"), as an advance on the note receivable ("Carlton House Note") secured by a deed of trust on the Carlton House Apartment and Office Building ("Carlton House"), to pay Carlton House's 1994 property taxes. In February 1994, CCIP advanced $40,000 to the Partnership as an advance on the Master Loan. CCEP then advanced $40,000 to NCHP as an advance on the Carlton House Note to pay the remaining balance of 1993 property taxes. The notes payable are all nonrecourse, collateralized by deeds of trust on the real property. The notes payable bear interest at rates ranging from 8.0% to 10.5% per annum and mature between 1998 and 2007. Note D - Note Receivable Deemed In-Substance Foreclosed The Partnership holds the Carlton House Note which is secured by a deed of trust on Carlton House with a scheduled maturity in 1995. According to the note terms, interest accrues at 10% and compounds monthly on principal plus accrued but unpaid interest. The note receivable has been in default since 1991. As described more fully in the 1994 audited financial statements, the required debt service payments were reduced to only the amount of net cash flow from the Carlton House. In 1995 and 1994 no interest income was recognized as no cash related to the note receivable was received by the Partnership. As more fully described in the 1994 audited financial statements, the Carlton House Note is deemed in-substance foreclosed. Summarized below are the assets, liabilities, partner's equity and the results of operations of the Carlton House that are included in the Partnership's financial statements for the nine months ended September 30, 1995 and 1994, prepared on the same basis as the Partnership's financial statements. Any intercompany balances between the Partnership and the Carlton House have been eliminated in the Partnership's consolidated financial statements and the summarized financial statements set forth below: September 30, December 31, 1995 1994 Assets (in thousands) Cash and cash equivalents $ 1,086 $ 1,519 Securities available for sale -- 195 Prepaid expenses and other assets 644 103 Real estate: Land 3,805 3,805 Building and improvements 17,446 16,917 21,251 20,722 Less accumulated depreciation (1,906) (1,122) 19,345 19,600 Total assets $ 21,075 $ 21,417 Note D - Note Receivable Deemed In-Substance Foreclosed - continued September 30, December 31, 1995 1994 (in thousands) Liabilities and Partners' Deficit Master loan and interest payable $ 17 $ 16 Due to affiliates 763 763 Other liabilities 578 467 Total liabilities 1,358 1,246 Partners' equity 19,717 20,171 Total liabilities and partners' equity $ 21,075 $ 21,417 For the Nine Months Ended September 30, 1995 1994 (in thousands) Revenues: Rental revenue $ 4,502 $ 3,498 Interest income on investments 22 -- Total revenues 4,524 3,498 Expenses: Property operations 3,358 3,136 Depreciation and amortization 791 672 Interest 731 3 Administrative 98 25 Total expenses 4,978 3,836 Net income (loss) $ (454) $ (338) Note E - Accounting for the Impairment of Long-Lived Assets At September 30, 1995, the Partnership adopted FASB Statement 121. Estimated fair value of the investment properties was determined using net operating income of the property capitalized at a rate deemed reasonable for the type of property, adjusted for market conditions, physical condition of the property and other factors to assess whether any permanent impairment in value has occurred. Estimated fair value of the investments in limited partnerships was determined using the estimated value of the limited partnership units in each partnership and the estimated future distributions. As a result of the Partnership's continuing evaluation of its investments, an impairment loss of approximately $3.8 million was recorded based on the individual property's operating results and expected cash flows and the estimated value of the limited partnership units owned by the Partnership. -----END PRIVACY-ENHANCED MESSAGE-----