-----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, UiyUE4PjVMHzzXTC6fy1UQDypqA5xzv+l1ulL5oZHROd0OzvY0KGeTv+CBWr3R7P LqQveARQuV1AMwsXONhgFg== 0000352983-96-000002.txt : 19960507 0000352983-96-000002.hdr.sgml : 19960507 ACCESSION NUMBER: 0000352983-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960506 SROS: NONE 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: 96556488 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 March 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.........to......... Commission file number 0-10831 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 (864) 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 CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except unit data) March 31, December 31, 1996 1995 Assets Cash and cash equivalents: Unrestricted $ 10,740 $ 26,122 Restricted--tenant security deposits 332 335 Securities available for sale 5,264 5,264 Other assets 1,332 1,444 Net investment in Master Loan 95,438 95,246 Less: Allowance for impairment loss (41,478) (41,478) 53,960 53,768 Investment properties: Land 3,620 3,620 Building and related personal property 18,236 17,756 21,856 21,376 Less accumulated depreciation (2,202) (1,958) 19,654 19,418 $ 91,282 $106,351 Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 434 $ 368 Tenant security deposits 315 323 Distributions payable 324 324 Mortgage note and interest payable 4,560 4,560 Partners' Capital (Deficit) General partner (369) (358) Limited partners (199,052 units outstanding at March 31, 1996, and December 31, 1995, respectively) 86,018 101,134 85,649 100,776 $ 91,282 $106,351 See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 1,936 $ 323 Interest income on investment in Master Loan to affiliate -- 1,536 Other income 377 128 Total revenues 2,313 1,987 Expenses: Operating 1,499 176 Depreciation 245 105 General and administrative 116 196 Interest 81 -- Total expenses 1,941 477 Net income $ 372 $ 1,510 Net income allocated to general partner (1%) $ 4 $ 15 Net income allocated to limited partners (99%) 368 1,495 $ 372 $ 1,510 Net income per limited partnership unit $ 1.85 $ 7.51 See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED 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, 1994 199,045 $ (294) $107,498 $107,204 Distributions to partners (15) (1,485) (1,500) Net income for the three months ended March 31, 1995 15 1,495 1,510 Partners' capital (deficit) at March 31, 1995 199,045 $ (294) $107,508 $107,214 Partners' capital (deficit) at December 31, 1995 199,052 $ (358) $101,134 $100,776 Distributions to partners (15) (15,484) (15,499) Net income for the three months ended March 31, 1996 4 368 372 Partners' capital (deficit) at March 31, 1996 199,052 $ (369) $ 86,018 $ 85,649 See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income $ 372 $ 1,510 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 245 105 Amortization of loan costs and lease commissions 4 -- Change in accounts: Restricted cash 4 -- Other assets 106 (31) Interest receivable on master loan -- (1,536) Accounts payable and accrued expenses 78 88 Tenant security deposit liabilities (8) (13) Net cash provided by operating activities 801 123 Cash flows from investing activities: Property improvements and replacements (480) (5) Purchase of securities available for sale -- (1,097) Proceeds from sale of securities available for sale -- 3,663 Advances on Master Loan (367) -- Principal receipts on Master Loan 175 -- Net cash (used in) provided by investing activities (672) 2,561 Cash flows from financing activities: Distributions to partners (15,499) (1,500) Mortgage principal payments (12) -- Net cash used in financing activities (15,511) (1,500) Net (decrease) increase in cash and cash equivalents (15,382) 1,184 Cash and cash equivalents at beginning of period 26,122 1,554 Cash and cash equivalents at end of period $ 10,740 $ 2,738 Supplemental disclosure of cash flow information: Cash paid for interest $ 67 $ -- See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated 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 month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K for the year ended December 31, 1995, for Consolidated Capital Institutional Properties ("Partnership"). Certain reclassifications have been made to the 1995 information to conform to the 1996 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 three month periods ended March 31, 1996 and 1995. Fees paid to affiliates of Insignia during the three month periods ended March 31, 1996 and 1995, are included in operating expenses on the consolidated statement of operations and are reflected in the following table. 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. These reimbursements are included in general and administrative expense on the consolidated statement of operations. The General Partner, and its current affiliates, received reimbursements as reflected in the following table: For the Three Months Ended March 31, 1996 1995 (in thousands) Property management fees $ 97 $ 17 Reimbursement for services of affiliates 58 115 Property management fees increased during the three months ended March 31, 1996, as compared to the three months ended March 31, 1995, due to the addition of the Carlton House Apartment and Office Building on November 30, 1995. Reimbursements for services of affiliates decreased during the three months ended March 31, 1996, as compared to the three months ended March 31, 1995. The three months ended March 31, 1995, included the additional costs associated with the combined efforts of the Dallas and Greenville offices during the transition period that ended June 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 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 Interest due to the Partnership pursuant to the terms of the Master Loan Agreement, but not recognized in the income statements, totaled approximately $7.4 million and $6.0 million for the three months ended March 31, 1996 and 1995, respectively. At March 31, 1996, and December 31, 1995, such cumulative unrecognized interest totaling approximately $145.6 million and $138.2 million was not included in the balance of the investment in Master Loan. During the first quarter of 1996, the Partnership advanced approximately $367,000 to Consolidated Capital Equity Partners, L.P. ("CCEP") as an advance on the Master Loan. CCEP used the funds to pay for deferred maintenance and capital improvements on the properties which collateralize the Master Loan. A portion of the advance was used to pay for additional expenses related to the December 1995 financing of six of CCEP's investment properties. Also, a portion of the advance was used to pay taxes on behalf of 1801 Tower Inc., a wholly owned subsidiary. During the first quarter of 1996, the Partnership received approximately $175,000 as principal payments on the Master Loan. Approximately $101,000 was due to the return of a real estate tax escrow set up at the time of the December 1995 financing of a certain CCEP investment property. This escrow was held until CCEP was able to provide proof of payment to the mortgage lender. Cash received on certain investments by CCEP, which are required to be transferred to the Partnership per the agreement, accounted for approximately $74,000. Note D - 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 (at market), totaling approximately $16.3 million, were greater than the reserve requirement of approximately $7.3 million at March 31, 1996. Note E - Subsequent Events Subsequent to March 31, 1996, the Carlton House Apartment and Office Building was renamed "The Sterling." ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership's investment properties consists of two properties, The Lofts and The Carlton House Apartment and Office Building ("Carlton House"). The Carlton House is a multiple-use facility which consists of an apartment complex and commercial space. This property was transferred from CCEP to a wholly owned subsidiary of the Partnership on November 30, 1995. The operations of Carlton House had a significant impact on the results of operations of the Partnership for the three months ended March 31, 1996, with revenues of approximately $1,586,000 and expenses of approximately $1,460,000. Subsequent to March 31, 1996, the Carlton House was renamed "The Sterling." The following table sets forth the average occupancies of the properties for the three months ended March 31, 1996 and 1995: Average Occupancy Property 1996 1995 The Loft Apartments 92% 92% Raleigh, North Carolina The Carlton House (residential) 87% 83% The Carlton House (commercial) 64% 63% Philadelphia, Pennsylvania Results of Operations The Partnership's net income for the three months ended March 31, 1996, was approximately $372,000 as compared to net income of approximately $1,510,000 for the three months ended March 31, 1995. The decrease in net income is primarily due to the fact there was no interest income recorded on investment in Master Loan to affiliate during the three months ended March 31, 1996. This decrease is the result of decreased operations at the affiliated properties. Offsetting this decrease in income was the transfer of The Carlton House from CCEP to the Partnership which resulted in net income for the Partnership of approximately $126,000 for the three months ended March 31, 1996. The transfer caused significant increases in rental income, operating expenses, and depreciation. Also, the Lofts experienced increased operating expenses during the three months ended March 31, 1996, due to major landscaping work done at the property. General and administrative expenses decreased during the three months ended March 31, 1996, as compared to the three months ended March 31, 1995, as a result of the additional costs associated with 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 1994 year-end reporting function including K-1 preparation and distribution. Interest expense increased as a result of the financing of The Lofts in December 1995. This property did not have a mortgage balance prior to December 1995 and as a result had no interest expense during the three months ended March 31, 1995. Other income increased during the three months ended March 31, 1996, due to the investment of the proceeds received from the December 1995 financing of The Lofts and the principal payments received on the Master Loan in December 1995. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 1996, the Partnership had unrestricted cash of approximately $10,740,000 versus approximately $2,738,000 at March 31, 1995. Net cash provided by operating activities increased primarily due to the decrease in interest receivable on the Master Loan. Offsetting this increase was a decrease in net income as explained above. Cash used in investing activities increased due to cash received in 1995 from the sale of securities available for sale and an increase in property improvements and replacements during the three months ended March 31, 1996. Net cash used in financing activities increased due to increased distributions paid to the partners as well as principal payments on the mortgage note for The Lofts. The Partnership has budgeted for the completion of approximately $14 million of deferred maintenance and capital improvements to The Carlton House during 1996 and 1997. These programs will be funded using a portion of the cash received from CCEP in 1995 on debt service on the Master Loan and cash flow from property operations, if available, as well as cash and cash equivalents on hand. The major capital improvements are for exterior renovation, elevator rehabilitation, residential and commercial common area renovations. 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. The mortgage indebtedness of approximately $4,560,000 requires monthly principal and interest payments and requires a balloon payment on December 1, 2005, at which time the property will either be refinanced or sold. Distributions of approximately $15,484,000 or $77.79 per Unit were made to the limited partners in March 1996. A matching distribution of approximately $15,000 was made to the General Partner. A distribution of approximately $1,485,000 or $7.46 per Unit was made to the limited partners in March 1995. A matching distribution of approximately $15,000 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. The Partnership is required by the Partnership Agreement to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital, as defined by the Partnership Agreement. Reserves, including cash and cash equivalents and securities available for sale, totaling approximately $16.3 million, were greater than the reserve requirement of $7.3 million as of March 31, 1996. CCEP Property Operations The Partnership invested approximately $367,000 in CCEP during the three months ended March 31, 1996, as additional advances under the Master Loan. CCEP used the funds to pay for deferred maintenance and capital improvements on the properties which collateralize the Master Loan. A portion of the advance was used to pay for additional expenses related to the December 1995 financing of six of CCEP's investment properties. Also, a portion of the advance was used to pay taxes on behalf of 1801 Tower Inc., a wholly owned subsidiary. For the three months ended March 31, 1996, CCEP's net loss totaled approximately $7.6 million on total revenues of approximately $4.9 million. CCEP recognizes interest expense on the New Master Loan Agreement obligation according to the note terms, although payments to the Partnership are required only to the extent of Excess Cash Flow, as defined therein. During the three months ended March 31, 1996, CCEP's statement of operations includes total interest expense attributable to the Master Loan of $7.4 million, all of which represents interest accrued in excess of required payments. CCEP is expected to continue to generate operating losses as a result of such interest accruals and noncash charges for depreciation. During the three months ended March 31, 1996, the Partnership received approximately $175,000 as principal payments on the Master Loan. Approximately $101,000 was due to the return of a real estate tax escrow set up at the time of the December 1995 financing of a certain CCEP investment property. This escrow was held until CCEP was able to provide proof of payment to the mortgage lender. Cash received on certain investments by CCEP, which are required to be transferred to the Partnership per the agreement, accounted for approximately $74,000. 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. 99.1 Consolidated Capital Equity Partners, L.P., unaudited financial statements for the three months ended March 31, 1996 and 1995. (b) Reports on Form 8-K: None filed during the quarter ended March 31, 1996. 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. Vice President/CAO Date: May 6, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties 1996 First Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000352983 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 1,000 3-MOS DEC-31-1996 MAR-31-1996 10,740 5,264 95,438 41,478 0 0 21,856 2,202 91,282 0 4,560 0 0 0 85,649 91,282 0 2,313 0 0 1,941 0 81 0 0 0 0 0 0 372 1.85 0 The Registrant has an unclassified balance sheet.
EX-99.1 3 EXHIBIT 99.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 EXHIBIT 99.1 (Continued) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands)
March 31, December 31, 1996 1995 Assets Cash and cash equivalents $ 1,914 $ 2,225 Investments in limited partnerships 387 460 Other assets 5,122 5,725 Investment properties: Land 10,452 10,452 Building and related personal property 95,990 94,906 106,442 105,358 Less accumulated depreciation (69,391) (68,167) 37,051 37,191 $ 44,474 $ 45,601 Liabilities and Partners' Deficit Accounts payable and accrued liabilities $ 1,909 $ 3,035 Mortgage notes and interest payable 25,039 25,050 Master loan and interest payable 241,083 233,490 Partners' Deficit General partner (2,235) (2,159) Limited partners (221,322) (213,815) (223,557) (215,974) $ 44,474 $ 45,601 See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) b) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 4,842 $ 6,054 Other income 15 15 Total revenues 4,857 6,069 Expenses: Operating 3,097 3,851 General and administrative 157 216 Depreciation and amortization 1,319 1,577 Interest 7,855 8,807 Total expenses 12,428 14,451 Loss on disposition of property (12) (7) Casualty gain -- 45 Net loss $ (7,583) $ (8,344) Net loss allocated to general partner (1%) $ (76) $ (83) Net loss allocated to limited partners (99%) (7,507) (8,261) $ (7,583) $ (8,344) See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) c) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) For the Three Months Ended March 31, 1996 and 1995 (in thousands)
General Limited Partners Partners Total Partners' deficit at December 31, 1994 $ (1,780) $(176,260) $(178,040) Net loss for the three months ended March 31, 1995 (83) (8,261) (8,344) Partners' deficit at March 31, 1995 $ (1,863) $(184,521) $(186,384) Partners' deficit at December 31, 1995 $ (2,159) $(213,815) $(215,974) Net loss for the three months ended March 31, 1996 (76) (7,507) (7,583) Partners' deficit at March 31, 1996 $ (2,235) $(221,322) $(223,557) See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) d) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net loss $ (7,583) $ (8,344) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,338 1,577 Loss on disposition of property 12 7 Casualty gain -- (45) Change in accounts: Other assets 630 (935) Accounts payable and accrued liabilities (1,127) 886 Interest on Master Loan 7,401 7,556 Interest payable 64 1,158 Net cash provided by operating activities 735 1,860 Cash flows from investing activities: Property improvements and replacements (1,162) (441) Proceeds from sale of securities available for sale -- 195 Net cash used in investing activities (1,162) (246) Cash flows from financing activities: Advances on Master Loan 367 -- Principal payments on Master Loan (175) -- Principal payments on notes payable (74) (136) Loan costs paid (2) -- Net cash provided by (used in) financing activities 116 (136) Net (decrease) increase in cash and cash equivalents (311) 1,478 Cash and cash equivalents at beginning of period 2,225 3,393 Cash and cash equivalents at end of period $ 1,914 $ 4,871 Supplemental disclosure of cash flow information: Cash paid for interest $ 371 $ 92 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 consolidated 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 month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Consolidation Consolidated Capital Equity Partners, L.P. ("CCEP") owns a 75% interest in a limited partnership ("Western Can, Ltd.") which owns 444 De Haro, an office building in San Francisco, California. CCEP's investment in Western Can, Ltd. is consolidated in CCEP'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 CCEP. The operations for the three months ended March 31, 1995, of Carlton House are consolidated in CCEP's financial statements pursuant to accounting guidelines regarding notes receivable in-substance foreclosed. Carlton House was transferred to a wholly owned subsidiary of Consolidated Capital Institutional Properties ("CCIP") in a series of transactions on November 30, 1995. Note B - Related Party Transactions CCEP paid property management fees based upon collected gross rental revenues for property management services in each of the three month periods ended March 31, 1996 and 1995. Fees paid to affiliates of Insignia during the three month periods ended March 31, 1996 and 1995, are included in operating expenses on the consolidated statement of operations and are reflected in the following table. The Partnership Agreement ("Agreement") also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of CCEP activities. These reimbursements are included in general and administrative expense on the consolidated statement of operations. The General Partner, and its current affiliates, received reimbursements for the three months ended March 31, 1996 and 1995, as reflected in the following table. Also, CCEP 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 CCEP's properties. Advisory fees paid pursuant to this agreement are included in general and administrative expenses on the consolidated statement of operations and are reflected in the following table: For the Three Months Ended March 31, 1996 1995 (in thousands) Property management fees $ 248 $314 Investment advisory fees 45 64 Lease commissions 7 -- Reimbursement for services of affiliates 113 126 The decrease in property management fees for the three months ended March 31, 1996, as compared to the three months ended March 31, 1995, is the result of the transfer of The Carlton House to CCIP on November 30, 1995. In addition to the compensation and reimbursements described above, interest payments are made to and loan advances are received from CCIP pursuant to the Master Loan Agreement, which is described more fully in the 1995 Annual Report. No interest payments were made during the three month periods ended March 31, 1996 and 1995. (See further discussion in "Note C"). Advances of approximately $367,000 were made under the Master Loan Agreement during the three months ended March 31, 1996. Principal payments of approximately $175,000 were made on the Master Loan during the three months ended March 31, 1996. On July 1, 1995, CCEP 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 CCEP'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 March 31, 1996, and December 31, 1995, are $241.1 million and $233.5 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 month periods ended March 31, 1996 and 1995, 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. CCIP invested approximately $367,000 in CCEP during the three months ended March 31, 1996, as additional advances under the Master Loan. CCEP used the funds to pay for deferred maintenance and capital improvements on the properties which collateralize the Master Loan. A portion of the advance was used to pay for additional expenses related to the December 1995 financing of six of CCEP's investment properties. Also, a portion of the advance was used to pay taxes on behalf of 1801 Tower Inc., a wholly owned subsidiary. During the three months ended March 31, 1996, CCEP paid approximately $175,000 to CCIP as principal payments on the Master Loan. Approximately $101,000 was due to the return of a real estate tax escrow set up at the time of the December 1995 financing of a certain CCEP investment property. This escrow was held until CCEP was able to provide proof of payment to the mortgage lender. Cash received on certain investments by CCEP, which are required to be transferred to CCIP per the agreement, accounted for approximately $74,000. Note D - Note Receivable Deemed In-Substance Foreclosed Prior to the transfer of Carlton House from CCEP to CCIP on November 30, 1995, CCEP held the Carlton House Note which was secured by a deed of trust on Carlton House with a scheduled maturity in 1995. According to the note terms, interest accrued at 10% and compounded monthly on principal plus accrued but unpaid interest. The note receivable had been in default since 1991. As described more fully in the 1995 audited financial statements, the required debt service payments were reduced to only the amount of net cash flow from the Carlton House. In 1995 no interest income was recognized as no cash related to the note receivable was received by CCEP. Summarized below are the results of operations of the Carlton House that are included in CCEP's financial statements for the three months ended March 31, 1995, prepared on the same basis as CCEP's financial statements. Any intercompany balances between the Partnership and the Carlton House have been eliminated in CCEP's consolidated financial statements and the summarized financial statements set forth below: For the Three Months Ended March 31, 1995 (in thousands) Revenues: Rental income $ 1,369 Other income 9 Total revenues 1,378 Expenses: Operating 1,248 Depreciation and amortization 250 Interest 1,141 Total expenses 2,639 Net loss $(1,261) -----END PRIVACY-ENHANCED MESSAGE-----