-----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, JXoz4CaJLJ52gOmzysfhx+WLnV0hs/CuyccI/xGQ8FhEYcV36VQ7eEy+WGqj1ZhM LuGVc8yyA6oW3a3wvhBgLg== 0000352983-96-000004.txt : 19961107 0000352983-96-000004.hdr.sgml : 19961107 ACCESSION NUMBER: 0000352983-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 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: 96655007 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, 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 (in thousands, except unit data) September 30, December 31, 1996 1995 (Unaudited) (Note) Assets Cash and cash equivalents: Unrestricted $ 14,205 $ 26,122 Restricted--tenant security deposits 322 335 Securities available for sale 7 5,264 Other assets 1,288 1,444 Net investment in Master Loan 92,914 95,246 Less: Provision for impairment loss (39,575) (41,478) 53,339 53,768 Investment properties: Land 3,620 3,620 Building and related personal property 21,023 17,756 24,643 21,376 Less accumulated depreciation (2,799) (1,958) 21,844 19,418 $ 91,005 $106,351 Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 666 $ 368 Tenant security deposits 305 323 Distributions payable 324 324 Mortgage note and interest payable 4,536 4,560 5,831 5,575 Partners' Capital (Deficit) General partner (374) (358) Limited partners (199,052 units outstanding at September 30, 1996, and December 31, 1995, respectively) 85,548 101,134 85,174 100,776 $ 91,005 $106,351 Note: The balance sheet at December 31, 1995, has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues: Rental income $ 1,872 $ 360 $ 5,763 $ 1,117 Interest income on investment in Master Loan to affiliate -- 967 -- 2,503 Other income 157 146 773 373 Reduction of provision for impairment losses 792 533 792 533 Total revenues 2,821 2,006 7,328 4,526 Expenses: Operating 1,421 198 4,345 528 Depreciation and amortization 320 106 846 316 General and administrative 103 168 479 607 Interest 81 -- 244 -- Total expenses 1,925 472 5,914 1,451 Net income $ 896 $ 1,534 $ 1,414 $ 3,075 Net income allocated to general partner (1%) $ 9 $ 15 $ 14 $ 31 Net income allocated to limited partners (99%) 887 1,519 1,400 3,044 $ 896 $ 1,534 $ 1,414 $ 3,075 Net income per limited partnership unit $ 4.45 $ 7.63 $ 7.03 $ 15.29 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 (30) (3,006) (3,036) Net income for the nine months ended September 30, 1995 31 3,044 3,075 Partners' capital (deficit) at September 30, 1995 199,052 $ (293) $107,536 $107,243 Partners' capital (deficit) at December 31, 1995 199,052 $ (358) $101,134 $100,776 Distributions to partners (30) (16,986) (17,016) Net income for the nine months ended September 30, 1996 14 1,400 1,414 Partners' capital (deficit) at September 30, 1996 199,052 $ (374) $ 85,548 $ 85,174 See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1996 1995 Cash flows from operating activities: Net income $ 1,414 $ 3,075 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 841 316 Amortization of loan costs and lease commissions 14 -- Reduction of provision for impairment losses (792) (533) Change in accounts: Restricted cash 13 -- Other assets 142 88 Due from affiliates -- 935 Accounts payable and accrued expenses 309 17 Tenant security deposit liabilities (18) (14) Net cash provided by operating activities 1,923 3,884 Cash flows from investing activities: Property improvements and replacements (3,267) (34) Purchase of securities available for sale -- (2,115) Proceeds from sale of securities available for sale 5,257 5,180 Advances on Master Loan (367) -- Principal receipts on Master Loan 1,588 -- Net cash provided by investing activities 3,211 3,031 Cash flows from financing activities: Distributions to partners (17,016) (3,036) Mortgage principal payments (35) -- Net cash used in financing activities (17,051) (3,036) Net (decrease) increase in cash and cash equivalents (11,917) 3,879 Cash and cash equivalents at beginning of period 26,122 1,554 Cash and cash equivalents at end of period $ 14,205 $ 5,433 Supplemental disclosure of cash flow information: Cash paid for interest $ 224 $ -- 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 of Consolidated Capital Institutional Properties ("Partnership") 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 ConCap Equities, Inc. ("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, 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 the Partnership. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. NOTE B - RELATED PARTY 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 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, 1996 and 1995. Such fees are included in operating expenses on the consolidated statements 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. The General Partner and its current affiliates received reimbursements as reflected in the following table: For the Nine Months September 30, 1996 1995 (in thousands) Property management fees $287 $ 51 Reimbursement for services of affiliates (1) 334 253 (1) Included in "reimbursements for services of affiliates" for 1996 is approximately $140,000 in reimbursements for construction oversight costs. At September 30, 1995, the Partnership had accrued approximately $15,000 of reimbursements to Insignia Mortgage & Investment Company related to refinancing costs which are included in "reimbursements for services of affiliated" above. No such costs have been accrued or paid during the nine months ended September 30, 1996. Property management fees increased during the nine months ended September 30, 1996, compared to the nine months ended September 30, 1995, due to the addition of The Sterling on November 30, 1995. Reimbursements for services of affiliates increased during the nine months ended September 30, 1996, due to the construction oversight cost incurred in 1996 related to The Sterling renovation. This was partially offset by a decrease in the reimbursements to the general partner. Higher reimbursements were paid in 1995 as a result of the combined efforts of the Dallas and Greenville offices during the transition period that ended June 30, 1996. 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 At September 30, 1996 and 1995, the recorded investment in the Master Loan was considered to be impaired under "FASB 114." The Partnership measured the impairment of the loan based upon the fair value of the collateral due to the fact that repayment of the loan is expected to be provided solely by the collateral. For the nine months ended September 30, 1996 and 1995, the Partnership recorded income of approximately $792,000 and $533,000, respectively, 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 $22.2 million and $20.2 million for the nine months ended September 30, 1996 and 1995, respectively. At September 30, 1996, and December 31, 1995, such cumulative unrecognized interest totaling approximately $160.4 million and $138.2 million was not included in the balance of the investment in Master Loan. During the nine months ended September 30, 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 certain properties which collateralize the Master Loan. A portion of the advance was used to pay 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 a wholly owned subsidiary of CCEP. During the nine months ended September 30, 1996, the Partnership received approximately $1,588,000 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 Master Loan Agreement, accounted for approximately $124,000. Approximately $1,363,000 received was due to an excess cash flow payment received from CCEP as stipulated by the master loan agreement. On September 13, 1996, CCEP sold Lakeview Office Tower to an unaffiliated third party. The net cash proceeds of approximately $587,000 were remitted to the Partnership subsequent to September 30, 1996, to pay down the Master Loan. 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 $14.5 million, were greater than the reserve requirement of approximately $7.3 million at September 30, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership's investment properties consist of two properties, The Loft and The Sterling Apartment Homes and Commerce Center ("The Sterling") (formerly known as The Carlton House Apartment and Office Building). The Sterling is a multiple-use facility which consists of an apartment complex and commercial space. This property was transferred from Consolidated Capital Equity Partners, L.P. ("CCEP") to a wholly owned subsidiary of the Partnership on November 30, 1995. The operations of The Sterling had a significant impact on the results of operations of the Partnership for the nine months ended September 30, 1996, with revenues of approximately $4,708,000 and expenses of approximately $4,282,000. The following table sets forth the average occupancies of the properties for the nine months ended September 30, 1996 and 1995: Average Occupancy Property 1996 1995 The Loft Apartments 95% 91% Raleigh, North Carolina The Sterling Apartment Homes 84% 82% The Sterling Commerce Center 68% 64% Philadelphia, Pennsylvania The General Partner attributes the increase in occupancy at The Loft to increased marketing strategies resulting in an increase in prospective tenant traffic. Also, the General Partner attributes the increase in occupancy at The Sterling Apartment Homes to increased marketing strategies and concessions offered to the residential tenants. The increased occupancy at The Sterling Commerce Center is attributable to the major ongoing capital improvements including exterior renovations, elevator rehabilitation, and common area renovations. Results of Operations The Partnership's net income for the nine months ended September 30, 1996, was approximately $1,414,000 compared to net income of approximately $3,075,000 for the nine months ended September 30, 1995. The Partnership recorded net income of approximately $896,000 for the three months ended September 30, 1996, compared to net income of approximately $1,534,000 for the three months ended September 30, 1995. Net income decreased for the three and nine months ended September 30, 1996, due to a decrease in interest income recorded on the investment in Master Loan to affiliate. This decrease is the result of decreased operations at the underlying collateral properties. Offsetting this decrease in net income was the transfer of The Sterling from CCEP to the Partnership which resulted in an increase in net income for the Partnership of approximately $52,000 and $426,000 for the three and nine month periods ended September 30, 1996, respectively. The transfer resulted in significant increases in rental income, operating expenses and depreciation for the three and nine month periods ended September 30, 1996. Also contributing to the increase in operating expenses during the nine month period ended September 30, 1996, was major landscaping work and a wood replacement project done at The Loft. In addition, the decrease in net income was offset by an increase in the reduction of the provision for impairment losses of the Master Loan as determined under "SFAS 114". General and administrative expenses decreased during the three and nine months ended September 30, 1996. For the three months ended September 30, 1996, this decrease was the result of increased printing costs incurred in 1995, related to the printing of additional 10-K's for investors. The decrease for the nine months ended September 30, 1996, is the 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 for the three and nine month periods ended September 30, 1996, as a result of the financing of The Loft 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 and nine month periods ended September 30, 1995. Other income increased during the three and nine month periods ended September 30, 1996, due to the increase in cash balances from the proceeds received from the December 1995 financing of The Loft 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 September 30, 1996, the Partnership had unrestricted cash of approximately $14,205,000 versus approximately $5,433,000 at September 30, 1995. Net cash provided by operating activities decreased primarily due to the decrease in net income as explained above. Also, due from affiliates decreased during the nine months ended September 30, 1995. No such activity occurred during the nine months ended September 30, 1996. Cash provided by investing activities increased primarily due to increased principal receipts on the Master Loan during the nine months ended September 30, 1996. Offsetting the increase in net cash provided by investing activities was an increase in property improvements and replacements during the nine months ended September 30, 1996, and additional advances under the Master Loan to CCEP. Net cash used in financing activities increased due to an increase in distributions paid to the partners as well as principal payments on the mortgage note for The Loft. The Partnership has budgeted for approximately $14 million of deferred maintenance and capital improvements to be made to The Sterling during 1996 and 1997. These programs will be paid by existing cash and investments and from cash generated by property operations and debt service on the Master Loan. The major capital improvements are for exterior renovation, elevator rehabilitation, residential and commercial common area renovations. As of September 30, 1996, approximately $2.5 million had been spent on these programs. 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 $4,510,000 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 $16,986,000 were made to the limited partners during the nine months ended September 30, 1996. A matching distribution of approximately $30,000 was made to the General Partner. Included in these amounts are payments to the North Carolina Department of Revenue for withholding taxes related to income generated by the Partnership's investment property located in that state. Distributions of approximately $3 million were made to the limited partners during the nine months ended September 30, 1995. Approximately $30,000 was distributed to the General Partner during that same period. Included in these amounts are payments to the North Carolina Department of Revenue for withholding taxes related to income generated by the Partnership's investment property located in that state. 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 $14.5 million, were greater than the reserve requirement of $7.3 million as of September 30, 1996. CCEP Property Operations The Partnership invested approximately $367,000 in CCEP during the nine months ended September 30, 1996, as additional advances under the Master Loan. CCEP used the funds to pay for deferred maintenance and capital improvements on certain properties which collateralize the Master Loan. A portion of the advance was used to pay 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 a wholly owned subsidiary of CCEP. For the nine months ended September 30, 1996, CCEP's net loss totaled approximately $21.3 million on total revenues of approximately $15.1 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 nine months ended September 30, 1996, CCEP's statement of operations includes total interest expense attributable to the Master Loan of approximately $22.2 million, all of which represents interest accrued in excess of required payments. During the nine months ended September 30, 1996, CCEP made an "Excess Cash Flow" principal payment of approximately $1,363,000 to the Partnership. Subsequent to September 30, 1996, CCEP made an additional "Excess Cash Flow" principal payment of approximately $69,000 to the Partnership. CCEP is expected to continue to generate operating losses as a result of such interest accruals and noncash charges for depreciation. During the nine months ended September 30, 1996, the Partnership received approximately $1,588,000 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 Master Loan Agreement, accounted for approximately $124,000. Approximately $1,363,000 received was due to an "Excess Cash Flow" payment from CCEP, as described above. On September 13, 1996, CCEP sold Lakeview Office Tower to an unaffiliated third party. The net cash proceeds of approximately $587,000 were remitted to the Partnership subsequent to September 30, 1996, to pay down the Master Loan. 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 and nine months ended September 30, 1996 and 1995. (b) Reports on Form 8-K: None filed during the quarter ended September 30, 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: November 6, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties 1996 Third Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000352983 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 1,000 9-MOS DEC-31-1996 SEP-30-1996 14,205 7 92,914 (39,575) 0 0 24,643 (2,799) 91,005 0 4,536 0 0 0 85,174 91,005 0 7,328 0 0 5,914 0 244 0 0 0 0 0 0 1,414 7.03 0 Registrant has an unclassified balance sheet. Multiplier is 1.
EX-99.1 3 EXHIBIT 99.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 EXHIBIT 99.1 (Continued) PART I - FINANCIAL INFORMATION TEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 1996 1995 (Unaudited) (Note) Assets Cash and cash equivalents $ 3,173 $ 2,225 Investments in limited partnerships 336 460 Other assets 4,264 5,725 Investment properties: Land 10,217 10,452 Building and related personal property 94,260 94,906 104,477 105,358 Less accumulated depreciation (69,281) (68,167) 35,196 37,191 $ 42,969 $ 45,601 Liabilities and Partners' Deficit Accounts payable and accrued liabilities $ 2,223 $ 3,035 Mortgage notes and interest payable 23,591 25,050 Master loan and interest payable 254,450 233,490 280,264 261,575 Partners' Deficit General partner (2,372) (2,159) Limited partners (234,923) (213,815) (237,295) (215,974) $ 42,969 $ 45,601 Note: The balance sheet at December 31, 1995, has been derived from the consolidated financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues: Rental income $ 4,987 $ 6,695 $ 14,946 $ 18,824 Other income 50 43 106 101 Total revenues 5,037 6,738 15,052 18,925 Expenses: Operating 3,128 4,616 9,156 12,199 General and administrative 192 169 559 843 Depreciation and amortization 1,356 1,655 4,018 4,862 Interest 7,831 7,655 23,554 22,985 Write-down of investment properties and investment in limited partnerships -- 3,814 -- 3,814 Total expenses 12,507 17,909 37,287 44,703 Gain on sale of investment property 914 -- 914 -- Net loss $(6,556) $(11,171) $(21,321) $(25,778) Net loss allocated to general partner (1%) $ (66) $ (112) $ (213) $ (258) Net loss allocated to limited partners (99%) (6,490) (11,059) (21,108) (25,520) $(6,556) $(11,171) $(21,321) $(25,778) 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 Nine Months Ended September 30, 1996 and 1995 (in thousands) General Limited Partner Partners Total 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) Partners' deficit at December 31, 1995 $ (2,159) $(213,815) $(215,974) Net loss for the nine months ended September 30, 1996 (213) ( 21,108) (21,321) Partners' deficit at September 30, 1996 $ (2,372) $(234,923) $(237,295) 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)
Nine Months Ended September 30, 1996 1995 Cash flows from operating activities: Net loss $(21,321) $(25,778) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,077 4,862 Gain on sale of investment property (914) -- Write-down of investment properties and investment in limited partnerships -- 3,814 Change in accounts: Other assets 1,454 (1,843) Accounts payable and accrued liabilities (754) 1,151 Interest on Master Loan 22,181 20,167 Due to affiliates -- (918) Interest payable 68 11 Net cash provided by operating activities 4,791 1,466 Cash flows from investing activities: Property improvements and replacements (2,987) (2,365) Proceeds from sale of investment property 1,882 -- Proceeds from sale of securities available for sale -- 195 Net cash used in investing activities (1,105) (2,170) Cash flows from financing activities: Advances on Master Loan 367 -- Principal payments on Master Loan (1,588) -- Principal payments on notes payable (220) (460) Repayment of note payable (1,295) Loan costs paid (2) -- Net cash used in financing activities (2,738) (460) Net increase (decrease) in cash and cash equivalents 948 (1,164) Cash and cash equivalents at beginning of period 2,225 3,393 Cash and cash equivalents at end of period $ 3,173 $ 2,229 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,257 $ 3,721 See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) e) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Consolidated Capital Equity Partners, L.P. ("CCEP") 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 ConCap Holdings, Inc. ("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, 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 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 nine months ended September 30, 1995, for The Sterling Apartment Home and Commerce Center ("The Sterling") (formerly known as The Carlton House Apartment and Office Building) are consolidated in CCEP's financial statements pursuant to accounting guidelines regarding notes receivable in-substance foreclosed. The Sterling 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 has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. CCEP paid property management fees based upon collected gross rental revenues for property management services in each of the nine month periods ended September 30, 1996 and 1995. Fees paid to affiliates of Insignia during the nine month periods ended September 30, 1996 and 1995, are included in operating expenses on the consolidated statements 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. The General Partner and its current affiliates received reimbursements for the nine months ended September 30, 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 Nine Months Ended September 30, 1996 1995 (in thousands) Property management fees $748 $966 Investment advisory fees 136 199 Lease commissions 55 186 Reimbursement for services of affiliates (1) 373 362 (1) Included in "reimbursements for services of affiliates" for 1996 is approximately $82,000 in reimbursements for construction oversight costs. The decrease in property management fees for the nine months ended September 30, 1996, compared to the nine months ended September 30, 1995, is the result of the transfer of The Sterling 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. Interest payments made during the nine month periods ended September 30, 1996 and 1995, were $0 and approximately $2.5 million, respectively. (See further discussion in "Note C"). Advances of approximately $367,000 were received under the Master Loan Agreement during the nine months ended September 30, 1996. Principal payments of approximately $1,588,000 were made on the Master Loan during the nine months ended September 30, 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 September 30, 1996, and December 31, 1995, are approximately $254.5 million and approximately $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 and nine month periods ended September 30, 1996 and 1995, was 12.5%. 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 and capital expenditures. Any unpaid interest is added to principal, compounded annually, and is payable at the loan's maturity. Any net proceeds from sale or refinancing of any of CCEP'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 nine months ended September 30, 1996, as additional advances under the Master Loan. CCEP used the funds to pay for deferred maintenance and capital improvements on certain properties which collateralize the Master Loan. A portion of the advance was used to pay 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 a wholly owned subsidiary. During the nine months ended September 30, 1996, CCEP paid approximately $1,588,000 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 Master Loan Agreement, accounted for approximately $124,000. Approximately $1,363,000 was due to an excess cash flow payment paid to CCIP as stipulated by the Master Loan Agreement. Subsequent to September 30, 1996, an excess cash payment of $69,000 was made to CCIP. NOTE D - NOTE RECEIVABLE DEEMED IN-SUBSTANCE FORECLOSED Prior to the transfer of The Sterling from CCEP to CCIP on November 30, 1995, CCEP held the "Sterling Note" which was secured by a deed of trust on The Sterling 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 Sterling. 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 Sterling that are included in CCEP's financial statements for the nine months ended September 30, 1995, prepared on the same basis as CCEP's financial statements. Any intercompany balances between the Partnership and The Sterling have been eliminated in CCEP's consolidated financial statements and the summarized financial statements set forth below: For the Nine Months Ended September 30, 1995 (in thousands) Revenues: Rental income $ 4,502 Other income 22 Total revenues 4,524 Expenses: Operating 3,358 Depreciation and amortization 791 Interest 731 Administrative 98 Total expenses 4,978 Net loss $ (454) NOTE E - SALE OF LAKEVIEW OFFICE TOWER On September 13, 1996, the Partnership sold Lakeview Office Tower to an unrelated third party for a contract price of $2,060,000. The Partnership received net proceeds of approximately $1,882,000 after payment of closing costs, and recognized a gain on the sale of approximately $914,000. A mortgage note payable on the property in the amount of approximately $1,295,000 was repaid with a portion of the proceeds. The remaining cash proceeds of approximately $587,000 from the sale of Lakeview were remitted to CCIP subsequent to September 30, 1996, to pay down the Master Loan. -----END PRIVACY-ENHANCED MESSAGE-----