-----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, M8lK3rEcqJbnUFJZBjuoqEFalSlfhQJSuG7vmMz1rZ8o2lttDmZa0KJ83Mpoisvb uLoPeO1PGKi4CzwP5vq32w== 0000711642-00-000158.txt : 20000516 0000711642-00-000158.hdr.sgml : 20000516 ACCESSION NUMBER: 0000711642-00-000158 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 000-10831 FILM NUMBER: 631512 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR STREET 2: PO BOX 1089 CITY: DENVER STATE: CO ZIP: 80222 10-Q 1 FIRST QUARTER OF 2000 FORM 10-Q---QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] 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.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) March 31, December 31, 2000 1999 (Unaudited) (Note) Assets Cash and cash equivalents $ 6,063 $ 11,175 Receivables and deposits 732 1,078 Restricted escrows 531 600 Other assets 2,078 1,641 Investment in Master Loan 67,756 67,865 Less: allowance for impairment loss (17,417) (17,417) 50,339 50,448 Investment properties: Land 3,564 3,564 Building and related personal property 37,817 37,115 41,381 40,679 Less: accumulated depreciation (10,691) (9,953) 30,690 30,726 $ 90,433 $ 95,668 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 213 $ 108 Tenant security deposit liabilities 590 574 Accrued property taxes 16 -- Other liabilities 586 627 Mortgage note payable 26,999 27,074 28,404 28,383 Partners' (Deficit) Capital General partner (56) (58) Limited partners (199,045.2 units issued and outstanding) 62,085 67,343 62,029 67,285 $ 90,433 $ 95,668 Note: The balance sheet at December 31, 1999, 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 March 31, 2000 1999 Revenues: Rental income $ 2,587 $ 2,456 Interest income on investment in Master Loan to affiliate -- 800 Interest income 114 72 Other income 145 133 Total revenues 2,846 3,461 Expenses: Operating 1,161 1,158 Depreciation 738 574 General and administrative 100 116 Property taxes 143 143 Interest 479 471 Total expenses 2,621 2,462 Net income $ 225 $ 999 Net income allocated to general partner (1%) $ 2 $ 10 Net income allocated to limited partners (99%) 223 989 $ 225 $ 999 Net income per limited partnership unit $ 1.12 $ 4.97 Distributions per limited partnership unit $ 27.54 $ 9.29 See Accompanying Notes to Consolidated Financial Statements c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 200,342.0 $ 1 $200,342 $200,343 Partners' (deficit) capital at December 31, 1998 199,045.2 $ (96) $ 86,230 $ 86,134 Distributions -- -- (1,850) (1,850) Net income for the three months ended March 31, 1999 -- 10 989 999 Partners' (deficit) capital at March 31, 1999 199,045.2 $ (86) $ 85,369 $ 85,283 Partners' (deficit) capital at December 31, 1999 199,045.2 (58) $ 67,343 $ 67,285 Distributions -- -- (5,481) (5,481) Net income for the three months ended March 31, 2000 -- 2 223 225 Partners' (deficit) capital at March 31, 2000 199,045.2 $ (56) $ 62,085 $ 62,029 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, 2000 1999 Cash flows from operating activities: Net income $ 225 $ 999 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 767 604 Change in accounts: Receivables and deposits 346 388 Other assets (466) (536) Accounts payable 105 (330) Tenant security deposit liabilities 16 21 Accrued property taxes 16 (46) Other liabilities (41) (106) Net cash provided by operating activities 968 994 Cash flows from investing activities: Net receipts from (deposits to) restricted escrows 69 (82) Property improvements and replacements (702) (550) Principal receipts on Master Loan 109 121 Net cash used in investing activities (524) (511) Cash flows from financing activities: Distributions to partners (5,481) (1,850) Payments on notes payable (75) (78) Loan costs paid -- (8) Net cash used in financing activities (5,556) (1,936) Net decrease in cash and cash equivalents (5,112) (1,453) Cash and cash equivalents at beginning of period 11,175 8,683 Cash and cash equivalents at end of period $ 6,063 $ 7,230 Supplemental disclosure of cash flow information: Cash paid for interest $ 464 $ 461 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 (the "Partnership" or "Registrant") 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. (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, 2000, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Principles of Consolidation The Partnership's financial statements include the accounts of Kennedy Boulevard Associates, I, L.P., a Pennsylvania Limited Partnership ("KBA-I, L.P."), Kennedy Boulevard Associates II, L.P. a Pennsylvania Limited Partnership ("KBA-II, L.P."), Kennedy Boulevard Associates III, L.P. a Pennsylvania Limited Partnership ("KBA-III, L.P."), Kennedy Boulevard Associates IV, L.P. a Pennsylvania Limited Partnership ("KBA-IV, L.P.") and Kennedy Boulevard GP I, a Pennsylvania Partnership. The general partners of each of the affiliated Limited and General Partnerships are Limited Liability Corporations of which the Partnership is the sole member. The Limited Partners of each of the affiliated limited and general partnerships are either the Partnership or a Limited Liability Corporation of which the Partnership is the sole member. Therefore, the Partnership controls the affiliated Limited and General Partnerships and consolidation is appropriate. KBA-I, L.P. holds title to The Sterling Apartment Home and Commerce Center ("Sterling"). Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - 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 Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were paid to the General Partner and its affiliates during the three months ended March 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $ 136 $ 133 Reimbursement for services of affiliates (included in operating, and general and administrative expenses and investment properties) 54 69 During the three months ended March 31, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $136,000 and $133,000 for the three months ended March 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $54,000 and $69,000 for the three months ended March 31, 2000 and 1999, respectively. AIMCO and its affiliates currently own 116,705.30 limited partnership units in the Partnership representing 58.63% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. As a result of its ownership of 58.63% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. Note D - Net Investment in Master Loan The Partnership was formed for the benefit of its limited partners to lend funds to Consolidated Capital Equity Partners ("CCEP"), a California general partnership. The Partnership loaned funds to CCEP subject to a nonrecourse note with a participation interest (the "Master Loan"). At March 31, 2000, the recorded investment in the Master Loan was considered to be impaired under Statement of Financial Accounting Standard No. 114 ("SFAS 114"), Accounting by Creditors for Impairment of a Loan. The Partnership measures 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 three months ended March 31, 1999, the Partnership recorded approximately $800,000, of interest income based upon "Excess Cash Flow" generated (as defined in the terms of the New Master Loan Agreement). There was no interest income recorded for the three months ended March 31, 2000. The fair value of the collateral properties was determined using the net operating income of the collateral properties capitalized at a rate deemed reasonable for the type of property adjusted for market conditions, the physical condition of the property and other factors, or by obtaining an appraisal by an independent third party. This methodology has not changed from that used in prior calculations performed by the General Partner in determining the fair value of the collateral properties. There was no change in the provision for impairment loss for the three months ended March 31, 2000 and 1999. The General Partner evaluates the net realizable value on a semi-annual basis. Interest, calculated on the accrual basis, due to the Partnership pursuant to the terms of the Master Loan Agreement, but not recognized in the consolidated statements of operations due to the impairment of the loan, totaled approximately $10,608,000 and $9,293,000 for the three months ended March 31, 2000 and 1999, respectively. Interest income is recognized on the cash basis as allowed under SFAS 114. At March 31, 2000, and December 31, 1999, such cumulative unrecognized interest totaling approximately $277,469,000 and $266,861,000 was not included in the balance of the investment in Master Loan. In addition, six of the properties are collateralized by first mortgages totaling approximately $22,478,000 which are superior to the Master Loan. Accordingly, this fact has been taken into consideration in determining the fair value of the Master Loan. During the three months ended March 31, 2000 and 1999, the Partnership received approximately $109,000 and $121,000 respectively, in principal payments on the Master Loan. This amount represents cash received on certain investments held by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Note E - Commitment 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 in the Partnership 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 tenant security deposits totaling approximately $6,653,000, were greater than the reserve requirement of approximately $4,685,000 at March 31, 2000. Note F - Distributions Distributions from surplus cash of approximately $5,481,000 were paid to the limited partners ($27.54 per limited partnership unit) during the three months ended March 31, 2000. During the three months ended March 31, 1999, the Partnership paid approximately $1,850,000 in distributions from surplus cash to the limited partners ($9.29 per limited partnership unit). Included in these amounts are payments to the North Carolina Department of Revenue for withholding taxes related to income generated by the Registrant's investment property located in that state. Note G - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has two reportable segments: residential properties and commercial properties. The Partnership's residential property segment consist of one apartment complex located in North Carolina and one multiple-use facility consisting of apartment units and commercial space located in Pennsylvania. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The commercial property leases space to various medical offices, various career services facilities, and a credit union at terms ranging from two months to fifteen years. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segments are the same as those described in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1999. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments are investment properties that offer different products and services. The reportable segments are each managed separately because they provide distinct services with different types of products and customers. Segment information for the three months ended March 31, 2000 and 1999 is shown in the tables below (in thousands). The "Other" column includes Partnership administration related items and income and expense not allocated to the reportable segment. 2000 Residential Commercial Other Totals Rental income $ 2,210 $ 377 $ -- $ 2,587 Interest income 9 1 104 114 Other income 90 55 -- 145 Interest expense 420 59 -- 479 Depreciation 718 20 -- 738 General and administrative expense -- -- 100 100 Segment profit 110 111 4 225 Total assets 33,688 2,317 54,428 90,433 Capital expenditures for investment properties 694 8 -- 702 1999 Residential Commercial Other Totals Rental income $ 2,130 $ 326 $ -- $ 2,456 Interest income 10 1 61 72 Other income 109 24 -- 133 Interest income on investment in Master Loan -- -- 800 800 Interest expense 412 59 -- 471 Depreciation 561 13 -- 574 General and administrative expense -- -- 116 116 Segment profit 203 51 745 999 Total assets 34,461 1,422 77,909 113,792 Capital expenditures for investment properties 549 1 -- 550 Note H - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this Form 10-Q contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-Q and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of two properties, The Loft and The Sterling Apartment Homes and Commerce Center ("The Sterling"). The Sterling is a multiple-use facility which consists of an apartment complex and commercial space. The following table sets forth the average occupancy of the properties for the three months ended March 31, 2000 and 1999: Average Occupancy Property 2000 1999 The Loft Apartments 94% 96% Raleigh, North Carolina The Sterling Apartment Homes 91% 94% The Sterling Commerce Center 88% 79% Philadelphia, Pennsylvania The decrease in occupancy at The Sterling Apartment Homes is attributable to a major renovation project which was performed at the property during the past year to improve the curb appeal of the property. The increase in occupancy at the Sterling Commerce Center is attributable to major capital improvements including exterior renovations, elevator rehabilitation and common area renovations which have been completed during the past year. Results of Operations The Partnership's net income for the three months ended March 31, 2000 was approximately $225,000 compared to a net income of approximately $999,000 for the corresponding period in 1999. The decrease in net income for the three months ended March 31, 2000 as compared to the three months ended March 31, 1999 was primarily due to a decrease in total revenues and, to a lesser extent, an increase in total expenses. The decrease in total revenues is due primarily to a decrease in interest income related to the Master Loan, which was partially offset by an increase in rental income and interest income. The decrease in interest income related to the Master Loan is a factor of the method used to recognize income. Interest income is only recognized to the extent that actual cash is received. The receipt of cash is dependent on the corresponding cash flow of the properties which secure the Master Loan. Cash flow for these properties was lower for the three months ended March 31, 2000 as a result of capital expenditures at the properties. The increase in rental income was due to an increase in average rental rates at The Loft and The Sterling Apartment Homes and to an increase in occupancy at The Sterling Commerce Center, which more than offset the decrease in occupancy at The Loft and The Sterling Apartment Homes. The increase in interest income is the result of increased levels of cash maintained in interest bearing accounts. The increase in total expenses for the three months ended March 31, 2000 is primarily due to an increase in depreciation expense, slightly offset by a decrease in general and administrative expenses. Depreciation expense increased due to major capital improvements and replacements at The Sterling during 1999 and 1998. General and administrative expense decreased due to a decrease in reimbursements to the General Partner for accountable administrative expenses. Included in general and administrative expenses for the three month periods ended March 31, 2000 and 1999 are management reimbursements to the General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 2000, the Partnership had cash and cash equivalents of approximately $6,063,000 as compared to approximately $7,230,000 at March 31, 1999. Cash and cash equivalents decreased approximately $5,112,000 for the three months ended March 31, 2000 from the Partnership's year ended December 31, 1999. This decrease was primarily due to approximately $5,556,000 of net cash used in financing activities and, to a lesser extent, to approximately $524,000 of net cash used in investing activities which was partially offset by approximately $968,000 of net cash provided by operating activities. Cash used in investing activities consisted primarily of property improvements and replacements partially offset by principal repayments received on the Master Loan and, net receipts from escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted primarily of distributions to partners and, to a lesser extent, payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in money market accounts. 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 tenant security deposits totaling approximately $6,653,000, were greater than the reserve requirement of approximately $4,685,000 at March 31, 2000. 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local, legal and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. The Loft The Partnership has budgeted, but is not limited to, approximately $55,200 for capital improvements during the current year consisting of floor covering and mini-blinds replacements, appliances, HVAC condensing units, and water heaters. During the three months ended March 31, 2000, the Partnership completed approximately $22,000 of capital improvements, consisting primarily of appliances, floor covering replacement and mini-blind replacements. These improvements were funded from cash flow. The Sterling The Partnership has budgeted, but is not limited to, approximately $1,379,000 for capital improvements during the current year consisting of appliances, cabinet replacements, interior building improvements, electrical and plumbing upgrades, and floor covering replacements. During the three months ended March 31, 2000, the Partnership completed approximately $680,000 of capital improvements consisting primarily of plumbing and electrical upgrades, appliance and cabinet replacements and interior building improvements. These improvements were funded primarily from cash flow and replacement reserves. The additional capital improvements planned for 2000 at the Partnership's properties will be made only to the extent of cash available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $26,999,000 requires monthly payments of principal and interest and balloon payments of approximately $3,903,000 and $19,975,000 on December 1, 2005 and October 1, 2008, respectively. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant may risk losing such properties through foreclosure. Distributions from surplus cash of approximately $5,481,000 were paid to the limited partners ($27.54 per limited partnership unit) during the three months ended March 31, 2000. During the three months ended March 31, 1999, the Partnership paid approximately $1,850,000 in distributions from surplus cash to the limited partners ($9.29 per limited partnership unit). Included in these amounts are payments to the North Carolina Department of Revenue for withholding taxes related to income generated by the Registrant's investment property located in that state. The Registrant's distribution policy is reviewed on a semi-annual basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. Furthermore, cash reserves are subject to the requirement of the Partnership Agreement which requires that the Partnership maintain reserves equal to 5% of Net Investment Capital. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit further distributions to its partners during the remainder of 2000 or subsequent periods. CCEP Property Operations For the three months ended March 31, 2000, CCEP's net loss totaled approximately $9,882,000 on total revenues of approximately $4,936,000. CCEP recognizes interest expense on the 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, 2000 and 1999, CCEP's statement of operations includes total interest expense attributable to the Master Loan of approximately $10,608,000 and $9,293,000, respectively, 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, 2000, the Partnership received approximately $109,000 in principal payments on the Master Loan. These amounts were received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Partnership is exposed to market risks associated with its Master Loan to Affiliate ("Loan). Receipts (interest income) on the Loan are based upon the operations and cash flow of the underlying investment properties that collateralize the Loan. Both the income and expenses of operating the investment properties are subject to factors outside the Partnership's control, such as an oversupply of similar properties resulting from overbuilding, increases in unemployment or population shifts, reduced availability of permanent mortgage financing, changes in zoning laws, or changes in the patterns or needs of users. The investment properties are also susceptible to the impact of economic and other conditions outside of the control of the Partnership as well as being affected by current trends in the market area in which they operate. In this regard, the General Partner of the Partnership closely monitors the performance of the properties collateralizing the loans. Based upon the fact that the loan is considered impaired under Statement of Financial Accounting Standard No. 114, Accounting by Creditors for Impairment of a Loan, interest rate fluctuations do not offset the recognition of income, as income is only recognized to the extent of cash flow. Therefore, market risk factors do not offset the Partnership's results of operations as it relates to the Loan. The Partnership is exposed to market risks from adverse changes in interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Partnership's cash and cash equivalents as well as interest paid on its indebtedness. As a policy, the Partnership does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for its borrowing activities used to maintain liquidity and fund business operations. To mitigate the impact of fluctuations in U.S. interest rates, the Partnership maintains its debt as fixed rate in nature by borrowing on a long-term basis. Based on interest rates at March 31, 2000, a 1% increase or decrease in market interest rates would not have a material impact on the Partnership. The following table summarizes the Partnership's debt obligations at December 31, 1999. The interest rates represent the weighted-average rates. The fair value of the debt obligations approximate the recorded value as of March 31, 2000. Principal Amount by Expected Maturity Fixed Rate Debt Long-term Average Interest Debt Rate 6.86% (in thousands) 2000 $ 222 2001 323 2002 346 2003 371 2004 393 Thereafter 25,344 Total $ 26,999 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. 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, 2000 and 1999. b) Reports on Form 8-K during the quarter ended March 31, 2000: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES By: CONCAP EQUITIES, INC. Its General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: May 15, 2000 EXHIBIT 99.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED March 31, 2000 and 1999 EXHIBIT 99.1 (Continued) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) March 31, December 31, 2000 1999 (Unaudited) (Note) Assets Cash and cash equivalents $ 4,030 $ 2,865 Receivables and deposits 1,083 1,359 Restricted escrows 580 718 Other assets 830 761 Investment properties: Land 8,290 8,290 Building and related personal property 86,906 85,969 95,196 94,259 Less accumulated depreciation (72,907) (71,592) 22,289 22,667 $ 28,812 $ 28,370 Liabilities and Partners' Deficit Liabilities Accounts payable $ 461 $ 493 Tenant security deposit liabilities 489 466 Accrued property taxes 411 435 Other liabilities 491 555 Mortgage notes 22,478 22,556 Master loan and interest payable 345,339 334,840 369,669 359,345 Partners' Deficit General partner (3,409) (3,310) Limited partners (337,448) (327,665) (340,857) (330,975) $ 28,812 $ 28,370 Note: The balance sheet at December 31, 1999, 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 EXHIBIT 99.1 (Continued) b) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands) Three Months Ended March 31, 2000 1999 Revenues: (restated) Rental income $ 4,555 $ 4,455 Other income 381 381 Total revenues 4,936 4,836 Expenses: Operating 1,999 2,045 General and administrative 161 138 Depreciation 1,314 1,141 Property taxes 326 289 Interest 11,018 10,511 Total expenses 14,818 14,124 Loss from continuing operations (9,882) (9,288) Income from discontinued operations -- 68 Net loss $ (9,882) $ (9,220) Net loss allocated to general partner (1%) $ (99) $ (92) Net loss allocated to limited partners (99%) (9,783) (9,128) $ (9,882) $ (9,220) See Accompanying Notes to Consolidated Financial Statements EXHIBIT 99.1 (Continued) c) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands) General Limited Partners Partners Total Partners' deficit at December 31, 1998 $ (3,108) $(307,679) $(310,787) Net loss for the three months ended March 31, 1999 (92) (9,128) (9,220) Partners' deficit at March 31, 1999 $ (3,200) $(316,807) $(320,007) Partners' deficit at December 31, 1999 $ (3,310) $(327,665) $(330,975) Net loss for the three months ended March 31, 2000 (99) (9,783) (9,882) Partners' deficit at March 31, 2000 $ (3,409) $(337,448) $(340,857) 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, 2000 1999 Cash flows from operating activities: Net loss $ (9,882) $ (9,220) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,336 1,352 Change in accounts: Receivables and deposits 276 (77) Other assets (90) (103) Accounts payable (32) (148) Tenant security deposit liabilities 23 20 Accrued property taxes (24) 102 Other liabilities (64) (77) Accrued interest on Master Loan 10,608 9,293 Net cash provided by operating activities 2,151 1,142 Cash flows from investing activities: Property improvements and replacements (937) (463) Lease commissions paid -- (42) Net receipts from (deposits to) restricted escrows 138 (64) Net cash used in investing activities (799) (569) Cash flows from financing activities: Principal payments on Master Loan (109) (121) Principal payments on notes payable (78) (72) Net cash used in financing activities (187) (193) Net increase in cash and cash equivalents 1,165 380 Cash and cash equivalents at beginning of period 2,865 1,992 Cash and cash equivalents at end of period $ 4,030 $ 2,372 Supplemental disclosure of cash flow information: Cash paid for interest $ 391 $ 1,197 See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Going Concern The Partnership's financial statements have been prepared assuming that the Partnership will continue as a going concern. The Partnership continues to incur operating losses, suffers from inadequate liquidity, has an accumulated deficit and is unable to repay the Master Loan balance, which matures in November 2000. The Partnership realized a net loss of approximately $9,882,000 for the three months ended March 31, 2000. The General Partner expects the Partnership to continue to incur such losses from operations. The Partnership generated cash from operations of approximately $2,151,000 during the three months ended March 31, 2000; however, this was primarily the result of accruing interest of approximately $10,608,000 on its Master Loan indebtedness. The Partnership's indebtedness to CCIP under the Master Loan of approximately $345,339,000, including accrued interest, matures in November 2000. The Partnership has not received notice as to the maturity of the Master Loan. The holder of the note has two options, which include foreclosing on the properties that collateralize the Master Loan or extending the term of the note. Currently, the Partnership does not have the means with which to satisfy this obligation. No other sources of additional financing have been identified by the Partnership, nor does the General Partner have any other plans to remedy the liquidity problems the Partnership is currently experiencing. At March 31, 2000, partners' deficit was approximately $340,857,000. The General Partner expects revenues from the eleven investment properties will be sufficient over the next twelve months to meet all property operating expenses, mortgage debt service requirements and capital expenditure requirements. However, these cash flows will be insufficient to repay to CCIP the Master Loan balance, including accrued interest, in the event it is not renegotiated. As a result of the above, there is substantial doubt about the Partnership's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classifications of liabilities that may result from these uncertainties. Note B - Basis of Presentation The accompanying unaudited consolidated financial statements of Consolidated Capital Equity Partners, L.P. ("CCEP" or the "Partnership") 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. (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, 2000, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. Certain reclassifications have been made to the 1999 information to conform to the 2000 presentation. Consolidation As of December 31, 1998, CCEP owned a 75% interest in a limited partnership ("Western Can, Ltd.") which owned 444 De Haro, an office building in San Francisco, California. No minority interest liability was reflected, as of December 31, 1998, for the 25% minority interest because Western Can, Ltd. had a net capital deficit and no minority liability existed with respect to CCEP. In May 1999, a limited partner in Western Can, Ltd. withdrew in connection with a settlement with CCEP pursuant to which the partner was paid $1,350,000 by CCEP. This settlement effectively terminated Western Can Ltd. as CCEP became the sole limited partner. CCEP's investment in Western Can, Ltd. is consolidated in CCEP's financial statements. In September 1999, 444 DeHaro was sold (see "Note D - - Discontinued Segment"). Note C - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note D - Discontinued Segment In September 1999, 444 De Haro located in San Francisco, California was sold to an unaffiliated third party. 444 DeHaro was the only remaining property in the commercial segment of the Partnership. Due to the sale of this property, the results of operations of the property have been classified as "Income from Discontinued Operations" for the three months ended March 31, 2000 and 1999. Revenues from 444 DeHaro were approximately $511,000 for the three months ended March 31, 1999. No revenues from 444 DeHaro were recorded during the three months ended March 31, 2000. Note E - 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 Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the General Partner and affiliates during the three months ended March 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $ 250 $ 240 Investment advisory fees (included in general and administrative expense) 45 43 Reimbursement for services of affiliates (included in operating, general and administrative expenses and investment properties) 93 72 During the three months ended March 31, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from the Partnership's residential properties for providing property management services. The Partnership paid to such affiliates approximately $250,000 and $240,000 for the three months ended March 31, 2000 and 1999, respectively. The Partnership is also subject to an Investment Advisory Agreement between the Partnership and an affiliate of the General Partner. This agreement provides for an annual fee, payable in monthly installments, to an affiliate of the General Partner for advising and consulting services for CCEP's properties. The Partnership paid to such affiliates approximately $45,000 and $43,000 for the three months ended March 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $93,000 and $72,000 for the three months ended March 31, 2000 and 1999, respectively. 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 (the "Master Loan"), which is described more fully in the 1999 annual report. Such interest payments totaled approximately $800,000 for the three months ended March 31, 1999. There were no interest payments made during the three months ended March 31, 2000. There were no advances on the Master Loan during the three months ended March 31, 2000 or 1999. During the three months ended March 31, 2000 and 1999 CCEP paid approximately $109,000 and $121,000 respectively, to CCIP as principal payments on the Master Loan. These amounts were from cash received on certain investments by CCEP, which are required to be transferred to CCIP as per the Master Loan Agreement. Note F - Master Loan and Accrued Interest Payable The Master Loan principal and accrued interest payable balances at March 31, 2000 and December 31, 1999, are approximately $345,339,000 and $334,840,000, respectively. Terms of Master Loan Agreement Under the terms of the Master Loan, 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%. Payments are currently payable quarterly in an amount equal to "Excess Cash Flow", generally defined in the Master Loan 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 the 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. The Partnership has not received notice as to the maturity of the Master Loan. The holder of the note has two options which include foreclosing on the properties that collateralize the Master Loan or extending the terms of the note. During the three months ended March 31, 2000, CCEP paid approximately $109,000 to CCIP as principal payments on the Master Loan. This amount was from cash received on certain investments by CCEP, which are required to be transferred to CCIP per the Master Loan Agreement. There were no advances on the Master Loan for the three months ended March 31, 2000 or 1999. EX-27 2 FIRST QUARTER 10-Q
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties 2000 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-31-2000 JAN-01-2000 MAR-31-2000 6,063 0 0 0 0 0 41,381 10,691 90,433 0 26,999 0 0 0 62,029 90,433 0 2,846 0 0 2,621 0 479 0 0 0 0 0 0 225 1.12 0 Registrant has an unclassified balance sheet. Multiplier is 1.
-----END PRIVACY-ENHANCED MESSAGE-----