10-K 1 ccip.txt CCIP FORM 10-K-- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 UNITED STATE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 2001 [] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________to _________ Commission file number 0-10831 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (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, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interests (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2001. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business General Consolidated Capital Institutional Properties (the "Partnership" or "Registrant") was organized on April 28, 1981, as a Limited Partnership under the California Uniform Limited Partnership Act. On July 23, 1981, the Partnership registered with the Securities and Exchange Commission under the Securities Act of 1933 (File No. 2-72384) and commenced a public offering for the sale of $200,000,000 of limited partnership units (the "Units"). The sale of Units terminated on July 21, 1983, with 200,342 Units sold for $1,000 each, or gross proceeds of $200,342,000 to the Partnership. In accordance with its Partnership Agreement (the original partnership agreement of the Partnership together with all amendments thereto shall be referred to as the "Agreement"), the Partnership has repurchased and retired a total of 1,296.8 Units for a total purchase price of $1,000,000. The Partnership may repurchase any Units, at its absolute discretion, but is under no obligation to do so. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to such date. Upon the Partnership's formation in 1981, Consolidated Capital Equities Corporation ("CCEC") was the Corporate General Partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, ConCap Equities, Inc. ("CEI") acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships"), and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the limited partners in the Partnership and in each of the Affiliated Partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Agreement to limit changes of control of the Partnership. All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT was merged into Apartment Investment and Management Company ("AIMCO"). Hence, CEI is now a wholly-owned subsidiary of AIMCO, a publicly held real estate investment trust (See "Transfer of Control" below). The Partnership's primary business and only industry segment is real estate related operations. The Partnership was formed for the benefit of its Limited Partners (herein so called and together with the General Partner shall be called the "Partners"), to lend funds to Consolidated Capital Equity Partners ("EP"), a California general partnership in which certain of the partners were former shareholders and former management of CCEC, the former Corporate General Partner of the Partnership. See "Status of the Master Loan" for a description of the loan and settlement of EP's bankruptcy. Through December 31, 2001, the Partnership had advanced a total of approximately $180,500,000 to EP and its successor under the Master Loan (as defined in "Status of the Master Loan"). As of December 31, 2001, the balance of the Master Loan, net of the allowance for possible losses, was approximately $26,430,000. EP used the proceeds from these loans to acquire 18 apartment complexes and four office complexes, which served as collateral for the Master Loan. EP's successor in bankruptcy (as more fully described in "Status of the Master Loan") currently has 9 apartment complexes. The Partnership acquired The Loft Apartments through foreclosure in November 1990. Prior to that time, The Loft Apartments had been collateral on the Master Loan. The Partnership acquired a multiple-use building, The Sterling Apartment Homes and Commerce Center ("The Sterling"), through a deed-in-lieu of foreclosure transaction on November 30, 1995. The Sterling was also collateral on the Master Loan. For a brief description of the properties refer to "Item 2 - Description of Property". The Registrant has no employees. Management and administrative services are provided by the General Partner and by agents retained by the General Partner. Property management services are performed at the Partnership's properties by an affiliate of the General Partner. The real estate business in which the Partnership is engaged is highly competitive. There are other residential and commercial properties within the market area of the Registrant's properties. The number and quality of competitive properties, including those residential properties which may be managed by an affiliate of the General Partner in such market area, could have a material effect on the rental market for the apartments and the commercial space at the Registrant's properties and the rents that may be charged for such apartments and space. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as 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 patterns or needs of users. In addition, there are risks inherent in owning and operating residential and commercial properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in Management's Discussion and Analysis of Financial Condition and Results of Operations included in "Item 7" of this Form 10-K. Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. ("Insignia") and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation. 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. 13 Segments Segment data for the years ended December 31, 2001, 2000 and 1999 is included in "Item 8. Financial Statements - Note J" and is an integral part of the Form 10-K. Status of the Master Loan Prior to 1989, the Partnership had loaned funds totaling $170,400,000 to EP subject to a nonrecourse note with a participation interest (the "Master Loan"), pursuant to the Master Loan Agreement dated July 22, 1981, between the Partnership and EP. The Partnership secured the Master Loan with deeds of trust or mortgages on real property purchased with the funds advanced, as well as by the assignment and pledge of promissory notes from the partners of EP. During 1989, EP defaulted on certain interest payments that were due under the Master Loan. Before the Partnership could exercise its remedies for such defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization proceeding. On October 18, 1990, the bankruptcy court approved EP's consensual plan of reorganization (the "Plan"). In November 1990, EP and the Partnership consummated a closing under the Plan pursuant to which, among other things, the Partnership and EP executed an amended and restated loan agreement (the "New Master Loan Agreement"), EP was converted from a California General Partnership to a California Limited Partnership, Consolidated Capital Equity Partners, L.P., ("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure the New Master Loan Agreement. ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary of CEI, is the sole General Partner of CCEP and an affiliate of the Partnership. The General Partners of EP became Limited Partners in CCEP. CHI has full discretion with respect to conducting CCEP's business, including managing CCEP's properties and initiating and approving capital expenditures and asset dispositions and refinancings. Under the terms of the New Master Loan Agreement (as adopted in November 1990), 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%. Interest payments are currently payable quarterly in an amount equal to "Excess Cash Flow". If such Excess Cash Flow payments are less than the current accrued interest during the quarterly period, the unpaid interest is added to principal, compounded annually, and is payable at the loan's maturity. If such Excess Cash Flow payments are greater than the current accrued interest, the excess amount is applied to the principal balance of the loan. Any net proceeds from the sale or refinancing of any of CCEP's properties are paid to the Partnership under the terms of the New Master Loan Agreement. The New Master Loan Agreement matured in November 2000. The General Partner had been negotiating with CCEP with respect to its options which included foreclosing on the properties which collateralize the Master Loan or extending the terms of the loan. The General Partner decided to foreclose on the properties that collateralize the Master Loan. The General Partner will begin the process of foreclosure or executing deeds in lieu of foreclosure during the first quarter of 2002 on all the properties in CCEP. As the deeds are executed, title in the properties owned by CCEP would be transferred to the Partnership, subject to the existing liens on such properties, including the first mortgage loans. As a result, the Partnership would become responsible for the operations of such properties. For 1992, Excess Cash Flow was generally defined in the New Master Loan Agreement as net cash flow from operations after third-party debt service. Effective January 1, 1993, the Partnership and CCEP amended the New Master Loan Agreement to stipulate that Excess Cash Flow would be computed net of capital improvements. Such expenditures were formerly funded from advances on the Master Loan from the Partnership to CCEP. This amendment and change in the definition of Excess Cash Flow has had the effect of reducing income on the investment in the Master Loan by the amount of CCEP's capital expenditures since such amounts were previously excluded from Excess Cash Flow. Item 2. Description of Properties The following table sets forth the Partnership's investment in real estate as of December 31, 2001:
Date of Property Acquisition Type of Ownership Use The Loft Apartments 11/19/90 Fee ownership, subject to Apartment Raleigh, NC a first mortgage 184 units The Sterling Apartment Homes 12/01/95 Fee ownership subject to Apartment and Commerce Center a first mortgage (1) 536 units Philadelphia, PA Commercial 110,368 sq ft
(1) Property is held by a Limited Partnership in which the Registrant ultimately owns a 100% interest. Schedule of Properties: Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis at December 31, 2001.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) The Loft Apartments $ 7,426 $ 3,878 5-20 yrs S/L $ 4,807 The Sterling Apartment Homes and Commerce Center 35,796 12,091 5-25 yrs S/L 26,182 $43,222 $15,969 $30,989
See "Note A" of the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness: The following table sets forth certain information relating to the mortgages encumbering the Registrant's properties at December 31, 2001.
Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 2001 Rate Amortized Date Maturity (1) (in thousands) (in thousands) The Loft Apartments 1st mortgage $ 4,210 6.95% 360 months 12/01/05 $ 3,903 The Sterling Apartment Homes and Commerce Center 1st mortgage 22,247 6.77% 120 months 10/01/08 19,975 $ 26,457 $ 23,878
(1) See "Item 8. Financial Statements and Supplementary Data - Note E" for information with respect to the Registrant's ability to prepay these mortgages and other specific details about the mortgages. Rental Rates and Occupancy: Average annual rental rates and occupancy for 2001 and 2000 for each property:
Average Annual Average Rental Rates Occupancy Property 2001 2000 2001 2000 The Loft Apartments $ 8,985/unit $ 8,941/unit 92% 93% The Sterling Apartment Homes (residential) 16,476/unit 15,523/unit 95% 94% The Sterling Commerce Center (commercial) 16.73/s.f. 16.22/s.f. 86% 89%
The General Partner attributes the decrease in occupancy at The Sterling Commerce Center to the loss of a major tenant in late December 2001. The Partnership is actively seeking a tenant to lease the space formerly occupied by this major tenant. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for further details regarding the loss of this tenant. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. All of the properties are subject to competition from other residential apartment complexes and commercial properties in the area. The General Partner believes that all of the properties are adequately insured. Each apartment complex leases properties for terms of one year or less. No residential tenant leases 10% or more of the available rental space. All of the properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. The following is a schedule of the lease expirations of the commercial space for The Sterling Commerce Center for the years beginning 2002 through the maturities of the current leases. Number of % of Gross Expirations Square Feet Annual Rent Annual Rent 2002 4 7,712 $115,239 12.44% 2003 9 20,341 309,181 33.37% 2004 4 9,611 146,124 15.77% 2005 3 4,268 89,852 9.70% 2006 1 3,838 70,440 7.60% 2007 2 7,147 195,816 21.13% No commercial tenant leases 10% or more of the available rental space. Real Estate Taxes and Rates: Real estate taxes and rates in 2001 for each property were: Billing Rate (in thousands) The Loft Apartments $ 88 0.99% The Sterling Apartment Homes and Commerce Center 740 8.81% Capital Improvements: The Loft During the year ended December 31, 2001, the Partnership completed approximately $284,000 of capital improvements, consisting primarily of exterior painting, floor covering and appliance replacements and structural improvements. These improvements were funded from operations and replacement reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $55,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The Sterling During the year ended December 31, 2001, the Partnership completed approximately $114,000 of capital improvements at The Sterling Apartment Homes and Commerce Center, consisting primarily of garage resurfacing, floor covering replacements, tenant improvements, and interior decoration. These improvements were funded from operating cash flow and replacement reserves. In addition, the Partnership acquired approximately $498,000 of improvements from a former tenant in satisfaction of unpaid rents due to the Partnership. The Partnership is currently evaluating the capital improvements needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $161,000 for the apartments and $.54 per square foot or approximately $60,000 for the Commerce Center. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Item 3. Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs 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 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 court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants oppose the motion and a hearing has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders During the fiscal quarter ended December 31, 2001, no matter was submitted to a vote of unitholders through the solicitation of proxies or otherwise. PART II Item 5. Market for Partnership Equity and Related Partner Matters The Partnership, a publicly-held limited partnership, offered and sold 200,342 limited partnership units (the "Units") aggregating $200,342,000. The Partnership currently has 12,193 holders of record owning an aggregate of 199,045.2 Units. Affiliates of the General Partner owned 126,477 units or 63.54% at December 31, 2001. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. The following table sets forth the distributions made by the Partnership for the years ended December 31, 1999, 2000 and 2001 (See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.): Distributions Per Limited Aggregate Partnership Unit 01/01/99 - 12/31/99 $22,621,000 (1) $113.65 01/01/00 - 12/31/00 47,880,000 (2) 240.55 01/01/01 - 12/31/01 15,757,000 (3) 78.83 (1) Distributions were made from surplus funds. (2) Distributions were made from surplus funds, approximately $28,770,000 of which was from the receipt of net financing and refinancing proceeds from CCEP. (3) Consists of approximately $6,646,000 of cash from operations and approximately $9,111,000 of cash from surplus funds, of which approximately $1,425,000 was from the receipt of previously undistributed net financing and refinancing proceeds from CCEP and approximately $6,019,000 was from the receipt of net sales proceeds from CCEP. The Registrant's cash available for distribution is reviewed on a monthly basis. Future distributions will depend on the levels of cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings and/or property sales. Future distributions may also be affected by the Partnership's decision regarding the Master Loan which matured in November 2000. The Partnership's options include foreclosing on the properties which collateralize the Master Loan or extending the terms of the loan. If the Partnership forecloses on the properties securing the new Master Loan, title in the properties owned by CCEP would be transferred to the Partnership, subject to the existing liens on such properties, including the first mortgage loans. As a result, the Partnership would become responsible for the operations of such properties. There can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners in 2002 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 126,477 limited partnership units (the "Units") in the Partnership representing 63.54% 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 which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.54% of the outstanding Units, AIMCO is in a position to control 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 its affiliation with the General Partner. Item 6. Selected Financial Data The following table sets forth a summary of selected financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in "Item 8. Financial Statements and Supplementary Data".
FOR THE YEARS ENDED DECEMBER 31, 2001 2000 1999 1998 1997 STATEMENTS OF OPERATIONS (in thousands, except per unit data) Total revenues $ 15,484 $ 14,193 $ 13,545 $ 14,394 $ 11,608 Total expenses (11,582) (10,823) (9,773) (9,087) (8,041) Reduction in provision for impairment loss 3,176 14,241 -- 23,269 -- Net income $ 7,078 $ 17,611 $ 3,772 $ 28,576 $ 3,567 Net income per Limited Partnership Unit $ 35.20 $ 87.59 $ 18.76 $ 142.12 $ 17.74 Distributions per Limited Partnership Unit $ 78.83 $ 240.55 $ 113.65 $ 143.58 $ 9.94 Limited Partnership Units outstanding 199,045.2 199,045.2 199,045.2 199,045.2 199,052
AS OF DECEMBER 31, BALANCE SHEETS 2001 2000 1999 1998 1997 (in thousands) Total assets $ 56,089 $ 65,383 $ 95,668 $115,182 $ 91,628 Mortgage note payable $ 26,457 $ 26,762 $ 27,074 $ 27,360 $ 4,448
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The matters discussed in this Form 10-K 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-K 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 operation. 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. This item should be read in conjunction with "Item 8. Financial Statements and Supplementary Data" and other items contained elsewhere in this report. Results of Operations 2001 Compared to 2000 The Partnership's net income for the year ended December 31, 2001 was approximately $7,078,000 compared to net income of approximately $17,611,000 for the year ended December 31, 2000. The decrease in net income for the year ended December 31, 2001 as compared to the year ended December 31, 2000 was primarily due to the decrease in the reduction of the provision for impairment loss on the investment in the Master Loan recognized in 2001, partially offset by an increase in interest payments received and therefore recognized as income related to the Master Loan. Each of these factors was caused by improved operations at the collateral properties due to major capital projects and the concerted effort to complete deferred maintenance items that have been ongoing over the past few years. This work was funded by cash flow from the collateral properties themselves as no amounts have been borrowed on the Master Loan or from other sources in order to fund such improvements. Excluding the items related to the Master Loan, the Partnership's net income for the year ended December 31, 2001 was approximately $622,000 compared to approximately $1,370,000 for the year ended December 31, 2000. The decrease in net income for the year ended December 31, 2001 is due to an increase in total expenses offset by a slight increase in total revenues. The increase in total expenses for the year ended December 31, 2001 was due to an increase in operating and property tax expenses. Operating expenses increased due to an increase in utility expense, primarily natural gas, at The Sterling and to increases in salary and other related benefits at both investment properties. Also, the Partnership experienced a significant increase in amortization expense due to the write-off of unamortized lease commissions relating to a tenant which moved out in December 2001 (See further discussion below). Property tax expense increased due to an increase in the assessed value of The Sterling. The increase in total revenues for the year ended December 31, 2001 is due to an increase in rental and other income offset by a decrease in interest income and property tax refunds. The increase in rental income was due to an increase in average rental rates at both of the Partnership's properties and an increase in occupancy at The Sterling Apartment Homes, offset by a decrease in occupancy at The Sterling Commerce Center and a slight decrease in occupancy at The Loft Apartments. Other income increased due to an increase in lease cancellation fees and cable television income at both investment properties and to utility reimbursements and tenant deposit forfeitures at The Sterling Commerce Center and Apartment Homes. The decrease in property tax refunds is due to The Sterling receiving a refund of prior year tax bills which had been under appeal during the year ending December 31, 2000. Interest income decreased due to the release of the working capital reserve requirement (see Note G of the consolidated financial statements) which resulted in lower average cash balances in interest bearing accounts. In December 2001, the Partnership's most significant commercial tenant at The Sterling Commerce Center vacated its space which represented 30.58% of the leaseable commercial space. The Partnership filed a lawsuit against such tenant seeking monetary damages for unpaid rent, including rent which had been abated in favor of the tenant completing significant improvements to its space. The Partnership accepted a settlement whereby the tenant will pay $180,000 in satisfaction of all unpaid rent amounts due and the Partnership will accept possession of the improvements completed by the tenant which have been valued at approximately $498,000. Beginning in 2002, these improvements will be depreciated over their remaining estimated useful lives. As a result of the tenant vacating the space, the Partnership expensed approximately $191,000 in unamortized lease commissions. The Partnership is actively pursuing a replacement tenant; however, if its efforts are unsuccessful the Partnership may experience a significant decrease in commercial rental income during 2002. 2000 compared to 1999 The Registrant's net income for the year ended December 31, 2000 was approximately $17,611,000 compared to net income of approximately $3,772,000 for the year ended December 31, 1999. The increase in net income for the year ended December 31, 2000 was primarily due to the $14,241,000 reduction of the provision for impairment loss on the investment in the Master Loan recognized in 2000 due to an increase in the net realizable value of the collateral properties. There was no adjustment to the provision for impairment loss during 1999. The General Partner evaluates the net realizable value on a semi-annual basis. The General Partner has seen a consistent increase in the net realizable value of the collateral properties, taken as a whole, over the past two years. The increase is deemed to be attributable to major capital improvement projects and the concerted effort to complete deferred maintenance items that have been ongoing over the past few years at the properties. This has enabled the properties to increase their respective occupancy levels or, in some cases, to maintain the properties' high occupancy levels. The vast majority of this work was funded by cash flow from the collateral properties themselves as no amounts have been borrowed on the Master Loan or from other sources in the past few years in order to fund such improvements. Excluding the reduction of provision for impairment loss, the Partnership's net income for the year ended December 31, 2000 and 1999 was approximately $3,370,000 and $3,772,000, respectively. The decrease in net income for the year ended December 31, 2000 was primarily due to an increase in total expenses, partially offset by an increase in total revenues. The increase in total expenses for the year ended December 31, 2000 is primarily due to an increase in depreciation, operating and general and administrative expenses. The increase in operating expense is the result of an increase in utilities expense and salaries and benefits at The Sterling, slightly offset by a decrease in advertising expense. Advertising expense decreased at The Sterling due to an increase in occupancy thus eliminating the need for extensive advertising. Depreciation expense increased due to major capital improvements and replacements at The Sterling during 2000 and 1999 which are now being depreciated. General and administrative expenses increased for the year ended December 31, 2000 due to an increase in the costs of services provided by the General Partner. The increase in total revenues for the year ended December 31, 2000 is attributable to an increase in rental, interest and other income and a property tax refund which more than offset the decrease in interest income recognized on the Master Loan. The decrease in interest income related to the Master Loan is a factor of the method used to recognize income. Income is only recognized to the extent that actual cash is received. The receipt of cash is dependent on the operating cash flow of the properties which secure the Master Loan. Operating cash flow for these properties was lower for the year ended December 31, 2000 as a result of capital expenditures at the properties. The increase in rental income for the years ended December 31, 2000 as compared to the same period in 1999, was due to increases in average rental rates at the Registrant's investment properties along with an increase in occupancy at the Sterling which was offset slightly by a decrease in occupancy at The Loft Apartments. In addition, there has been a decrease in concessions offered at The Sterling as a result of the complex completing its renovation during 2000. The increase in interest income is the result of higher average balances in interest bearing accounts. The property tax refund was due to The Sterling receiving a refund on prior year tax bills which were appealed. Included in general and administrative expenses for the years ended December 31, 2001 and 2000 are costs of the services provided by the General Partner as allowed under the Partnership Agreement associated with its management of the Partnership. Also included are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. 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 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. Capital Resources and Liquidity At December 31, 2001, the Partnership had cash and cash equivalents of approximately $922,000 compared to approximately $2,036,000 at December 31, 2000. Cash and cash equivalents decreased approximately $1,114,000 due to approximately $16,062,000 of cash used in financing activities partially offset by approximately $7,484,000 and $7,464,000 of cash provided by operating and investing activities, respectively. Cash used in financing activities consisted primarily of distributions to partners and, to a lesser extent, principal payments made on the mortgages encumbering the Registrant's properties. Cash provided by investing activities consisted of principal payments received on the Master Loan and net receipts from escrow accounts maintained by the mortgage lenders slightly offset by property improvements and replacements. The Registrant invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the various properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. The Partnership is currently evaluating the capital improvements needs of all the properties for the upcoming year. The minimum amount to be budgeted for the Partnership is expected to be $300 per unit or approximately $216,000 for all the apartment complexes and $0.54 per square foot or approximately $60,000 for the Sterling Commerce Center. Additional improvements may be considered and will depend on the physical condition of the properties as well as replacement reserves and anticipated cash flow generated by the properties. 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 $26,457,000 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 dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. During the year ended December 31, 2001, distributions from surplus cash of approximately $9,111,000 were paid to the limited partners ($45.77 per limited partnership unit), of which approximately $1,425,000 was from the receipt of net financings and refinancing proceeds from CCEP and approximately $6,019,000 was from the receipt of net sales proceeds from CCEP. Distributions of approximately $6,646,000 (approximately $6,580,000 paid to the limited partners or $33.06 per limited partnership unit) were paid from operations. Distributions from surplus cash of approximately $47,880,000 were paid to the limited partners ($240.55 per limited partnership unit) during the year ended December 31, 2000 of which approximately $28,770,000 was from the receipt of net financing and refinancing proceeds from CCEP. Distributions from surplus cash of approximately $22,621,000 were paid to limited partners ($113.65 per limited partnership unit) during the year ended December 31, 1999. The Registrant's cash available for distribution is reviewed on a monthly 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. Future distributions may also be affected by the Partnership's decision regarding the Master Loan which matured in November 2000. The Partnership's options include foreclosing on the properties which collateralize the Master Loan or extending the terms of the loan. If the Partnership forecloses on the properties securing the new Master Loan, title in the properties owned by CCEP would be transferred to the Partnership, subject to the existing liens on such properties, including the first mortgage loans. As a result, the Partnership would become responsible for the operations of such properties. There can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit distributions to its partners in 2002 or subsequent periods. On September 16, 2000, the Partnership sought the vote of limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partners' capital contributions less distributions to limited partners and instead permit the General Partner to determine reasonable reserve requirements of the Partnership. The vote was sought pursuant to a Consent Solicitation that expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership interests. Upon expiration of the consent period, a total number of 140,565.90 units had voted of which 136,767.20 units had voted in favor of the amendment, 2,805.70 voted against the amendment and 993.00 units abstained. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 126,477 limited partnership units (the "Units") in the Partnership representing 63.54% of the outstanding Units at December 31, 2001. 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 which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.54% of the outstanding Units, AIMCO is in a position to control 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 its affiliation with the General Partner. During the years ended December 31, 2001, 2000 and 1999, the Partnership received approximately $7,801,000, $33,634,000 and $20,713,000, as principal payments on the Master Loan from CCEP. For 2001, approximately $357,000 was received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Approximately $6,019,000 was received representing net proceeds from the sale of Magnolia Trace and approximately $1,425,000 was received representing additional proceeds received for the refinancing of the mortgages encumbering nine of the investment properties in 2000. For 2000, approximately $238,000 was received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Approximately $4,526,000 was received representing net proceeds from the sale of Shirewood and approximately $28,870,000 was received representing net proceeds received for the refinancing of the mortgages encumbering nine of the investment properties. For 1999, approximately $163,000 was received on certain investments by CCEP. Approximately $20,550,000 was received representing the net proceeds from the sale of 444 DeHaro. CCEP Property Operations For the years ended December 31, 2001, 2000 and 1999, CCEP's net loss totaled approximately $36,890,000, $37,493,000, and $20,178,000, respectively, with total revenues of approximately $22,941,000, $22,747,000, and $19,262,000, respectively. 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 year ended December 31, 2001, 2000 and 1999, CCEP's statement of operations includes total interest expense attributable to the Master Loan of approximately $42,043,000, $41,287,000, and $39,609,000, respectively, all but $3,280,000, $2,000,000, and $2,744,000, respectively, 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. The Master Loan Agreement matured in November 2000. 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. If CCIP were to foreclose on its collateral, CCEP would no longer hold title to its properties and would be dissolved. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Item 7a. Market Risk Factors 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 of the Partnership's control, such as an oversupply of similar properties resulting from overbuilding, increases in unemployment, 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 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 impact the recognition of income, as income is only recognized to the extent of cash flow. Therefore, market risk factors do not impact the Partnership's results of operations as it relates to the Loan. See "Item 8 - Financial Statements and Supplementary Data - Note D" for further information. 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 December 31, 2001, a 100 basis point increase or decrease in market interest rates would impact Partnership income approximately $265,000. The following table summarizes the Partnership's debt obligations at December 31, 2001. The interest rates represent the weighted-average rates. The fair value of the debt obligations approximates the carrying value as of December 31, 2001. Principal Amount by Expected Maturity Fixed Rate Debt Long-term Average Interest Debt Rate 6.80% (in thousands) 2002 $ 346 2003 371 2004 393 2005 4,320 2006 362 Thereafter 20,665 Total $26,457 Item 8. Financial Statements and Supplementary Data CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Operationsfor the Years ended December 31,2001, 2000 and 1999 Consolidated Statements of Changes in Partners' (Deficit) Capital for the Years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the Years ended December 31,2001, 2000 and 1999 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Institutional Properties We have audited the accompanying consolidated balance sheets of Consolidated Capital Institutional Properties as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in partners' (deficit) capital, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Institutional Properties at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Greenville, South Carolina March 15, 2002 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data)
December 31, 2001 2000 Assets Cash and cash equivalents $ 922 $ 2,036 Receivables and deposits 488 886 Restricted escrows 392 453 Other assets 604 1,616 Investment in Master Loan (Note D) 26,430 34,231 Less allowance for impairment loss -- (3,176) 26,430 31,055 Investment properties (Notes E and H): Land 3,564 3,564 Buildings and related personal property 39,658 38,762 43,222 42,326 Less accumulated depreciation (15,969) (12,989) 27,253 29,337 $ 56,089 $ 65,383 Liabilities and Partners' Capital Liabilities Accounts payable $ 126 $ 189 Tenant security deposit liabilities 566 675 Other liabilities 603 741 Mortgage notes payable (Note E) 26,457 26,762 27,752 28,367 Partners' Capital General partner 123 118 Limited partners (199,045.2 units issued and outstanding) 28,214 36,898 28,337 37,016 $ 56,089 $ 65,383 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data)
Years Ended December 31, 2001 2000 1999 Revenues: Rental income $ 11,305 $ 10,826 $ 9,877 Interest income on investment in Master Loan to affiliate (Note D) 3,280 2,000 2,744 Reduction of provision for impairment loss (Note D) 3,176 14,241 -- Interest income 78 397 318 Other income 821 760 606 Property tax refund -- 210 -- Total revenues 18,660 28,434 13,545 Expenses: Operating 5,168 4,570 4,150 General and administrative 720 711 531 Depreciation 2,980 3,036 2,655 Interest 1,889 1,909 1,926 Property taxes 825 597 511 Total expenses 11,582 10,823 9,773 Net income (Note C) $ 7,078 $ 17,611 $ 3,772 Net income allocated to general partner (1%) $ 71 $ 176 $ 38 Net income allocated to limited partners (99%) 7,007 17,435 3,734 $ 7,078 $ 17,611 $ 3,772 Net income per limited partnership unit $ 35.20 $ 87.59 $ 18.76 Distributions per limited partnership unit $ 78.83 $ 240.55 $ 113.65 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (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 to partners -- -- (22,621) (22,621) Net income for the year ended December 31, 1999 -- 38 3,734 3,772 Partners' (deficit) capital at December 31, 1999 199,045.2 (58) 67,343 67,285 Distributions to partners -- -- (47,880) (47,880) Net income for the year ended December 31, 2000 -- 176 17,435 17,611 Partners' capital at December 31, 2000 199,045.2 118 36,898 37,016 Distributions to partners -- (66) (15,691) (15,757) Net income for the year ended December 31, 2001 -- 71 7,007 7,078 Partners' capital at December 31, 2001 199,045.2 $ 123 $ 28,214 $ 28,337 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2001 2000 1999 Cash flows from operating activities: Net income $ 7,078 $ 17,611 $ 3,772 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,296 3,169 2,778 Reduction of provision for impairment loss (3,176) (14,241) -- Change in accounts: Receivables and deposits 518 192 (93) Other assets 78 (22) (513) Accounts payable (63) 81 (323) Tenant security deposit liabilities (109) 101 70 Accrued property taxes -- -- (62) Other liabilities (138) 114 (64) Net cash provided by operating activities 7,484 7,005 5,565 Cash flows from investing activities: Property improvements and replacements (398) (1,647) (2,183) Lease commissions paid -- (74) -- Net receipts from restricted escrows 61 147 1,312 Principal receipts on Master Loan 7,801 33,634 20,713 Net cash provided by investing activities 7,464 32,060 19,842 Cash flows from financing activities: Loan costs -- (12) (8) Distributions to partners (15,757) (47,880) (22,621) Payments on mortgage notes payable (305) (312) (286) Net cash used in financing activities (16,062) (48,204) (22,915) Net (decrease) increase in cash and cash equivalents (1,114) (9,139) 2,492 Cash and cash equivalents at beginning of year 2,036 11,175 8,683 Cash and cash equivalents at end of year $ 922 $ 2,036 $ 11,175 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,702 $ 1,992 $ 1,869 Supplemental disclosure of non-cash transactions: Property improvements and replacements capitalized as part of a settlement with a tenant that vacated its space $ 498 $ -- $ -- See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 Note A - Organization and Significant Accounting Policies Organization: Consolidated Capital Institutional Properties (the "Partnership" or "Registrant"), a California Limited Partnership, was formed on April 28, 1981, to lend funds through nonrecourse notes with participation interests (the "Master Loan"). The loans were made to, and the real properties that secure the Master Loan were purchased and owned by, Consolidated Capital Equity Partners, ("EP"), a California general partnership in which certain of the partners were former shareholders and former management of Consolidated Capital Equities Corporation ("CCEC"), the former Corporate General Partner. Through December 31, 2001, the Partnership had advanced a total of approximately $180,500,000 to EP and its successor under the Master Loan. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to such date. Upon the Partnership's formation in 1981, CCEC, a Colorado corporation, was the Corporate General Partner. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"), acquired CCEC's General Partner interests in the Partnership and in 15 other affiliated public Limited Partnerships (the "Affiliated Partnerships") and replaced CCEC as Managing General Partner in all 16 partnerships. During 1989, EP defaulted on certain interest payments that were due under the Master Loan. Before the Partnership could exercise its remedies for such defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization proceeding. On October 18, 1990, the Bankruptcy Court approved EP's consensual plan of reorganization (the "Plan"). In November 1990, EP and the Partnership consummated a closing under the Plan pursuant to which, among other things, the Partnership and EP executed an amended and restated loan agreement (the "New Master Loan Agreement"). EP was converted from a California General Partnership to a California Limited Partnership, Consolidated Capital Equity Partners, L.P. ("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure the New Master Loan Agreement. ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary of CEI, is the sole general partner of CCEP and an affiliate of the Partnership. The General Partners of EP became Limited Partners in CCEP. CHI has full discretion with respect to conducting CCEP's business, including managing CCEP's properties and initiating and approving capital expenditures and asset dispositions and refinancings. All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT was merged into Apartment Investment and Management Company ("AIMCO"). Hence, CEI is now a wholly-owned subsidiary of AIMCO, a publicly held real estate investment trust. The Partnership owns and operates one apartment property and one multiple-use complex in North Carolina and Pennsylvania, respectively. Also, the Partnership is the holder of the Master Loan which is collateralized by apartment properties located throughout the United States. Principles of Consolidation: The Partnership's consolidated financial statements include the accounts of CCIP Sterling, L.P., a Pennsylvania Limited Partnership, Kennedy Boulevard Associates II, L.P., Kennedy Boulevard Associates III, L.P., Kennedy Boulevard Associates IV, L.P., and Kennedy Boulevard GP I ("KBGP-I"), a Pennsylvania Partnership. Each of the entities above except KBGP-I are Pennsylvania limited partnerships, and the general partners of each of these affiliated limited and general partnerships are limited liability corporations of which the Partnership is the sole member. Therefore, the Partnership controls these affiliated limited and general partnerships, and consolidation is required. CCIP Sterling, L.P. holds title to The Sterling Apartment Home and Commerce Center ("the Sterling"). All interpartnership transactions have been eliminated. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Allocation of Profits, Gains, and Losses: The Agreement provides for net income and net losses for both financial and tax reporting purposes to be allocated 99% to the Limited Partners and 1% to the General Partner. Net Income Per Limited Partnership Unit: Net income per Limited Partnership Unit ("Unit") is computed by dividing net income allocated to the Limited Partners by the number of Units outstanding at the beginning of the year. Per Unit information has been computed based on 199,045.2 Units outstanding in 2001, 2000 and 1999. Cash and Cash Equivalents: Includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $840,000 and $1,861,000 at December 31, 2001 and 2000, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Restricted Escrows: At the time of the 1995 refinancing of The Loft, approximately $60,000 of the proceeds were designated for a Replacement Reserve Fund for certain capital replacements at the property. Additionally, monthly deposits are required pursuant to the mortgage agreement. At both December 31, 2001 and 2000, the balance in this reserve was approximately $121,000. In conjunction with the financing of the Sterling in September 1998, the Partnership is required to make monthly deposits of approximately $17,000 with the mortgage company to establish and maintain a Replacement Reserve Fund designated for repairs and replacements at the property. Additionally, monthly deposits are required pursuant to the mortgage agreement. As of December 31, 2001 and 2000, the balance was approximately $271,000 and $332,000, respectively. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment and commercial properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for real property over 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27 1/2 years and (2) personal property additions over 5 years. Loan Costs: As of December 31, 2001 and 2000, loan costs of approximately $569,000 and $584,000, respectively, less accumulated amortization of approximately $219,000 and $160,000 respectively, are included in other assets. These costs are amortized on a straight-line basis over the life of the loans. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on rental payments. Investment Properties: Investment properties consist of one apartment complex and one multiple-use building consisting of apartment units and commercial space and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in the years ended December 31, 2001, 2000 or 1999. See "Recent Accounting Pronouncements" below. Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair values due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Investment in Master Loan: In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", the allowance for credit losses related to loans that are identified for evaluation in accordance with the SFAS is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Leases: The Partnership leases certain commercial space to tenants under various lease terms. The leases are accounted for as operating leases in accordance with SFAS No. 13, "Accounting for Leases". Some of the leases contain stated rental increases during their term. For leases with fixed rental increases, rents are recognized on a straight-line basis over the terms of the leases. For all other leases, minimum rents are recognized over the terms of the leases. The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Lease Commissions: Lease commissions are capitalized and included in other assets and are being amortized using the straight-line method over the life of the applicable lease. At December 31, 2001 and 2000, lease commissions totaled approximately $231,000 and $543,000, respectively, with accumulated amortization of approximately $151,000 and $207,000, respectively. During the year ended December 31, 2001, lease commissions of approximately $313,000 and accumulated amortization of approximately $122,000 was written off as a result of the tenant to which these lease commissions related vacating its space. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. See "Note J" for detailed disclosure of the Partnership's segments. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $67,000, $71,000 and $90,000 for the years ended December 31, 2001, 2000 and 1999, respectively, were charged to operating expense. Reclassifications: Certain reclassifications have been made to the 1999 information to conform to the 2000 presentation. Recent Accounting Pronouncements: In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. 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 IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation. 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 - Income Taxes The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net income and Federal taxable income (in thousands, except per unit data):
2001 2000 1999 Net income as reported $ 7,078 $17,611 $ 3,772 Add (deduct): Deferred revenue and other liabilities (157) 195 (915) Depreciation differences 398 499 471 Accrued expenses 7 21 28 Interest income (3,280) (2,000) (2,744) Differences in valuation allowances (3,176) (14,241) -- Other 90 14 -- Federal taxable income $ 960 $ 2,099 $ 612 Federal taxable income per limited partnership unit $ 4.78 $ 10.44 $ 3.04
The following is reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): December 31, 2001 2000 Net assets as reported $28,337 $37,016 Land and buildings 433 931 Accumulated depreciation 3,303 2,905 Allowance for impairment loss -- 3,176 Interest receivable 44 3,324 Syndication fees 22,500 22,500 Other 233 (205) Net assets - Federal tax basis $54,850 $69,647 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 general partner of CCEP is an affiliate of the General Partner. The Partnership loaned funds to CCEP subject to a nonrecourse note with a participation interest (the "Master Loan"). At December 31, 2001, the recorded investment in the Master Loan was considered to be impaired under 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, as repayment of the loan is expected to be provided solely by the collateral. For the years ended December 31, 2001, 2000 and 1999, the Partnership recorded approximately $3,280,000, $2,000,000, and $2,744,000 respectively, of interest income based upon "Excess Cash Flow" (as defined in the terms of the New Master Loan Agreement) generated by CCEP and paid to the Partnership. The fair value of all of the collateral properties which on a combined basis secure the Master Loan, 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. The approximate reduction of $3,176,000 and $14,241,000 in the provision for impairment loss recognized during the years ended December 31, 2001 and 2000, respectively, is attributed to an increase in the net realizable value of the collateral properties and to the payment of principal on the Master Loan from the sales proceeds of Magnolia Trace in January 2001 and the refinancing and financing proceeds of the collateral properties in the third and fourth quarter of 2000. The General Partner evaluates the net realizable value on a semi-annual basis or as circumstances dictate that it should be analyzed. Interest, calculated on the accrual basis, due to the Partnership pursuant to the terms of the Master Loan Agreement, but not recognized in the income statements due to the impairment of the loan, totaled approximately $38,763,000, $39,287,000 and $36,865,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Interest income is recognized on the cash basis as required by SFAS 114. At December 31, 2001 and 2000, such cumulative unrecognized interest totaling approximately $345,024,000 and $306,262,000 was not included in the balance of the investment in Master Loan. All of the collateral properties are encumbered by first mortgages totaling approximately $54,834,000 as of December 31, 2001, which are senior to the Master Loan. This has been taken into consideration in determining the fair value of the Master Loan. During the years ended December 31, 2001, 2000 and 1999, the Partnership made no advances to CCEP on Master Loan. During the years ended December 31, 2001, 2000 and 1999, the Partnership received approximately $7,801,000, $33,634,000 and $20,713,000, as principal payments on the Master Loan from CCEP. For 2001, approximately $357,000 was received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Approximately $6,019,000 was received representing net proceeds from the sale of Magnolia Trace and approximately $1,425,000 was received representing additional proceeds received for the refinancing of the mortgages encumbering nine of the investment properties in 2000. For 2000, approximately $238,000 was received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement. Approximately $4,526,000 was received representing net proceeds from the sale of Shirewood and approximately $28,870,000 was received representing net proceeds received for the refinancing of the mortgages encumbering nine of the investment properties. For 1999, approximately $163,000 was received on certain investments by CCEP. Approximately $20,550,000 was received representing the net proceeds from the sale of 444 DeHaro. Terms of the Master Loan Agreement The Master Loan matured in November 2000. The General Partner had been negotiating with CCEP with respect to its options which included foreclosing on the properties which collateralize the Master Loan or extending the terms of the loan. The General Partner decided to foreclose on the properties that collateralize the Master Loan. The General Partner will begin the process of foreclosure or executing deeds in lieu of foreclosure during the first quarter of 2002 on all the properties in CCEP. As the deeds are executed, title in the properties owned by CCEP would be transferred to the Partnership, subject to the existing liens on such properties, including the first mortgage loans. As a result, the Partnership would become responsible for the operations of such properties. The investment in the Master Loan consists of the following: As of December 31, 2001 2000 (in thousands) Master Loan funds advanced at beginning of year $ 34,231 $ 67,865 Principal receipts on Master Loan (7,801) (33,634) Master Loan funds advanced at end of year $ 26,430 $ 34,231 The allowance for impairment loss on Master Loan consists of the following: As of December 31, 2001 2000 (in thousands) Allowance for impairment loss on Master Loan, beginning of year $ 3,176 $ 17,417 Reduction of impairment loss (3,176) (14,241) Allowance for impairment loss on Master Loan, end of year $ -- $ 3,176 Note E - Mortgage Notes Payable The principal terms of mortgage notes payable are as follows:
Principal Monthly Principal Balance At Payment Balance December 31, (including Interest Maturity Due At Property 2001 2000 interest) Rate Date Maturity (in thousands) (in thousands) (in thousands) The Loft Apartments 1st mortgage $ 4,210 $ 4,276 $ 30 6.95% 12/01/05 $ 3,903 The Sterling Apartment Homes and Commerce Center 1st mortgage 22,247 22,486 149 6.77% 10/01/08 19,975 $ 26,457 $ 26,762 $179 $ 23,878
The mortgage notes payable are non-recourse and are secured by pledge of the respective properties and by pledge of revenues from the respective properties. The notes require prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2001, are as follows (in thousands): 2002 $ 346 2003 371 2004 393 2005 4,320 2006 362 Thereafter 20,665 $26,457 Note F - 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 its affiliates during the years ended December 31, 2001, 2000, and 1999: 2001 2000 1999 (in thousands) Property management fees (included in operating expense) $640 $580 $525 Reimbursement for services of affiliates (included in general and administrative expenses, and investment properties) 332 510 259 Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $640,000, $580,000 and $525,000 for the years ended December 31, 2001, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $332,000, $510,000 and $259,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $29,000 and $38,000 for the years ended December 31, 2000 and 1999, respectively. The fees for the year ended December 31, 2001 amounted to less than $1,000. The construction management service fees are calculated based on a percentage of current additions to investment properties and are being depreciated over 15 years. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $60,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 126,477 limited partnership units (the "Units") in the Partnership representing 63.54% of the outstanding Units at December 31, 2001. 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 which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.54% of the outstanding Units, AIMCO is in a position to control 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 its affiliation with the General Partner. Note G - Commitments Until October 17, 2000, the Partnership was 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 were made from this reserve, operating revenues were to be allocated to such reserve to the extent necessary to maintain the foregoing level. On September 16, 2000, the Partnership sought the vote of limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partner's capital contributions less distributions to limited partners and instead permit the General Partner to determine reasonable reserve requirements of the Partnership. The vote was sought pursuant to a Consent Solicitation that expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership interests. Upon expiration of the consent period, a total number of 140,565.90 units had voted of which 136,767.20 units had voted in favor of the amendment, 2,805.70 voted against the amendment and 993.00 units abstained. Note H - Real Estate and Accumulated Depreciation Investment Properties Initial Cost To Partnership (in thousands)
Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) The Loft Apartments $ 4,210 $ 1,053 $ 4,147 $ 2,226 The Sterling Apt Homes and Commerce Center 22,247 2,567 12,341 20,888 $26,457 $ 3,620 $16,488 $ 23,114
Gross Amount At Which Carried At December 31, 2001 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years (in thousands) The Loft $ 997 $ 6,429 $ 7,426 $ 3,878 11/19/90 5-20 The Sterling 2,567 33,229 35,796 12,091 12/01/95 5-25 Totals $3,564 $39,658 $43,222 $15,969
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31, 2001 2000 1999 (in thousands) Real Estate Balance, real estate at beginning of year $42,326 $40,679 $38,496 Property improvements and replacements 896 1,647 2,183 Balance, real estate at end of year $43,222 $42,326 $40,679 Accumulated Depreciation Balance at beginning of year $12,989 $ 9,953 $ 7,298 Additions charged to expense 2,980 3,036 2,655 Balance at end of year $15,969 $12,989 $ 9,953
The aggregate cost of the real estate for Federal income tax purposes at December 31, 2001 and 2000, is approximately $43,655,000 and $43,257,000, respectively. Accumulated depreciation for Federal income tax purposes at December 31, 2001 and 2000 is approximately $12,666,000, and $10,084,000, respectively. Note I - Commercial Leases In December 2001, the Partnership's most significant commercial tenant at The Sterling Commerce Center vacated its space which represented 30.58% of the leaseable commercial space. The Partnership filed a lawsuit against such tenant seeking monetary damages for unpaid rent, including rent which had been abated in favor of the tenant completing significant improvements to its space. The Partnership accepted a settlement whereby the tenant will pay $180,000 in satisfaction of all unpaid rent amounts due and the Partnership will accept possession of the improvements completed by the tenant which have been valued at approximately $498,000. Beginning in 2002, these improvements will be depreciated over their remaining estimated useful lives. As a result of the tenant vacating the space, the Partnership expensed approximately $191,000 in unamortized lease commissions. Rental income on the commercial property leases is recognized on the straight-line basis over the life of the applicable leases. Minimum future rental income for the commercial properties subject to noncancellable operating leases is as follows (in thousands): Year Ending December 31, 2002 $ 821 2003 609 2004 413 2005 286 2006 246 Thereafter 138 $ 2,513 There is no assurance that this rental income will continue at the same level when the current leases expire. Note J - 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 property. The Partnership's property segments consist of one apartment complex in North Carolina and one multiple use facility consisting of apartment units and commercial space in Pennsylvania. The Partnership rents apartment units to tenants for terms that are typically less than twelve months. The commercial property leases space to various medical offices, career service facilities, and retail shops at terms ranging from two months to fifteen years. Measurement of segment profit and 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 summary of significant accounting policies. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments are business units (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 years ending December 31, 2001, 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 reportable segments.
2001 Residential Commercial Other Totals Rental income $ 9,782 $ 1,523 $ -- $11,305 Interest income 58 8 12 78 Other income 539 282 -- 821 Interest expense 1,659 230 -- 1,889 Depreciation 2,890 90 -- 2,980 General and administrative expenses -- -- 720 720 Interest income on investment in Master Loan -- -- 3,280 3,280 Reduction of provision for impairment loss -- -- 3,176 3,176 Segment profit 1,285 49 5,744 7,078 Total assets 27,896 1,213 26,980 56,089 Capital expenditures for investment properties 372 524 -- 896
2000 Residential Commercial Other Totals Rental income $ 9,298 $ 1,528 $ -- $10,826 Interest income 98 24 275 397 Other income 520 239 1 760 Interest expense 1,673 236 -- 1,909 Depreciation 2,952 84 -- 3,036 General and administrative expenses -- -- 711 711 Interest Income on Investment in Master Loan -- -- 2,000 2,000 Reduction of provision for impairment loss -- -- 14,241 14,241 Segment profit 1,424 381 15,806 17,611 Total assets 32,276 1,853 31,254 65,383 Capital expenditures for investment properties 1,596 51 -- 1,647
1999 Residential Commercial Other Totals Rental income $ 8,452 $ 1,425 $ -- $ 9,877 Interest income 33 5 280 318 Other income 447 159 -- 606 Interest expense 1,691 235 -- 1,926 Depreciation 2,578 77 -- 2,655 General and administrative expenses -- -- 531 531 Interest Income on Investment in Master Loan -- -- 2,744 2,744 Segment profit 772 507 2,493 3,772 Total assets 33,654 2,067 59,947 95,668 Capital expenditures for investment properties 2,132 51 -- 2,183
Note K - Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs 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 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 court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants oppose the motion and a hearing has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Note L - Selected Quarterly Financial Data (Unaudited) The following is a summary of the unaudited quarterly results of operations for the Partnership (in thousands, except per unit data):
1st 2nd 3rd 4th 2001 Quarter Quarter Quarter Quarter Total Revenues: Rental, interest and other income $ 3,075 $ 3,030 $ 3,044 $ 3,055 $ 12,204 Interest income on investment in Master Loan 1,900 804 576 -- 3,280 Reduction of provision for impairment loss 3,176 -- -- -- 3,176 Total revenues 8,151 3,834 3,620 3,055 18,660 Total expenses 2,945 3,126 2,725 2,786 11,582 Net income $ 5,206 $ 708 $ 895 $ 269 $ 7,078 Net income allocated to General Partner (1%) $ 52 $ 7 $ 9 $ 3 $ 71 Net income allocated to Limited Partners (99%) 5,154 701 886 266 7,007 $ 5,206 $ 708 $ 895 $ 269 $ 7,078 Net income per limited partnership unit $ 25.89 $ 3.52 $ 4.45 $ 1.34 $ 35.20 Distributions per limited partnership unit $ 39.02 $ 16.53 $ 18.65 $ 4.63 $ 78.83
1st 2nd 3rd 4th 2000 Quarter Quarter Quarter Quarter Total Revenues: Rental, interest and other income $ 2,846 $ 2,963 $ 3,066 $ 3,108 $ 11,983 Interest income on investment in Master Loan -- 1,000 1,000 -- 2,000 Reduction of provision for impairment loss -- -- 14,241 -- 14,241 Property tax refund -- -- 210 -- 210 Total revenues 2,846 3,963 18,517 3,108 28,434 Total expenses 2,621 2,736 2,816 2,650 10,823 Net income $ 225 $ 1,227 $ 15,701 $ 458 $ 17,611 Net income allocated to General Partner (1%) $ 2 $ 12 $ 157 $ 5 $ 176 Net income allocated to Limited Partners (99%) 223 1,215 15,544 453 17,435 $ 225 $ 1,227 $ 15,701 $ 458 $ 17,611 Net income per limited partnership unit $ 1.12 $ 6.10 $ 78.09 $ 2.28 $ 87.59 Distributions per limited partnership unit $ 27.54 $ 5.97 $ 31.17 $ 175.87 $ 240.55
Note M - Distributions During the year ended December 31, 2001, distributions from surplus cash of approximately $9,111,000 were paid to the limited partners ($45.77 per limited partnership unit) of which approximately $1,425,000 was from the receipt of net financing and refinancing proceeds from CCEP and approximately $6,019,000 was from the receipt of net sales proceeds from CCEP. Distributions of approximately $6,646,000 (approximately $6,580,000 paid to the limited partners or $33.06 per limited partnership unit) were paid from operations. Distributions from surplus cash of approximately $47,880,000 were paid to the limited partners ($240.55 per limited partnership unit) during the year ended December 31, 2000 of which approximately $28,770,000 was from the receipt of net financing and refinancing proceeds from CCEP. Distributions from surplus cash of approximately $22,621,000 were paid to limited partners ($113.65 per limited partnership unit) during the year ended December 31, 1999. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors, Executive Officers of the General Partner of the Partnership The names and ages of, as well as the positions and offices held by, the present executive officers and directors of ConCap Equities, Inc. ("CEI") the Partnership's General Partner as of December 31, 2001, their ages and the nature of all positions with CEI presently held by them are as follows: Name Age Position Patrick J. Foye 44 Executive Vice President and Director Martha L. Long 42 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the Managing General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the audit committee or its equivalent under auditing standards generally accepted in the United States. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner have approved the inclusion of the audited financial statements in the Form 10-K for the year ended December 31, 2001 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were annual audit services of approximately $43,000 and non-audit services (principally tax-related) of approximately $25,000. Item 11. Executive Compensation No remuneration was paid to the General Partner nor its director or officers. Item 12. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as noted below, no persons or entity is known by the General Partner to own beneficially more than 5% of the outstanding Units of the Partnership: Name and Address Number of Units Percentage Insignia Properties, L.P. (an affiliate of AIMCO) 50,572.4 25.41% Reedy River Properties, L.L.C. (an affiliate of AIMCO) 28,832.5 14.48% Cooper River Properties, L.L.C. (an affiliate of AIMCO) 11,365.6 5.71% AIMCO Properties, L.P. (an affiliate of AIMCO) 35,706.5 17.94% Reedy River Properties, Cooper River Properties LLC and Insignia Properties LP are indirectly ultimately owned by AIMCO. Their business addresses are 55 Beattie Place, Greenville, SC 20602. AIMCO Properties, LP is ultimately controlled by AIMCO. Its business address is 2000 South Colorado Blvd., Denver, Colorado 80222. (b) Beneficial Owners of Management Except as described in Item 12(a) above, neither CEI nor any of the directors, officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of December 31, 2001, the following entity was known to CEI to be the beneficial owner of more than 5% of its common stock: NUMBER OF PERCENT NAME AND ADDRESS UNITS OF TOTAL Insignia Properties Trust 55 Beattie Place P.O. Box 1089 Greenville, SC 29602 100,000 100% Effective February 26, 1999, Insignia Properties Trust merged into AIMCO with AIMCO being the surviving corporation. As a result, AIMCO ultimately acquired a 100% interest in Insignia Properties Trust. Item 13. Certain Relationships and Related Transactions The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) 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 its affiliates during the years ended December 31, 2001, 2000 and 1999: 2001 2000 1999 (in thousands) Property management fees $640 $580 $525 Reimbursement for services of affiliates 332 510 259 Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $640,000, $580,000 and $525,000 for the years ended December 31, 2001, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $332,000, $510,000 and $259,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $29,000 and $38,000 for the years ended December 31, 2000 and 1999, respectively. The fees for the year ended December 31, 2001 amounted to less than $1,000. The construction management service fees are calculated based on a percentage of current additions to investment properties and are being depreciated over 15 years. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $60,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 126,477 limited partnership units (the "Units") in the Partnership representing 63.54% of the outstanding Units at December 31, 2001. 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 which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.54% of the outstanding Units, AIMCO is in a position to control 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 its affiliation with the General Partner. PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements Consolidated Capital Equity Partners,L.P. Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Changes in Partners' Deficit for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements 2. Schedules All schedules are omitted because they are not required, are not applicable or the financial information is included in the financial statements or notes thereto. 3. Exhibits (a)10.23 Third Amendment to the Limited Partnership Agreement. 10.24 Fourth Amendment to the Limited Partnership Agreement. (b) Reports on Form 8-K filed during the fourth quarter of 2001: None. EXHIBIT INDEX S-K Reference Document Description 3 Certificates of Limited Partnership, as amended to date. (Incorporated by reference to the Annual Report on Form 19-K for the year ended December 31, 1991 ("1991 Annual Report")). 10.1 Amended Loan Agreement dated November 15, 1990 (the "Effective Date"), by and between the Partnership and EP (Incorporated by reference to the Annual Report of Form 10-K for the year ended December 31, 1990 ("1990 Annual Report")). 10.2 Assumption Agreement as of the Effective Date, by and between EP and CCEP (Incorporated by reference to the 1990 Annual Report). 10.3 Assignment of Claims as of the Effective Date, by and between the Partnership and EP (Incorporated by reference to the 1990 Annual Report). 10.4 Assignment of Partnership Interests in Western Can, Ltd., by and between EP and CCEP (Incorporated by reference to the 1990 Annual Report). 10.5 Bill of Sale and Assignment dated October 23, 1990, by and between CCEP and ConCap Services Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.6 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and Metro ConCap, Inc. (300 series of Property Management contracts), (Incorporated by reference to the 1990 Annual Report). 10.7 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Metro ConCap, Inc. (Incorporated by reference to the 1991 Annual Report). 10.8 Investor Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.9 Assignment and Assumption Agreement (Investor Services Agreement) dated October 23, 1990 by and between CCEC and ConCap Services Company (Incorporated by reference to the 1990 Annual Report). 10.10Letter of Notice dated December 20, 1991, from Partnership Services, Inc. ("PSI") to the Partnership regarding the change in ownership and dissolution of ConCap Services Company whereby PSI assumed the Investor Services Agreement. (Incorporated by reference to the 1991 Annual Report). 10.11Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.12Assignment and Assumption Agreement (Financial Services Agreement) dated October 23, 1990 by and between CCEC and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.13Letter of Notice dated December 20, 1991, from PSI to the Partnership regarding the change in ownership and dissolution of ConCap Capital Company whereby PSI assumed the Financial Services Agreement. (Incorporated by reference to the 1991 Annual Report). 10.14Property Management Agreement No. 503 dated February 16, 1993, by and between the Partnership, New Carlton House Partners, Ltd. and Coventry Properties, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 10.15Property Management Agreement No. 508 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.16Assignment and Assumption Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.17Multifamily Note dated November 30, 1995 between Consolidated Capital Institutional Properties, a California limited partnership, and Lehman Brothers Holdings, Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holding, Inc. 10.18Contract of Sale for Northlake Quadrangle, Tucker, Georgia, Consolidated Capital Equity Partners, L.P, and SPIVLL Management and Investment Company dated December 17, 1997, filed in Form 10-Q for the quarter ended September 30, 1998. 10.19First Amendment to Contract of Sale for Northlake Quadrangle, Tucker, Georgia, between Consolidated Capital Equity Partners, L.P., and SPIVLL Management and Investment Company dated April 16, 1998, filed in Form 10-Q for the quarter ended September 30, 1998. 10.20Mortgage and Security Agreement between Kennedy Boulevard Associates I, L.P., and Lehman Brothers Holdings, Inc., dated August 25, 1998, securing The Sterling Apartment Home and Commerce Center filed in Form 10-Q for the quarter ended September 30, 1998. 10.21Repair Escrow Agreement between Kennedy Boulevard Associates I, L.P., and Lehman Brothers Holdings, Inc., dated August 25, 1998, securing The Sterling Apartment Home and Commerce Center filed in Form 10-Q for the quarter ended September 30, 1998. 10.22Replacement Reserve and Security Agreement between Kennedy Boulevard Associates I, L.P., and Lehman Brothers Holdings, Inc., dated August 25, 1998, securing The Sterling Apartment Home and Commerce Center filed in Form 10-Q for the quarter ended September 30, 1998. 10.23 Third Amendment to the Limited Partnership Agreement as filed herein. 10.24 Fourth Amendment to the Limited Partnership Agreement as filed herein. 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note A of Item 8 - Financial Statements of this Form 10-K) 28.1 Fee Owner's Limited Partnership Agreement dated November 14, 1990 (Incorporated by reference to the 1990 Annual Report). 99.1 Audited Financial Statements of Consolidated Capital Equity Partners, L.P. for the years ended December 31, 2001 and 2000. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Senior Vice President and Controller Date: April 1, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the date indicated. /s/Patrick J. Foye Date: April 1, 2002 Patrick J. Foye Executive Vice President and Director /s/Martha L. Long Date: April 1, 2002 Martha L. Long Senior Vice President and Controller 2 EXHIBIT 99.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. Consolidated FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. TABLE OF CONTENTS December 31, 2001 LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Changes in Partners' Deficit for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Equity Partners, L.P. We have audited the accompanying consolidated balance sheets of Consolidated Capital Equity Partners, L.P. as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Equity Partners, L.P. at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. The accompanying consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note A to the consolidated financial statements, the Partnership has incurred operating losses, suffers from inadequate liquidity, has an accumulated deficit and is unable to repay the Master Loan balance, which matured in 2000. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. /s/ ERNST & YOUNG LLP Greenville, South Carolina March 15, 2002 EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. consolidated BALANCE SHEETS (in thousands)
December 31, 2001 2000 Assets Cash and cash equivalents $ 1,321 $ 5,894 Receivables and deposits 280 928 Restricted escrows 615 767 Other assets 1,514 1,634 Investment properties (Notes F and H): Land 6,904 7,796 Buildings and related personal property 80,399 83,558 87,303 91,354 Less accumulated depreciation (68,315) (70,793) 18,988 20,561 $ 22,718 $ 29,784 Liabilities and Partners' Deficit Liabilities Accounts payable $ 527 $ 410 Tenant security deposit liabilities 440 485 Accrued property taxes 256 218 Other liabilities 564 586 Mortgage notes payable (Note F) 54,834 56,060 Master loan and interest payable 371,455 340,493 428,076 398,252 Partners' Deficit General partner (4,054) (3,685) Limited partners (401,304) (364,783) (405,358) (368,468) $ 22,718 $ 29,784 See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. consolidated STATEMENTS OF OPERATIONS (in thousands)
Years Ended December 31, 2001 2000 1999 Revenues: Rental income $ 16,501 $ 17,825 $ 17,832 Other income 2,063 1,801 1,430 Gain on sale of investment property (Note J) 4,377 3,121 -- Total revenues 22,941 22,747 19,262 Expenses: Operating 7,997 8,441 8,275 General and administrative 883 746 654 Depreciation 3,132 4,821 4,812 Interest 46,552 43,653 41,263 Property taxes 1,267 1,169 1,244 Total expenses 59,831 58,830 56,248 Loss from continuing operations (36,890) (36,083) (36,986) Income from discontinued operations (Note D) -- -- 178 Gain on sale of discontinued operations (Note D) -- -- 16,630 Loss before extraordinary item (36,890) (36,083) (20,178) Extraordinary loss on early extinguishment of debt (Note I) -- (1,410) -- Net loss $(36,890) $(37,493) $(20,178) Net loss allocated to general partner (1%) $ (369) $ (375) $ (202) Net loss allocated to limited partners (99%) (36,521) (37,118) (19,976) $(36,890) $(37,493) $(20,178) See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. consolidated STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (in thousands)
General Limited Partners Partners Total Partners' deficit at December 31, 1998 $ (3,108) $(307,679) $(310,787) Distributions -- (10) (10) Net loss for the year ended December 31, 1999 (202) (19,976) (20,178) Partners' deficit at December 31, 1999 (3,310) (327,665) (330,975) Net loss for the year ended December 31, 2000 (375) (37,118) (37,493) Partners' deficit at December 31, 2000 (3,685) (364,783) (368,468) Net loss for the year ended December 31, 2001 (369) (36,521) (36,890) Partners' deficit at December 31, 2001 $ (4,054) $(401,304) $(405,358) See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. consolidated STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2001 2000 1999 Cash flows from operating activities: Net loss $(36,890) $(37,493) $(20,178) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,306 4,920 5,381 Gain on sale of discontinued operations -- -- (16,630) Extraordinary loss on early extinguishment of debt -- 1,410 -- Gain on sale of investment property (4,377) (3,121) -- Change in accounts: Receivables and deposits 648 431 (77) Other assets 45 27 (199) Accounts payable (132) (83) 140 Tenant security deposit liabilities (45) 19 (107) Accrued property taxes 38 (217) 190 Other liabilities (22) 121 (35) Accrued interest on Master Loan 38,763 39,287 36,865 Net cash provided by operating activities 1,334 5,301 5,350 Cash flows from investing activities: Property improvements and replacements (2,952) (4,210) (3,902) Lease commissions paid -- -- (144) Proceeds from sale of investment property 6,019 4,526 20,550 Net withdrawals from (deposits to) restricted escrows 152 (49) 41 Net cash provided by investing activities 3,219 267 16,545 Cash flows from financing activities: Principal payments on Master Loan (7,801) (33,634) (20,713) Principal payments on mortgage notes payable (1,226) (385) (299) Proceeds from financing/refinancing -- 56,200 -- Repayment of mortgage notes payable -- (22,311) -- Debt extinguishment costs -- (1,007) -- Loan costs paid (99) (1,402) -- Distributions to partners -- -- (10) Net cash used in financing activities (9,126) (2,539) (21,022) Net (decrease) increase in cash and cash equivalents (4,573) 3,029 873 Cash and cash equivalents at beginning of year 5,894 2,865 1,992 Cash and cash equivalents at end of year $ 1,321 $ 5,894 $ 2,865 Supplemental disclosure of cash flow information: Cash paid for interest $ 7,617 $ 4,032 $ 4,348 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 249 $ -- $ -- See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO consolidated FINANCIAL STATEMENTS December 31, 2001 Note A - Going Concern The Partnership's consolidated 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 matured in November 2000. The Partnership realized a net loss of approximately $36,890,000 for the year ended December 31, 2001. The net loss included the recognition of a gain on the sale of Magnolia Trace of approximately $4,377,000. The General Partner expects the Partnership to continue to incur losses from operations. The Partnership's indebtedness to CCIP under the Master Loan of approximately $371,455,000, including accrued interest, matured in November 2000. The General Partner has been in negotiations with CCIP with respect to its options which include CCIP foreclosing on the properties that collateralize the Master Loan or extending the term of the note. CCIP has decided to foreclose on the properties securing the Master Loan. CCIP will begin the process of foreclosure or executing deeds in lieu of foreclosure during the first quarter of 2002 on all the properties in the Partnership. As deeds are executed, title in the properties currently owned by the Partnership will be transferred to CCIP, subject to existing liens on such properties including the first mortgage loans. When the Partnership no longer has title to its properties, it will be dissolved. The General Partner expects revenues from the nine 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 the Master Loan balance, including accrued interest. As a result, there is substantial doubt about the Partnership's ability to continue as a going concern. The 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 - Organization and Summary of Significant Accounting Policies Organization: Consolidated Capital Equity Partners ("EP"), a California general partnership, was formed on June 24, 1981, to engage in the business of acquiring, operating and holding equity investments in income-producing real estate properties. The operations of EP were financed substantially through nonrecourse notes (the "Master Loan") from Consolidated Capital Institutional Properties ("CCIP"), a California limited partnership. These notes are secured by the real estate properties owned by EP. The General Partner of CCIP is ConCap Equities, Inc. ("CEI"), a Delaware corporation. In November 1990, EP's general partners executed a new partnership agreement (the "New Partnership Agreement") in conjunction with the bankruptcy settlement discussed below whereby EP converted from a general partnership to a California limited partnership, Consolidated Capital Equity Partners, L.P. ("CCEP" or the "Partnership"). Pursuant to the New Partnership Agreement, ConCap Holding, Inc. ("CHI"), a Texas corporation, a wholly-owned subsidiary of CEI, became the General Partner of CCEP, and the former General Partners of EP became Limited Partners of CCEP. CHI has full discretion with respect to conducting CCEP's business, including managing CCEP's properties and initiating and approving capital expenditures and asset dispositions and refinancings. All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT was merged into Apartment Investment and Management Company ("AIMCO"). Hence, CEI is now a wholly-owned subsidiary of AIMCO, a publicly held real estate investment trust (See "Note C" - Transfer of Control). The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011, unless terminated prior to such date. Principles of 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. In September 1999, 444 DeHaro was sold (see "Note D - Discontinued Segment"). Allocation of Profits, Gains, and Losses: Pursuant to the New Partnership Agreement, net income and net losses for both financial and tax reporting purposes are allocated 99% to the Limited Partners and 1% to the General Partner. Cash and Cash Equivalents: Includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $1,180,000 and $4,381,000 at December 31, 2001 and 2000, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on rental payments. Replacement Reserve Account: At the time of the refinancing and financing of all the investment properties, approximately $767,000 of the proceeds was designated for a replacement reserve fund for certain capital replacements at The Knolls, Palm Lake and Tates Creek Village. At December 31, 2001 and 2000, the balance in the replacement reserve fund was approximately $615,000 and $767,000, respectively. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27 1/2 years and (2) personal property additions over 5 years. Loan Costs: Loan costs totaled approximately $1,501,000 and $1,402,000 at December 31, 2001 and 2000, respectively. Related accumulated amortization totaled approximately $214,000 and $40,000, respectively. These balances are included in other assets and are being amortized on a straight-line basis over the life of the loans. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising costs were approximately $333,000, $385,000 and $408,000 for the years ended December 31, 2001, 2000 and 1999, respectively, and are included in operating expense. Investment Properties: Investment properties consist of nine apartment complexes at December 31, 2001 and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded during any of the years ended December 31, 2001, 2000 or 1999. See "Recent Accounting Pronouncements" below. Leases: The Partnership leased certain commercial space to tenants under various lease terms. The leases were accounted for as operating leases in accordance with SFAS No. 13 "Accounting for Leases". Some of the leases contain stated rental increases during their term. For leases with fixed rental increases, rents were recognized on a straight-line basis over the terms of the leases. For all other leases, minimum rents are recognized over the terms of the leases. The Partnership's only remaining commercial property was sold in September 1999 (see Note D). The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Income Taxes: No provision has been made in the financial statements for Federal income taxes because, under current law, no Federal income taxes are paid directly by CCEP. The Partners are responsible for their respective shares of CCEP's net income or loss. CCEP reports certain transactions differently for tax than for financial statement purposes. The tax basis of CCEP's assets and liabilities is approximately $354,253,000 and $311,877,000 greater than the assets and liabilities as reported in the financial statements at December 31, 2001 and 2000, respectively. Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair values due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Recent Accounting Pronouncements: In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. 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 IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation. 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 DeHaro, located in San Francisco, California was sold to an unaffiliated third party for approximately $23,250,000. In conjunction with the sale, a fee of approximately $698,000 was paid to the General Partner in accordance with the Partnership Agreement. After payment of closing expenses and the fee to the General Partner, the net proceeds received by the Partnership were approximately $20,550,000. The sale of the property resulted in a gain on sale of discontinued operations of approximately $16,630,000 after writing off the undepreciated value of the property and CCEP's investment in Western Can, Ltd. (see "Note B. Principles of Consolidation). As required by the terms of the Master Loan Agreement (see "Note E"), the Partnership remitted the net sale proceeds to CCIP representing principal payments on the Master Loan. 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 year ended December 31, 1999 and the gain on sale of the property is reported as "Gain from sale of discontinued operations". Revenues from discontinued operations were approximately $1,472,000 for the year ended December 31, 1999. No revenues from 444 DeHaro were recorded for the years ended December 31, 2001 and 2000. Note E - Master Loan and Accrued Interest Payable The Master Loan principal and accrued interest payable balances at December 31, 2001 and 2000, are approximately $371,455,000 and $340,493,000, respectively. 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 was 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 matured in November 2000. The General Partner has been in negotiations with CCIP with respect to its options which included CCIP foreclosing on the properties in CCEP which collateralize the Master Loan or extending the terms of the note. CCIP has decided to foreclose on the properties that collateralize the Master Loan. CCIP will begin the process of foreclosure or executing deeds in lieu of foreclosure during the first quarter of 2002 on all the properties in the Partnership. As deeds are executed, title in the properties currently owned by the Partnership will be transferred to CCIP, subject to the existing items on the properties including the first mortgage loans. When the Partnership no longer has title to its properties, it will be dissolved. During the years ended December 31, 2001, 2000 and 1999, CCEP paid approximately $7,801,000, $33,634,000 and $20,713,000, respectively, as principal payments on the Master Loan. There were no advances on the Master Loan during the years ended December 31, 2001, 2000 or 1999. See Notes D, I and J for details concerning the sales of 444 DeHaro and Magnolia Trace and the refinancings and the sale of Shirewood Townhomes, respectively. Note F - Mortgage Notes Payable The principal terms of mortgage notes payable are as follows:
Principal Principal Monthly Principal Balance At Balance at Payment Stated Balance December 31, December 31, Including Interest Maturity Due At Property 2001 2000 Interest Rate Date Maturity (in thousands) (in thousands) Indian Creek Village 1st Mortgage $ 8,545 $ 8,735 $ 72 7.83% 01/01/10 $ 6,351 The Knolls 1st Mortgage 9,667 9,883 81 7.78% 03/01/10 7,105 Palm Lake 1st Mortgage 2,924 2,990 25 7.86% 02/01/10 2,158 Plantation Gardens 1st Mortgage 9,473 9,683 80 7.83% 03/01/10 6,972 Regency Oaks 1st Mortgage 7,456 7,623 63 7.80% 02/01/10 5,494 Silverado 1st Mortgage 3,443 3,519 29 7.87% 11/01/10 2,434 Society Park 1st Mortgage 5,194 5,311 44 7.80% 02/01/10 3,828 The Dunes 1st Mortgage 4,015 4,106 34 7.81% 02/01/10 2,960 Tates Creek Village 1st Mortgage 4,117 4,210 35 7.78% 04/01/10 3,017 Total $ 54,834 $ 56,060 $ 463 $40,319
The mortgage notes payable are non-recourse and are secured by pledge of the respective apartment properties and by pledge of revenues from the respective apartment properties. The mortgage notes are senior to the Master Loan. Prepayment penalties are required if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. During 2000, the Partnership refinanced each of the existing mortgages and financed each of the unencumbered investment properties except for Magnolia Trace which was sold January 19, 2001. See notes I and J for further details concerning these refinancings and financings and the sale of Magnolia Trace, respectively. Principal payments on mortgage notes payable are due as follows (in thousands): Years Ending December 31, 2002 $ 1,325 2003 1,432 2004 1,548 2005 1,673 2006 1,809 Thereafter 47,047 $54,834 Note G - 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 New Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates for services. The following payments were made or accrued to the General Partner and its affiliates during the years ended December 31, 2001, 2000 and 1999: 2001 2000 1999 (in thousands) Property management fees (included in operating expense) $ 964 $ 985 $ 968 Investment advisory fees (included in general and administrative expense) 214 179 179 Reimbursement for services of affiliates (included in general and administrative expenses and investment properties) 1,486 548 373 Affiliates of the General Partner are entitled to receive 5% of gross receipts from all of the Partnership's residential properties for providing property management services. The Partnership paid to such affiliates approximately $964,000, $985,000 and $968,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The Partnership is also required to pay an investment advisory fee to 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 $214,000, $179,000 and $179,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Affiliates of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $1,486,000, $548,000 and $373,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $990,000, $112,000 and $33,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The construction management service fees are calculated based on a percentage of current and certain prior year additions to investment properties and are being depreciated over 15 years. In connection with the sale of Magnolia Trace in 2001, Shirewood Townhomes in 2000 and 444 DeHaro in 1999 the General Partner was paid a fee of $206,000, $133,000 and $698,000, respectively, in compensation for its role in the sales. In connection with the refinancing of each of its mortgages and the financing of its unencumbered investment properties during 2000, the Partnership paid to the General Partner fees totaling $560,000 for its role in the transactions. These fees were capitalized as loan costs and are included in other assets in the accompanying consolidated balance sheets. In addition to the compensation and reimbursements described above, interest payments are made to and loan advances are received from CCIP. Such interest payments totaled approximately $3,280,000, $2,000,000 and $2,744,000 for the years ended December 31, 2001, 2000 and 1999, respectively. There were no advances during 2001, 2000 or 1999. Principal payments totaling $7,801,000, $33,634,000 and $20,713,000 were made during the years ended December 31, 2001, 2000 and 1999, respectively. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $132,000 for insurance coverage and fees associated with policy claims administration. Note H - Real Estate and Accumulated Depreciation The investment properties owned by the Partnership consist of the following (dollar amounts in thousands):
Building December 31, 2001 & Related Personal Accumulated Depreciable Description Land Property Total Depreciation Life-Years Indian Creek Village $ 1,041 $ 9,454 $10,495 $ 8,202 5-18 The Knolls 647 8,700 9,347 6,832 5-18 Palm Lake 272 5,394 5,666 4,512 5-18 Plantation Gardens 1,958 14,949 16,907 13,315 5-18 Regency Oaks 521 12,254 12,775 10,333 5-18 Silverado 628 5,590 6,218 4,700 5-18 Society Park 966 9,691 10,657 8,561 5-18 The Dunes 489 6,090 6,579 4,992 5-18 Tates Creek Village 382 8,277 8,659 6,868 5-18 Total $ 6,904 $80,399 $87,303 $68,315
Building December 31, 2000 & Related Personal Accumulated Depreciable Description Land Property Total Depreciation Life-Years Indian Creek Village $ 1,041 $ 9,281 $10,322 $ 7,827 5-18 The Knolls 647 8,339 8,986 6,513 5-18 Palm Lake 272 5,152 5,424 4,280 5-18 Plantation Gardens 1,958 14,205 16,163 12,759 5-18 Regency Oaks 521 11,820 12,341 9,763 5-18 Magnolia Trace 892 6,340 7,232 5,578 5-18 Silverado 628 5,460 6,088 4,577 5-18 Society Park 966 9,167 10,133 8,211 5-18 The Dunes 489 5,951 6,440 4,681 5-18 Tates Creek Village 382 7,843 8,225 6,604 5-18 Total $ 7,796 $83,558 $91,354 $70,793
Note I - Refinancings/Financings and Extraordinary Loss On September 29, 2000, the Partnership refinanced the mortgage encumbering The Dunes Apartments. The refinancing replaced indebtedness of approximately $1,945,000 with a new mortgage in the amount of $4,120,000. The new mortgage carries a stated interest rate of 7.81%. Interest on the old mortgage was 6.95%. Principal and interest payments are due monthly until the loan matures on February 1, 2010 at which time a balloon payment of approximately $2,960,000 is due. Total capitalized loan costs were approximately $111,000 during the year ended December 31, 2000. Approximately $10,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $134,000 due to the write-off of unamortized loan costs and a prepayment penalty. On September 29, 2000, the Partnership refinanced the mortgage encumbering Palm Lake Apartments. The refinancing replaced indebtedness of approximately $1,653,000 with a new mortgage in the amount of $3,000,000. The new mortgage carries a stated interest rate of 7.86%. Interest on the old mortgage was 6.95%. Principal and interest payments are due monthly until the loan matures on February 1, 2010 at which time a balloon payment of approximately $2,158,000 is due. Total capitalized loan costs were approximately $93,000 during the year ended December 31, 2000. Approximately $7,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $118,000 due to the write-off of unamortized loan costs and a prepayment penalty. On September 29, 2000, the Partnership refinanced the mortgage encumbering Tates Creek Village Apartments. The refinancing replaced indebtedness of approximately $2,455,000 with a new mortgage in the amount of $4,225,000. The new mortgage carries a stated interest rate of 7.78%. Interest on the old mortgage was 6.95%. Principal and interest payments are due monthly until the loan matures on April 1, 2010 at which time a balloon payment of approximately $3,017,000 is due. Total capitalized loan costs were approximately $101,000 during the year ended December 31, 2000. Approximately $13,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $155,000 due to the write-off of unamortized loan costs and a prepayment penalty. On September 29, 2000, the Partnership financed a mortgage encumbering Society Park Apartments. The mortgage debt totaled $5,330,000. The mortgage carries a stated interest rate of 7.80%. Principal and interest payments are due monthly until the loan matures on February 1, 2010 at which time a balloon payment of approximately $3,828,000 is due. Total capitalized loan costs were approximately $154,000 during the year ended December 31, 2000. Approximately $8,000 of additional loan costs were capitalized during the year ended December 31, 2001. On September 29, 2000, the Partnership financed a mortgage encumbering Regency Oaks Apartments. The mortgage debt totaled $7,650,000. The mortgage carries a stated interest rate of 7.80%. Principal and interest payments are due monthly until the loan matures on February 1, 2010 at which time a balloon payment of approximately $5,494,000 is due. Total capitalized loan costs were approximately $209,000 during the year ended December 31, 2000. Approximately $13,000 of additional loan costs were capitalized during the year ended December 31, 2001. On October 3, 2000, the Partnership refinanced the mortgage encumbering Plantation Gardens Apartments. The refinancing replaced indebtedness of approximately $6,704,000 with a new mortgage in the amount of $9,700,000. The new mortgage carries a stated interest rate of 7.83%. Interest on the old mortgage was 6.95%. Principal and interest payments are due monthly until the loan matures on March 1, 2010 at which time a balloon payment of approximately $6,972,000 is due. Total capitalized loan costs were approximately $219,000 during the year ended December 31, 2000. Approximately $13,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $428,000 due to the write-off of unamortized loan costs and a prepayment penalty. On October 3, 2000, the Partnership refinanced the mortgage encumbering Indian Creek Apartments. The refinancing replaced indebtedness of approximately $4,438,000 with a new mortgage in the amount of $8,750,000. The new mortgage carries a stated interest rate of 7.83%. Interest on the old mortgage was 6.95%. Principal and interest payments due monthly until the loan matures on January 1, 2010 at which time a balloon payment of $6,351,000 is due. Total capitalized loan costs were approximately $190,000 during the year ended December 31, 2000. Approximately $13,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $260,000 due to the write-off of unamortized loan costs and a prepayment penalty. On October 3, 2000, the Partnership financed a mortgage encumbering Silverado Apartments. The new mortgage is in the amount of $3,525,000. The new mortgage carries a stated interest rate of 7.87%. Principal and interest payments are due monthly until the loan matures on November 1, 2010 at which time a balloon payment of approximately $2,434,000 is due. Total capitalized loan costs were approximately $107,000 during the year ended December 31, 2000. Approximately $9,000 of additional loan costs were capitalized during the year ended December 31, 2001. On October 11, 2000, the Partnership refinanced the mortgage encumbering The Knolls Apartments. The refinancing replaced indebtedness of approximately $5,116,000 with a new mortgage in the amount of $9,900,000. The new mortgage carries a stated interest rate of 7.78%. Interest on the old mortgage was 6.95%. Principal and interest payments are due monthly until the loan matures on March 1, 2010 at which time a balloon payment of approximately $7,105,000 is due. Total capitalized loan costs were approximately $218,000 during the year ended December 31, 2000. Approximately $13,000 of additional loan costs were capitalized during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $315,000 due to the write-off of unamortized loan costs and a prepayment penalty. Included in the loan costs capitalized associated with the above transactions was a 1% fee of approximately $560,000 paid to the General Partner in accordance with the terms of the Partnership Agreement. Note J - Sale of Property On January 19, 2001, the Partnership sold Magnolia Trace, located in Baton Rouge, Louisiana, to an unaffiliated third party for net sales proceeds of approximately $6,019,000, after payment of closing costs. The Partnership used all of the proceeds from the sale of the property to pay down the Master Loan principal as required by the Master Loan Agreement. The sale resulted in a gain on sale of investment property of approximately $4,377,000. In conjunction with the sale, a fee of approximately $206,000 was paid to the General Partner in accordance with the Partnership Agreement. On July 21, 2000 the Partnership sold Shirewood Townhomes, located in Shreveport, Louisiana, to an unaffiliated third party for net sales proceeds of approximately $4,526,000, after payment of closing costs. The Partnership used all of the proceeds from the sale of the property to pay down the Master Loan principal as required by the Master Loan Agreement. The sale resulted in a gain on sale of investment property of approximately $3,121,000. In conjunction with the sale, a fee of approximately $133,000 was paid to the General Partner in accordance with the Partnership Agreement. Note K - Selected Quarterly Financial Data (unaudited) The following is a summary of the unaudited quarterly results of operations for the Partnership (in thousands):
Year Ended December 31, 2001 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Revenues $ 4,584 $ 4,673 $ 4,783 $ 4,524 $ 18,564 Gain sale of investment property 4,377 -- -- -- 4,377 Expenses 15,189 15,105 14,806 14,731 59,831 Net loss $ (6,228) $(10,432) $(10,023) $(10,207) $(36,890)
Year Ended December 31, 2000 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Revenues $ 4,936 $ 5,072 $ 4,803 $ 4,815 $ 19,626 Gain on sale of investment property -- -- 3,024 97 3,121 Expenses 14,818 14,984 14,583 14,445 58,830 Loss before extraordinary item (9,882) (9,912) (6,756) (9,533) (36,083) Extraordinary loss on early extinguishment of debt -- -- (407) (1,003) (1,410) Net loss $ (9,882) $ (9,912) $ (7,163) $(10,536) $(37,493)
EXHIBIT 10.23 THIRD AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES THIS THIRD AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (this "Amendment") is entered into as of the 17th day of October, 2000, by and among ConCap Equities, Inc., a Delaware corporation (the "General Partner"), and each of the Limited Partners. All capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the "Partnership Agreement" (as defined below). WHEREAS, Consolidated Capital Institutional Properties, a California limited partnership (the "Partnership"), exists pursuant to that certain Limited Partnership Agreement of Consolidated Capital Institutional Properties, dated as of April 28, 1981, as amended by that certain First Amendment to the Consolidated Capital Institutional Properties Limited Partnership Agreement, dated as of July 11, 1985, and as further amended by that certain Second Amendment to the Limited Partnership Agreement of Consolidated Capital Institutional Properties, dated as of October 23, 1990 (as so amended, the "Partnership Agreement"); and WHEREAS, the General Partner has obtained consents of the requisite percentage-in-interest of the Limited Partners (i.e., Limited Partners holding greater than fifty percent (50%) of the Units) necessary to amend the Partnership Agreement as provided in this Amendment. NOW, THEREFORE, in consideration of the premises, the agreement of the parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and confessed, the parties hereby agree as follows: 1. Reserves. Section 4.09 is amended to read as follows: "The Partnership shall maintain reasonable reserves for normal working capital and contingencies in an amount equal to at least five percent (5%) of invested Capital determined from time to time by the General Partner in its sole discretion." 2. Miscellaneous. a. Effect of Amendment. In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail. In the event any conflict or apparent conflict between any of the provisions of the Partnership Agreement as amended by this Amendment, such conflicting provisions shall be reconciled and construed to give effect to the terms and intent of this Amendment. b. Ratification. Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed. Except as amended hereby, the Partnership Agreement shall continue, unmodified, and in full force and effect. c. Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. d. Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above. THE GENERAL PARTNER: CONCAP EQUITIES, INC., a Delaware corporation By: Patrick J. Foye Executive Vice President THE LIMITED PARTNERS: AIMCO PROPERTIES, L.P. a Delaware limited partnership By: AIMCO-GP, INC. (General Partner) By: Patrick J. Foye Executive Vice President COOPER RIVER PROPERTIES, L.L.C. a Delaware limited liability company By: Patrick J. Foye Executive Vice President AIMCO IPLP, L.P. a Delaware limited partnership By: AIMCO/IPT, INC. (General Partner) By: Patrick J. Foye Executive Vice President REEDY RIVER PROPERTIES, L.L.C. a Delaware limited liability company By: Patrick J. Foye Executive Vice President By: Patrick J. Foye Executive Vice President of ConCap Equities, Inc., agent and attorney-in-fact for each of the remaining Limited Partners of the Partnership EXHIBIT 10.24 FOURTH AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES THIS FOURTH AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (this "Amendment") is entered into as of the 25th day of May, 2001, by and among ConCap Equities, Inc., a Delaware corporation (the "General Partner"), and each of the Limited Partners. All capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the "Partnership Agreement" (as defined below). WHEREAS, Consolidated Capital Institutional Properties, a California limited partnership (the "Partnership"), exists pursuant to that certain Limited Partnership Agreement of Consolidated Capital Institutional Properties, dated as of April 28, 1981, as amended by that certain First Amendment to the Consolidated Capital Institutional Properties Limited Partnership Agreement, dated as of July 11, 1985, as further amended by that certain Second Amendment to the Limited Partnership Agreement of Consolidated Capital Institutional Properties, dated as of October 23, 1990, and as further amended by that certain Third Amendment to the Limited Partnership Agreement of Consolidated Capital Institutional Properties, dated as of October 17, 2000 (as so amended, the "Partnership Agreement"); and WHEREAS, the General Partner has obtained consents of the requisite percentage-in-interest of the Limited Partners (i.e., Limited Partners holding greater than fifty percent (50%) of the Units) necessary to amend the Partnership Agreement as provided in this Amendment. NOW, THEREFORE, in consideration of the premises, the agreement of the parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and confessed, the parties hereby agree as follows: 1. Surplus Funds. The definition of "Surplus Funds" contained in Section 1.04(u) of the Partnership Agreement is hereby deleted, in its entirety, and the following new definition is inserted in lieu thereof: "(u) 'Surplus Funds' shall mean the Partnership's share of the net cash funds or proceeds resulting from the Partnership's receipt of (a) principal and additional interest from the Participating Note issued by the Fee Owner or (b) any funds from the sale, lease, financing or refinancing of any of the Partnership's properties, and in each case, (i) after deduction of all expenses incurred in connection therewith and (ii) less such amounts for working capital reserves as the General Partner deems reasonably necessary for future Partnership operations." 2. Purpose of Partnership and Investment Objectives. The first paragraph of Section 1.05 of the Partnership Agreement is amended to read as follows: "Purpose of Partnership and Investment Objectives. The principal purpose of the Partnership is to lend funds in return for the Participating Note with participations secured by deeds of trust on real properties (including apartment buildings, shopping centers, industrial projects, office buildings and other similar properties) as shall from time to time be acquired by the Fee Owner and which offer the potential for (i) preserving and protecting the Limited Partners' original Invested Capital; (ii) providing quarterly distributions from interest received from the Fee Owner or other sources; and (iii) providing special payments to the extent of additional interest received from such Participating Note; and to engage in any and all general business activities related to and incidental to those purposes, including, without limitation, the acquisition, ownership, improvement, management, operation, leasing, financing, refinancing, sale or exchange of any real or personal property obtained (x) in connection with the exercise of any remedy available to it under the Participating Note or the Master Loan Agreement or (y) in a transaction (a "1031 Transaction") that is intended to a like-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as amended, or any successor statute, at law or in equity (including, without limitation, those properties commonly known as The Loft Apartments in Raleigh, North Carolina and The Sterling Home and Commerce Center in Philadelphia, Pennsylvania); provided, however, that the Partnership shall not own or lease property jointly or in partnership with others but it may transfer any such property to a single-purpose wholly-owned subsidiary." 3. Powers and Duties of the General Partner. (a) The fourth sentence of the first paragraph of Section 2.01 of the Partnership Agreement is amended to read as follows: "The General Partner shall have the right, power and authority granted to General Partner hereunder or by law, or both, to obligate and bind the Partnership and, on behalf and in the name of the Partnership, to take such action as the General Partner deems necessary or advisable, including, without limitation, making, executing and delivering loan and other agreements, leases, assignments and transfers and agreements to purchase, sell, exchange, lease or otherwise deal with real or personal property, escrow instructions, advances under the Participating Note, pledges, deeds of trust, mortgages and other security agreements, promissory notes, checks, drafts and other negotiable instruments, and all other documents and agreements which the General Partner deems reasonable or necessary in connection with the loaning and investment of the Partnership's net proceeds resulting from the Capital Contributions received and the management thereof, including, without limitation, the acquisition, ownership, improvement, management, operation, lease, financing, refinancing, exchange or sale of any real or personal property (including the transfer of such property to a single-purpose wholly-owned subsidiary of the Partnership) obtained (i) in connection with the exercise of any remedy available to it under the Participating Note or the Master Loan Agreement or (ii) in a 1031 Transaction, at law or in equity (including, without limitation, those properties commonly known as The Loft Apartments in Raleigh, North Carolina and The Sterling Home and Commerce Center in Philadelphia, Pennsylvania)." (b) The penultimate sentence of the second paragraph of Section 2.01 of the Partnership Agreement is amended to read as follows: "The Partnership shall not be permitted to purchase real property, directly or indirectly, but it may acquire real property upon exercising any remedy under the Participating Note and the Master Note Loan Agreement or a 1031 Transaction." 4. Miscellaneous. e. Effect of Amendment. In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail. In the event any conflict or apparent conflict between any of the provisions of the Partnership Agreement as amended by this Amendment, such conflicting provisions shall be reconciled and construed to give effect to the terms and intent of this Amendment. f. Ratification. Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed. Except as amended hereby, the Partnership Agreement shall continue, unmodified, and in full force and effect. g. Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. h. Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above. THE GENERAL PARTNER: CONCAP EQUITIES, INC., a Delaware corporation By: Patrick J. Foye Executive Vice President THE LIMITED PARTNERS: AIMCO PROPERTIES, L.P. a Delaware limited partnership By: AIMCO-GP, INC. (General Partner) By: Patrick J. Foye Executive Vice President COOPER RIVER PROPERTIES, L.L.C. a Delaware limited liability company By: Patrick J. Foye Executive Vice President AIMCO IPLP, L.P. a Delaware limited partnership By: AIMCO/IPT, INC. (General Partner) By: Patrick J. Foye Executive Vice President REEDY RIVER PROPERTIES, L.L.C. a Delaware limited liability company By: Patrick J. Foye Executive Vice President By: Patrick J. Foye Executive Vice President of ConCap Equities, Inc., agent and attorney-in-fact for each of the remaining Limited Partners of the Partnership