-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IxU/GjB5VpEZeECN75sl0R2mGnKQY517wJdAW5iB7C/bGlLPhdutISv5Clcr3J8z 0TjMLrili5DcnEJN7oXkrQ== 0000802200-97-000005.txt : 19971114 0000802200-97-000005.hdr.sgml : 19971114 ACCESSION NUMBER: 0000802200-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CENTRAL INDEX KEY: 0000352983 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942744492 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10831 FILM NUMBER: 97713791 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.........to......... Commission file number 0-10831 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (Exact name of registrant as specified in its charter) California 94-2744492 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P. O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) September 30, December 31, 1997 1996 (Unaudited) (Note) Assets Cash and cash equivalents: Unrestricted $ 8,221 $ 12,348 Restricted--tenant security deposits 346 318 Accounts receivable 242 120 Escrows for taxes 266 551 Restricted escrows 65 62 Other assets 526 209 Interest receivable on Master Loan 644 -- Net investment in Master Loan 91,339 93,370 Less: Allowance for impairment loss (40,686) (40,686) 50,653 52,684 Investment properties: Land 3,620 3,620 Building and related personal property 30,817 24,962 34,437 28,582 Less accumulated depreciation (4,546) (3,217) 29,891 25,365 $ 90,854 $ 91,657 Liabilities and Partners' Capital (Deficit) Accounts payable $ 288 $ 1,789 Tenant security deposit liabilities 347 317 Accrued taxes 47 -- Other liabilities 578 465 Mortgage note payable 4,461 4,498 Partners' Capital (Deficit) General partner (375) (380) Limited partners (199,052 units outstanding at September 30, 1997, and December 31, 1996, respectively) 85,508 84,968 85,133 84,588 $ 90,854 $ 91,657 Note: The balance sheet at December 31, 1996, has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 2,066 $ 1,785 $ 5,824 $ 5,381 Interest income on investment in Master Loan to affiliate 644 -- 2,064 -- Reduction in provision for impairment loss on investment in Master Loan to affiliate -- 792 -- 792 Other income 256 282 778 1,193 Total revenues 2,966 2,859 8,666 7,366 Expenses: Operating 975 1,033 2,972 3,060 Depreciation and amortization 480 320 1,339 846 General and administrative 92 103 306 479 Maintenance 224 352 843 892 Property taxes 138 74 418 431 Interest 81 81 244 244 Total expenses 1,990 1,963 6,122 5,952 Net income $ 976 $ 896 $ 2,544 $ 1,414 Net income allocated to general partner (1%) $ 10 $ 9 $ 25 14 Net income allocated to limited partners (99%) 966 887 2,519 1,400 $ 976 $ 896 $ 2,544 $ 1,414 Net income per limited partnership unit $ 4.85 $ 4.45 $ 12.65 $ 7.03 See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 200,342 $ 1 $200,342 $200,343 Partners' capital (deficit) at December 31, 1995 199,052 $ (358) $101,134 $100,776 Distributions to partners -- (30) (16,986) (17,016) Net income for the nine months ended September 30, 1996 -- 14 1,400 1,414 Partners' capital (deficit) at September 30, 1996 199,052 $ (374) $ 85,548 $ 85,174 Partners' capital (deficit) at December 31, 1996 199,052 $ (380) $ 84,968 $ 84,588 Distributions to partners -- (20) (1,979) (1,999) Net income for the nine months ended September 30, 1997 -- 25 2,519 2,544 Partners' capital (deficit) at September 30, 1997 199,052 $ (375) $ 85,508 $ 85,133 See Accompanying Notes to Consolidated Financial Statements d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 2,544 $ 1,414 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,329 841 Amortization of loan costs and lease commissions 19 14 Reduction for provision for impairment losses -- (792) Change in accounts: Restricted cash (28) 13 Accounts receivable (122) 91 Escrows for taxes 285 11 Other assets (336) (19) Interest receivable on Master Loan (644) -- Accounts payable (1,234) 326 Tenant security deposit liabilities 30 (18) Accrued taxes 47 47 Other liabilities 113 (64) Net cash provided by operating activities 2,003 1,864 Cash flows from investing activities: Deposits to restricted escrows (3) (8) Withdrawals for restricted savings -- 67 Property improvements and replacements (6,122) (3,267) Proceeds from sale of securities available for sale -- 5,257 Advances on Master Loan -- (367) Principal receipts on Master Loan 2,031 1,588 Net cash (used in) provided by investing activities (4,094) 3,270 Cash flows from financing activities: Distributions to partners (1,999) (17,016) Mortgage principal payments (37) (35) Net cash used in financing activities (2,036) (17,051) Net decrease in cash and cash equivalents (4,127) (11,917) Cash and cash equivalents at beginning of period 12,348 26,122 Cash and cash equivalents at end of period $ 8,221 $ 14,205 Supplemental disclosure of cash flow information: Cash paid for interest $ 234 $ 224 See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Consolidated Capital Institutional Properties (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - RELATED PARTY TRANSACTIONS The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. The Partnership paid property management fees based upon collected gross rental revenues for property management services as noted below for the nine month periods ended September 30, 1997 and 1996. Such fees are included in operating expenses on the consolidated statements of operations and are reflected in the following table. The Partnership Agreement ("Agreement") also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its current affiliates received reimbursements as reflected in the following table: For the Nine Months Ended September 30, 1997 1996 (in thousands) Property management fees $312 $287 Reimbursement for services of affiliates (included in general and administrative, other assets and investment properties) (1) 476 333 (1) Included in "Reimbursement for services of affiliates" for the nine months ended September 30, 1997 and 1996 is approximately $152,000 and $140,000, respectively, in reimbursements for construction oversight costs. In addition, approximately $164,000 of lease commissions are included for the nine months ended September 30, 1997. For the period of January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with theGeneral Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The agent assumed the financial obligations to the affiliate of the General Partner who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. On October 30, 1997, an Insignia affiliate commenced tender offers for limited partnership interests in two real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 45,000 of the outstanding units of limited partnership interest in the Partnership, at $400.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 30, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on October 30, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. NOTE C - NET INVESTMENT IN MASTER LOAN At September 30, 1997, the recorded investment in the Master Loan was considered to be impaired under "FASB 114." The Partnership measures the impairment of the loan based upon the fair value of the collateral due to the fact that repayment of the loan is expected to be provided solely by the collateral. For the nine months ended September 30, 1997, the Partnership recorded approximately $2,064,000 of interest income based upon cash received as a result of an increase in the fair value of the collateral attributable to current year operations versus actual collateral value. Interest, calculated on the accrual basis, is 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. Interest income is recognized on the cash basis as allowed under "FASB 114". Interest income calculated on an accrual basis totaled approximately $23,200,000 and $22,200,000 for the nine months ended September 30, 1997 and 1996, respectively. At September 30, 1997, and December 31, 1996, such cumulative unrecognized interest totaling approximately $190,900,000 and $167,700,000 was not included in the balance of the investment in Master Loan. In addition, six of the properties are collateralized by first mortgages totaling approximately $23,199,000 which are superior to the Master Loan. During the nine months ended September 30, 1997, the Partnership made no advances to Consolidated Capital Equity Partners, L.P. ("CCEP") as an advance on the Master Loan. During the nine months ended September 30, 1997, the Partnership received approximately $2,031,000 as principal payments on the Master Loan. Cash received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement, accounted for approximately $388,000. Approximately $643,000 received was due to excess cash flow payments received from CCEP as stipulated by the master loan agreement. Approximately $1,000,000 was received from CCEP as additional principal payments. NOTE D - COMMITMENT The Partnership is required by the Agreement to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital, as defined in the Agreement. In the event expenditures are made from this reserve, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash and cash equivalents and securities available for sale (at market), totaling approximately $8,600,000, were greater than the reserve requirement of approximately $7,300,000 at September 30, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership's investment properties consist of two properties, The Loft and The Sterling Apartment Homes and Commerce Center ("The Sterling"). The Sterling is a multiple-use facility which consists of an apartment complex and commercial space. The following table sets forth the average occupancies of the properties for the nine months ended September 30, 1997 and 1996: Average Occupancy Property 1997 1996 The Loft Apartments 95% 95% Raleigh, North Carolina The Sterling Apartment Homes 85% 84% The Sterling Commerce Center 69% 68% Philadelphia, Pennsylvania The General Partner attributes the low occupancy level at The Sterling Apartment Homes to major capital improvements occurring at the complex, along with rental increases established in order to upgrade the tenant base. The improvements at The Sterling Commerce Center are substantially complete at September 30, 1997. The Partnership's net income for the three and nine months ended September 30, 1997, was approximately $976,000 and $2,544,000, respectively, compared to net income of approximately $896,000 and $1,414,000 for the corresponding periods ended September 30, 1996. The increase in net income is primarily due to an increase in interest income recorded on the investment in Master Loan to affiliate. This increase is the result of an increase in the fair value of the underlying collateral properties due to an increase in operations of such properties. In addition, rental income increased at The Sterling due to an increase in rental rates. Also contributing to the increase in net income was a decrease in tax expense, operating expense and general and administrative expense. The decrease in tax expense for the nine months ended September 30, 1997, is the result of an assessment reduction at The Sterling in 1996. Operating expense has decreased due to a reduction in the Sterling's insurance requirements during 1997 as a result of the completion of its renovations. General and administrative expense has decreased due to decreases in copying and mailing costs related to the mailing of 1996 10-K's to the partners. This decrease is also attributable to professional fees incurred in 1996 as a result of the acquisition of The Sterling. Partially offsetting the increase in net income was an increase in depreciation and a decrease in other interest income. Depreciation increased during the three and nine months ended September 30, 1997, as a direct result of the ongoing capital improvements and renovations at The Sterling. Interest income decreased as a result of a decrease in investment balances during the nine months ended September 30, 1997. During the nine months ended September 30, 1997, the Partnership included approximately $330,000 in major repairs and maintenance including interior building improvements, exterior building improvements and window coverings. During the nine months ended September 30, 1996, the Partnership had approximately $274,000 of major repairs and maintenance including exterior painting, gutter repairs, major landscaping and interior building improvements. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At September 30, 1997, the Partnership had unrestricted cash of approximately $8,221,000 versus approximately $14,205,000 at September 30, 1996. Net cash provided by operating activities increased slightly due to the increase in net income from operations as discussed above. This increase was partially offset by a decrease in accounts payable resulting from the payment of invoices relating to the renovations at The Sterling and increases in other assets and interest receivable on the Master Loan. Net cash used in investing activities increased as a result of an increase in property improvements and replacements related to the renovations at The Sterling. In addition, the Partnership received proceeds from the sale of securities in 1996. Partially offsetting this increase in net cash used in investing activities was an increase in the receipt of principal payments on the Master Loan from CCEP. Net cash used in financing activities decreased due to a decrease in distributions to partners. The Partnership has budgeted for major deferred maintenance and capital improvements to be made to The Sterling during 1997. These programs will be paid by existing cash and from cash generated by property operations and debt service on the Master Loan. The major capital improvements are for exterior renovations, elevator rehabilitation, and residential and commercial common area renovations. As of September 30, 1997, approximately $11,505,000 had been spent on these programs during 1996 and 1997. 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 properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $4,461,000 requires monthly principal and interest payments and requires a balloon payment on December 1, 2005, at which time the property will either be refinanced or sold. Distributions of approximately $1,979,000 were made to the limited partners during the nine months ended September 30, 1997. A corresponding distribution of approximately $20,000 was made to the General Partner. Distributions of approximately $16,986,000 were made to the limited partners during the nine months ended September 30, 1996. A corresponding distribution of approximately $30,000 was made to the General Partner. Future cash distributions will depend on the levels of cash generated from operations, Master Loan interest income, capital expenditure requirements, property sales, and the availability of cash reserves. The Partnership is required by the Partnership Agreement to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital, as defined by the Partnership Agreement. Reserves, including cash and cash equivalents and securities available for sale totaling approximately $8,600,000, were greater than the reserve requirement of approximately $7,300,000 at September 30, 1997. On October 30, 1997, an Insignia affiliate commenced tender offers for limited partnership interests in two real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 45,000 of the outstanding units of limited partnership interest in the Partnership, at $400.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 30, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on October 30, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. CCEP Property Operations For the nine months ended September 30, 1997, CCEP's net loss totaled approximately $24,544,000 on total revenues of approximately $15,467,000. CCEP recognizes interest expense on the New Master Loan Agreement obligation according to the note terms, although payments to the Partnership are required only to the extent of Excess Cash Flow, as defined therein. During the nine months ended September 30, 1997, CCEP's statement of operations includes total interest expense attributable to the Master Loan of approximately $24,658,000, $1,420,000 of which was paid, the remainder of which represents interest accrued in excess of required payments. CCEP is expected to continue to generate operating losses as a result of such interest accruals and noncash charges for depreciation. During the nine months ended September 30, 1997, the Partnership received approximately $2,031,000 as principal payments on the Master Loan. Cash received on certain investments by CCEP, which are required to be transferred to the Partnership per the Master Loan Agreement, accounted for approximately $388,000. Approximately $643,000 received was due to excess cash flow payments from CCEP as described above. The Partnership also received an additional $1,000,000 from CCEP as principal payment on the Master Loan. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: S-K Reference Number Description 27 Financial Data Schedule is filed as an exhibit to this report. 99.1 Consolidated Capital Equity Partners, L.P., unaudited financial statements for the nine months ended September 30, 1997 and 1996. (b) Reports on Form 8-K: None filed during the quarter ended September 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES By: CONCAP EQUITIES, INC. General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President By: /s/ Ronald Uretta Ronald Uretta Vice President/Treasurer Date: November 12, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties 1997 Third Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000352983 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 1,000 9-MOS DEC-31-1997 SEP-30-1997 8,221 0 92,225 (40,686) 0 0 34,437 (4,546) 90,854 0 4,461 0 0 0 85,133 90,854 0 8,666 0 0 6,122 0 244 0 0 0 0 0 0 2,544 12.65 0 Registrant has an unclassified balance sheet. Multiplier is 1.
EX-99.1 3 EXHIBIT 99.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED September 30, 1997 AND 1996 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 1997 1996 (Unaudited) (Note) Assets Cash and cash equivalents: Unrestricted $ 1,654 $ 1,960 Restricted - tenant security deposits 610 554 Investments in limited partnerships -- 336 Accounts receivable 161 252 Escrow for taxes 1,132 678 Restricted escrows 550 1,420 Other assets 1,555 1,630 Investment properties: Land 10,217 10,217 Building and related personal property 96,851 95,236 107,068 105,453 Less accumulated depreciation (74,479) (70,606) 32,589 34,847 $ 38,251 $ 41,677 Liabilities and Partners' Deficit Accounts payable $ 248 $ 798 Tenant security deposit liabilities 606 611 Accrued taxes 900 313 Other liabilities 436 363 Mortgage notes 23,199 23,393 Master loan and interest payable 282,343 261,136 Partners' Deficit General partner (2,694) (2,449) Limited partners (266,787) (242,488) (269,481) (244,937) $ 38,251 $ 41,677 Note: The balance sheet at December 31, 1996, has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 4,873 $ 4,851 $ 14,474 $ 14,340 Other income 307 313 993 1,049 Total revenues 5,180 5,164 15,467 15,389 Expenses: Operating 2,047 1,977 5,898 5,912 General and administrative 158 192 685 559 Depreciation and amortization 1,363 1,356 3,977 4,018 Maintenance 1,013 963 2,554 2,593 Property taxes 320 315 962 988 Interest 8,614 7,831 25,935 23,554 Total expenses 13,515 12,634 40,011 37,624 Gain on sale of investment property -- 914 -- 914 Net loss $(8,335) $ (6,556) $(24,544) $(21,321) Net loss allocated to general partner (1%) $ (83) $ (66) (245) $ (213) Net loss allocated to limited partners (99%) (8,252) (6,490) (24,299) (21,108) $(8,335) $ (6,556) $(24,544) $(21,321) See Accompanying Notes to Consolidated Financial Statements c) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1997 and 1996 (in thousands) General Limited Partner Partners Total Partners' deficit at December 31, 1995 $ (2,159) $(213,815) $(215,974) Net loss for the nine months ended September 30, 1996 (213) (21,108) (21,321) Partners' deficit at September 30, 1996 $ (2,372) $(234,923) $(237,295) Partners' deficit at December 31, 1996 $ (2,449) $(242,488) $(244,937) Net loss for the nine months ended September 30, 1997 (245) (24,299) (24,544) Partners' deficit at September 30, 1997 $ (2,694) $(266,787) $(269,481) See Accompanying Notes to Consolidated Financial Statements d) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net loss $(24,544) $(21,321) Adjustments to reconcile net loss to net cash provided by operating activities: Gain on sale of investment property -- (914) Depreciation and amortization 4,039 4,077 Change in accounts: Restricted cash (56) (40) Accounts receivable 91 22 Escrows for taxes (454) (622) Other assets (91) 67 Accounts payable (550) (1,300) Tenant security deposit liabilities (5) 36 Accrued taxes 587 573 Other liabilities 73 3 Interest on Master Loan 23,238 22,181 Net cash provided by operating activities 2,328 2,762 Cash flows from investing activities: Property improvements and replacements (1,615) (2,987) Proceeds from sale of investment property -- 1,882 Deposits to restricted escrows (72) (77) Withdrawals from restricted escrows 942 1,942 Distributions from investments in limited partnerships 336 124 Net cash provided by (used in) investing activities (409) 884 Cash flows from financing activities: Advances on Master Loan -- 367 Principal payments on Master Loan (2,031) (1,588) Principal payments on notes payable (194) (220) Loan costs paid -- (2) Repayment of note payable -- (1,295) Net cash used in financing activities (2,225) (2,738) Net (decrease) increase in cash and cash equivalents (306) 908 Cash and cash equivalents at beginning of period 1,960 1,686 Cash and cash equivalents at end of period $ 1,654 $ 2,594 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,635 $ 1,257 See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Consolidated Capital Equity Partners, L.P. ("CCEP") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Holdings, Inc. ("General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. Consolidation CCEP owns a 75% interest in a limited partnership ("Western Can, Ltd.") which owns 444 De Haro, an office building in San Francisco, California. CCEP's investment in Western Can, Ltd. is consolidated in CCEP's financial statements. No minority interest liability has been reflected for the 25% minority interest because Western Can, Ltd. has a net capital deficit and no minority liability exists with respect to CCEP. NOTE B - RELATED PARTY TRANSACTIONS CCEP has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. CCEP paid property management fees based upon collected gross rental revenues for property management services in each of the nine month periods ended September 30, 1997 and 1996. Fees paid to affiliates of the General Partner during the nine month periods ended September 30, 1997 and 1996, are included in operating expenses on the consolidated statements of operations and are reflected in the following table. The Partnership Agreement ("Agreement") also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of CCEP activities. The General Partner and its current affiliates received reimbursements for the nine months ended September 30, 1997 and 1996, as reflected in the following table. Also, CCEP is subject to an Investment Advisory Agreement between CCEP and an affiliate of the General Partner. This agreement provides for an annual fee, payable in monthly installments, to an affiliate of the General Partner for advising and consulting services for CCEP's properties. Advisory fees paid pursuant to this agreement are reflected in the following table: For the Nine Months Ended September 30, 1997 1996 (in thousands) Property management fees $771 $748 Investment advisory fees 136 136 Reimbursement for services of affiliates (included in general and administrative and operating expenses and other assets) (1) 424 424 (1) Included in "Reimbursement for services of affiliates" for 1997 and 1996 is approximately $54,000 and $82,000 respectively in reimbursements for construction oversight costs and approxiamtely $109,000 and $55,000 respectively of lease commissions. In addition to the compensation and reimbursements described above, interest payments are made to and loan advances are received from CCIP pursuant to the Master Loan Agreement, which is described more fully in the 1996 Annual Report. Interest payments totaling $1,420,236 have been paid during the nine months ended September 30, 1997. No interest payments were made during the nine month period ended September 30, 1996. No advances were received under the Master Loan Agreement during the nine months ended September 30, 1997. Principal payments of approximately $2,031,000 were made on the Master Loan during the nine months ended September 30, 1997. For the period January 1, 1996 to August 31, 1997, CCEP insured its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner who receives payments on these obligations from the agent. The amount of CCEP's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. NOTE C - MASTER LOAN AND ACCRUED INTEREST PAYABLE The Master Loan principal and accrued interest payable balances at September 30, 1997, and December 31, 1996, are approximately $282,343,000 and $261,136,000, respectively. Terms of Master Loan Agreement Under the terms of the Master Loan Agreement, interest accrues at a fluctuating rate per annum adjusted annually on July 15 by the percentage change in the U.S. Department of Commerce Implicit Price Deflator for the Gross National Product subject to an interest rate ceiling of 12.5%. The interest rates for each of the nine month periods ended September 30, 1997 and 1996, was 12.5%. Payments are currently payable quarterly in an amount equal to "Excess Cash Flow", generally defined in the Master Loan Agreement as net cash flow from operations after third-party debt service and capital expenditures. Any unpaid interest is added to principal, compounded annually, and is payable at the loan's maturity. Any net proceeds from sale or refinancing of any of CCEP's properties are paid to CCIP under the terms of the Master Loan Agreement. The Master Loan Agreement matures in November 2000. During the nine months ended September 30, 1997, CCEP paid approximately $2,031,000 to CCIP as principal payments on the Master Loan. Cash received on certain investments by CCEP, which are required to be transferred to CCIP per the Master Loan Agreement, accounted for approximately $388,000. Approximately $643,000 was due to excess cash flow payments paid to CCIP as stipulated by the Master Loan Agreement. CCEP also paid an additional $1,000,000 to CCIP as principal payment on the Master Loan. -----END PRIVACY-ENHANCED MESSAGE-----