-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fpzp25e1s+E+GwMM3lPhgAEkyDMK+cqW/ILgoEnygos2O8afHCt54Z8e/VzAvJid lQPU8IVvzRJvIIVhB4239w== 0000910650-95-000030.txt : 19950613 0000910650-95-000030.hdr.sgml : 19950613 ACCESSION NUMBER: 0000910650-95-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950612 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CENTRAL INDEX KEY: 0000352983 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942744492 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10831 FILM NUMBER: 95546430 BUSINESS ADDRESS: STREET 1: 5520 LBJ FRWY STE 430 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2147020027 MAIL ADDRESS: STREET 1: 5520 LBJ FREEWAY STREET 2: SUITE 430 CITY: DALLAS STATE: TX ZIP: 75240 10-Q 1 1ST QUARTER REPORT FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No. 312905, eff. 04/26/93.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended March 31, 1995 or [ ] Transition Report Under Section 13 or 15(d) of the Exchange Act For the transition period.........to......... Commission file number 0-10831 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES (Exact name of small business issuer as specified in its charter) California 94-2744492 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Registrant's telephone number (803) 239-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports ), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ===== ====== PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, December 31, 1995 1994 ---------- ----------- Assets Cash and cash equivalents $ 2,738 $ 1,554 Securities available for sale 5,763 8,329 Prepaid expenses and other assets 297 276 Due from affiliates 936 935 Net investment in master loan 93,322 91,786 Investment properties: Land 1,053 1,053 Building and related personal property 5,207 5,202 ------- ------- 6,260 6,255 Less accumulated depreciation (1,610) (1,505) ------- ------- 4,650 4,750 ------- ------- $107,706 $107,630 ======= ======= Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 134 $ 55 Tenant security deposits 34 47 Distributions payable 324 324 ------- ------- 492 426 ------- ------- Partners' Capital (Deficit) General partners (294) (294) Limited partners (199,045 units outstanding) 107,508 107,498 ------- ------- 107,214 107,204 ------- ------- $107,706 $107,630 ======= ======= See Accompanying Notes to Financial Statements b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1995 1994 -------- -------- Revenues: Rental income $ 323 $ 314 Interest income on investment in master loan to affiliate 1,536 474 Interest income on investments 119 167 ----- ------ Total revenues 1,978 955 ----- ------ Expenses: Property operations 176 144 Depreciation 105 104 Administrative 196 138 ----- ------ Total expenses 477 386 ----- ------ Other income (Note D) -- 50 Casualty gain 9 -- ----- ------ Net income $1,510 $ 619 ===== ====== Net income allocated to general partners (1%) $ 15 $ 6 Net income allocated to limited partners (99%) 1,495 613 ----- ------ $1,510 $ 619 ===== ====== Net income per limited partnership unit $ 7.51 $ 3.08 ===== ====== See Accompanying Notes to Financial Statements c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) For the Three Months Ended March 31, 1995 and 1994 (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total ----------- ---------- ---------- ---------- Original capital contributions 200,342 $ 1 $200,342 $200,343 ======= ====== ======= ======= Partners' capital (deficit) at December 31, 1993 199,046 $ (287) $108,220 $107,933 Distributions to partners -- (24) (2,339) (2,363) Net income for the three months ended March 31, 1994 -- 6 613 619 ------- ------ ------- ------- Partners' capital (deficit) at March 31, 1994 199,046 $ (305) $106,494 $106,189 ======= ====== ======= ======= Partners' capital (deficit) at December 31, 1994 199,045 $ (294) $107,498 $107,204 Distributions to partners -- (15) (1,485) (1,500) Net income for the three months ended March 31, 1995 -- 15 1,495 1,510 ------- ------ ------- ------- Partners' capital (deficit) at March 31, 1995 199,045 $ (294) $107,508 $107,214 ======= ====== ======= ======= See Accompanying Notes to Financial Statements d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1995 1994 -------- -------- Cash flows from operating activities: Net income $ 1,510 $ 619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 105 104 Casualty gain (9) -- Change in accounts: Prepaid expenses and other assets (22) 6 Interest receivable master loan (1,536) -- Accounts payable and accrued expenses 88 (44) Distributions payable -- (16) Due from affiliates -- (477) Tenant security deposits (13) (1) ------ ------ Net cash provided by operating activities 123 191 ------ ------ Cash flows from investing activities: Property improvements and replacements (5) (28) Purchase of securities available for sale (1,097) (2,320) Proceeds from sale of securities available for sale 3,663 4,720 Advances on master loan -- (40) ------ ------ Net cash provided by investing activities 2,561 2,332 ------ ------ Cash flows used in financing activities: Distributions to partners (1,500) (2,347) ------ ------ Net increase in cash and cash equivalents 1,184 176 Cash and cash equivalents at beginning of period 1,554 222 ------ ------ Cash and cash equivalents at end of period $ 2,738 $ 398 ====== ====== See Accompanying Notes to Financial Statements e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 1995. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended December 31, 1994. Investment in Master Loan - ------------------------- The Master Loan and the New Master Loan agreements are considered investments in acquisition, development, and construction ("ADC") loans, primarily because the Partnership is entitled to receive, according to the provisions of the Master Loan and New Master Loan agreements, in excess of 50% of the residual profits from the sale or refinancing of the properties securing the agreements. The investment in Master Loan is accounted for by the cost method, whereby income from the investment is recognized as interest income to the extent of payments received and losses in the estimated net realizable value of the investment are recognized in the period they are identified. Interest income contractually due according to the terms of the Master Loan and New Master Loan agreements in excess of payments received is deferred. As of March 31, 1995, and December 31, 1994, such cumulative deferred interest, which is not included in the balance of the net investment in Master Loan, totaled $116.8 million and $110.8 million, respectively. Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. NOTE B - RELATED PARTY TRANSACTIONS - ----------------------------------- Consolidated Capital Institutional Properties ("Partnership") paid property management fees equal to 5% of collected gross rental revenues ("Rental Revenues") for property management services in each of the three months ended March 31, 1995, and 1994. For the three months ended March 31, 1994, a portion of such property management fees equal to 4% of Rental Revenues were paid to Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, for day-to-day property management services and the portion equal to 1% of Rental Revenues were paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day property operations. In late December 1994, an affiliate of Insignia assumed day-to-day property management responsibilities for all of the Partnerships' properties. Fees paid to affiliates of Insignia during the three months ended March 31, 1995, and fees paid to Coventry and PSI for the three months ended March 31, 1994, are reflected in the following table: For the Three Months Ended March 31, ------------------------- 1995 1994 -------- ------- (in thousands) Property management fees $ 17 $ 16 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 and former affiliates, which includes Coventry for the three months ended March 31, 1994, received reimbursements as reflected in the following table: For the Three Months Ended March 31, ------------------------- 1995 1994 -------- ------- (in thousands) Reimbursement for services of affiliates $115 $ 56 NOTE C - NET INVESTMENT IN MASTER LOAN - -------------------------------------- Interest due to the Partnership according to the terms of the New Master Loan Agreement but not recognized in the income statements totaled approximately $6.0 and $6.2 million for the three months ended March 31, 1995, and 1994, respectively. At March 31, 1995, and December 31, 1994, such cumulative unrecognized interest totaling approximately $116.8 million and $110.8 million was not included in the balance of the investment in Master Loan. In February 1994, the Partnership advanced $40,000 to CCEP as an advance on the Master Loan. CCEP then advanced $40,000 to New Carlton House Partners as an advance on the note receivable secured by the Carlton House Apartment and Office Building ("Carlton House") to pay the remaining balance of 1993 property taxes. NOTE D - OTHER INCOME - --------------------- In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding. These claims related to Southmark Corporation's activities while it exercised control (directly, or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the affiliated partnership's allowed claim at $11 million, in aggregate. In March 1994, the Partnership received 909 shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,651 shares of Southmark Corporation New common Stock with an aggregate market value on the date of receipt of $6,690 and $49,847 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. NOTE E - COMMITMENT - ------------------- The Partnership is required by the Partnership Agreement to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital, as defined in the Partnership Agreement. In the event expenditures are made from this reserve, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash and cash equivalents and securities available for sale, totalling approximately $8.5 million, were greater than the reserve requirement of $8.0 million at March 31, 1995. NOTE F - DISTRIBUTIONS - ---------------------- In March 1995, the General Partner declared and paid distributions representing a return of capital totalling approximately $1,485,000 or $7.46 per Unit to the limited partners. A matching distribution of $15,000 was made to the General Partner. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS ---------------------------------------------------------- The Partnership's investment properties consist of one apartment complex. The following table sets forth the average occupancy of this property for the three months ended March 31, 1995 and 1994: Average Occupancy 1995 1994 ---- ---- The Loft Apartments Raleigh, North Carolina 92% 96% The General Partner attributes the decrease in occupancy to increased rental rates. The Partnership realized net income of approximately $1,510,000 for the three months ended March 31, 1995, as compared to net income of $619,000 for the three months ended March 31, 1994. This increase in net income is due primarily to an increase in interest income on the master loan due to increased cash flows at the affiliated apartments (income is recorded based on the cash flow of the properties collateralized by the Master Loan). Also, increasing net income is $9,000 in casualty income in 1995 related to insurance proceeds from damages incurred in a prior year. Offsetting these increases in net income is a decrease in interest income due to lower investment balances in the quarter ended March 31, 1995, as compared to the quarter ended March 31, 1994. Also, property operations expense increased due to increased insurance expense resulting from higher premiums. Administrative expenses for the three months ended March 31, 1995 increased as compared to the three months ended March 31, 1994, due primarily to approximately $68,000 in increased expense related to the combined efforts of the Dallas and Greenville offices during the transition period for the three months ended March 31, 1995. These increased costs related to the transition efforts were incurred to minimize any disruption in the year- end reporting function including the financial reporting and K-1 preparation and distribution. The General Partner expects overall administrative expenses to be reduced after the second quarter of 1995 once the transition efforts are completed. Other income realized in the three months ended March 31, 1994, is due to the receipt of its pro rata share of the claims filed in Southmark's Chapter 11 bankruptcy proceedings. (See Note D). As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At March 31, 1995, the Partnership had cash and cash equivalents of $2,738,000 as compared to $398,000 at March 31, 1994. Net cash provided by operating activities decreased primarily due to the increase in interest receivable on master loan which was partially offset by an increase in net income explained above and a decrease in the change in the due from affiliates accounts. Net cash provided by investing activities increased due to a decrease in the purchase of securities available for sale offset partially by a decrease in proceeds from sale of securities available for sale for the two quarter ending periods. Net cash used in financing activities decreased due to a decrease in distributions to partners. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. As noted above, a distribution of $1,485,000 or $7.46 per Unit was made to the limited partners in March 1995. A matching distribution of $15,000 was made to the General Partner. Future cash distributions will depend on the levels of net cash generated from operations, master loan interest income, property sales, and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- The Partnership is not a party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary litigation routine to the Partnership's business. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits: S-K Reference Sequential Number Description Page Number ------------- ----------- ----------- 28.1 Consolidated Capital Equity Partners, L.P., unaudited financial statements for the three months ended March 31, 1995 and 1994. (b) Reports on Form 8-K: None filed during the three months ended March 31, 1995. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES By: CONCAP EQUITIES, INC. General Partner By: /s/ Carroll D. Vinson -------------------------- Carroll D. Vinson President By: /s/ Robert D. Long, Jr. -------------------------- Robert D. Long, Jr. Controller and Principal Accounting Officer Date: May 26, 1995 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information from Consolidated Capital Institutional Properties' 10-Q for the First Quarter of 1995 and is qualified in its entirety by reference to such 10-Q. 3-MOS DEC-31-1995 MAR-31-1995 2,738,000 5,763,000 93,322,000 0 0 1,233,000 6,260,000 (1,610,000) 107,706,000 492,000 0 0 0 0 107,214,000 107,706,000 1,978,000 1,978,000 477,000 477,000 (9,000) 0 0 1,510,000 1,510,000 1,510,000 0 0 0 1,510,000 7.51 7.51
EX-28.1 3 EXHIBIT 28.1 CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- a) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands) March 31, December 31, 1995 1994 ---------- ----------- Assets Cash and cash equivalents $ 4,871 $ 3,393 Securities available for sale -- 195 Prepaid expenses and other assets 2,166 1,254 Investments in limited partners 2,508 2,508 Land 10,831 10,831 Buildings and related personal equipment 93,956 93,660 -------- -------- 104,787 104,491 Less accumulated depreciation (64,520) (63,288) -------- -------- 40,267 41,203 Real estate assets of property in-substance foreclosed 20,774 20,722 Less accumulated depreciation (1,372) (1,122) -------- -------- 19,402 19,600 -------- -------- $ 69,214 $ 68,153 ======== ======== Liabilities and Partners' Deficit Accounts payable and accrued expenses $ 2,854 $ 2,038 Notes and interest payable 5,721 4,700 Master loan and interest payable 246,042 238,486 Due to affiliates 981 969 -------- -------- 255,598 246,193 Partners' Deficit General partners (1,863) (1,780) Limited partners (20 units outstanding) (184,521) (176,260) -------- -------- (186,384) (178,040) -------- -------- $ 69,214 $ 68,153 ======== ======== b) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1995 1994 ----------- ---------- Revenues: Rental income $ 6,054 $ 5,592 Interest income 15 7 -------- -------- Total revenues 6,069 5,599 -------- -------- Expenses: Property operations 3,851 3,851 Depreciation and amortization 1,577 1,475 Interest 8,807 6,809 Administrative 216 242 -------- -------- Total expenses 14,451 12,377 -------- -------- Loss on disposition (7) -- Casualty gain 45 -- -------- -------- Net loss $ (8,344) $ (6,778) ======== ======== Net loss allocated to general partners (1%) $ (83) $ (68) Net loss allocated to limited partners (99%) (8,261) (6,710) -------- -------- $ (8,344) $ (6,778) ======== ======== Net loss per limited partnership unit $ (413,050) $(335,500) ======== ======== c) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) For the Three Months Ended March 31, 1995 and 1994 (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total ----------- ---------- ---------- ---------- Partners' deficit at December 31, 1993 20 $(1,507) $(149,178) $(150,685) Net loss for the three months ended March 31, 1994 -- (68) (6,710) (6,778) ------ ------ -------- -------- Partners' deficit at March 31, 1994 20 $(1,575) $(155,888) $(157,463) ====== ====== ======== ======== Partners' deficit at December 31, 1994 20 $(1,780) $(176,260) $(178,040) Net loss for the three months ended March 31, 1995 -- (83) (8,261) (8,344) ------ ------ -------- -------- Partners' deficit at March 31, 1995 20 $(1,863) $(184,521) $(186,384) ====== ====== ======== ======== d) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1995 1994 -------- -------- Cash flows from operating activities: Net loss $(8,344) $ (6,778) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,577 1,475 Loss on disposal of property 7 -- Casualty gain (45) -- Change in accounts: Prepaid expenses and other assets (935) (106) Accounts payable and accrued expenses 886 (142) Interest on master loan 7,556 6,207 Due to affiliates -- 432 Note interest payable 1,158 -- ------ ------ Net cash provided by operating activities 1,860 1,088 ------ ------ Cash flows from investing activities: Property improvements and replacements (441) (248) Proceeds from sale of securities available for sale 195 -- ------ ------ Net cash used in investing activities (246) (248) ------ ------ Cash flows used in financing activities: Payments on notes payable (136) (153) Advances on master loan -- 40 ------ ------ Net cash used in financing activities (136) (113) ------ ------ Net increase in cash and cash equivalents 1,478 727 Cash and cash equivalents at beginning of period 3,393 2,429 ------ ------ Cash and cash equivalents at end of period $ 4,871 $ 3,156 ====== ====== Supplemental disclosure of cash flow information: Cash paid for interest $ 92 $ 597 ====== ====== e) CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION ------------------------------ The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Consolidation ------------- CCEP owns a 75% interest in a limited partnership ("Western Can, Ltd.") which owns 444 De Haro, an office building in San Francisco, California. CCEP's investment in Western Can, Ltd. is consolidated in CCEP's financial statements. No minority interest liability has been reflected for the 25% minority interest because Western Can Ltd. has a net capital deficit and no minority liability exists with respect to CCEP. The assets and liabilities of March 31, 1995 and December 31, 1994, and operations for the three months ended March 31, 1995 and 1994, of the Carlton House are consolidated in CCEP's financial statements pursuant to accounting guidelines regarding notes receivable in-substance foreclosed. Note Receivable In-Substance Foreclosed --------------------------------------- The note receivable secured by the Carlton House Apartment and Office Building ("Carlton House") was deemed in-substance foreclosed as of September 30, 1993. The Carlton House note receivable is deemed in- substance foreclosed because control of the property effectively rest with an affiliate of CCEP and the debtor is unable to pay debt service according to the note terms. The note receivable in-substance foreclosed is recorded at the estimated fair value of the collateral property. See Note C. Investments in Limited Partnerships ----------------------------------- The investments in limited partnerships represent certain general partner interest in seven affiliated limited partnerships that were contributed by EP's general partners to CCEP. These investments are stated at the lower of estimated fair value of the interests at the time of contribution to CCEP or the current estimated fair value of the interests. NOTE B - RELATED PARTY TRANSACTIONS - ----------------------------------- Consolidated Capital Equity Partners ("Partnership") paid property management fees equal to 5% of collected gross rental revenues ("Rental Revenues") for property management services in each of the three months ended March 31, 1995 and 1994. For the three months ended March 31, 1994 a portion of such property management fees equal to 4% of Rental Revenues were paid to the property management companies performing day-to-day property management services and the portion equal to 1% of Rental Revenues were paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day property operations. Coventry Properties, Inc. ("Coventry"), an affiliate of the General Partner, provided day-to-day property management responsibilities for two of the Partnership's properties under the same management fee arrangement as the unaffiliated management companies. In late December 1994, an affiliate of Insignia assumed day-to-day property management responsibilities for all of the Partnerships' properties. Fees paid to affiliates of Insignia during the three months ended March 31, 1995, and fees paid to Coventry and PSI for the three months ended March 31, 1994, are reflected in the following table. Also, CCEP is subject to an Investment Advisory Agreement between CCEP and an affiliate of CHI. This agreement provides for an annual fee, payable in monthly installments, to an affiliate of CHI for advising and consulting services for CCEP's services for CCEP's properties. Advisory fees paid pursuant to this agreement are reflected in the following table. For the Three Months Ended March 31, ------------------------- 1995 1994 -------- ------- (in thousands) Property management fees $314 $164 Investment advisory fees 64 64 Property management fees increased for the three months ended March 31, 1995 compared to the three months ended March 31, 1994, due to the fact that all but two of the Partnership's investment properties were managed by unaffiliated management companies during the three months ended March 31, 1994. All of the Partnership's investment properties were managed by an affiliate of Insignia during the three months ended March 31, 1995. 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 and former affiliates which includes Coventry for the three months ended March 31, 1994, received reimbursements as reflected in the following table: For the Three Months Ended March 31, ------------------------- 1995 1994 -------- ------- (in thousands) Reimbursement for services of affiliates $126 $ 68 Reimbursements for services of affiliates increased during the three months ended March 31, 1995 compared to the three months ended March 31, 1994 due to increased expense reimbursements related to the combined efforts of the Dallas and Greenville offices during the transition period for the three months ended March 31, 1995. These increased costs related to the transition efforts were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. The General Partner expects overall administrative expenses to be reduced after the second quarter of 1995 once the transition efforts are completed. In addition to the compensation and reimbursements described above, interest payments are made to and loan advances are received from CCIP pursuant to the New Master Loan Agreement, which is described more fully in the 1993 Annual Report. Such interest payments totaled $0 and $474,000 in the three months ended March 31, 1995 and 1994, respectively. CCEP received advances under the New Master Loan Agreement totaling $40,000 in the three months ended March 31, 1994. No advances under the new Master Loan Agreement were made during the three months ended March 31, 1995. NOTE C - NOTE RECEIVABLE DEEMED IN-SUBSTANCE FORECLOSED - ------------------------------------------------------- CCEP holds a note receivable (the "Carlton House Note") which is secured by a deed of trust on the Carlton House Apartment and Office Building ("Carlton House") with a scheduled maturity in 1995. According to the note terms, interest accrues at 10% and compounds monthly on principal plus accrued but unpaid interest. The note receivable has been in default since 1991. As described more fully below the required debt service payments were reduced to only the amount of net cash flow from the Carlton House. In 1995 and 1994 no interest income was recognized as no cash related to the note receivable was received by CCEP. The Carlton House was originally owned by CCEP. In 1984, CCEP sold the Carlton House and received back a $28 million purchase money note secured by a first lien on the property. CCEP assigned this purchase money note to CCIP as additional collateral for the Master Loan. In 1986, the buyer defaulted on this purchase money note and filed for bankruptcy when CCEP attempted to foreclose on the Carlton House. Pursuant to a reorganization plan, a successor (New Carlton House Partners, "NCHP") to the buyer executed a new promissory note in the amount of $31.5 million (the Carlton House Note). In early 1991, NCHP defaulted on the Carlton House Note. Since default, CCEP and NCHP have negotiated a restructuring of the Carlton House Note. During the negotiating process, the owner made interim payments of $150,000 per month. In 1992, CCEP and NCHP entered into a Restructure Agreement (herein so called). Pursuant to the Restructure Agreement, 1801 Tower, Inc., an affiliate of CCEP and CCIP was substituted as the new general partner of NCHP in February 1993. The Restructure Agreement provides that payments to CCEP under the Carlton House Note will be in an amount equal to the property's net cash flow and included CCEP's agreement not to foreclose on the property until April 1995, provided that NCHP remains in compliance with the Restructure Agreement and various other conditions are satisfied. Prior to the Restructure Agreement, limited information was provided by the borrower. Information obtained subsequent to execution of the Restructure Agreement indicate that the property's deferred maintenance is significantly higher than the borrower's estimate of $5 million. The substantial amount of deferred maintenance which was, in some cases, endangering the continued operations of the property, and the value of the property which collateralized the Carlton House Note, is currently being addressed. In September 1993, a wholly-owned subsidiary of CCIP purchased the $20.4 million second lien mortgage note secured by the Carlton House from an unaffiliated third party. This mortgage note, which is subordinate to CCEP's Master Loan debt secured by Carlton House, remains the obligation of NCHP. As a result of the facts that (1) NCHP has no equity in the Carlton House, considering the current fair value of the Carlton House; (2) proceeds for repayment of the Carlton House Note can be expected to come only from the operations or sale of the Carlton House' and (3) NCHP effectively abandoned control of the Carlton House to CCEP when 1801 Tower, Inc. gained the general partner interest in NCHP in 1993, CCEP has deemed the Carlton House Note in- substance foreclosed as of December 31, 1993. Accordingly, the net note receivable secured by Carlton House is presented at "Note Receivable in- substance foreclosed" in accompanying financial statements. Summarized below are the assets, liabilities, equity and the results of operations of the Carlton House that are included in CCEP's financial statements for the three months ended March 31, 1995 and 1994, prepared on the same basis as CCEP's financial statements. Any intercompany balance between CCEP and the Carlton House have been implemented in CCEP's consolidated financial statements and the summarized financial statements set forth below: March 31,December 31, 1995 1994 --------------------- ASSETS ------ Cash and cash equivalents $ 1,633 $ 1,519 Securities available for sale -- 195 Prepaid expenses and other assets 602 103 Real estate: Land 3,805 3,805 Buildings and improvements 16,969 16,917 ------- -------- 20,774 20,722 Less accumulated depreciation (1,372) (1,122) ------- -------- 19,402 19,600 ------- -------- Total assets $ 21,637 $ 21,417 ======= ======== March 31, December 31, 1995 1994 --------------------- LIABILITIES AND PARTNERS' DEFICIT --------------------------------- Notes and interest payable $ 1,156 $ 16 Due to affiliates 763 763 Other liabilities 808 467 ------- -------- Total liabilities 2,727 1,246 ------- -------- Partners' equity 18,910 20,171 ------- -------- Total liabilities and partners' equity $21,637 $ 21,417 ======= ======== For the Three Months Ended March 31, ------------------------- 1995 1994 -------- -------- Revenues: Rental revenue $ 1,369 $ 1,122 Interest income 9 -- ------- ------- Total revenue 1,378 1,122 Expenses: Property operations 1,248 1,073 Depreciation and amortization 250 202 Interest 1,141 4 Administrative -- 78 ------- ------- Total expenses 2,639 1,357 ------- ------- Net loss $(1,261) $ (235) ====== ======= NOTE D - MASTER LOAN AND ACCRUED INTEREST PAYABLE ------------------------------------------------- The Master Loan and accrued interest payable balances at March 31, 1995 and December 31, 1994 are $246 million and $238.5 million, respectively. Terms of New Master Loan Agreement ---------------------------------- Under the terms of the New Master 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 Delator for the Gross national Product subject to an interest rate ceiling of 12.5%. The interest rates for each of the three month periods ended March 31, 1995 and 1994 was 12.5%. Interest payments are currently payable quarterly in an amount equal to "Excess Cash Flow", generally defined in the New Master Loan Agreement as net cash flow from operations after third-party debt service. If such Excess Cash Flow payments are less than the current accrued interest during the quarterly period, the unpaid interest is added to principal, compounded annually, and is payable at the loan's maturity. If such Excess Cash Flow payments are greater than the currently payable interest, the excess amount is applied to the principal balance of the loan. Any net proceeds from sale or refinancing of any of CCEP's properties are paid to CCIP under the terms of the New Master Loan Agreement. The New Master Loan Agreement matures in November 2000. Effective January 1, 1993, CCEP and CCIP 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 CCIP to CCEP. This amendment and change in the definition of Excess Cash Flow will have the effect of reducing Master Loan payments to CCIP by the amount of CCEP's capital expenditures since such amounts were previously excluded from Excess Cash Flow. The amendment will have no effect on the computation of interest expense on the Master Loan for CCEP. In February 1994, CCEP advanced approximately $589,000 to New Carlton House Partners, as an advance on the Carlton House Note, to pay Carlton House's 1994 property taxes. In February 1994, the Partnership advanced $40,000 to CCEP as an advance on the Master Loan. CCEP then advanced $40,000 to NCHP as an advance on the Carlton House Note to pay the remaining balance of 1993 property taxes. The notes payable are all nonrecourse, collateralized by deeds of trust on the real property. The notes payable bear interest at rates ranging from 8.0% to 10.5% per annum and mature between 1998 and 2007. -----END PRIVACY-ENHANCED MESSAGE-----