-----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, If2RyWnbhrB+8kmSl/SEE6FhFeklUXfBaVEjuPOd6K5SHVsqE8rBFAvnImuCIOKC fz+hHZGCn4wVlATeKD65nA== 0000711642-03-000239.txt : 20030515 0000711642-03-000239.hdr.sgml : 20030515 20030515163307 ACCESSION NUMBER: 0000711642-03-000239 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL PROPERTIES IV CENTRAL INDEX KEY: 0000355804 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942768742 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11002 FILM NUMBER: 03705239 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FL CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FL CITY: DENVER STATE: CO ZIP: 80222 10-Q 1 ccp4.txt CCP4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 [ ] 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 0-11002 CONSOLIDATED CAPITAL PROPERTIES IV (Exact Name of Registrant as Specified in Its Charter) California 94-2768742 (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) (864) 239-1000 (Issuer's telephone number) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED BALANCE SHEETS (in thousands, except unit data)
March 31, December 31, 2003 2002 (Unaudited) (Note) Assets Cash and cash equivalents $ 5,582 $ 2,127 Receivables and deposits 807 1,166 Restricted escrows 357 656 Due from affiliates -- 149 Other assets 1,374 1,449 Investment properties: Land 9,732 10,907 Buildings and related personal property 119,763 126,750 129,495 137,657 Less accumulated depreciation (104,746) (110,917) 24,749 26,740 $ 32,869 $ 32,287 Liabilities and Partners' Deficit Liabilities Accounts payable $ 428 $ 407 Tenant security deposit liabilities 479 523 Accrued property taxes 690 1,392 Other liabilities 1,117 820 Distributions payable 571 571 Mortgage notes payable 68,177 72,630 71,462 76,343 Partners' Deficit General partners (6,932) (7,146) Limited partners (342,773 units issued and outstanding) (31,661) (36,910) (38,593) (44,056) $ 32,869 $ 32,287 Note: The balance sheet at December 31, 2002, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended March 31, 2003 2002 (Restated) Revenues: Rental income $ 4,889 $ 6,156 Other income 667 673 Total revenues 5,556 6,829 Expenses: Operating 2,650 2,396 General and administrative 351 367 Depreciation 863 1,004 Interest 1,220 1,312 Property taxes 395 509 Total expenses 5,479 5,588 Income from continuing operations 77 1,241 Income from discontinued operations 33 187 Gain from sale of discontinued operations 6,149 -- Net income $ 6,259 $ 1,428 Net income allocated to general partners (4%) $ 250 $ 57 Net income allocated to limited partners (96%) 6,009 1,371 $ 6,259 $ 1,428 Per limited partnership unit: Income from continuing operations $ 0.22 $ 3.48 Income from discontinued operations 0.09 0.52 Gain from sale of discontinued operations 17.22 -- Net income $ 17.53 $ 4.00 Distributions per limited partnership unit $ 2.22 $ -- See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Total Partnership General Limited Partners' Units Partners Partners Deficit Original capital contributions 343,106 $ 1 $171,553 $171,554 Partners' deficit at December 31, 2001 342,773 $ (7,064) $(35,636) $(42,700) Distributions to partners -- (14) -- (14) Net income for the three months ended March 31, 2002 -- 57 1,371 1,428 Partners' deficit at March 31, 2002 342,773 $ (7,021) $(34,265) $(41,286) Partners' deficit at December 31, 2002 342,773 $ (7,146) $(36,910) $(44,056) Distributions to partners -- (36) (760) (796) Net income for the three months ended March 31, 2003 -- 250 6,009 6,259 Partners' deficit at March 31, 2003 342,773 $ (6,932) $(31,661) $(38,593) See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 2003 2002 Cash flows from operating activities: Net income $ 6,259 $ 1,428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 919 1,058 Amortization of loan costs 52 55 Casualty gain -- (97) Loss on early extinguishment of debt 13 -- Gain on sale of discontinued operations (6,149) -- Change in accounts: Receivables and deposits 359 251 Other assets 10 (494) Accounts payable (79) 204 Tenant security deposit liabilities (44) (2) Accrued property taxes (702) (567) Other liabilities 297 311 Due from affiliates 149 -- Net cash provided by operating activities 1,084 2,147 Cash flows from investing activities: Property improvements and replacements (816) (635) Net withdrawals from restricted escrows 299 111 Insurance proceeds from casualties -- 145 Net proceeds from sale of discontinued operations 8,137 -- Net cash provided by (used in) investing activities 7,620 (379) Cash flows from financing activities: Payments on mortgage notes payable (224) (198) Repayment of mortgage note payable (4,229) -- Distributions to partners (796) (14) Net cash used in financing activities (5,249) (212) Net increase in cash and cash equivalents 3,455 1,556 Cash and cash equivalents at beginning of period 2,127 2,729 Cash and cash equivalents at end of period $ 5,582 $ 4,285 Supplemental Disclosures of Cash Flow Information: Cash paid for interest was approximately $1,366,000 and $1,345,000 for the three months ended March 31, 2003 and 2002, respectively. See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Consolidated Capital Properties IV (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. ("CEI" or the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as discontinued operations on the statement of operations. As a result, the accompanying consolidated statements of operations have been restated as of January 1, 2002 to reflect the operations and gain from sale of South Port Apartments, which was sold March 28, 2003, as income from discontinued operations and gain on sale from discontinued operations. Note B - Transactions with Affiliated Parties 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) reimbursements of certain expenses incurred by affiliates on behalf of the Partnership. During the three months ended March 31, 2003 and 2002, affiliates of the General Partner were entitled to receive 5% of gross receipts from all the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $295,000 and $372,000 for the three months ended March 31, 2003 and 2002, respectively, which is included in operating expenses. During the three months ended March 31, 2003, an affiliate of the General Partner refunded the Partnership approximately $38,000 for overpayment of property management fees during 2002. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $252,000 and $307,000 for the three months ended March 31, 2003 and 2002, respectively, which is included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $27,000 and $19,000 for the three months ended March 31, 2003 and 2002, respectively. The construction management service fees are calculated based on a percentage of current year additions to investment properties. During the three months ended March 31, 2003, an affiliate of the General Partner refunded the Partnership approximately $111,000 for overpayment of management reimbursements during 2002. The Partnership Agreement provides for a special management fee equal to 9% of the total distributions made to the limited partners from cash flow provided by operations to be paid to the General Partner for executive and administrative management services. The Partnership paid approximately $68,000 under this provision of the Partnership Agreement to the General Partner during the three months ended March 31, 2003, which is included in general and administrative expenses. There were no such special management fees paid or earned during the three months ended March 31, 2002. For acting as real estate broker in connection with the sale of South Port Apartments, the General Partner was paid a real estate commission of approximately $295,000 during the three months ended March 31, 2003. When the Partnership terminates, the General Partner will have to return this commission if the limited partners do not receive their original invested capital plus a 6% per annum cumulative return. The Partnership insures 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 2003 and 2002, the Partnership's cost for insurance coverage and fees associated with policy claims administration provided by AIMCO and its affiliates will be approximately $350,000 and $423,000. Note C - Casualty Gain In March 2000, South Port Apartments had wind and hail damage, which damaged the majority of the 240 rental units. The repairs included roof replacements to the majority of units. Insurance proceeds of approximately $145,000 were received during the three months ended March 31, 2002. The Partnership recognized a casualty gain of approximately $97,000 during the three months ended March 31, 2002, which represents the excess of the proceeds received as of March 31, 2002 over the write-off of the undepreciated damaged assets, and is included in income from discontinued operations in the accompanying consolidated statements of operations. Note D - Disposition of Investment Property On March 28, 2003, the Partnership sold South Port Apartments to an unrelated third party, for a gross sale price of $8,625,000. The net proceeds realized by the Partnership were approximately $8,137,000 after payment of closing costs of approximately $488,000. The Partnership used approximately $4,229,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $6,149,000 for the three months ended March 31, 2003, as a result of this sale, this amount is included in gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $33,000 and $187,000 for the three months ended March 31, 2003 and 2002, respectively, including revenues of approximately $340,000 and $489,000, respectively, are included in income from discontinued operations. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $13,000 for the three months ended March 31, 2003 due to the write-off of unamortized loan costs, which is also included in income from discontinued operations in the accompanying consolidated statements of operations. Note E - Subsequent Distribution Subsequent to the three months ended March 31, 2003, the Partnership paid a distribution from the sales proceeds of South Port Apartments to the limited partners of approximately $3,599,000. Note F - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (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. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties could have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action described below. On April 4, 2003, the Court preliminarily approved the settlement and scheduled a hearing on final approval for June 2, 2003. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make a tender offer to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provides for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. 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. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. Before completing briefing on the appeal, the parties stayed further proceedings in the appeal pending the Court's review of the terms of the proposed settlement described above. The General Partner does not anticipate that any costs to the Partnership, 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, do not take into account the effects of any changes to the Registrant's business and results of operations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment properties consist of fourteen apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 2003 and 2002: Average Occupancy Property 2003 2002 The Apartments 91% 89% Omaha, NE Arbours of Hermitage Apartments 94% 91% Nashville, TN Briar Bay Racquet Club Apartments 90% 95% Miami, FL Chimney Hill Apartments 6% 89% Marietta, GA Citadel Apartments 92% 94% El Paso, TX Citadel Village Apartments 61% 93% Colorado Springs, CO Foothill Place Apartments 83% 94% Salt Lake City, UT Knollwood Apartments 96% 93% Nashville, TN Lake Forest Apartments 94% 93% Omaha, NE Nob Hill Villa Apartments 88% 90% Nashville, TN Point West Apartments 90% 93% Charleston, SC Post Ridge Apartments 96% 90% Nashville, TN Rivers Edge Apartments 92% 94% Auburn, WA Village East Apartments 67% 83% Cimarron Hills, CO The increase in occupancy at Arbours of Hermitage Apartments, Knollwood Apartments and Post Ridge Apartments is attributable to a more aggressive marketing campaign. The decrease in occupancy at Briar Bay Racquet Club Apartments, Point West Apartments and Foothill Place Apartments is due to more tenants purchasing houses due to lower mortgage interest rates and changing economic conditions in their respective local markets. The decrease in occupancy at Village East Apartments and Citadel Village Apartments is due to an increase in competitive pricing strategies and competition in their respective local markets. The Partnership attributes the decrease in occupancy at Chimney Hill Apartments primarily to the presence of mold in a significant number of the units and general deferred maintenance issues has resulted in all apartment units not being available for rent as of March 31, 2003. The General Partner is currently evaluating its options with respect to Chimney Hill Apartments, including rehabilitation or complete rebuild of the property. Results of Operations The Partnership's net income for the three months ended March 31, 2003 was approximately $6,259,000, as compared to net income of approximately $1,428,000 for the three months ended March 31, 2002. The increase is due to the recognition of a gain from sale of discontinued operations in 2003, partially offset by a decrease in income from continuing operations. On March 28, 2003, the Partnership sold South Port Apartments to an unrelated third party, for a gross sale price of $8,625,000. The net proceeds realized by the Partnership were approximately $8,137,000 after payment of closing cost of approximately $488,000. The Partnership used approximately $4,229,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $6,149,000 for the three months ended March 31, 2003, as a result of this sale. This amount is included in gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $33,000 and $187,000 for the three months ended March 31, 2003 and 2002, respectively, including revenues of approximately $340,000 and $489,000, respectively, are included in income from discontinued operations. The Partnership also recorded a loss on early extinguishment of debt of approximately $13,000 for the three months ended March 31, 2003 due to the write-off of unamortized loan costs, which is also included in income from discontinued operations in the accompanying consolidated statements of operations. In March 2000, South Port Apartments had wind and hail damage, which damaged the majority of the 240 rental units. The repairs included roof replacements to the majority of units. Insurance proceeds of approximately $145,000 were received during the three months ended March 31, 2002. The Partnership recognized a casualty gain of approximately $97,000 during the three months ended March 31, 2002, which represents the excess of the proceeds received as of March 31, 2002 over the write-off of the undepreciated damaged assets and is included in income from discontinued operations. Excluding the impact of income from discontinued operations and the gain on sale of discontinued operations, the Partnership's income from continuing operations for the three months ended March 31, 2003 was approximately $77,000, as compared to income from continuing operations of approximately $1,241,000 for the three months ended March 31, 2002. The decrease in income from continuing operations is due to a decrease in total revenues partially offset by a decrease in total expenses. The decrease in total revenues is due to a decrease in rental income. Rental income decreased due to a decrease in occupancy at nine of the fourteen investment properties and an increase in bad debt expense at nine investment properties, partially offset by an increase in occupancy at three of the investment properties. Total expenses decreased due to a decrease in depreciation, interest and property tax expenses, partially offset by an increase in operating expense. Depreciation decreased due to some fixed assets becoming fully depreciated at The Apartments and Lake Forest Apartments during 2002 partially offset by an increase in capital improvements completed and placed into service during the past twelve months. Interest expense decreased due to capitalization of approximately $98,000 of interest expense at Chimney Hill Apartments related to the renovation project during 2003. Property tax expense decreased due to capitalization of taxes at Chimney Hill Apartments related to the renovation project during 2003 and a refund received at Citadel Apartments for prior year taxes during the three months ended March 31, 2003. The increase in operating expense was due to an increase in maintenance, advertising and insurance expense, partially offset by a decrease in property management fees. Maintenance expense increased due to an increase in contract work at many of the Partnership's investment properties. Advertising expense increased due to an increase in resident relations at Chimney Hill Apartments and periodical and web advertising at many of the Partnership's investment properties. Insurance expense increased due to an increase in hazard insurance premiums at many of the Partnership's investment properties. Property management fees are based on a percentage of revenues and decreased as a result of decreases in rental income at many of the investment properties. General and administrative expenses consist of management reimbursements to the General Partner as allowed under the Partnership Agreement and management fees paid to the General Partner in connection with distributions made from operations. Also included are costs associated with the quarterly 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 expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 2003, the Partnership held cash and cash equivalents of approximately $5,582,000 as compared to approximately $4,285,000 at March 31, 2002. The increase in cash and cash equivalents of approximately $3,455,000 from the Partnership's year ended December 31, 2002, is due to approximately $7,620,000 of cash provided by investing activities and approximately $1,084,000 of cash provided by operating activities, partially offset by approximately $5,249,000 of cash used in financing activities. Cash provided by investing activities consisted of net proceeds received from the sale of discontinued operations and net withdrawals from escrow accounts maintained by the mortgage lenders, partially offset by property improvements and replacements. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties, repayment of the mortgage encumbering South Port Apartments and distributions to the partners. The Partnership 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 properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for each of the Partnership's properties are detailed below. The Apartments During the three months ended March 31, 2003, the Partnership completed approximately $11,000 of capital improvements at The Apartments, consisting primarily of floor covering replacements and maintenance equipment. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $98,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of garage doors, floor covering and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Arbours of Hermitage Apartments During the three months ended March 31, 2003, the Partnership completed approximately $31,000 of capital improvements at Arbours of Hermitage Apartments, consisting primarily of structural improvements and floor covering and appliance replacements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $158,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of structural upgrades, floor covering and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Briar Bay Club Apartments During the three months ended March 31, 2003, the Partnership completed approximately $31,000 of capital improvements at Briar Bay Racquet Club Apartments, consisting primarily of appliance and floor covering replacements, roof and structural upgrades and major landscaping. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $514,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of major landscaping, structural, plumbing and parking lot upgrades and appliance and floor covering replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and the anticipated cash flow generated by the property. Chimney Hill Apartments During the three months ended March 31, 2003, the Partnership completed approximately $387,000 of capital improvements at Chimney Hill Apartments, consisting primarily of parking lot resurfacing, water heater replacements, mold removal and roof and structural upgrades. These expenditures included capitalized construction period interest of approximately $98,000, taxes and insurance of approximately $64,000 and other construction period operating expenses of approximately $112,000. These improvements were funded from operating cash flow and partnership reserves. The Partnership is currently evaluating its options for the property, including rehabilitation or complete rebuild of the property. Citadel Apartments During the three months ended March 31, 2003, the Partnership completed approximately $27,000 of capital improvements at Citadel Apartments, consisting primarily of water heaters, floor covering replacements, and plumbing fixtures. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $91,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of structural upgrades and appliance and floor covering replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Citadel Village Apartments During the three months ended March 31, 2003, the Partnership completed approximately $27,000 of capital improvements at Citadel Village Apartments, consisting primarily of appliance and floor covering replacements and structural upgrades. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $85,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of cabinet replacements, interior building improvements and appliance and floor covering replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Foothill Place Apartments During the three months ended March 31, 2003, the Partnership completed approximately $105,000 of capital improvements at Foothill Place Apartments, consisting primarily of water heaters, plumbing fixtures, appliance and floor covering replacements and structural upgrades. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $665,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of major landscaping, plumbing improvements, structural and electrical and floor covering and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Knollwood Apartments During the three months ended March 31, 2003, the Partnership completed approximately $39,000 of capital improvements at Knollwood Apartments, consisting primarily of floor covering replacements and roof and structural upgrades. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $29,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of floor covering, appliance and cabinet replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Lake Forest Apartments During the three months ended March 31, 2003, the Partnership completed approximately $19,000 of capital improvements at Lake Forest Apartments, consisting primarily of fire safety upgrades and floor covering and appliance replacements. These improvements were funded from operating cash flow and replacement reserves. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $97,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of structural upgrades, water heater replacements, appliance and floor covering replacements and major landscaping. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Nob Hill Villa Apartments During the three months ended March 31, 2003, the Partnership completed approximately $41,000 of capital improvements at Nob Hill Villa Apartments, consisting primarily of appliance and floor covering replacements, electrical upgrades, water heaters replacements and plumbing fixtures. These improvements were funded from operating cash flow and replacement reserves. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $469,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of roof replacement, interior building improvements, floor covering, cabinet and HVAC replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Point West Apartments During the three months ended March 31, 2003, the Partnership completed approximately $14,000 of capital improvements at Point West Apartments, consisting primarily of floor covering replacements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $55,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of window replacements, cabinet upgrades and floor covering and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Post Ridge Apartments During the three months ended March 31, 2003, the Partnership completed approximately $16,000 of capital improvements at Post Ridge Apartments, consisting primarily of floor covering replacements and plumbing fixtures. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $20,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of roof repairs, floor covering, HVAC and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Rivers Edge Apartments During the three months ended March 31, 2003, the Partnership completed approximately $14,000 of capital improvements at Rivers Edge Apartments, consisting primarily of floor covering replacements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $28,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of structural upgrades and floor covering and appliance replacements. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. South Port Apartments During the three months ended March 31, 2003, the Partnership completed approximately $21,000 of capital improvements at South Port Apartments, consisting primarily of floor covering and appliance replacements. These improvements were funded from operating cash flow. The property was sold on March 28, 2003. Village East Apartments During the three months ended March 31, 2003, the Partnership completed approximately $33,000 of capital improvements at Village East Apartments, consisting primarily of floor covering replacements and exterior painting. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $172,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of major landscaping, structural and plumbing upgrades, appliance and floor covering replacements and exterior painting. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are currently thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $68,177,000 matures at various dates between 2004 and 2022. 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 Partnership will risk losing such properties through foreclosure. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2011. Accordingly, prior to such date the Partnership will need to either sell its investment properties or extend the term of the Partnership. The Partnership distributed the following amounts during the three months ended March 31, 2003 and 2002 (in thousands except per unit data):
Three Months Per Three Months Per Ended Limited Ended Limited March 31, Partnership March 31, Partnership 2003 Unit 2002 Unit Operations $ 792 $ 2.22 $ -- $ --
In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $4,000 and $14,000 was distributed to the general partner of the majority owned sub-tier limited partnerships during the three months ended March 31, 2003 and 2002, respectively. Subsequent to March 31, 2003, the Partnership paid a distribution from the sale proceeds of South Port Apartments to the limited partners of approximately $3,599,000. The Partnership'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. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit distributions to its partners during the remainder of 2003 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 193,552.50 limited partnership units in the Partnership representing 56.47% of the outstanding units at March 31, 2003. 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 acquire additional units of limited partnership interest in the Partnership in exchange for cash or a combination of cash and units in the operating partnership of AIMCO either through private purchases or tender offers. 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 56.47% of the outstanding units, AIMCO is in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause an impairment in the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned and the Partnership fully reserves all balances outstanding over thirty days. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged to income as incurred. Item 3. Quantitative and Qualitative Disclosures about Market Risk 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 trading purposes. The Partnership is exposed to changes in interest rates primarily as a result of its borrowing activities used to maintain liquidity and fund business operations. To mitigate the impact of fluctuations in U.S. interest rates, the Partnership maintains its debt as fixed rate in nature by borrowing on a long-term basis. Based on interest rates at March 31, 2003, a 100 basis point increase or decrease in market interest rates would not have a material impact on the Partnership. The following table summarizes the Partnership's debt obligations at March 31, 2003. The interest rates represent the weighted-average rates. The fair value of the debt obligations approximated the recorded value as of March 31, 2003. Principal amount by expected maturity: Long Term Debt Fixed Rate Debt Average Interest Rate (in thousands) 2003 $ 651 7.89% 2004 931 7.89% 2005 43,138 7.42% 2006 875 7.68% 2007 944 7.68% Thereafter 21,638 7.68% Total $68,177 ITEM 4. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have, within 90 days of the filing date of this quarterly report, evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls and procedures are adequate. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the Partnership's internal controls since the date of evaluation. The Partnership does not believe any significant deficiencies or material weaknesses exist in the Partnership's internal controls. Accordingly, no corrective actions have been taken. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (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. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties could have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action described below. On April 4, 2003, the Court preliminarily approved the settlement and scheduled a hearing on final approval for June 2, 2003. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make a tender offer to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provides for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. 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. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. Before completing briefing on the appeal, the parties stayed further proceedings in the appeal pending the Court's review of the terms of the proposed settlement described above. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 3.1 Certificate of Limited Partnership, (incorporated by reference to the Registration statement of the Partnership (file No. 2-74353), filed October 9, 1981, as amended to date). 3.2 Limited Partnership Agreement (Exhibit to the Prospectus of the Partnership, filed October 12, 1981). 99 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K: None filed during the quarter ended March 31, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONSOLIDATED CAPITAL PROPERTIES IV By: CONCAP EQUITIES, INC. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Thomas C. Novosel Thomas C. Novosel Senior Vice President and Chief Accounting Officer Date: May 15, 2003 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital Properties IV; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/Patrick J. Foye Patrick J. Foye Executive Vice President of ConCap Equities, Inc., equivalent of the chief executive officer of the Partnership CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital Properties IV; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer of ConCap Equities, Inc., equivalent of the chief financial officer of the Partnership Exhibit 99 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-Q of Consolidated Capital Properties IV (the "Partnership"), for the quarterly period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Patrick J. Foye Name: Patrick J. Foye Date: May 15, 2003 /s/Paul J. McAuliffe Name: Paul J. McAuliffe Date: May 15, 2003 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----