-----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, A72NKggC8oiKLGh+Zz6IGzJwP5cLZkKulU3qxFH5t/LX1AIV9Sory/FJE8+jsdp1 iwu6Cl2MISjaIlzn+GZijw== 0000711642-05-000071.txt : 20050331 0000711642-05-000071.hdr.sgml : 20050331 20050331150248 ACCESSION NUMBER: 0000711642-05-000071 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050331 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11002 FILM NUMBER: 05719540 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-K 1 ccp4.txt CCP4 UNITED SATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K (Mark One) [X] ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 or [ ] TRANSITION REPORT PURSUANT 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 (Name of small business issuer 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) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interests (Title of class) 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___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ______ No __X__ State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2004. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None 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. 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; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, 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. PART I Item 1. Description of Business Consolidated Capital Properties IV (the "Partnership" or "Registrant") was organized on September 22, 1981 as a limited partnership under the California Uniform Limited Partnership Act. On December 18, 1981, the Partnership commenced a public offering for the sale of 200,000 units (the "Units") with the general partner's right to increase the offering to 400,000 units. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on December 14, 1983, with 343,106 Units sold at $500 each, or gross proceeds of $171,553,000 to the Partnership. Since its initial offering, the Partnership has not received, nor are limited partners required to make, additional capital contributions. By the end of fiscal year 1985, approximately 73% of the proceeds raised had been invested in 48 properties. Of the remaining 27%, 11% was required for organizational and offering expenses, sales commissions and acquisition fees, and 16% was retained in Partnership reserves for project improvements and working capital as required by the Partnership Agreement. The general partner of the Partnership is ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The directors and officers of the General Partner also serve as executive officers of AIMCO. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to that date. The Partnership's primary business and only industry segment is real estate related operations. The Partnership is engaged in the business of operating and holding real estate properties for investment. As of the close of fiscal year 1985, the Partnership had completed its property acquisition stage and had acquired 48 properties. At December 31, 2004, the Partnership owned 10 income-producing properties (or interests therein) and one property which is under development in Atlanta, Georgia, which range in age from 27 to 32 years old and are principally located in the midwest, southeastern and southwestern United States. Prior to 2004, the Partnership had disposed of 34 properties originally owned by the Partnership. Three properties were sold in 2004. See "Item 2. Description of Properties" for further information about the Partnership's remaining properties. Risk Factors The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the General Partner, in such market area could have a material effect on the rental market for the apartments at the Partnership's properties and the rents that may be charged for such apartments. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. Laws benefiting disabled persons may result in the Partnership's incurrence of unanticipated expenses. Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. Likewise, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990 to be accessible to the handicapped. These and other Federal, state and local laws may require modifications to the Partnership's properties, or restrict renovations of the properties. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although the General Partner believes that the Partnership's properties are substantially in compliance with the present requirements, the Partnership may incur unanticipated expenses to comply with the ADA and the FHAA. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. From time to time, the Federal Bureau of Investigation, or FBI, and the United States Department of Homeland Security issue alerts regarding potential terrorist threats involving apartment buildings. Threats of future terrorist attacks, such as those announced by the FBI and the Department of Homeland Security, could have a negative effect on rent and occupancy levels at the Partnership's properties. The effect that future terrorist activities or threats of such activities could have on the Partnership's operations is uncertain and unpredictable. If the Partnership were to incur a loss at a property as a result of an act of terrorism, the Partnership could lose all or a portion of the capital invested in the property, as well as the future revenue from the property. In this regard, the Partnership has purchased insurance to cover acts of terrorism. The General Partner does not anticipate that these costs will have a negative effect on the Partnership's consolidated financial condition or results of operations. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. The Partnership has no employees. Property management and administrative services are provided by the General Partner and by agents of the General Partner. The General Partner has also selected an affiliate to provide real estate advisory and asset management services to the Partnership. As advisor, such affiliate provides all Partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. A further description of the Partnership's business is included in "Management's Discussion and Analysis of Financial Condition and Results of Operation" included in "Item 7" of this Form 10-K. Transfers of Control Upon the Partnership's formation in 1981, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Management Company ("CCMC"), a California general partnership, was the non-corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired a controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of its reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the Limited Partners in the Partnership and in each of the affiliated partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership, and the conversion of CCMC from a general partner to a special limited partner, thereby leaving CEI as the sole general partner of the Partnership. On November 14, 1990, CCMC was dissolved and its special limited partnership interest was divided among its former partners. All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT"). Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Item 2. Description of Properties The Partnership originally acquired 48 properties of which seventeen (17) were sold, ten (10) were conveyed to lenders in lieu of foreclosure, and ten (10) were foreclosed upon by the lenders. As of December 31, 2004, the Partnership owned eleven (11) apartment complexes, including one which is currently under development. Additional information about the properties is found in "Item 8. Financial Statements and Supplementary Data".
Date of Property Purchase Type of Ownership Use The Apartments (1) 04/84 Fee ownership, subject to Apartment Omaha, Nebraska a first mortgage 204 units Arbours of Hermitage Apts. (1) 09/83 Fee ownership subject to Apartment Nashville, Tennessee a first mortgage 350 units Belmont Place Apts. (2) 08/82 Fee ownership subject to Land being Marietta, Georgia a first mortgage developed Citadel Apts. (1) 05/83 Fee ownership subject Apartment El Paso, Texas to first and second mortgages 261 units Citadel Village Apts. (1) 12/82 Fee ownership subject Apartment Colorado Springs, Colorado to a first mortgage 122 units Foothill Place Apts. (2) 08/85 Fee ownership subject Apartment Salt Lake City, Utah to a first mortgage 450 units Knollwood Apts. (1) 07/82 Fee ownership subject Apartment Nashville, Tennessee to a first mortgage 326 units Lake Forest Apts. 04/84 Fee ownership subject Apartment Omaha, Nebraska to first and second mortgages 312 units Post Ridge Apts. (2) 07/82 Fee ownership subject Apartment Nashville, Tennessee to first and second 150 units mortgages Rivers Edge Apts. (2) 04/83 Fee ownership subject Apartment Auburn, Washington to a first mortgage 120 units Village East Apts. (1) 12/82 Fee ownership subject Apartment Cimarron Hills, Colorado to a first mortgage 137 units
(1) Property is held by a limited partnership and/or limited liability corporation in which the Partnership owns a 100% interest. (2) Property is held by a limited partnership in which the Partnership owns a 99% interest. On March 28, 2003, the Partnership sold South Port Apartments to a 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 $6,232,000 for the year ended December 31, 2003, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $8,000 and $497,000 for the years ended December 31, 2003 and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $327,000, and $1,571,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $13,000 for the year ended December 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. On March 31, 2004, the Partnership sold Point West Apartments to a third party, for a gross sale price of $3,900,000. The net proceeds realized by the Partnership were approximately $3,794,000 after payment of closing costs of approximately $106,000. The Partnership used approximately $2,204,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $3,210,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, losses of approximately $87,000 and $62,000 and income of approximately $44,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $189,000, $811,000 and $822,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $48,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third party, for a gross sale price of $10,700,000. The net proceeds realized by the Partnership were approximately $10,519,000 after payment of closing costs of approximately $181,000. The Partnership used approximately $6,328,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $7,962,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, a loss of approximately $108,000 and income of approximately $24,000 and $273,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $2,071,000, $2,642,000 and $2,702,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $23,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party, for a gross sale price of $20,352,000. The net proceeds realized by the Partnership were approximately $19,644,000 after payment of closing costs of approximately $708,000. The Partnership used approximately $3,500,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $18,109,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $308,000, $637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively. In addition, for the year ended December 31, 2004 the Partnership recorded a loss on early extinguishment of debt of approximately $16,000 due to the write-off of unamortized loan costs and approximately $98,000 due to pre-payment penalties paid. These amounts are included in income from discontinued operations in the accompanying consolidated statements of operations. Schedule of Properties Set forth below for each of the Partnership's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Depreciable Method of Federal Property Value Depreciation Life Depreciation Tax Basis (in thousands) (in thousands) The Apartments $ 9,751 $ 8,246 5-30 yrs S/L $ 1,541 Arbours of Hermitage Apartments 15,448 12,715 5-30 yrs S/L 3,187 Belmont Place Apartments 23,685 -- 5-30 yrs S/L 22,350 Citadel Apartments 8,295 7,200 5-30 yrs S/L 935 Citadel Village Apartments 5,238 3,930 5-30 yrs S/L 1,645 Foothill Place Apartments 18,072 12,804 5-30 yrs S/L 6,165 Knollwood Apartments 12,999 11,147 5-30 yrs S/L 2,384 Lake Forest Apartments 10,389 8,710 5-30 yrs S/L 1,760 Post Ridge Apartments 5,960 4,785 5-30 yrs S/L 1,436 Rivers Edge Apartments 3,808 3,000 5-30 yrs S/L 982 Village East Apartments 4,559 3,559 5-30 yrs S/L 1,008 Total $118,204 $ 76,096 $ 43,393
See "Note A - Organization and Significant Accounting Policies" to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's capitalization and depreciation policies. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Partnership's properties.
Principal Principal Principal Balance At Balance At Stated Balance December 31, December 31, Interest Period Maturity Due At Property 2004 2003 Rate Amortized Date Maturity (h) (in thousands) (in thousands) The Apartments $ 4,235 $ 4,367 8.37% (a) 20 yrs 03/20 $ -- Arbours of Hermitage Apartments 5,650 5,650 6.95% (a) (c) 12/05 5,650 Belmont Place Apartments -- 5,400 6.95% (a) (d) (d) -- Briar Bay Racquet Club Apartments -- 3,500 6.95% (a) (e) (e) -- Citadel Apartments 1st mortgage 4,215 4,303 8.55% (a) 30 yrs 7/14 3,748 2nd mortgage 1,310 -- (b) (c)(f) 7/07 1,310 Citadel Village 2,450 2,450 6.95% (a) (c) 12/05 2,450 Apartments Foothill Place 10,100 10,100 6.95% (a) (c) 12/05 10,100 Apartments Knollwood Apartments 6,780 6,780 6.95% (a) (c) 12/05 6,780 Lake Forest Apartments 1st mortgage 6,027 6,156 7.43% (a) 30 yrs 7/14 5,255 2nd mortgage 2,500 -- (b) (c)(f) 7/07 2,500 Nob Hill Villa -- 6,476 9.20% (a) (e) (e) -- Apartments Point West Apartments -- 2,221 7.86% (a) (e) (e) -- Post Ridge Apartments 1st mortgage 4,152 4,279 6.63% (a) 20 yrs 01/22 -- 2nd mortgage 369 375 7.04% (a) 18 yrs 01/22 173 (g) Rivers Edge Apartments 3,582 3,693 7.82% (a) 20 yrs 09/20 -- Village East Apartments 2,150 2,150 6.95% (a) (c) 12/05 2,150 Totals $53,520 $67,900 $40,116
(a) Fixed rate mortgage. (b) Interest rate is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). (c) Monthly payments of interest only at the stated rate until maturity. (d) Mortgage was repaid in September 2004. (e) Property was sold during 2004. (f) The first mortgage was modified and the second mortgage was obtained in June 2004 (see below for further explanation). (g) Debt was obtained October 22, 2003 (see below for further explanation). (h) See "Note C - Mortgage Notes Payable" to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for information with respect to the Partnership's ability to prepay these loans and other specific details about the loans. On October 22, 2003, the Partnership entered into a second mortgage for Post Ridge Apartments. The second mortgage is in the principal amount of $375,000 and has a stated interest rate of 7.04% per annum. Payments of principal and interest of approximately $3,000 are due on the first day of each month commencing December 2003 until January 2022 at which time a balloon payment of approximately $173,000 is required. The proceeds from the second mortgage were used as a cross collateralized loan to Belmont Place Apartments to establish a capital escrow reserve as required by the mortgage lender. Belmont Place Apartments used these proceeds to fund the reconstruction of the property. On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest Apartments in the amount of $2,500,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $83,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Lake Forest Apartments. The modification of terms consisted of an interest rate of 7.43%, a payment of approximately $44,000 due on July 1, 2004 and monthly payments of approximately $42,000, commencing August 1, 2004 through the maturity of July 1, 2014, at which time a balloon payment of approximately $5,255,000 is due. The previous terms consisted of monthly payments of approximately $51,000 with a stated interest rate of 7.13% through the maturity date of October 1, 2021, at which time the loan was scheduled to be fully amortized. On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel Apartments in the amount of $1,310,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $66,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Citadel Apartments. The modification of terms consisted of an interest rate of 8.55%, a payment of approximately $38,000 due on July 1, 2004 and monthly payments of approximately $33,000, commencing August 1, 2004 through the maturity of July 1, 2014, at which time a balloon payment of approximately $3,748,000 is due. The previous terms consisted of monthly payments of approximately $40,000 with a stated interest rate of 8.25% through the maturity date of March 1, 2020, at which time the loan was scheduled to be fully amortized. Rental Rates and Occupancy The following table sets forth the average annual rental rates and occupancy for 2004 and 2003 for each property.
Average Annual Average Rental Rates Occupancy (per unit) Property 2004 2003 2004 2003 The Apartments $ 6,907 $ 6,812 92% 94% Arbours of Hermitage Apartments 7,307 7,159 94% 95% Belmont Place Apartments -- -- --% 2% Citadel Apartments 6,647 6,497 92% 95% Citadel Village Apartments 7,598 7,311 89% 80% Foothill Place Apartments 7,679 7,776 86% 91% Knollwood Apartments 7,452 7,661 92% 95% Lake Forest Apartments 6,945 6,862 94% 95% Post Ridge Apartments 8,976 8,949 91% 95% Rivers Edge Apartments 8,328 8,316 96% 93% Village East Apartments 6,248 6,574 77% 68%
The decrease in occupancy at Citadel Apartments is primarily due to military deployments in the local area. The increases in occupancy at Citadel Village and Village East Apartments is due to a more aggressive marketing campaign and the use of competitive pricing strategies in the local market coupled with the return of military personnel from overseas deployment. The decrease in occupancy at Foothill Place Apartments is due to a more stringent tenant acceptance policy in order to create a more stable customer base and due to the addition of new student housing in the local area, which has created greater competition for tenants. The decreases in occupancy at Knollwood and Post Ridge Apartments are due to a more stringent tenant acceptance policy in order to create a more stable customer base. In addition, some units were uninhabitable due to fire damage at Knollwood Apartments and roofing issues at Post Ridge Apartments. The increase in occupancy at Rivers Edge Apartments is due to a more aggressive marketing campaign and the use of competitive pricing strategies in the local market. During 2003, the General Partner determined that Belmont Place Apartments suffered from severe structural defects in the buildings' foundation and as such, demolished the property. The General Partner has designed and approved a redevelopment plan for the property. Site work on the redevelopment began during the fourth quarter of 2003. The Partnership has entered into a construction contract with Casden Builders, Inc. (a related party) to develop the new Belmont Place Apartments at an estimated cost of approximately $26.9 million. The construction contract provides for the payment of the cost of the work plus a fee without a maximum guaranteed price. Construction is expected to be completed in 2005 at a total project cost of approximately $31.6 million. The Partnership has funded construction expenditures from operating cash flow, proceeds from a cross collateralized loan, Partnership reserves, loans from an affiliate of the General Partner and sales proceeds. During the year ended December 31, 2004, approximately $19,762,000 of construction costs were incurred. During the years ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest costs of approximately $299,000, $390,000, and $107,000, tax and insurance expenses of approximately $136,000, $226,000, and $31,000, and other construction period operating expenses of approximately $105,000, $351,000, and $65,000, respectively. The Partnership anticipates additional construction costs of approximately $11.8 million during 2005 which will be funded by, among other things, additional loans from the General Partner. As part of the redevelopment, during the year ended December 31, 2004, an affiliate of the General Partner advanced the Partnership approximately $5,600,000 to repay the mortgage and associated accrued interest encumbering Belmont Place Apartments. The loan was scheduled to mature in December 2005. In addition to repaying the mortgage of approximately $5,400,000, the Partnership paid prepayment penalties of approximately $170,000 and wrote off unamortized loan costs of approximately $109,000, which is shown as loss on early extinguishment of debt on the accompanying consolidated statements of operations. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. All of the properties are subject to competition from other residential apartment complexes in the area. The General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% or more of the available rental space. All of the properties are in good physical condition, with the exception of Belmont Place Apartments, as described above, subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates Real estate taxes and rates in 2004 and 2003 for each property were:
2004 2004 2003 2003 Billing Rate Billing Rate (in thousands) (in thousands) The Apartments $127 2.2% $127 2.2% Arbours of Hermitage Apartments 181 3.8% 186 3.8% Belmont Place Apartments 55 3.0% 152 3.0% Citadel Apartments 188 3.1% 184 3.0% Citadel Village Apartments 19 5.9% 19 5.9% Foothill Place Apartments 196 1.5% 175 1.5% Knollwood Apartments 183 3.8% 183 3.8% Lake Forest Apartments 196 2.2% 196 2.2% Post Ridge Apartments 98 3.8% 98 3.8% Rivers Edge Apartments 69 1.3% 70 1.4% Village East Apartments 22 6.1% 22 6.0%
Capital Improvements The Apartments During the year ended December 31, 2004, the Partnership completed approximately $448,000 of capital improvements at the property, consisting primarily of structural and building improvements, water heater and floor covering replacements and golf cart purchases. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Arbours of Hermitage Apartments During the year ended December 31, 2004, the Partnership completed approximately $245,000 of capital improvements at the property, consisting primarily of parking area upgrade, roof replacement, major landscaping, structural improvements, and floor covering replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Briar Bay Racquet Club Apartments During the year ended December 31, 2004, the Partnership completed approximately $53,000 of capital improvements at the property consisting primarily of structural improvements and floor covering replacements. These improvements were funded from operating cash flow. This property was sold October 29, 2004. Belmont Place Apartments During 2003, the General Partner determined that Belmont Place Apartments suffered from severe structural defects in the building's foundation and as such, demolished the property. The General Partner has designed and approved a redevelopment plan for the property. Site work on the redevelopment began during the fourth quarter of 2003. The Partnership has entered into a construction contract with Casden Builders, Inc. (a related party) to develop the new Belmont Place Apartments at an estimated cost of approximately $26.9 million. The construction contract provides for the payment of the cost of the work plus a fee without a maximum guaranteed price. Construction is expected to be completed in 2005 at a total project cost of approximately $31.6 million. The Partnership has funded these construction expenditures from operating cash flows, proceeds from a cross collateralized loan, partnership reserves, loans from an affiliate of the General Partner and sales proceeds. During 2004, approximately $19,762,000 of construction costs were incurred. These expenditures included capitalized construction period interest of approximately $299,000, capitalized property tax expense of approximately $136,000 and capitalized construction period operating costs of approximately $105,000. The Partnership anticipates additional construction costs of approximately $11.8 million during 2005 which will be funded by, among other things, additional loans from the General Partner. Citadel Apartments During the year ended December 31, 2004, the Partnership completed approximately $55,000 of capital improvements at the property, consisting primarily of water heater, air conditioning unit, floor covering and appliance replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Citadel Village Apartments During the year ended December 31, 2004, the Partnership completed approximately $555,000 of capital improvements at the property, consisting primarily of casualty repairs from a fire, building improvements, swimming pool and fencing upgrades, major landscaping, parking lot resurfacing, and appliance and floor covering replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Foothill Place Apartments During the year ended December 31, 2004, the Partnership completed approximately $793,000 of capital improvements at the property, consisting primarily of floor covering, countertop, water heater and appliance replacements, plumbing fixture replacements, structural improvements, air conditioning upgrades and major landscaping. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Knollwood Apartments During the year ended December 31, 2004, the Partnership completed approximately $233,000 of capital improvements at the property, consisting primarily of roof replacements, and floor covering and appliance replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Lake Forest Apartments During the year ended December 31, 2004, the Partnership completed approximately $205,000 of capital improvements at the property, consisting primarily of water heater and air conditioning upgrades, tennis court resurfacing, structural improvements, and floor covering and appliance replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Nob Hill Villa Apartments During the year ended December 31, 2004, the Partnership completed approximately $215,000 of capital improvements at the property consisting primarily of appliance and floor covering replacements, water heater replacements, and plumbing fixtures. These improvements were funded from replacement reserves and operating cash flow. The property was sold October 29, 2004. Point West Apartments During the year ended December 31, 2004, the Partnership completed approximately $3,000 of capital improvements at Point West Apartments consisting primarily of floor covering replacements. These improvements were funded from operating cash flow. The property was sold on March 31, 2004. Post Ridge Apartments During the year ended December 31, 2004, the Partnership completed approximately $216,000 of capital improvements at the property, consisting primarily of floor covering and appliance replacements, structural improvements, and roof repairs. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Rivers Edge Apartments During the year ended December 31, 2004, the Partnership completed approximately $63,000 of capital improvements at the property, consisting primarily of floor covering and appliance replacements and structural improvements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Village East Apartments During the year ended December 31, 2004, the Partnership completed approximately $224,000 of capital improvements at the property, consisting primarily of structural improvements, plumbing fixture replacement, and floor covering and appliance replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. Item 3. 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that 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 that 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 sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 at least one round of tender offers 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 provided 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. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. On March 21, 2005, the Court of Appeals issued opinions in both pending appeals. With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial court's order and remanded to the trial court for further findings on the basis that the "state of the record is insufficient to permit meaningful appellate review". With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. 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. As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both affiliates of the General Partner, are defendants in an action in the United States District Court, District of Columbia. The plaintiffs have styled their complaint as a collective action under the Fair Labor Standards Act ("FLSA") and seek to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, plaintiffs allege AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Discovery relating to the certification of the collective action has concluded and briefing on the matter is underway. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders The unit holders of the Partnership did not vote on any matter during the quarter ended December 31, 2004. PART II Item 5. Market for the Registrant's Units of Limited Partnership and Related Security Holder Matters (A) No established trading market for the Partnership's Units exists, nor is one expected to develop. (B) Title of Class Number of Unitholders of Record Limited Partnership Units 5,925 as of December 31, 2004 There were 342,773 Units outstanding at December 31, 2004, of which affiliates of the General Partner owned 222,900 Units or approximately 65.03%. The following table sets forth the distributions declared by the Partnership for the years ended December 31, 2004, 2003 and 2002 (in thousands except per unit data) (see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for more details):
Per Per Per Year Ended Limited Year Ended Limited Year Ended Limited December 31, Partnership December 31, Partnership December 31, Partnership 2004 Unit 2003 Unit 2002 Unit Operations $ -- $ -- $1,827 $ 5.12 $5,515 $15.45 Refinance (1) -- -- -- -- 76 0.21 Sale (2) -- -- 3,743 10.50 -- -- $ -- $ -- $5,570 $15.62 $5,591 $15.66
(1) From refinance proceeds of Post Ridge Apartments distributed in 2002. (2) From sale proceeds of Southport Apartments distributed in 2003. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $7,000, $9,000 and $29,000 was distributed to the general partner of the majority owned sub-tier limited partnerships during the years ended December 31, 2004, 2003, and 2002, respectively. Future cash distributions will depend on the levels of net cash generated from operations and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in the year 2005 or subsequent periods. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information relating to anticipated capital expenditures at the properties. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 222,900 limited partnership units (the "Units") in the Partnership representing 65.03% of the outstanding Units at December 31, 2004. 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 in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 65.03% of the outstanding Units, AIMCO and its affiliates are in a position to control all 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. Item 6. Selected Financial Data The following table sets forth a summary of certain financial data for the Partnership. Certain 2000, 2001, 2002 and 2003 amounts have been restated due to property sales to conform to the 2004 presentation in accordance with accounting principles generally accepted in the United States. This summary should be read in conjunction with the Partnership's consolidated financial statements and notes thereto appearing in "Item 8. Financial Statements and Supplementary Data."
Years Ended December 31, (in thousands, except per unit data) Consolidated Statements of Operations 2004 2003 2002 2001 2000 (Restated) (Restated) (Restated) (Restated) Total revenues $18,453 $17,836 $20,445 $ 21,704 $ 21,276 Total expenses (16,923) (16,475) (17,791) (19,403) (18,220) Income from continuing operations 1,530 1,361 2,654 2,301 3,056 Gain on sales of discontinued operations 29,281 6,232 -- -- 3,440 Income from discontinued operations 113 607 1,610 1,857 1,978 Net income $30,924 $ 8,200 $ 4,264 $ 4,158 $ 8,474 Per Limited Partnership Unit: Income from continuing operations $ 4.28 $ 3.82 $ 7.43 $ 6.45 $ 8.56 Gain on sales of discontinued operations 82.01 17.45 -- -- 9.63 Income from discontinued operations 0.32 1.70 4.51 5.20 5.54 Net income $ 86.61 $ 22.97 $ 11.94 $ 11.65 $ 23.73 Distributions per Limited Partnership Unit $ -- $ 15.62 $ 15.66 $ 25.59 $ 31.32 Limited Partnership Units outstanding 342,773 342,773 342,773 342,773 342,773 Consolidated Balance Sheets Total assets $49,619 $30,775 $ 32,287 $ 34,180 $ 38,870 Mortgage notes payable $53,520 $67,900 $ 72,630 $ 73,475 $ 71,791
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The operations of the Partnership primarily include operating and holding income-producing real estate properties for the benefit of its partners. Therefore, the following discussion of operations, liquidity and capital resources will focus on these activities and should be read in conjunction with "Item 8. Financial Statements and Supplementary Data" and the notes related thereto included elsewhere in this report. The Partnership's financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in 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, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership's financial results. RESULTS OF OPERATIONS The Partnership's net income was approximately $30,924,000 for the year ended December 31, 2004, compared to approximately $8,200,000 and $4,264,000 for the years ended December 31, 2003 and 2002, respectively. The increase in net income was primarily due to the increase in gain on sale of discontinued operations. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the accompanying consolidated statements of operations have been restated as of January 1, 2002 to reflect the operations of South Port Apartments, Point West Apartments, Nob Hill Apartments and Briar Bay Apartments as income from discontinued operations due to their sales in March 2003, March 2004, and October 2004, respectively. On March 28, 2003, the Partnership sold South Port Apartments to a 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 $6,232,000 for the year ended December 31, 2003, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $8,000 and $497,000, for the years ended December 31, 2003 and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $327,000 and $1,571,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $13,000 for the year ended December 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. On March 31, 2004, the Partnership sold Point West Apartments to a third party, for a gross sale price of $3,900,000. The net proceeds realized by the Partnership were approximately $3,794,000 after payment of closing costs of approximately $106,000. The Partnership used approximately $2,204,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $3,210,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, losses of approximately $87,000 and $62,000 and income of approximately $44,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $189,000, $811,000 and $822,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $48,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third party, for a gross sale price of $10,700,000. The net proceeds realized by the Partnership were approximately $10,519,000 after payment of closing costs of approximately $181,000. The Partnership used approximately $6,328,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $7,962,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, a loss of approximately $108,000 and income of approximately $24,000 and $273,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $2,071,000, $2,642,000 and $2,702,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $23,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party, for a gross sale price of $20,352,000. The net proceeds realized by the Partnership were approximately $19,644,000 after payment of closing costs of approximately $708,000. The Partnership used approximately $3,500,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $18,109,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $308,000, $637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively. In addition, for the year ended December 31, 2004 the Partnership recorded a loss on early extinguishment of debt of approximately $16,000 due to the write-off of unamortized loan costs, and approximately $98,000 due to pre-payment penalties paid. These amount are included in income from discontinued operations in the accompanying consolidated statements of operations. 2004 Compared to 2003 Excluding the impact of discontinued operations and the gain on sale of discontinued operations, the Partnership's income from continuing operations was approximately $1,530,000 for the year ended December 31, 2004, compared to approximately $1,361,000 for the year ended December 31, 2003. Income from continuing operations increased due to an increase in total revenues partially offset by an increase in total expenses. The increase in total revenues is due to increases in other income and casualty gains partially offset by a decrease in rental income. The increase in other income is due to increases in lease cancellation fees at Foothill Place and Lake Forest Apartments and The Apartments and in utility reimbursements at most of the investment properties partially offset by decreases in late charges at Citadel Village and Village East Apartments. The decrease in rental income is due to a decrease in occupancy at eight investment properties and a decrease in the average rental rate at three investment properties partially offset by an increase in occupancy at three investment properties, an increase in the average rental rate at seven investment properties and a decrease in bad debt expense, primarily at Citadel Village and Village East Apartments. In October 2003, Citadel Village Apartments suffered fire damage to five apartment units. Insurance proceeds of approximately $219,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $219,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In November 2003, Lake Forest Apartments suffered water damage to some of its rental units. Insurance proceeds of approximately $44,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $44,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In February 2004, The Apartments suffered damage to 180 apartment units due to an ice storm. During the year ended December 31, 2004, the Partnership received insurance proceeds of approximately $322,000, which included approximately $30,000 for emergency expenses. The Partnership recognized a casualty gain of approximately $292,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In February 2004, Knollwood Apartments suffered fire damage to some of its rental units. Insurance proceeds of approximately $46,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $46,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In March 2004, Village East Apartments suffered an electrical fire that damaged six apartment units. Insurance proceeds of approximately $77,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $77,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In January 2003, The Apartments had a fire which damaged five apartment units and a hallway. Insurance proceeds of approximately $23,000 were received during the year ended December 31, 2003. The Partnership recognized a casualty gain of approximately $23,000 during the year ended December 31, 2003 as the damaged assets were fully depreciated at the time of the casualty. Total expenses increased as a result of increases in operating and interest expenses, and loss on early extinguishment of debt (as discussed in Liquidity and Capital Resources) partially offset by decreases in general and administrative and depreciation expenses. Operating expense increased due to increases in advertising, property and maintenance expenses. Advertising expense increased due to increased marketing costs at Belmont Place Apartments as the construction nears completion. Property expense increased due to an increase in payroll and related expenses at all of the investment properties, partially offset by a decrease in utilities at Belmont Place Apartments which was not operational during 2004. Maintenance expense increased due to fewer capitalized costs associated with the reconstruction of Belmont Place Apartments. Interest expense increased due to the addition of second mortgages at Citadel and Lake Forest Apartments and an increase in interest on advances due to affiliates as a result of Belmont's redevelopment project. Depreciation expense decreased due to assets becoming fully depreciated at Foothill Place Apartments and no depreciation being charged at Belmont Place Apartments during 2004 while the property was being reconstructed. General and administrative expense decreased due to a decrease in management reimbursements to the General Partner, as allowed under the Partnership Agreement, a decrease in management fees paid to the General Partner in connection with distributions made from operations and a decrease in the cost of the annual audit. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies. 2003 Compared to 2002 Income from continuing operations decreased due to a decrease in total revenues partially offset by a decrease in total expenses. The decrease in total revenues is due to decreases in rental and other income partially offset by the casualty gain recognized in 2003. The decrease in rental income is due to decreased average rental rates at eleven of the Partnership's fourteen properties, a decrease in occupancy levels at five of the investment properties and an increase in concessions at nine of the investment properties partially offset by an increase in occupancy at nine of the investment properties. The decrease in other income is due to decreases in late charges at Village East and Belmont Place Apartments and in lease cancellation fees at Foothill Place Apartments. 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 the units. During 2001, insurance proceeds of approximately $182,000 were received and a partial casualty gain of approximately $128,000 was recognized. During the year ended December 31, 2002, additional insurance proceeds of approximately $168,000 were received and additional net assets of approximately $48,000 were written off. This resulted in the Partnership recognizing a casualty gain of approximately $120,000 during the year ended December 31, 2002. This amount is included in income from discontinued operations. Total expenses decreased due to decreases in general and administrative, depreciation, interest and property tax expenses. General and administrative expense decreased due to a decrease in the management fee on distributions from operating cash flows. Depreciation expense decreased due to fixed assets becoming fully depreciated at The Apartments, Lake Forest Apartments and Foothill Place Apartments during 2003. Interest expense decreased due to the capitalization of interest at Belmont Place Apartments related to the construction project during 2003. The decrease in property tax expense is due to the increased capitalization of property taxes at Belmont Place Apartments and decreases in the assessed values of nine of the Partnership's investment properties. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2004, the Partnership had cash and cash equivalents of approximately $4,539,000 compared to approximately $1,537,000 at December 31, 2003. Cash and cash equivalents increased approximately $3,002,000 since December 31, 2003 due to approximately $2,810,000 of cash provided by operating activities and approximately $14,951,000 of cash provided by investing activities partially offset by approximately $14,759,000 of cash used in financing activities. Cash provided by investing activities consisted of proceeds from the sales of Nob Hill Villa, Briar Bay, and Point West Apartments, insurance proceeds received and net withdrawals from restricted escrows partially offset by property improvements and replacements. Cash used in financing activities consisted of repayment of the mortgages encumbering Briar Bay, Nob Hill, Point West and Belmont Place Apartments, payments of principal made on the mortgages encumbering the Partnership's investment properties, loan costs and pre-payment penalties paid and payment on advances from an affiliate of the General Partner partially offset by proceeds from second mortgages obtained on Citadel and Lake Forest Apartments and advances received from an affiliate of the General Partner. 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance. For example, 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. The Partnership regularly evaluates the capital improvement needs of the properties. Except as discussed below, the Partnership has no material commitments for property improvements and replacements however certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the properties as well as replacement reserves and cash flow generated by the properties. Capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. During 2003, the General Partner determined that Belmont Place Apartments suffered from severe structural defects in the buildings' foundation and as such, demolished the property. The General Partner has designed and approved a redevelopment plan for the property. Site work on the redevelopment began during the fourth quarter of 2003. The Partnership has entered into a construction contract with Casden Builders, Inc. (a related party) to develop the new Belmont Place Apartments at an estimated cost of approximately $26.9 million. The construction contract provides for the payment of the cost of the work plus a fee without a maximum guaranteed price. Construction is expected to be completed in 2005 at a total project cost of approximately $31.6 million. The Partnership has funded construction expenditures from operating cash flow, proceeds from a cross collateralized loan, Partnership reserves, loans from an affiliate of the General Partner and sales proceeds. During the year ended December 31, 2004, approximately $19,762,000 of construction costs were incurred. During the years ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest costs of approximately $299,000, $390,000, and $107,000, tax and insurance expenses of approximately $136,000, $226,000, and $31,000, and other construction period operating expenses of approximately $105,000, $351,000, and $65,000, respectively. The Partnership anticipates additional construction costs of approximately $11.8 million during 2005 which will be funded by, among other things, additional loans from the General Partner. As part of the redevelopment, during the year ended December 31, 2004, an affiliate of the General Partner advanced the Partnership approximately $5,600,000 to repay the mortgage and associated accrued interest encumbering Belmont Place Apartments. The loan was scheduled to mature in December 2005. In addition to repaying the mortgage of approximately $5,400,000, the Partnership paid prepayment penalties of approximately $170,000 and wrote off unamortized loan costs of approximately $109,000, which is shown as loss on early extinguishment of debt on the accompanying consolidated statements of operations. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering the Partnership's investment properties of approximately $53,520,000 matures at various dates between 2005 and 2022 with balloon payments of approximately $27,130,000, $3,810,000 $9,003,000 and $173,000 due in 2005, 2007, 2014 and 2022, respectively. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If a property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest Apartments in the amount of $2,500,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $83,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Lake Forest Apartments. The modification of terms consisted of an interest rate of 7.43%, a payment of approximately $44,000 due on July 1, 2004 and monthly payments of approximately $42,000, commencing August 1, 2004 through the maturity of July 1, 2014, at which time a balloon payment of approximately $5,255,000 is due. The previous terms consisted of monthly payments of approximately $51,000 with a stated interest rate of 7.13% through the maturity date of October 1, 2021, at which time the loan was scheduled to be fully amortized. On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel Apartments in the amount of $1,310,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $66,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Citadel Apartments. The modification of terms consisted of an interest rate of 8.55%, a payment of approximately $38,000 due on July 1, 2004 and monthly payments of approximately $33,000, commencing August 1, 2004 through the maturity of July 1, 2014, at which time a balloon payment of approximately $3,748,000 is due. The previous terms consisted of monthly payments of approximately $40,000 with a stated interest rate of 8.25% through the maturity date of March 1, 2020, at which time the loan was scheduled to be fully amortized. On October 22, 2003, the Partnership entered into a second mortgage for Post Ridge Apartments. The second mortgage is in the principal amount of $375,000 and has a stated interest rate of 7.04% per annum. Payments of principal and interest of approximately $3,000 are due on the first day of each month commencing December 2003 until January 2022 at which time a balloon payment of approximately $173,000 is required. The proceeds from the second mortgage were used as a cross collateralized loan to Belmont Place Apartments to establish a capital escrow reserve as required by the mortgage lender. Belmont Place Apartments used these proceeds to fund the construction project at the property. The Partnership declared the following distributions during the years ended December 31, 2004, 2003 and 2002 (in thousands except per unit data):
Per Per Per Year Ended Limited Year Ended Limited Year Ended Limited December 31, Partnership December 31, Partnership December 31, Partnership 2004 Unit 2003 Unit 2002 Unit Operations $ -- $ -- $1,827 $ 5.12 $5,515 $15.45 Refinance (1) -- -- -- -- 76 0.21 Sale (2) -- -- 3,743 10.50 -- -- $ -- $ -- $5,570 $15.62 $5,591 $15.66
(1) From refinance proceeds of Post Ridge Apartments distributed in 2002. (2) From sale proceeds of Southport Apartments distributed in 2003. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $7,000, $9,000 and $29,000 was distributed to the general partner of the majority owned sub-tier limited partnerships during the years ended December 31, 2004, 2003, and 2002, respectively. Future cash distributions will depend on the levels of cash generated from operations and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit any distributions to its partners in 2005 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 222,900 limited partnership units (the "Units") in the Partnership representing 65.03% of the outstanding Units at December 31, 2004. 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 in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 65.03% of the outstanding Units, AIMCO and its affiliates are in a position to control all 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 A summary of the Partnership's significant accounting policies is included in "Note A - Organization and Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data." The General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership's operating results and financial condition. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership's accounting policies in many areas. 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, but are not limited to, 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 of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. Item 7a. Market Risk Factors 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 93% of its debt as fixed rate in nature by borrowing on a long-term basis. Based on interest rates at December 31, 2004, a 100 basis point increase or decrease in market interest rates would have no material impact on the Partnership. The following table summarizes the Partnership's fixed rate debt obligations at December 31, 2004. The interest rates represent the weighted-average rates. The fair value of the total debt obligations after discounting the scheduled loan payments to maturity, at the Partnership's incremental borrowing rate was approximately $53,520,000 at December 31, 2004.
Long-term Debt Principal amount by expected maturity: Fixed Rate Debt Average Interest Rate (in thousands) 2005 $ 27,619 7.33% 2006 538 7.64% 2007 580 7.64% 2008 626 7.64% 2009 676 7.64% Thereafter 19,671 7.64% Total $ 49,710
Item 8. Financial Statements and Supplementary Data CONSOLIDATED CAPITAL PROPERTIES IV LIST OF FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets - December 31, 2004 and 2003 Consolidated Statements of Operations - Years ended December 31, 2004, 2003 and 2002 Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2004, 2003, and 2002 Consolidated Statements of Cash Flows - Years ended December 31, 2004, 2003 and 2002 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm The Partners Consolidated Capital Properties IV We have audited the accompanying consolidated balance sheets of Consolidated Capital Properties IV as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties IV at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina March 21, 2005 CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED BALANCE SHEETS (in thousands, except unit data)
December 31, 2004 2003 Assets Cash and cash equivalents $ 4,539 $ 1,537 Receivables and deposits 1,187 1,163 Restricted escrows 426 748 Other assets 1,359 1,504 Investment properties (Notes C and F): Land 11,030 12,996 Buildings and related personal property 107,174 109,374 118,204 122,370 Less accumulated depreciation (76,096) (96,547) 42,108 25,823 $ 49,619 $ 30,775 Liabilities and Partners' Deficit Liabilities Accounts payable $ 3,704 $ 731 Tenant security deposit liabilities 306 510 Accrued property taxes 991 1,247 Other liabilities 901 1,107 Distribution payable (Note E) 715 715 Mortgage notes payable (Note C) 53,520 67,900 60,137 72,210 Partners' Deficit General partners (Note E) (5,814) (7,044) Limited partners (342,773 units issued and outstanding) (4,704) (34,391) (10,518) (41,435) $ 49,619 $ 30,775 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data)
Years Ended December 31, 2004 2003 2002 (Restated) (Restated) Revenues: Rental income $15,757 $15,850 $18,395 Other income 2,018 1,963 2,050 Casualty gains (Note H) 678 23 -- Total revenues 18,453 17,836 20,445 Expenses: Operating 8,581 7,566 7,591 General and administrative 881 1,334 1,565 Depreciation 2,130 2,654 2,978 Interest 3,935 3,788 4,105 Property taxes 1,117 1,133 1,552 Loss on early extinguishment of debt (Note G) 279 -- -- Total expenses 16,923 16,475 17,791 Income from continuing operations 1,530 1,361 2,654 Income from discontinued operations 113 607 1,610 Gain on sale of discontinued operations (Note D) 29,281 6,232 -- Net income (Note I) $30,924 $ 8,200 $ 4,264 Net income allocated to general partners (4%) $ 1,237 $ 328 $ 171 Net income allocated to limited partners (96%) 29,687 7,872 4,093 Net income $30,924 $ 8,200 $ 4,264 Per limited partnership unit: Income from continuing operations $ 4.28 $ 3.82 $ 7.43 Income from discontinued operations 0.32 1.70 4.51 Gain on sale of discontinued operations 82.01 17.45 -- Net income $ 86.61 $ 22.97 $ 11.94 Distributions per limited partnership unit $ -- $ 15.62 $ 15.66 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 343,106 $ 1 $171,553 $171,554 Partners' deficit at December 31, 2001 342,773 $ (7,064) $(35,636) $(42,700) Net income for the year ended December 31, 2002 -- 171 4,093 4,264 Distributions to partners -- (253) (5,367) (5,620) Partners' deficit at December 31, 2002 342,773 (7,146) (36,910) (44,056) Net income for the year ended December 31, 2003 -- 328 7,872 8,200 Distributions to partners -- (226) (5,353) (5,579) Partners' deficit at December 31, 2003 342,773 (7,044) (34,391) (41,435) Net income for the year ended December 31, 2004 -- 1,237 29,687 30,924 Distributions to partners -- (7) -- (7) Partners' deficit at December 31, 2004 342,773 $ (5,814) $ (4,704) $(10,518) See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2004 2003 2002 Cash flows from operating activities: Net income $30,924 $ 8,200 $ 4,264 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,523 3,293 3,770 Amortization of loan costs 145 211 208 Gain on sale of discontinued operations (29,281) (6,232) -- Casualty gains (678) (23) (120) Loss on early extinguishment of debt 464 13 -- Change in accounts: Receivables and deposits (24) 3 20 Due from affiliates -- 149 (149) Other assets (47) (279) (29) Accounts payable (505) 64 203 Tenant security deposit liabilities (204) (13) 26 (13) Accrued property taxes (256) (145) 203 Other liabilities (251) 287 (127) Net cash provided by operating activities 2,810 5,528 8,269 Cash flows from investing activities: Property improvements and replacements (20,006) (4,021) (2,565) Net proceeds from sales of discontinued operations 33,957 8,137 -- Net withdrawals from (deposits to) restricted escrows 322 (92) (12) Insurance proceeds received 678 23 168 Net cash provided by (used in) investing activities 14,951 4,047 (2,409) Cash flows from financing activities: Payments on mortgage notes payable (758) (876) (845) Repayment of mortgage notes payable (17,432) (4,229) -- Proceeds from mortgage notes payable 3,810 375 -- Loan costs and pre-payment penalties paid (417) -- -- Advances from affiliates 14,035 -- -- Payments on advances from affiliates (13,990) -- -- Distributions to partners (7) (5,435) (5,617) Net cash used in financing activities (14,759) (10,165) (6,462) Net increase (decrease) in cash and cash equivalents 3,002 (590) (602) Cash and cash equivalents at beginning of the year 1,537 2,127 2,729 Cash and cash equivalents at end of year $ 4,539 $ 1,537 $ 2,127 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Supplemental Disclosures of Cash Flow Information and Non-Cash Activities: At December 31, 2003 and 2002, distributions payable to partners were each adjusted by approximately $144,000 and $3,000 for non-cash activity, respectively. Cash paid for interest was approximately $4,942,000, $5,251,000 and $5,401,000 for the years ended December 31, 2004, 2003 and 2002, respectively. At December 31, 2004 and 2003, property improvements and replacements of approximately $3,307,000 and $243,000, respectively, were included in accounts payable. CONSOLIDATED CAPITAL PROPERTIES IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2004 Note A - Organization and Summary of Significant Accounting Policies Organization: Consolidated Capital Properties IV (the "Partnership" or "Registrant"), a California limited partnership, was formed on September 22, 1981, to operate and hold real estate properties. The general partner of the Partnership is ConCap Equities, Inc. (the "General Partner" or "CEI"), a Delaware corporation. Additionally, the General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to that date. As of December 31, 2004, the Partnership operates 10 residential properties in or near major urban areas in the United States and one residential property is nearing completion. Upon the Partnership's formation in 1981, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Management Company ("CCMC"), a California general partnership, was the non-corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the limited partners in the Partnership and in each of the Affiliated Partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of the solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership, and the conversion of CCMC from a general partner to a Special Limited Partner, thereby leaving CEI as the sole general partner of the Partnership. On November 14, 1990, CCMC was dissolved and its Special Limited Partnership interest was divided among its former partners. All of CEI's outstanding stock is owned by Insignia Properties Trust ("IPT"), which is an affiliate of AIMCO. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of Insignia acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As part of the Insignia Transaction, the Insignia affiliate also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity, and a subsidiary of Insignia acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, the Insignia affiliate exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. Basis of Presentation: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the accompanying consolidated statements of operations have been restated as of January 1, 2002 to reflect the operations of South Port Apartments, Point West Apartments, Nob Hill Apartments and Briar Bay Apartments as income from discontinued operations due to their sales in March 2003, March 2004, and October 2004, respectively. Consolidation: The consolidated financial statements include the Partnership's majority interest in a joint venture which owned South Port Apartments. The Partnership has the ability to control the major operating and financial policies of the joint venture. No minority interest has been reflected for the joint venture because minority interests are limited to the extent of their equity capital, and losses in excess of the minority interest equity capital are charged against the Partnership's interest. Should the losses reverse, the Partnership would be credited with the amount of minority interest losses previously absorbed. The other partner of this joint venture is AIMCO Properties, LP, an affiliate of the General Partner. South Port Apartments was sold in March 2003. The Partnership's consolidated financial statements also include the accounts of the Partnership, its wholly-owned partnerships, and its 99% limited partnership interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd., Concap River's Edge Associates, Ltd., Foothill Chimney Associates, L.P., and ConCap Stratford Associates, Ltd. The Partnership may remove the general partner of its 99% owned partnerships; therefore, the partnerships are deemed controlled and therefore consolidated by the Partnership. All significant interpartnership balances have been eliminated. Briar Bay Apartments was sold in October 2004. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $4,394,000 and $1,358,000 at December 31, 2004 and 2003, respectively, that are maintained by the affiliated management company on behalf of affiliated entities in a cash concentration account. Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Restricted Escrows: Tax Escrow Account: In connection with the second mortgages obtained on Citadel and Lake Forest Apartments in June 2004, the lender required the establishment of a property tax escrow account to be maintained by the mortgage lender. The Partnership was required to make initial deposits of approximately $115,000 and $136,000 for Citadel and Lake Forest Apartments, respectively, at the time the mortgages were obtained and is required to make monthly deposits of approximately $16,000 and $17,000, respectively. At December 31, 2004, the total reserve balance was approximately $353,000. Replacement Reserve Account - At the time of the refinancings of the mortgage notes payable encumbering the Arbours of Hermitage Apartments, Briar Bay Apartments, Nob Hill Villa Apartments, South Port Apartments, Belmont Place Apartments, Citadel Village Apartments, Foothill Place Apartments, Knollwood Apartments, and Village East Apartments, $507,000 of the proceeds, ranging from $191 to $325 per unit, were designated for replacement reserves. These funds were established to cover necessary repairs and replacements of existing improvements. At December 31, 2003, the total reserve balance was approximately $373,000 and had been fully utilized at December 31, 2004. In connection with the second mortgages obtained on Citadel and Lake Forest Apartments in June 2004, the lender required the establishment of a replacement reserve to be used for the funding of capital replacements throughout the loan terms. The Partnership is required to make monthly deposits of approximately $6,000 and $7,000 for Citadel and Lake Forest Apartments, respectively. At December 31, 2004, the total reserve balance was approximately $73,000. Repair Reserve Account - As part of the redevelopment of Belmont Place Apartments, the mortgage lender required a repair escrow account to be set by the Partnership. In order to fulfill this requirement, the Partnership entered into a second mortgage of approximately $375,000 on Post Ridge Apartments. The proceeds from the second mortgage were transferred to Belmont Place Apartments as a cross-collateralized loan to fund the repair escrow required by the mortgage lender. The repair escrow balance at Belmont Place Apartments was approximately $375,000 at December 31, 2003 and had been fully utilized at December 31, 2004. Investments in Real Estate: Investment properties consist of ten apartment complexes and one property under construction and are stated at cost. Acquisition fees are capitalized as a cost of real estate. The Partnership capitalizes all expenditures in excess of $250 that clearly relate to the acquisition and installation of real and personal property components. These expenditures include costs incurred to replace existing property components, costs incurred to add a material new feature to a property, and costs that increase the useful life or service potential of a property component. These capitalized costs are depreciated over the useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred. In accordance with SFAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets," the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. No adjustments for impairment of value were recorded in the years ended December 31, 2004, 2003, or 2002. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the investment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for real property over 19 years for additions after May 8, 1985 and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal property additions over 5 years. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. Deferred Costs: Loan costs of approximately $1,744,000 and $2,330,000, net of accumulated amortization of approximately $882,000 and $1,270,000, are included in other assets at December 31, 2004 and 2003, respectively. The loan costs are amortized over the terms of the related loan agreements. Amortization expense is included in interest expense and income from discontinued operations. Amortization expense is expected to be approximately $211,000 in 2005, $103,000 in 2006, $78,000 in 2007, $51,000 in 2008 and $50,000 in 2009. Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases. Amortization of these costs is included in operating expenses. Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The Partnership estimates the fair value of its long-term debt by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, fully amortizing long-term debt. The fair value of the Partnership's long term debt at the Partnership's incremental borrowing rate approximates its fair value at December 31, 2004. Allocation of Net Income and Net Loss: The Partnership Agreement provides for net income (losses) and distributions of distributable cash from operations to be allocated generally 96% to the Limited Partners and 4% to the General Partner. Net Income Per Limited Partnership Unit: Net income per Limited Partnership Unit is computed by dividing net income allocated to the Limited Partners by the number of Units outstanding. Per Unit information has been computed based on the number of Units outstanding at the beginning of each year. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. Advertising Costs: Advertising costs of approximately $909,000, $553,000 and $542,000 in 2004, 2003 and 2002, respectively, are expensed as incurred and are included in operating expense and income from discontinued operations. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassification: Certain reclassifications have been made to the 2002 and 2003 balances to conform to the 2004 presentation. Note B - Transactions with Affiliated Parties The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and for reimbursements of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the General Partner receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $1,075,000, $1,161,000 and $1,382,000 for the years ended December 31, 2004, 2003 and 2002, respectively, which is included in operating expense and income from discontinued operations. Affiliates of the General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $914,000, $955,000 and $906,000 for the years ended December 31, 2004, 2003, and 2002, respectively, which is included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the years ended December 31, 2004, 2003, and 2002 are fees related to construction management services provided by an affiliate of the General Partner of approximately $223,000, $104,000, and $55,000, respectively. The construction management service fees are calculated based on a percentage of current additions to investment properties. The first three quarters of 2002 were based on estimated amounts and in the fourth quarter of 2002 the reimbursements were adjusted by $111,000 to actual costs. This amount was refunded to the Partnership in 2003. The adjustment to management reimbursements was included in general and administrative expense. In accordance with the Partnership Agreement, an affiliate of the General Partner advanced the Partnership approximately $14,035,000 during the year ended December 31, 2004 to assist with the construction of Belmont Place Apartments and to repay the mortgage encumbering the property (see Note G). During the same period, the Partnership repaid approximately $14,105,000, which included approximately $115,000 of interest. There were no such advances or repayments during the years ended December 31, 2003 or 2002. Interest on advances is charged at prime plus 2% or 7.25% at December 31, 2004. Interest expense was approximately $115,000 for the year ended December 31, 2004. There was no interest expense for the years ended December 31, 2003 and 2002. At December 31, 2004, the Partnership owed approximately $45,000 for advances and accrued interest, which is included in other liabilities. Subsequent to December 31, 2004, an affiliate of the General Partner advanced the Partnership approximately $3,005,000 to assist in the construction of Belmont Place Apartments and to pay redevelopment costs at Foothill Place Apartments. The Partnership has repaid approximately $338,000 in principal and interest on these loans. 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. Affiliates of the General Partner were paid approximately $158,000 and $477,000 under this provision of the Partnership Agreement during the years ended December 31, 2003 and 2002, respectively. There were no such special management fees paid or earned during the year ended December 31, 2004. For acting as a real estate broker in connection with the sale of South Port Apartments in March 2003, the General Partner was paid a real estate commission of approximately $295,000 during the year ended December 31, 2003. For acting as real estate broker in connection with the sale of Stratford Place Apartments in December 2000, a real estate commission of approximately $228,000 was accrued in December 2000 and paid to the General Partner during the year ended December 31, 2001. For acting as real estate broker in connection with the sale of Overlook Apartments in December 1999, the General Partner was paid a real estate commission of approximately $40,000 during the year ended December 31, 2000. When the Partnership terminates, the General Partner will have to return these commissions 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 the years ended December 31, 2004, 2003, and 2002, respectively, the Partnership paid AIMCO and its affiliates approximately $377,000, $350,000 and $423,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 222,900 limited partnership units (the "Units") in the Partnership representing 65.03% of the outstanding Units at December 31, 2004. 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 in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 65.03% of the outstanding Units, AIMCO and its affiliates are in a position to control all 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. Note C - Mortgage Notes Payable The principle terms of mortgage notes payable are as follows:
Principal Principal Monthly Principal Balance At Balance At Payment Stated Balance December 31, December 31, Including Interest Maturity Due At Property 2004 2003 Interest Rate Date Maturity (in thousands) (in thousands) The Apartments $ 4,235 $ 4,367 $ 41 8.37% (f) 03/20 $ -- Arbours of Hermitage Apartments 5,650 5,650 33 (a) 6.95% (f) 12/05 5,650 Belmont Place -- 5,400 -- (b) 6.95% (f) (b) -- Apartments Briar Bay Racquet Club Apartments -- 3,500 -- (c) 6.95% (c) -- (f) Citadel Apartments 1st mortgage 4,215 4,303 33 (d) 8.55% (f) 7/14 3,748 2nd mortgage 1,310 -- 5(a)(d) (g) 7/07 1,310 Citadel Village 2,450 2,450 14 (a) 6.95% (f) 12/05 2,450 Apartments Foothill Place 10,100 10,100 58 (a) 6.95% (f) 12/05 10,100 Apartments Knollwood Apartments 6,780 6,780 39 (a) 6.95% (f) 12/05 6,780 Lake Forest Apartments 1st mortgage 6,027 6,156 42 (d) 7.43% (f) 7/14 5,255 2nd mortgage 2,500 -- 17(a)(d) (g) 7/07 2,500 Nob Hill Villa -- 6,476 -- (c) 9.20% (f) (c) -- Apartments Point West Apartments -- 2,221 -- (c) 7.86% (f) (c) -- Post Ridge Apartments 1st mortgage 4,152 4,279 34 6.63% (f) 01/22 -- 2nd mortgage 369 375 3 (e) 7.04% (f) 01/22 173 Rivers Edge Apartments 3,582 3,693 33 7.82% (f) 09/20 -- Village East Apartments 2,150 2,150 12 (a) 6.95% (f) 12/05 2,150 Total $53,520 $67,900 $ 364 $40,116
(a) Monthly payments of interest only at the stated rate until maturity. (b) Mortgage was repaid in September 2004 (see Note G). (c) Property was sold during 2004 (see Note D). (d) The first mortgage was modified and the second mortgage was obtained in June 2004 (see below for further explanation). (e) Debt was obtained October 22, 2003 (see below for further explanation). (f) Fixed rate mortgage. (g) Interest rate is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). The notes payable represent borrowings on the properties purchased by the Partnership. The notes are non-recourse, and are collateralized by deeds of trust on the investment properties. The notes mature between 2005 and 2022 with balloon payments of approximately $27,130,000, $3,810,000, $9,003,000 and $173,000 due in 2005, 2007, 2014 and 2022, respectively, and bear interest at rates ranging from 5.42% to 9.20%. Various mortgages require prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. On October 22, 2003, the Partnership entered into a second mortgage for Post Ridge Apartments. The second mortgage is in the principal amount of $375,000 and has a stated interest rate of 7.04% per annum. Payments of principal and interest of approximately $3,000 are due on the first day of each month commencing December 2003 until January 2022 at which time a balloon payment of approximately $173,000 is required. The proceeds from the second mortgage were used as a cross collateralized loan to Belmont Place Apartments to establish a capital escrow reserve as required by the mortgage lender. Belmont Place Apartments used these proceeds to fund the construction project of the property (See Note G - Redevelopment of Belmont Place). On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest Apartments in the amount of $2,500,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $83,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Lake Forest Apartments. The modification of terms consisted of an interest rate of 7.43%, a payment of approximately $44,000 due on July 1, 2004 and monthly payments of approximately $42,000 commencing August 1, 2004 through the maturity of July 1, 2014, at which time a balloon payment of approximately $5,255,000 is due. The previous terms consisted of monthly payments of approximately $51,000 with a stated interest rate of 7.13% through the maturity date of October 1, 2021, at which time the loan was scheduled to be fully amortized. On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel Apartments in the amount of $1,310,000. The second mortgage requires monthly payments of interest beginning August 1, 2004 until the loan matures July 1, 2007. Interest is variable and is equal to the one month LIBOR rate plus 300 basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on the financing were approximately $66,000. In connection with the new financing, the Partnership agreed to certain modifications on the existing mortgage loan encumbering Citadel Apartments. The modification of terms consisted of an interest rate of 8.55%, a payment of approximately $38,000 due on July 1, 2004 through the maturity date of July 1, 2014, at which time a balloon payment of approximately $3,748,000 is due. The previous terms consisted of monthly payments of approximately $40,000 with a stated interest rate of 8.25% through the maturity date of March 1, 2020, at which time the loan was scheduled to be fully amortized. Future annual principal payments required under the terms of the mortgage notes payable subsequent to December 31, 2004, are as follows (in thousands): 2005 $27,619 2006 538 2007 4,390 2008 626 2009 676 Thereafter 19,671 Total $53,520 Note D - Disposition of Investment Properties On March 28, 2003, the Partnership sold South Port Apartments to a 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 $6,232,000 for the year ended December 31, 2003, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $8,000 and $497,000, for the years ended December 31, 2003 and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $327,000 and $1,571,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $13,000 for the year ended December 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. On March 31, 2004, the Partnership sold Point West Apartments to a third party, for a gross sale price of $3,900,000. The net proceeds realized by the Partnership were approximately $3,794,000 after payment of closing costs of approximately $106,000. The Partnership used approximately $2,204,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $3,210,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, losses of approximately $87,000 and $62,000 and income of approximately $44,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $189,000, $811,000 and $822,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $48,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third party, for a gross sale price of $10,700,000. The net proceeds realized by the Partnership were approximately $10,519,000 after payment of closing costs of approximately $181,000. The Partnership used approximately $6,328,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $7,962,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, a loss of approximately $108,000 and income of approximately $24,000 and $273,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $2,071,000, $2,642,000 and $2,702,000, respectively. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $23,000 for the year ended December 31, 2004 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. On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party, for a gross sale price of $20,352,000. The net proceeds realized by the Partnership were approximately $19,644,000 after payment of closing costs of approximately $708,000. The Partnership used approximately $3,500,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $18,109,000 for the year ended December 31, 2004, as a result of this sale. This amount is shown as gain on sale of discontinued operations in the accompanying consolidated statements of operations. The property's operations, income of approximately $308,000, $637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002, respectively, are included in income from discontinued operations and include revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively. In addition, for the year ended December 31, 2004 the Partnership recorded a loss on early extinguishment of debt of approximately $16,000 due to the write-off of unamortized loan costs, and approximately $98,000 due to pre-payment penalties paid. These amount are included in income from discontinued operations in the accompanying consolidated statements of operations. Note E - Distributions In conjunction with the transfer of funds from certain majority-owned sub-tier limited partnerships to the Partnership, approximately $7,000 was distributed to the general partner of the majority owned sub-tier limited partnership during the year ended December 31, 2004. During 2003, the Partnership declared distributions of approximately $5,570,000 (approximately $5,353,000 to the limited partners or $15.62 per limited partnership unit) consisting of approximately $1,827,000 (approximately $1,754,000 or $5.12 per limited partnership unit) from operations and approximately $3,743,000 (approximately $3,599,000 or $10.50 per limited partnership unit) from the sales proceeds of South Port Apartments, which sold in March of 2003. Approximately $144,000 of these distributions from proceeds is payable at December 31, 2004 to the General Partner and special limited partners as this portion is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus cash. In conjunction with the transfer of funds from their certain majority owned sub-tier limited partnerships to the Partnership, approximately $9,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. During 2002, the Partnership declared distributions of approximately $5,591,000 (approximately $5,367,000 to the limited partners or $15.66 per limited partnership unit) consisting of approximately $5,515,000 (approximately $5,294,000 or $15.45 per limited partnership unit) from operations and approximately $76,000 (approximately $73,000 to the limited partners or $0.21 per limited partnership unit) of refinancing proceeds from Post Ridge Apartments. Approximately $3,000 of these distributions from proceeds is payable at December 31, 2004 to the General Partner and special limited partners as this portion is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus cash. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $29,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. In years prior to 2002, the Partnership distributed various amounts from the proceeds of property sales and refinancings. At December 31, 2004, approximately $568,000 of these distributions from proceeds is payable to the General Partner and special limited partners as this distribution is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus funds. Note F - Investment Properties and Accumulated Depreciation Initial Cost To Partnership (in thousands)
Buildings Net Cost and Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) The Apartments $ 4,235 $ 438 $ 6,218 $ 3,095 Arbours of Hermitage Apartments 5,650 547 8,574 6,327 Belmont Place Apartments -- 659 7,188 15,838 Citadel Apartments 5,525 695 5,619 1,981 Citadel Village Apartments 2,450 337 3,334 1,567 Foothill Place Apartments 10,100 3,492 9,435 5,145 Knollwood Apartments 6,780 345 7,065 5,589 Lake Forest Apartments 8,527 692 5,811 3,886 Post Ridge Apartments 4,521 143 2,498 3,319 Rivers Edge Apartments 3,582 512 2,160 1,136 Village East Apartments 2,150 184 2,236 2,139 Totals $53,520 $ 8,044 $60,138 $50,022
Gross Amount At Which Carried At December 31, 2004 (in thousands)
Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construct- Acquired Life-Years (in thousands) ion The Apartments $ 438 $ 9,313 $ 9,751 $ 8,246 1973 04/84 5-30 Arbours of Hermitage Apartments 547 14,901 15,448 12,715 1973 09/83 5-30 Belmont Place 3,737 19,948 23,685 -- -- 08/82 5-30 Apartments Citadel Apartments 694 7,601 8,295 7,200 1973 05/83 5-30 Citadel Village 337 4,901 5,238 3,930 1974 12/82 5-30 Apartments Foothill Place 3,402 14,670 18,072 12,804 1973 08/85 5-30 Apartments Knollwood Apartments 345 12,654 12,999 11,147 1972 07/82 5-30 Lake Forest 692 9,697 10,389 8,710 1971 04/84 5-30 Apartments Post Ridge Apartments 143 5,817 5,960 4,785 1972 07/82 5-30 Rivers Edge 512 3,296 3,808 3,000 1976 04/83 5-30 Apartments Village East 183 4,376 4,559 3,559 1973 12/82 5-30 Apartments Totals $11,030 $107,174 $118,204 $ 76,096
Reconciliation of "Investment Properties and Accumulated Depreciation": Years ended December 31, 2004 2003 2002 (in thousands) Investment Properties Balance at beginning of year $122,370 $137,657 $135,208 Additions 23,070 4,264 2,565 Property dispositions - other (27,236) (19,551) (116) Balance at end of year $118,204 $122,370 $137,657 Accumulated Depreciation Balance at beginning of year $ 96,547 $110,917 $107,215 Additions charged to expense 2,523 3,293 3,770 Property dispositions - other (22,974) (17,663) (68) Balance at end of year $ 76,096 $ 96,547 $110,917 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2004, 2003 and 2002, is approximately $128,255,000, $150,401,000, and $149,635,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2004, 2003 and 2002, is approximately $84,862,000, $120,662,000 and $118,176,000, respectively. Note G - Redevelopment of Belmont Place Apartments During 2003, the General Partner determined that Belmont Place Apartments suffered from severe structural defects in the buildings' foundation and as such, demolished the property. The General Partner has designed and approved a redevelopment plan for the property. Site work on the redevelopment began during the fourth quarter of 2003. The Partnership has entered into a construction contract with Casden Builders, Inc. (a related party) to develop the new Belmont Place Apartments at an estimated cost of approximately $26.9 million. The construction contract provides for the payment of the cost of the work plus a fee without a maximum guaranteed price. Construction is expected to be completed in 2005 at a total project cost of approximately $31.6 million. The Partnership has funded construction expenditures from operating cash flow, proceeds from a cross collateralized loan, Partnership reserves, loans from an affiliate of the General Partner and sales proceeds. During the year ended December 31, 2004, approximately $19,762,000 of construction costs were incurred. During the years ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest costs of approximately $299,000, $390,000, and $107,000, tax and insurance expenses of approximately $136,000, $226,000, and $351,000, and other construction period operating expenses of approximately $105,000, $351,000, and $65,000, respectively. The Partnership anticipates additional construction costs of approximately $11.8 million during 2005 which will be funded by, among other things, additional loans from the General Partner. As part of the redevelopment, during the year ended December 31, 2004, an affiliate of the General Partner advanced the Partnership approximately $5,600,000 to repay the mortgage and associated accrued interest encumbering Belmont Place Apartments. The loan was scheduled to mature in December 2005. In addition to repaying the mortgage of approximately $5,400,000, the Partnership paid prepayment penalties of approximately $170,000 and wrote off unamortized loan costs of approximately $109,000, which is shown as loss on early extinguishment of debt on the accompanying consolidated statements of operations. Note H - Casualty Events In October 2003, Citadel Village Apartments suffered fire damage to five apartment units. Insurance proceeds of approximately $219,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $219,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of casualty. In November 2003, Lake Forest Apartments suffered water damage to some of its rental units. Insurance proceeds of approximately $44,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $44,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In February 2004, The Apartments suffered damage to 180 apartment units due to an ice storm. During the year ended December 31, 2004, the Partnership received insurance proceeds of approximately $322,000, which included approximately $30,000 for emergency expenses. The Partnership recognized a casualty gain of approximately $292,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In February 2004, Knollwood Apartments suffered fire damage to some of its rental units. Insurance proceeds of approximately $46,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $46,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In March 2004, Village East Apartments suffered an electrical fire that damaged six apartment units. Insurance proceeds of approximately $77,000 were received during the year ended December 31, 2004. The Partnership recognized a casualty gain of approximately $77,000 during the year ended December 31, 2004 as the damaged assets were fully depreciated at the time of the casualty. In January 2003, The Apartments had a fire which damaged five apartment units and a hallway. Insurance proceeds of approximately $23,000 were received during the year ended December 31, 2003. The Partnership recognized a casualty gain of approximately $23,000 during the year ended December 31, 2003 as the damaged assets were fully depreciated at the time of the casualty. 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 the units. During 2001, insurance proceeds of approximately $182,000 were received and a partial casualty gain of approximately $128,000 was recognized. During the year ended December 31, 2002, additional insurance proceeds of approximately $168,000 were received and additional net assets of approximately $48,000 were written off. This resulted in the Partnership recognizing a casualty gain of approximately $120,000 during the year ended December 31, 2002. This amount is included in income from discontinued operations. Note I - Income Taxes The Partnership is classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation between net income as reported in the consolidated financial statements and Federal taxable income allocated to the partners in the Partnership's information return for the years ended December 31, 2004, 2003 and 2002 (in thousands, except per unit data): 2004 2003 2002 Net income as reported $30,924 $ 8,200 $ 4,264 (Deduct) add: Deferred revenue and other liabilities (162) (2) 150 Depreciation differences (32) 56 130 Accrued expenses (74) (7) (35) Minority interest -- -- (305) Other (204) 274 (283) Gain on casualty/ disposition/foreclosure (1,513) (1,720) (119) Federal taxable income $28,939 $ 6,801 $ 3,802 Federal taxable income per Limited Partnership unit $ 81.05 $ 20.55 $ 10.65 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets (in thousands): Net liabilities as reported $(10,518) Land and buildings 10,051 Accumulated depreciation (8,766) Syndication fees 18,871 Other 6,288 Net assets - Federal tax basis $ 15,866 Note J - Contingencies 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that 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 that 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 sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 at least one round of tender offers 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 provided 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. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. On March 21, 2005, the Court of Appeals issued opinions in both pending appeals. With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial court's order and remanded to the trial court for further findings on the basis that the "state of the record is insufficient to permit meaningful appellate review". With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. 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. As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both affiliates of the General Partner, are defendants in an action in the United States District Court, District of Columbia. The plaintiffs have styled their complaint as a collective action under the Fair Labor Standards Act ("FLSA") and seek to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, plaintiffs allege AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Discovery relating to the certification of the collective action has concluded and briefing on the matter is underway. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. Environmental Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership and operation of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties. Mold The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the General Partner have implemented a national policy and procedures to prevent or eliminate mold from its properties and the General Partner believes that these measures will eliminate, or at least minimize, the effects that mold could have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership's consolidated financial condition or results of operations. SEC Investigation As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission (the "SEC") is conducting a formal investigation relating to certain matters. Although the staff of the SEC is not limited in the areas that it may investigate, AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, capitalization of payroll and certain other costs, and tax credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict when the matter will be resolved. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. Note K - Selected Quarterly Financial Data (unaudited) The following is a summary of the unaudited quarterly results of operations for the Partnership (in thousands, except per unit data):
2004 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total (Restated) (Restated) Total revenues $ 4,382 $ 4,716 $ 4,656 $ 4,699 $ 18,453 Total expenses (3,863) (4,048) (4,527) (4,485) (16,923) Income from continuing operations 519 668 129 214 1,530 Discontinued operations 148 81 205 (321) 113 Gain on sale of discontinued operations 3,141 -- -- 26,140 29,281 Net income $ 3,808 $ 749 $ 334 $ 26,033 $ 30,924 Per limited partnership unit: Income from continuing operations $ 1.46 $ 1.86 $ 0.37 $ 0.59 $ 4.28 Discontinued operations 0.41 0.23 0.57 (0.89) 0.32 Gain on sale of discontinued operations 8.80 -- -- 73.21 82.01 Net income $ 10.67 $ 2.09 $ 0.94 $ 72.91 $ 86.61
2003 (restated) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Total revenues $ 4,299 $ 4,422 $ 4,704 $ 4,411 $ 17,836 Total expenses (4,293) (3,825) (4,310) (4,047) (16,475) Income from continuing operations 6 597 394 364 1,361 Discontinued operations 104 69 172 262 607 Gain on sale of discontinued operations 6,149 -- 83 -- 6,232 Net income $ 6,259 $ 666 $ 649 $ 626 $ 8,200 Per limited partnership unit: Income from continuing operations $ 0.02 $ 1.67 $ 1.10 $ 1.03 $ 3.82 Discontinued operations 0.29 0.19 0.49 0.73 1.70 Gain on sale of discontinued operations 17.22 -- 0.23 -- 17.45 Net income $ 17.53 $ 1.86 $ 1.82 $ 1.76 $ 22.97
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. Item 9A. Controls and Procedures (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of 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, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, 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 concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2004 that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Consolidated Capital Properties IV (the "Registrant" or "Partnership") has no directors or officers. ConCap Equities, Inc. ("CEI" or the "General Partner") manages and controls the Partnership and has general responsibility and authority in all matters affecting its business. The names of the directors and officers of the General Partner, their ages and the nature of all positions presently held by them are set forth below. Martha L. Long 45 Director and Senior Vice President Harry G. Alcock 42 Director and Executive Vice President Miles Cortez 61 Executive Vice President, General Counsel and Secretary Patti K. Fielding 41 Executive Vice President Paul J. McAuliffe 48 Executive Vice President and Chief Financial Officer Thomas M. Herzog 42 Senior Vice President and Chief Accounting Officer Stephen B. Waters 43 Vice President Martha L. Long has been a Director and Senior Vice President of the General Partner since February 2004. Ms. Long has been with AIMCO since October 1998 and has served in various capacities. From 1998 to 2001, Ms. Long served as Senior Vice President and Controller of AIMCO and the General Partner. During 2002 and 2003, Ms. Long served as Senior Vice President of Continuous Improvement for AIMCO. Harry G. Alcock was appointed as a Director of the General Partner in October 2004 and was appointed Executive Vice President of the General Partner in February 2004 and has been Executive Vice President and Chief Investment Officer of AIMCO since October 1999. Prior to October 1999 Mr. Alcock served as a Vice President of AIMCO from July 1996 to October 1997, when he was promoted to Senior Vice President Acquisitions where he served until October 1999. Mr. Alcock has had responsibility for acquisition and financing activities of AIMCO since July 1994. Miles Cortez was appointed Executive Vice President, General Counsel and Secretary of the General Partner in February 2004 and of AIMCO in August 2001. Prior to joining AIMCO, Mr. Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver law firm, from December 1997 through September 2001. Patti K. Fielding was appointed Executive Vice President - Securities and Debt of the General Partner in February 2004 and of AIMCO in February 2003. Ms. Fielding was appointed Treasurer of AIMCO in January 2005. Ms. Fielding is responsible for debt financing and the treasury department. Ms. Fielding previously served as Senior Vice President - Securities and Debt of AIMCO from January 2000 to February 2003. Ms. Fielding joined AIMCO in February 1997 as a Vice President. Paul J. McAuliffe has been Executive Vice President and Chief Financial Officer of the General Partner since April 2002. Mr. McAuliffe has served as Executive Vice President of AIMCO since February 1999 and was appointed Chief Financial Officer of AIMCO in October 1999. From May 1996 until he joined AIMCO, Mr. McAuliffe was Senior Managing Director of Secured Capital Corp. Thomas M. Herzog was appointed Senior Vice President and Chief Accounting Officer of the General Partner in February 2004 and of AIMCO in January 2004. Prior to joining AIMCO in January 2004, Mr. Herzog was at GE Real Estate, serving as Chief Accounting Officer & Global Controller from April 2002 to January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior to joining GE Real Estate, Mr. Herzog was at Deloitte & Touche LLP from 1990 until 2000. Stephen B. Waters was appointed Vice President of the General Partner in April 2004. Mr. Waters previously served as a Director of Real Estate Accounting since joining AIMCO in September 1999. Mr. Waters has responsibilities for real estate and partnership accounting with AIMCO. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that Martha L. Long meets the requirement of an "audit committee financial expert". The directors and officers of the General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing. Item 11. Executive Compensation Neither the directors nor officers of the General Partner received any remuneration from the Partnership during the year ended December 31, 2004. Item 12. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as provided below, as of December 31, 2004, no person or group was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership: Entity Number of Units Percentage AIMCO IPLP, L.P. 67,033.5 19.55% (an affiliate of AIMCO) IPLP Acquisition I, LLC 29,612.5 8.64% (an affiliate of AIMCO) AIMCO Properties, L.P. 126,254.0 36.84% (an affiliate of AIMCO) AIMCO IPLP, L.P. and IPLP Acquisition I, LLC are indirectly, ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29602. AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237. (b) Beneficial Owners of Management Neither CEI nor any of the directors or officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of December 31, 2004, the following persons were known to CEI to be the beneficial owners of more than five percent (5%) of its common stock: Number of Percent Name and Address CEI Shares Of Total Insignia Properties Trust ("IPT") 100,000 100% 55 Beattie Place, Greenville, SC 29602 Effective February 26, 1999, IPT was merged with and into AIMCO. As of December 31, 2004, AIMCO owns 51% of the outstanding common shares of beneficial interest of IPT. Item 13. Certain Relationships and Related Transactions The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and for reimbursements of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the General Partner receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $1,075,000, $1,161,000 and $1,382,000 for the years ended December 31, 2004, 2003 and 2002, respectively, which is included in operating expense and income from discontinued operations. Affiliates of the General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $914,000, $955,000 and $906,000 for the years ended December 31, 2004, 2003, and 2002, respectively, which is included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the years ended December 31, 2004, 2003, and 2002 are fees related to construction management services provided by an affiliate of the General Partner of approximately $223,000, $104,000, and $55,000, respectively. The construction management service fees are calculated based on a percentage of current additions to investment properties. The first three quarters of 2002 were based on estimated amounts and in the fourth quarter of 2002 the reimbursements were adjusted by $111,000 to actual costs. This amount was refunded to the Partnership in 2003. The adjustment to management reimbursements was included in general and administrative expense. In accordance with the Partnership Agreement, an affiliate of the General Partner advanced the Partnership approximately $14,035,000 during the year ended December 31, 2004 to assist with the construction of Belmont Place Apartments and to repay the mortgage encumbering the property. During the same period, the Partnership repaid approximately $14,105,000, which included approximately $115,000 of interest. There were no such advances or repayments during the years ended December 31, 2003 or 2002. Interest on advances is charged at prime plus 2% or 7.25% at December 31, 2004. Interest expense was approximately $115,000 for the year ended December 31, 2004. There was no interest expense for the years ended December 31, 2003 and 2002. At December 31, 2004, the Partnership owed approximately $45,000 for advances and accrued interest, which is included in other liabilities. Subsequent to December 31, 2004, an affiliate of the General Partner advanced the Partnership approximately $3,005,000 to assist in the construction of Belmont Place Apartments and to pay redevelopment costs at Foothill Place Apartments. The Partnership has repaid approximately $338,000 in principal and interest on these loans. 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. Affiliates of the General Partner were paid approximately $158,000 and $477,000 under this provision of the Partnership Agreement during the years ended December 31, 2003 and 2002, respectively. There were no such special management fees paid or earned during the year ended December 31, 2004. For acting as a real estate broker in connection with the sale of South Port Apartments in March 2003, the General Partner was paid a real estate commission of approximately $295,000 during the year ended December 31, 2003. For acting as real estate broker in connection with the sale of Stratford Place Apartments in December 2000, a real estate commission of approximately $228,000 was accrued in December 2000 and paid to the General Partner during the year ended December 31, 2001. For acting as real estate broker in connection with the sale of Overlook Apartments in December 1999, the General Partner was paid a real estate commission of approximately $40,000 during the year ended December 31, 2000. When the Partnership terminates, the General Partner will have to return these commissions 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 the years ended December 31, 2004, 2003, and 2002, respectively, the Partnership paid AIMCO and its affiliates approximately $377,000, $350,000 and $423,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 222,900 limited partnership units (the "Units") in the Partnership representing 65.03% of the outstanding Units at December 31, 2004. 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 in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 65.03% of the outstanding Units, AIMCO and its affiliates are in a position to control all 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. Item 14. Principal Accounting Fees and Services The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2005. The aggregate fees billed for services rendered by Ernst & Young LLP for 2004 and 2003 are described below. Audit Fees. Fees for audit services totaled approximately $104,000 and $112,000 for 2004 and 2003, respectively. Fees for audit services also include fees for the reviews of the Partnership's Quarterly Reports on Form 10-Q. Tax Fees. Fees for tax services totaled approximately $49,000 and $69,000 for 2004 and 2003, respectively. Item 15. Exhibits and Financial Statements Schedules (a) The following documents are filed as part of this report: 1. Financial Statements Consolidated Balance Sheets - December 31, 2004 and 2003 Consolidated Statements of Operations - Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Changes in Partners' Deficit - Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Cash Flows - Years Ended December 31, 2004, 2003 and 2002 Notes to Consolidated Financial Statements 2. Schedules All schedules are omitted because either they are not required, or not applicable or the financial information is included in the financial statements or notes thereto. 3. Exhibits S-K Reference Number Document Description 3 Certificate of Limited Partnership, as amended to date. 10.62 Contracts related to refinancing of debt: (a) Deed of Trust and Security Agreement dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. (b) Promissory Note dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. (c) Assignment of leases and Rents dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. 10.63Multifamily Note dated November 30, 1995 between Briar Bay Apartments, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* 10.64Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* (mortgage for Village East) 10.65Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* (mortgage for Knollwood) 10.66Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* (mortgage for Citadel Village) 10.67Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* (mortgage for Arbour East) 10.69Multifamily Note dated November 30, 1995 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc.* 10.78Multifamily Note dated February 2, 2000 between Apartment Associates, Ltd., a Texas limited partnership and ARCS Commercial Mortgage Co., L.P., a California limited partnership. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.79Multifamily Note dated February 28, 2000 between ConCap Citadel Associated, Ltd., a Texas limited partnership and ARCs Commercial Mortgage Cl., L.P., a California corporation. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.81Multifamily Note dated August 29, 2000 between ConCap Rivers Edge Associates, Ltd., a Texas Limited Partnership, and GMAC Commercial Mortgage Corporation, a California Corporation. (Incorporated by reference to Quarterly Report on Form 10-Q for quarter ended September 30, 2000.) 10.85Multifamily Note dated September 27, 2001 between Consolidated Capital Properties IV, a California limited partnership, doing business in Nebraska as Consolidated Capital Properties IV Limited Partnership and AIMCO Properties, L.P., a Delaware limited partnership, in favor of GMAC Commercial Mortgage Corporation, a California corporation.** (mortgage for Lake Forest) 10.86Multifamily Note dated December 20, 2001 between Post Ridge Associates, Ltd., a Tennessee limited partnership, and GMAC Commercial Mortgage Corporation, a California corporation.*** 10.87Purchase and Sale Contract dated January 14, 2003 between South Port CCP IV, L.L.C., a South Carolina limited liability company, and Warren Lortie Associates, Inc., a California corporation.**** 10.88Reinstatement and First Amendment of Purchase and Sale Contract between South Port IV, L.L.C., a South Carolina limited liability company, and Warren Lortie Associates, Inc., a California corporation.**** 10.89 Form of Multifamily Note dated October 22, 2003 between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee limited partnership, and GMAC Commercial Mortgage Corporation, a California corporation.**** 10.90 Form of Replacement Reserve Agreement dated October 22, 2003 between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee limited partnership, and GMAC Commercial Mortgage Corporation, a California corporation.**** 10.91 Form of Repair Agreement dated October 22, 2003 between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee limited partnership, and GMAC Commercial Mortgage Corporation, a California corporation.**** 10.92 Form of Cross-Collateralization Agreement dated October 22, 2003 between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee limited partnership, and Federal Home Loan Mortgage Corporation, a corporation organized and existing under the laws of the United States of America.**** 10.93 Form of Cross-Collateralization Agreement dated October 22, 2003 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Federal Home Loan Mortgage Corporation, a corporation organized and existing under the laws of the United States of America.**** 10.94 Form of Debt Service Escrow Agreement dated October 22, 2003 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Federal Homes Loan Mortgage Corporation, a corporate instrumentality of the United States of America.**** 10.95 Form of Second Modification to Replacement Reserve Agreement dated October 22, 2003 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Federal Homes Loan Mortgage Corporation, a corporate instrumentality of the United States of America.**** 10.96 Purchase and Sale Contract between Point West Associates Limited Partnership, a Georgia limited partnership, as Seller and Focus Development, Inc., a Georgia corporation, as Purchaser, effective November 17, 2003. (Incorporated by reference to Form 8-K dated March 31, 2004). 10.97 First Amendment to Purchase and Sale Contract dated January 23, 2004 between Point West Associates Limited Partnership, a Georgia limited partnership, as Seller and Focus Development, Inc., a Georgia corporation, as Purchaser. (Incorporated by reference to Form 8-K dated March 31, 2004). 10.98Multifamily Note dated June 21, 2004 between Concap Citadel Associates, Ltd., a Texas limited partnership, and GMAC Commercial Mortgage Bank. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.99Replacement Reserve Agreement dated June 21, 2004 between Concap Citadel Associates, Ltd. a Texas limited partnership, and GMAC Commercial Mortgage Bank. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.100 Allonge and Amendment to Multifamily Note dated June 21, 2004 between Concap Citadel Associates, Ltd., a Texas limited partnership, and Federal Home Loan Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.101 Multifamily Note dated June 8, 2004 between Consolidated Capital Properties IV, a California limited partnership, doing business in Nebraska as Consolidated Capital Properties IV Limited Partnership and GMAC Commercial Mortgage Bank. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.102 Replacement Reserve Agreement dated June 8, 2004 between Consolidated Capital Properties IV, a California limited partnership, doing business in Nebraska as Consolidated Capital Properties IV Limited Partnership and GMAC Commercial Mortgage Bank. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.103 Allonge and Amendment to Multifamily Note dated June 8, 2004 between Consolidated Capital Properties IV, a California limited partnership, doing business in Nebraska as Consolidated Capital Properties IV Limited Partnership and Federal Home Loan Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 10.104 Purchase and Sale Contract between Briar Bay Associates, Ltd., a Texas limited partnership, as Seller, and Victoria Real Estate Management, Inc., a Florida corporation, as Purchaser, effective September 13, 2004. (Incorporated by reference to Form 8-K dated September 13, 2004). 10.105 Purchase and Sale Contract between Nob Hill Villa Apartments Associates, L.P., a Tennessee limited partnership, as Seller, and DAMA Realty Investors, LLC, a New York limited liability company, as Purchaser, effective August 18, 2004. (Incorporated by reference to Form 8-K dated October 29, 2004.) 10.106 Assignment and Assumption of Real Estate Agreement between The DAMA Realty Investors, LLC, and Nob Hill General Partnership, dated August 18, 2004. (Incorporated by reference to Form 8-K dated October 29, 2004.) 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note A of Item 8 - Financial Statements of this Form 10-K). 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *(Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1995). **(Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). ***(Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2001). ****(Incorporated by reference to the Annual Report on Form 10-K for the year ended December 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/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: March 31, 2005 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. /s/Harry G. Alcock Director and Executive Date: March 31, 2005 Harry G. Alcock Vice President /s/Martha L. Long Director and Senior Vice Date: March 31, 2005 Martha L. Long President /s/Stephen B. Waters Vice President Date: March 31, 2005 Stephen B. Waters Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this annual report on Form 10-K of Consolidated Capital Properties IV; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 31, 2005 /s/Martha L. Long Martha L. Long Senior Vice President of ConCap Equities, Inc., equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, certify that: 1. I have reviewed this annual report on Form 10-K of Consolidated Capital Properties IV; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 31, 2005 /s/Stephen B. Waters Stephen B. Waters Vice President of ConCap Equities, Inc., equivalent of the chief financial officer of the Partnership Exhibit 32.1 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 Annual Report on Form 10-K of Consolidated Capital Properties IV (the "Partnership"), for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, 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/Martha L. Long Name: Martha L. Long Date: March 31, 2005 /s/Stephen B. Waters Name: Stephen B. Waters Date: March 31, 2005 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----