10KSB 1 ccp6.txt CCP6 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) Form 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________to _________ Commission file number 0-14099 CONSOLIDATED CAPITAL PROPERTIES VI (Name of small business issuer in its charter) California 94-2940204 (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 Interest (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $1,845,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2001. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business Consolidated Capital Properties VI (the "Partnership" or "Registrant") was organized on May 23, 1984, as a limited partnership under California Uniform Limited Partnership Act. 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"). The Partnership Agreement provides that the Partnership is to terminate on December 31, 2015 unless terminated prior to such date. On December 7, 1984, the Partnership offered $50,000,000 of Limited Partnership Interest (the "Units") pursuant to a Registration Statement filed with the Securities and Exchange Commission. 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 6, 1985, with 181,808 Units sold at $250 each, or gross proceeds of approximately $45,452,000 to the Partnership. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. The Registrant is engaged in the business of operating and holding real estate properties for investment. By the end of fiscal 1987, the Partnership had acquired seven properties and a 75% interest in a joint venture with an affiliated partnership which acquired one property. The Registrant continues to own and operate one of these properties. (See "Item 2, Description of Properties".) The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Registrant's property. 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 Registrant's property 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 apartments is local. The Registrant has no employees. Management and administrative services are provided by the General Partner and by agents retained by the General Partner. Upon the Partnership's formation in 1984, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Group II ("CCG"), 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 this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement limiting changes of control of the Partnership and approved conversion of the general partner interest of the non-corporate general partner, CCG, to that of a special limited partner ("Special Limited Partner") without voting and without other rights of a limited partner except for the economic interest previously held as a general partner. Pursuant to this amendment to the Partnership Agreement, the non-corporate general partner interest of CCG was converted to that of a Special Limited Partner and CEI became the sole general partner of the Partnership on December 31, 1991. Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of Insignia Financial Group, Inc. ("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 a part of the Insignia Transaction, the Insignia affiliate also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity, and 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, prohibited 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. Both the income and expenses of operating the property 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. 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 property owned by the Partnership. The Partnership monitors its property for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed, which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Item 6. Management's Discussion and Analysis or Plan of Operation" included in this Form 10-KSB. Item 2. Description of Property The following table sets forth the Partnership's investment in property: Date of Property Purchase Type of Ownership Use Colony of Springdale Apartments 02/20/87 Fee ownership subject Apartment Springdale, Ohio to first mortgage. (1) 261 units (1) Property is held by a limited partnership in which the Registrant owns a 100% interest. Schedule of Property Set forth below for the Registrant's property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Colony of Springdale $10,904 $ 5,202 5-30 yrs S/L $ 5,065
See the "Note A" included in "Item 7. Financial Statements" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness
Principal Principal Balance At Stated Balance December 31, Interest Period Maturity Due At Property 2001 Rate Amortized Date Maturity (1) (in thousands) Colony of Springdale 1st mortgage $5,336 7.79% 20 yrs 11/2019 $ --
(1) See "Item 7. Financial Statements, Note E" for information with respect to the Registrant's ability to repay this loan and other specific details about the loan. Rental Rates and Occupancy Average annual rental rate and occupancy for 2001 and 2000 for the property: Average Annual Average Annual Rental Rate Occupancy (per unit) Property 2001 2000 2001 2000 Colony of Springdale $7,366 $7,339 92% 92% As noted under "Item 1. Description of Business", the real estate industry is highly competitive. The Partnership's property is subject to competition from other residential apartment complexes in the area. The General Partner believes that the property is adequately insured. The 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. The property is in good physical condition, 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 the tax rate in 2001 for the property were: 2001 2001 Taxes Rate (in thousands) Colony of Springdale $ 131 4.68% Capital Improvements During the year ended December 31, 2001, the Partnership completed approximately $303,000 of capital improvements at the property. These improvements consisted of roof replacement, floor covering, appliance replacements, structural improvements, and air conditioning unit replacements. These improvements were funded from cash from operations and insurance proceeds. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $78,000. The capital improvements planned for 2002 at the Partnership's property will be made only to the extent of cash available from operations. 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 purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders During the quarter ended December 31, 2001, no matters were submitted to a vote of the unit holders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters The Partnership, a publicly-held limited partnership, offered and sold 181,808 limited partnership units aggregating $45,452,000. The Partnership currently has 2,657 holders of record owning an aggregate of 181,300 Units. Affiliates of the General Partner owned 88,726 units or 48.94% at December 31, 2001. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. The following table sets forth the distribution from operations declared by the Partnership for the years ended December 31, 2001 and 2000 (see "Item 6. Management's Discussion and Analysis or Plan of Operation" for further details): Distribution Per Limited Aggregate Partnership Unit (in thousands) 01/01/00 - 12/31/00 $ -- $ -- 01/01/01 - 12/31/01 534 2.83 Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of the debt maturity, refinancing, and/or sale of the property. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in 2002 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 88,726 limited partnership units ("Units") in the Partnership representing 48.94% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 48.94% of the outstanding Units, AIMCO is in a position to significantly influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Item 6. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report. Results of Operations The Partnership's net loss for the year ended December 31, 2001, was approximately $171,000 compared to a net loss of approximately $204,000 for the year ended December 31, 2000. The decrease in net loss is due to a decrease in total expenses partially offset by a slight decrease in total revenues. The decrease in total expenses resulted from a decrease in interest and property tax expenses, partially offset by an increase in operating expense. The decrease in interest expense is due to additional interest being paid during the year ended December 31, 2000, related to the refinance of the Partnership's property. The decrease in property tax expense is due to the timing of the receipt of the tax bills, which affected the recording of the related accrual. The increase in operating expense is primarily due to an increase in payroll costs and utility charges at the Partnership's property. The decrease in revenues is due to a decrease in rental income largely offset by an increase in other income and a casualty gain at the Partnership's property as discussed below. Rental income decreased as a result of an increase in concessions offered to tenants. Other income increased as a result of an increase in late charges collected, slightly offset by a decrease in interest income due to lower average cash balances in interest bearing accounts and a lower interest rate being offered on those accounts. During the year ended December 31, 2001, a casualty gain of approximately $43,000 was recognized at the Colony of Springdale Apartments. The casualty gain was related to a fire, which resulted from a lightning strike in August 2001. The gain resulted from the receipt of insurance proceeds of approximately $73,000, net of the write off of undepreciated property improvements and replacements of approximately $30,000. Included in general and administrative expenses are management reimbursements to the General Partner allowed under the Partnership Agreement. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 2001, the Partnership had cash and cash equivalents of approximately $240,000 compared to approximately $810,000 at December 31, 2000. Cash and cash equivalents decreased approximately $570,000 from December 31, 2000 due to approximately $535,000 and $230,000 of cash used in financing and investing activities, respectively, partially offset by approximately $195,000 of cash provided by operating activities. Cash used in financing activities consisted primarily of distributions to the partners, and to a lesser extent, principal payments made on the mortgage encumbering the Partnership's property and payments on advances from an affiliate partially offset by advances from an affiliate. Cash used in investing activities consisted of property improvements and replacements partially offset by insurance proceeds received. The Partnership invests its working capital reserves in interest bearing accounts. In accordance with the Partnership Agreement, an affiliate of the General Partner advanced the Partnership $158,000 to cover operating expenses at Colony of Springdale Apartments during the year ended December 31, 2001. The Partnership repaid approximately $19,000 of this advance including approximately $1,000 in accrued interest. Interest is being charged at the prime rate plus 2% and amounted to approximately $2,000. There were no loans from the General Partner or associated interest expense during the year ended December 31, 2000. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $78,000. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. The capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $5,336,000 matures in November 2019 at which time the mortgage is scheduled to be fully amortized. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2015. Accordingly, prior to such date the Partnership will need to either sell its investment property or extend the term of the Partnership. If the Partnership is unable to extend its term, the ultimate sale price of the investment property may be adversely affected. On September 16, 2000, the Partnership sought the vote of the limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partners' capital contributions less distributions. The vote was sought pursuant to a Consent Solicitation that expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership interests. During the year ended December 31, 2001, a distribution of approximately $534,000 was declared and paid (approximately $513,000 to the limited partners or $2.83 per limited partnership unit) consisting of funds from operations. A distribution of approximately $2,297,000 (approximately $2,250,000 to the limited partners or $12.41 per limited partnership unit) was accrued during December 1999 and paid in January 2000. This distribution consisted of cash from operations of approximately $1,175,000 (approximately $1,128,000 to the limited partners or $6.22 per limited partnership unit) and refinancing proceeds of approximately $1,122,000 to the limited partners ($6.19 per limited partnership unit). No distributions were declared during the year ended December 31, 2000. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of the debt maturity, refinancing and/or sale of the property. The Registrant's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit distributions to its partners during 2002 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 88,726 limited partnership units (the "Units") in the Partnership representing 48.94% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 48.94% of the outstanding Units, AIMCO is in a position to significantly influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Item 7. Financial Statements CONSOLIDATED CAPITAL PROPERTIES VI LIST OF FINANCIAL STATEMENTS Report of Ernst & Young, LLP, Independent Auditors Consolidated Balance Sheet - December 31, 2001 Consolidated Statements of Operations - Years ended December 31, 2001 and 2000 Consolidated Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 2001 and 2000 Consolidated Statements of Cash Flows - Years ended December 31, 2001 and 2000 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Properties VI We have audited the accompanying consolidated balance sheet of Consolidated Capital Properties VI as of December 31, 2001, and the related consolidated statements of operations, changes in partners' (deficit) capital, and cash flows for each of the two years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties VI at December 31, 2001, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina February 15, 2002 CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 2001
Assets Cash and cash equivalents $ 240 Receivables and deposits 55 Other assets 120 Investment property (Notes E and F): Land $ 916 Buildings and personal property 9,988 10,904 Less accumulated depreciation (5,202) 5,702 $ 6,117 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 89 Tenant security deposit liabilities 63 Accrued property taxes 122 Other liabilities 71 Due to Affiliates (Note B) 140 Mortgage note payable (Note E) 5,336 Partners' (Deficit) Capital General partner $ (2) Special limited partners (81) Limited partners (181,300 units issued and outstanding) 379 296 $ 6,117 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data)
Years Ended December 31, 2001 2000 Revenues: Rental income $ 1,602 $ 1,698 Other income 200 156 Casualty gain (Note H) 43 -- Total revenues 1,845 1,854 Expenses: Operating 867 791 General and administrative 192 201 Depreciation 434 432 Interest 421 479 Property taxes 102 155 Total expenses 2,016 2,058 Net loss (Note G) $ (171) $ (204) Net loss allocated to general partner $ -- $ -- Net loss allocated to limited partners (171) (204) $ (171) $ (204) Net loss per limited partnership unit $ (.94) $ (1.12) Distribution per limited partnership unit $ 2.83 $ -- See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (in thousands, except unit data)
Limited Special Partnership General Limited Limited Units Partner Partners Partners Total Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453 Partners' (deficit) capital at December 31, 1999 181,300 $ (1) $ (79) $ 1,285 $ 1,205 Amortization of timing difference (Note C) -- -- 9 (9) -- Net loss for the year ended December 31, 2000 -- -- -- (204) (204) Partners' (deficit) capital at December 31, 2000 181,300 (1) (70) 1,072 1,001 Amortization of timing difference (Note C) -- -- 9 (9) -- Distributions paid to partners -- (1) (20) (513) (534) Net loss for the year ended December 31, 2001 -- -- -- (171) (171) Partners' (deficit) capital at December 31, 2001 181,300 $ (2) $ (81) $ 379 $ 296 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2001 2000 Cash flows from operating activities: Net loss $ (171) $ (204) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 434 432 Amortization of loan costs 7 6 Casualty gain (43) -- Change in accounts: Receivables and deposits (34) 204 Other assets 4 10 Accounts payable 37 15 Tenant security deposit liabilities (19) 3 Accrued taxes (26) 28 Other liabilities 5 (153) Due to Affiliates 1 -- Net cash provided by operating activities 195 341 Cash flows from investing activities: Property improvements and replacements (303) (252) Insurance proceeds received 73 -- Net withdrawals from restricted escrows -- 135 Net cash used in investing activities (230) (117) Cash flows from financing activities: Payments on mortgage note payable (140) (114) Advances from affiliate 158 -- Payments on advances from affiliate (19) -- Loan costs paid -- (35) Distributions paid to partners (534) (2,297) Net cash used in financing activities (535) (2,446) Net decrease in cash and cash equivalents (570) (2,222) Cash and cash equivalents at beginning of period 810 3,032 Cash and cash equivalents at end of period $ 240 $ 810 Supplemental disclosure of cash flow information: Cash paid for interest $ 379 $ 509 Distributions to partners of approximately $2,297,000 were accrued at December 31, 1999 and paid in January 2000. See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 Note A - Organization and Summary of Significant Accounting Policies Organization: Consolidated Capital Properties VI, a California limited partnership (the "Partnership" or "Registrant"), was formed on May 23, 1984, to acquire and operate commercial and residential properties. The general partner of the Partnership is ConCap Equities, Inc. (the "General Partner" or "CEI"). The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"). The director 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, 2015 unless terminated prior to such date. The Partnership operates one apartment property located in Ohio. At the time of the Partnership's formation, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Group II ("CCG"), 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 this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership. Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of Insignia Financial Group, Inc. ("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 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, prohibited 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. Consolidation: The Partnership's financial statements include the accounts of Colony of Springdale Associates, Ltd., which holds fee title to the Colony of Springdale Apartments. The results of its operations are included in the Partnership's consolidated financial statements. All interpartnership transactions have been eliminated. Uses of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles 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. Investment Property: Investment property consists of one apartment complex and is stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of apartment properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in the years ended December 31, 2001 or 2000. See "Recent Accounting Pronouncements" below. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment property and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for real property over 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal property additions over 5 years. Cash and Cash Equivalents: Includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $234,000 at December 31, 2001 that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Loan Costs: Net loan costs of approximately $108,000 are included in other assets and are being amortized on a straight-line basis over the life of the loan. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. 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 fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Allocation of Profits, Gains and Losses: Profits, gains and losses of the Partnership are allocated between general and limited partners in accordance with the provisions of the Partnership Agreement. The Partnership Agreement, as amended, and as described more fully in "Note C", provides net income and losses to be allocated to the general partner, special limited partners and limited partners at 0.2%, 3.8% and 96%, respectively. At no time shall net losses be allocated to the special limited partners if such allocation would make the capital balance negative or make a negative balance larger. In the event that a loss is not allocated to the special limited partners, it is allocated to the limited partners. As the partnership is currently recognizing net losses and the special limited partners' capital balance is negative, net losses are allocated 0.2% to the general partner and 99.8% to the limited partners. 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. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Advertising Costs: The Partnership expenses the cost of advertising as incurred. Advertising costs of approximately $53,000 in 2001 and approximately $42,000 in 2000 were charged to expense as incurred and are included in operating expenses. Commitment: On September 16, 2000, the Partnership sought the vote of the limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partners' capital contributions less distributions. The vote was sought pursuant to a Consent Solicitation that expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership interests. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Note B - Related Party Transactions The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to the General Partner or affiliates of the General Partner during the years ended December 31, 2001 and 2000. 2001 2000 (in thousands) Property management fees (included in operating $ 96 $ 92 expenses) Reimbursement for services of affiliates (included in investment property and operating and general and administrative expenses) 172 106 Partnership management fee (included in other liabilities and general and administrative expenses) 52 -- Affiliates of the General Partner are entitled to receive 5% of gross receipts from the Partnership's property as compensation for providing property management services. The Partnership paid to such affiliates approximately $96,000 and $92,000 for the years ended December 31, 2001 and 2000, respectively. Affiliates of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $172,000 and $106,000 for the years ended December 31, 2001 and 2000, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $110,000 and $3,000 for the years ended December 31, 2001 and 2000, respectively. The construction management service fees are calculated based on a percentage of current and certain prior year additions to investment property and are being depreciated over 15 years. The Partnership Agreement also provides for a special management fee equal to 9% of the total distributions from operations made to the Limited Partners to be paid to the General Partner for executive and administration management services. The General Partner received approximately $52,000 during the year ended December 31, 2001. The General Partner received approximately $102,000 in January 2000, resulting from a distribution declared during the year ended December 31, 1999. No such fee was earned in 2000. In accordance with the Partnership Agreement, an affiliate of the General Partner advanced the Partnership $158,000 to cover operating expenses at Colony of Springdale Apartments during the year ended December 31, 2001. The Partnership repaid approximately $19,000 of this advance including approximately $1,000 in accrued interest. Interest is being charged at the prime rate plus 2% and amounted to approximately $2,000. There were no loans from the General Partner or associated interest expense during the year ended December 31, 2000. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $19,000 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 88,726 limited partnership units (the "Units") in the Partnership representing 48.94% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 48.94% of the outstanding Units, AIMCO is in a position to significantly influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Note C - Change in Status of Non-Corporate General Partner During the year ended December 31, 1991, the Partnership Agreement was amended to convert the general partner interests held by the non-corporate general partner, Consolidated Capital Group II ("CCG"), to that of special limited partners ("Special Limited Partners"). The Special Limited Partners do not have a vote and do not have any of the other rights of a Limited Partner except the right to inspect the Partnership's books and records; however, the Special Limited Partners retained the economic interest in the Partnership which they previously owned as a general partner. ConCap Equities, Inc. ("CEI") became the sole general partner of the Partnership effective December 31, 1991. In connection with CCG's conversion, a special allocation of gross income was made to the Special Limited Partners in order to eliminate their tax basis negative capital accounts. After the conversion, the various Special Limited Partners transferred portions of their interests to CEI so that CEI now holds a .2% interest in all allocable items of income, loss and distribution. The difference between the Special Limited Partner's capital accounts for financial statement and tax reporting purposes are being amortized to the Limited Partners' capital accounts as the components of the timing differences which created the balance reverse. Note D - Distributions During the year ended December 31, 2001, a distribution of approximately $534,000 was declared and paid (approximately $513,000 to the limited partners or $2.83 per limited partnership unit) consisting of funds from operations. A distribution of approximately $2,297,000 (approximately $2,250,000 to the limited partners or $12.41 per limited partnership unit) was accrued during December 1999 and paid in January 2000. This distribution consisted of cash from operations of approximately $1,175,000 (approximately $1,128,000 to the limited partners or $6.22 per limited partnership unit) and refinancing proceeds of approximately $1,122,000 to the limited partners ($6.19 per limited partnership unit). No distributions were declared during the year ended December 31, 2000. Note E - Mortgage Note Payable The principal terms of the mortgage note payable are as follows:
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 2001 Interest Rate Date Maturity (in thousands) Colony of Springdale 1st mortgage $5,336 $ 46 7.79% 11/2019 $ --
The mortgage note payable is non-recourse and secured by pledge of the apartment property and by pledge of revenues from the apartment property. The note has a prepayment penalty requirement if repaid prior to maturity. Further, the property may not be sold subject to existing indebtedness. Scheduled principal payments of the mortgage note payable subsequent to December 31, 2001 are as follows (in thousands): 2002 $ 143 2003 154 2004 167 2005 180 2006 194 Thereafter 4,498 Total $5,336 Note F - Real Estate and Accumulated Depreciation Initial Cost To Partnership (in thousands) Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrance Land Property Acquisition (in thousands) (in thousands) Colony of Springdale Springdale, Ohio $5,336 $ 909 $8,358 $1,637
Gross Amount At Which Carried At December 31, 2001 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years (in thousands) Colony of Springdale Springdale, Ohio $ 916 $ 9,988 $10,904 $ 5,202 2/20/87 5-30
Reconciliation of "Real Estate and Accumulated Depreciation" Years Ended December 31, 2001 2000 (in thousands) Investment Properties Balance at beginning of year $10,659 $10,407 Property improvements 303 252 Disposals of property (58) -- Balance at end of year $10,904 $10,659 Accumulated Depreciation Balance at beginning of year $ 4,796 $ 4,364 Additions charged to expense 434 432 Disposals of property (28) -- Balance at end of year $ 5,202 $ 4,796 The aggregate cost of the investment property for Federal income tax purposes at December 31, 2001 and 2000, is approximately $10,052,000 and $9,823,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2001 and 2000, is approximately $4,987,000 and $4,550,000, respectively. Note G - Income Taxes Taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. The following is a reconciliation of reported net loss and Federal taxable loss (in thousands, except per unit data): 2001 2000 Net loss as reported $ (171) $ (204) Add (deduct): Depreciation differences (3) (5) Unearned income 2 (2) Other (100) (112) Accruals and prepaids (12) 41 Federal taxable loss $ (284) $ (282) Federal taxable loss per limited partnership unit $(1.56) $(1.55) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net assets as reported $ 296 Land and buildings (852) Accumulated depreciation 215 Syndication costs 4,989 Other 284 Net assets - Federal tax basis $ 4,932 Note H - Casualty Event During the year ended December 31, 2001, a casualty gain of approximately $43,000 was recognized at the Colony of Springdale Apartments. The casualty gain was related to a fire, which resulted from a lightning strike in August 2001. The gain resulted from the receipt of insurance proceeds of approximately $73,000, net of the write off of undepreciated property improvements and replacements of approximately $30,000. Note I - Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Consolidated Capital Properties VI (the "Partnership" or the "Registrant") has no officers or directors. ConCap Equities, Inc. (the "General Partner" or "CEI") manages and controls the Registrant and has general responsibility and authority in all matters affecting its business. The name of the director and executive officers of the General Partner, their age and the nature of all positions with CEI presently held by them are set forth below. There are no family relationships between or among any officers or directors. Name Age Position Patrick J. Foye 44 Executive Vice President and Director Martha L. Long 42 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1999. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1999. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under auditing standards generally accepted in the United States. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner has approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2001 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were audit services of approximately $36,000 and non-audit services (principally tax-related) of approximately $18,000. Item 10. Executive Compensation Neither the director nor the officers of the General Partner received any remuneration from the Registrant. Item 11. Security Ownership of Certain Beneficial Owners and Management Except as provided below, as of December 31, 2001, no person was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership. Entity Number Percent of Units of Total Insignia Properties, LP 42,480 23.43% (an affiliate of AIMCO) AIMCO Properties, LP 46,246 25.51% (an affiliate of AIMCO) Insignia Properties, L.P is indirectly ultimately owned by AIMCO. Its business address is 55 Beattie Place, Greenville, SC 29602. AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Boulevard, Denver, Colorado 80222. No director or officer of the General Partner owns any Units. As of December 31, 2001, 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 100,000 100% 55 Beattie Place Greenville, SC 29602 Insignia Properties Trust is an affiliate of AIMCO. Item 12. Certain Relationships and Related Transactions The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to the General Partner or affiliates of the General Partner during the years ended December 31, 2001 and 2000. 2001 2000 (in thousands) Property management fees $ 96 $ 92 Reimbursement for services of affiliates 172 106 Partnership management fee 52 -- Affiliates of the General Partner are entitled to receive 5% of gross receipts from the Partnership's property as compensation for providing property management services. The Partnership paid to such affiliates approximately $96,000 and $92,000 for the years ended December 31, 2001 and 2000, respectively. Affiliates of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $172,000 and $106,000 for the years ended December 31, 2001 and 2000, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $110,000 and $3,000 for the years ended December 31, 2001 and 2000, respectively. The construction management service fees are calculated based on a percentage of current and certain prior year additions to investment property and are being depreciated over 15 years. The Partnership Agreement also provides for a special management fee equal to 9% of the total distributions from operations made to the Limited Partners to be paid to the General Partner for executive and administration management services. The General Partner received approximately $52,000 during the year ended December 31, 2001. The General Partner received approximately $102,000 in January 2000, resulting from a distribution declared during the year ended December 31, 1999. No such fee was earned in 2000. In accordance with the Partnership Agreement, an affiliate of the General Partner advanced the Partnership $158,000 to cover operating expenses at Colony of Springdale Apartments during the year ended December 31, 2001. The Partnership repaid approximately $19,000 of this advance including approximately $1,000 in accrued interest. Interest is being charged at the prime rate plus 2% and amounted to approximately $2,000. There were no loans from the General Partner or associated interest expense during the year ended December 31, 2000. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $19,000 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 88,726 limited partnership units (the "Units") in the Partnership representing 48.94% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 48.94% of the outstanding Units, AIMCO is in a position to significantly influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Conversion of Non-Corporate General Partner; Special Allocation In the year ended December 31, 1991, the Partnership Agreement was amended to convert the general partner interest held by the non-corporate general partner, CCG, to that of a special limited partner ("Special Limited Partner"). The Special Limited Partner does not have a vote and does not have any of the other rights of a Limited Partner except the right to inspect the Partnership's books and records; however, the Special Limited Partner will retain the economic interest in the Partnership which it previously owned as general partner. CEI became the sole general partner of the Partnership effective as of December 31, 1991. In connection with CCG's conversion, a special allocation of gross income was made to the Special Limited Partner in order to eliminate its tax basis negative capital account. After the conversion, the various owners of interests in the Special Limited Partner transferred portions of their interests to CEI so that CEI now holds a .2% interest in all allocable items of income, loss and distribution. The difference between the Special Limited Partners' capital accounts for financial statement and tax reporting purposes is being amortized to the Limited Partners' capital account as the components of the timing differences which created the balance reverse. Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K filed during the fourth quarter of 2001: None. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL PROPERTIES VI By: CONCAP EQUITIES, INC. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Senior Vice President and Controller Date: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the date indicated. /s/Patrick J. Foye Executive Vice President Date: Patrick J. Foye and Director /s/Martha L. Long Senior Vice President Date: Martha L. Long and Controller CONSOLIDATED CAPITAL PROPERTIES VI EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT incorporated by reference to Exhibit 2.1 filed with the Registrant's Current Report on Form 8-K dated October 1, 1998. 3 Certificate of Limited Partnership as amended to date. 10.1 Bill of Sale and Assignment dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.2 Assignment and Assumption Agreement dated October 23, 1990, by and between the CCEC and ConCap Management Limited Partnership ("CCMLP") (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.3 Property Management Agreement No. 119 dated April 9, 1991, by and between Colony Springdale Associates and CCMLP. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.4 Assignment and Agreement as to Certain Property Management Services dated April 9, 1991, by and between CCMLP and ConCap Capital Company. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.5 Investor Services Agreement dated October 23, 1990, by and between the Partnership and CCEC(Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.6 Assignment and Assumption Agreement (Investor Services Agreement) dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1990). 10.7 Letter of Notice dated December 20, 1991, from Partnership Services, Inc. ("PSI") to the Partnership regarding the change in ownership and dissolution of ConCap Services Company whereby PSI assumed the Investor Services Agreement. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.8 Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.9 Assignment and Assumption Agreement (Financial Services Agreement) dated October 23, 1990, by and between CCEC and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.10 Letter of Notice dated December 20, 1991, from PSI to the Partnership regarding the change in ownership and dissolution of ConCap Capital Company whereby PSI assumed the Financial Services Agreement. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.11 Property Management Agreement No. 421 dated May 13, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.12 Assignment and Assumption Agreement (Property Management Agreement No. 421) dated May 13, 1993, by and between Coventry Properties, Inc. and R&B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.13 Assignment and Agreement as to Certain Property Management Services dated May 13, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.14 Property Management Agreement No. 515 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.15 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.16 Stock and Asset Purchase Agreement, dated December 8, 1994 (the "Gordon Agreement"), among MAE-ICC, Inc. ("MAE-ICC"), Gordon Realty Inc. ("Gordon"), GII Realty, Inc. ("GII Realty"), and certain other parties. (Incorporated by reference to Form 8-K dated December 8, 1994). 10.17 Exercise of the Option (as defined in the Gordon Agreement) dated December 8, 1994, between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated December 8, 1994). 10.18 Exercise of the remaining portion of the Option (as defined in the Gordon Agreement) dated December 8, 1994, between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated October 24, 1995). 10.19 Contract to Purchase and Sell Property made and entered into as of August 13, 1997, but effective October 20, 1997, by and between Consolidated Capital Properties VI, a California limited partnership, and The Vandenburg Organization, a Texas corporation regarding Celina Plaza Apartments. 10.20 Assignment and assumption of Leases dated October 13, 1997, by and between Consolidated Capital Properties VI, a California limited partnership and The Vandenburg Organization, a Texas corporation regarding Celina Plaza Apartments. 10.21 Blanket Conveyance, Bill of Sale and Assignment dated October 13, 1997, by and between Consolidated Capital Properties VI, a California limited partnership and The Vandenburg Organization, a Texas corporation regarding Celina Plaza Apartments. 10.22 Multi-family note between Colony of Springdale Associates, Ltd. and GMAC Commercial Mortgage Corporation dated October 25, 1999. (Incorporated by reference to the Annual Report on Form 10-K dated December 31, 1999.) 16.1 Letter, dated August 12, 1992, from Ernst & Young to the Securities and Exchange Commission regarding change in certifying accountant. (Incorporated by reference to Form 8-K dated August 6, 1992). 16.2 Letter dated May 9, 1995 from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant regarding a change in the certifying accountant. (Incorporated by reference to Form 8-K dated May 3, 1995).