-----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, LCVLF6pgQDF7kl8Qw4HyWsLPmkjxwZPrIpo0UWksnTWSIVTRGC+gCEwaSiZl5uZB swwDt3azNfQk7tuqb3mHsA== 0000711642-99-000064.txt : 19990503 0000711642-99-000064.hdr.sgml : 19990503 ACCESSION NUMBER: 0000711642-99-000064 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL PROPERTIES VI CENTRAL INDEX KEY: 0000755908 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942940204 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14099 FILM NUMBER: 99606762 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to_________ Commission file number 0-14099 CONSOLIDATED CAPITAL PROPERTIES VI (Exact name of small business issuer as specified in its charter) California 94-2940204 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1999 Assets Cash and cash equivalents $ 1,937 Receivables and deposits 173 Restricted escrows 90 Other assets 59 Investment property: Land $ 916 Buildings and personal property 9,199 10,115 Less accumulated depreciation (4,079) 6,036 $ 8,295 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 12 Tenant security deposit liabilities 68 Accrued property taxes 92 Other liabilities 77 Mortgage note payable 4,324 Partners' Capital (Deficit) General partner $ 1 Special limited partners' (41) Limited partners (181,300 units issued and outstanding) 3,762 3,722 $ 8,295 See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1999 1998 Revenues: Rental income $ 426 $ 373 Other income 35 60 Total revenues 461 433 Expenses: Operating 191 207 General and administrative 30 33 Depreciation 90 87 Interest 110 110 Property taxes 26 30 Total expenses 447 467 Net income (loss) $ 14 $ (34) Net income (loss) allocated to general partner (0.2%) $ -- $ -- Net income (loss) allocated to limited partners (99.8%) 14 (34) $ 14 $ (34) Net income (loss) per limited partnership unit $ .08 $ (.19) Distribution per limited partnership unit $ -- $ 2.76 See Accompanying Notes to Consolidated Financial Statements c) CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (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' capital (deficit) at December 31, 1998 181,300 $ 1 $ (43) $ 3,750 $ 3,708 Amortization of timing difference -- -- 2 (2) -- Net income for the three months ended March 31, 1999 -- -- -- 14 14 Partners' capital (deficit) at March 31, 1999 181,300 $ 1 $ (41) $ 3,762 $ 3,722 See Accompanying Notes to Consolidated Financial Statements d) CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1999 1998 Cash flows from operating activities: Net income (loss) $ 14 $ (34) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 90 87 Amortization of loan costs 6 6 Changes in accounts: Receivables and deposits 85 169 Other assets (1) 5 Accounts payable 1 21 Tenant security deposit liabilities -- 9 Accrued taxes (26) (28) Other liabilities (1) (18) Net cash provided by operating activities 168 217 Cash flows from investing activities: Property improvements and replacements (54) (20) Proceeds from sale of investments -- 302 Net deposits to restricted escrows (22) (22) Net cash (used in) provided by investing activities (76) 260 Cash flows from financing activities: Payments on mortgage notes payable (17) (16) Distribution paid to limited partners -- (500) Net cash used in financing activities (17) (516) Net increase (decrease) in cash and cash equivalents 75 (39) Cash and cash equivalents at beginning of period 1,862 1,949 Cash and cash equivalents at end of period $1,937 $1,910 Supplemental disclosure of cash flow information: Cash paid for interest $ 103 $ 105 See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL PROPERTIES VI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Consolidated Capital Properties VI (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. ("CEI" or the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1998. Principles of Consolidation The Partnership's financial statements include the accounts of Colony of Springdale Associates, Ltd. ("Colony Associates"), 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 intercompany transactions between the Partnership and Colony Associates have been eliminated. NOTE B - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("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 will have a material effect on the affairs and operations of the Partnership. NOTE C - 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 an affiliate of the General Partner during the three months ended March 31, 1999 and 1998: 1999 1998 (in thousands) Property management fees (included in operating expenses) $22 $20 Reimbursements for services of affiliates (included in investment property and operating and general and administrative expenses ) (1) 14 20 (1)Included in "reimbursements for services of affiliates" is approximately $1,000, of reimbursements for construction oversight costs for the three months ended March 31, 1998. No such fees were paid in 1999. During the three months ended March 31, 1999 and 1998, affiliates of the General Partner were 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 $22,000 and $20,000 for each of the three months ended March 31, 1999 and 1998, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $14,000 and $20,000 for the three months ended March 31, 1999 and 1998, respectively. NOTE D - COMMITMENT The Partnership is required to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital as defined in the Partnership Agreement. In the event expenditures are made from these reserves, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, consisting of cash and cash equivalents, tenant security deposits, investments, and reserves for capital improvements and contingencies, totaling approximately $2,182,000 exceed the reserve requirement of approximately $2,070,000 at March 31, 1999. NOTE E - 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 general partner. 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 its tax basis negative capital account. 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 differences between the Special Limited Partners' 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 F - DISTRIBUTIONS In the first quarter of 1998, the Partnership declared and paid a cash distribution to the limited partners in the amount of $500,000. The distribution was from surplus funds from the sale of Celina Plaza in October 1997. No distributions were paid in the first quarter of 1999. NOTE G - SEGMENT REPORTING Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of one apartment complex in Ohio. The Partnership rents apartment units to people for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segment are the same as those of the Partnership as described in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1998. Factors management used to identify the enterprise's reportable segment: Segment information for the three months ended March 31, 1999 and 1998 (in thousands) is shown in the tables below. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 1999 Residential Other Totals Rental income $ 426 $ -- $ 426 Other income 18 17 35 Interest expense 110 -- 110 Depreciation 90 -- 90 General and administrative expense -- 30 30 Segment profit (loss) 30 (16) 14 Total assets 6,094 2,201 8,295 Capital expenditures for investment property 54 -- 54 1998 Residential Other Totals Rental income $ 373 $ -- $ 373 Other income 19 41 60 Interest expense 110 -- 110 Depreciation 87 -- 87 General and administrative expense -- 33 33 Segment (loss) profit (39) 5 (34) Total assets 6,261 2,193 8 454 Capital expenditures for investment properties 20 -- 20 NOTE H - 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. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia and entities which were, at the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks 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 have filed an amended complaint. The General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The General Partner does not anticipate that costs associated with this case, if any, will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB 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-QSB and the other filings with the Securities and Exchange Commission made by the Partnership from time to time. The discussion of the Partnership'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 Partnership'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. The Partnership's investment property consists of one apartment complex, Colony of Springdale Apartments, located in Springdale, Ohio. The average occupancy for the three month periods ended March 31, 1999 and 1998, was 94% and 90%, respectively. The Partnership attributes the improvement in occupancy to the improved curbside appeal of the property. Results of Operations The Partnership realized net income of approximately $14,000 compared to a net loss of approximately $34,000 for the three months ended March 31, 1999 and 1998, respectively. This increase in net income is primarily due to the increase in rental income and the decrease in operating expenses. The increase in rental income resulted from an increase in occupancy, as noted above. This was partially offset by the decrease in other income resulting from low cash balances in 1999. The decrease in operating expenses is primarily due to a decrease in courtesy patrol expenses in 1999. Included in general and administrative expenses at both March 31, 1999 and 1998 are management reimbursements to the General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership agreement are also included. 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 March 31, 1999, the Partnership had cash and cash equivalents of approximately $1,937,000 as compared to approximately $1,910,000 at March 31, 1998. For the three months ended March 31, 1999 cash and cash equivalents increased by approximately $75,000 from the Partnership's year ended December 31, 1998. The increase in cash and cash equivalents is due to approximately $168,000 of cash provided by operating activities which was partially offset by approximately $76,000 of cash used in investing activities and approximately $17,000 of cash used in financing activities. Cash used in investing activities consisted of deposits to restricted escrows held by the mortgage lender and property improvements and replacements. Cash used in financing activities consisted of principal payments made on the mortgage encumbering the Partnership's property The Partnership invests its working capital reserves in a money market account. 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 asset and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for the Partnership's property is discussed below. During the three month period ended March 31, 1999, the Partnership completed approximately $54,000 of capital improvements at the property. These improvements consisted of flooring and interior and exterior improvements. These improvements were funded from operating cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the General Partner on interior improvements, it is estimated that the property requires approximately $344,000 of capital improvements over the near term. Capital improvements planned for 1999 consist of, but are not limited to, appliances, landscaping and outdoor lighting, asphalt repairs, roof replacement, and carpeting. These improvements are expected to cost approximately $359,000. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership is required to maintain working capital reserves for contingencies of not less than 5% of Net Invested Capital as defined in the Partnership Agreement. In the event expenditures are made from these reserves, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, consisting of cash and cash equivalents, tenant security deposits, investments and reserves for capital improvements and contingencies totaling approximately $2,182,000 are more than the reserve requirement of approximately $2,070,000 at March 31, 1999. The Partnership'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 $4,324,000 is amortized over 300 months with a balloon payment of approximately $4,152,000 due on May 31, 2001. The General Partner will attempt to refinance such indebtedness or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. A cash distribution from surplus cash of approximately $500,000 from proceeds of the sale of Celina Plaza in 1997 was made during the year ended December 31, 1998. No distributions were made in 1999. The Partnership's distribution policy is reviewed on a quarterly basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings and/or property sale. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit further distributions to its partners in 1999 or subsequent periods. Year 2000 Compliance General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or not completed in time, the Year 2000 issue could have a material impact on the operations of the Partnership. The Managing Agent's plan to resolve Year 2000 issues involves four phases: assessment, remediation, testing, and implementation. To date, the Managing Agent has fully completed its assessment of all the information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase Computer Hardware: During 1997 and 1998, the Managing Agent identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. In August 1998, the mainframe system used by the Managing Agent became fully functional. In addition to the mainframe, PC-based network servers, routers and desktop PCs were analyzed for compliance. The Managing Agent has begun to replace each of the non-compliant network connections and desktop PCs and, as of March 31, 1999, had completed approximately 75% of this effort. The total cost to the Managing Agent to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million of which $1.3 million has been incurred to date. The remaining network connections and desktop PCs are expected to be upgraded to Year 2000 compliant systems by July 31, 1999. Computer Software: The Managing Agent utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. During 1998, the Managing Agent began converting the existing property management and rent collection systems to its management properties Year 2000 compliant systems. The estimated additional costs to convert such systems at all properties, is $200,000, and the implementation and the testing process is expected to be completed by July 31, 1999. The final software area is the office software and server operating systems. The Managing Agent has upgraded all non-compliant office software systems on each PC and has upgraded 80% of the server operating systems. The remaining server operating systems are planned to be upgraded to be Year 2000 compliant by July 31, 1999. Operating Equipment: The Managing Agent has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, the Managing Agent began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example elevators, heating, ventilating, and air conditioning systems, security and alarm systems, etc.). The Managing Agent has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non-compliance issues that put the Managing Agent at risk financially or operationally. The Managing Agent intends to have a third-party conduct an audit of these systems and report their findings by July 31, 1999. Any of the above operating equipment that has been found to be non-compliant to date has been replaced or repaired. To date, these have consisted only of security systems and phone systems. As of March 31, 1999 the Managing Agent has evaluated approximately 86% of the operating equipment for the Year 2000 compliance. The total cost incurred for all properties managed by the Managing Agent as of March 31, 1999 to replace or repair the operating equipment was approximately $400,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $325,000, which is expected to be completed by August 30, 1999. The Managing Agent continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within its enterprise. Nature and Level of Importance of Third Parties and Their Exposure to the Year 2000 The Managing Agent continues to conduct surveys of its banking and other vendor relationships to assess risks regarding their Year 2000 readiness. The Managing Agent has banking relationships with three major financial institutions, all of which have indicated their compliance efforts will be complete before May 1999. The Managing Agent has updated data transmission standards with two of the three financial institutions. The Managing Agent's contingency plan in this regard is to move accounts from any institution that cannot be certified Year 2000 compliant by June 1, 1999. The Partnership does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems (external agent). To date the Partnership is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Partnership's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant. The Managing Agent does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Costs to Address Year 2000 The total cost of the Year 2000 project to the Managing Agent is estimated at $3.5 million and is being funded from operating cash flows. To date, the Managing Agent has incurred approximately $2.8 million ($0.6 million expensed and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. The Partnership's portion of these costs are not material. Risks Associated with the Year 2000 The Managing Agent believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Managing Agent has not yet completed all necessary phases of the Year 2000 program. In the event that the Managing Agent does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios could include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Partnership. The Partnership could be subject to litigation for, among other things, computer system failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans Associated with the Year 2000 The Managing Agent has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia and entities which were, at the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks 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 have filed an amended complaint. The General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The General Partner does not anticipate that costs associated with this case, if any, will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b)Reports on Form 8-K: None filed during the quarter ended March 31, 1999. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL PROPERTIES VI By: CONCAP EQUITIES, INC. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting Date: EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Properties VI First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000755908 CONSOLIDATED CAPITAL PROPERTIES VI 1,000 3-MOS DEC-31-1999 MAR-31-1999 1,937 0 0 0 0 0 10,115 4,079 8,295 0 4,324 0 0 0 3,722 8,295 0 461 0 0 447 0 110 0 0 0 0 0 0 14 .08 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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