-----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, POwF5aE5QNTm/yv7pNEf3a1XA9schHXuQ+IiBpNnGz2jLRGXqe+roUaEwpOVoF3K qB/UG1pUsd5MhUEZHVaKlw== 0000755908-96-000001.txt : 19960325 0000755908-96-000001.hdr.sgml : 19960325 ACCESSION NUMBER: 0000755908-96-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 SROS: NONE 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14099 FILM NUMBER: 96537639 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 2147020027 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10KSB 1 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) (As last amended by 34-31905, eff. 4/26/93) FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1995 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period.........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.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) 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 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. $3,289,000. 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, 1995. Market value information for the Registrant's partnership interests is not available. Should a trading market develop for these interests, it is management's belief that such trading would not exceed $25,000,000. PART I Item 1. Description of Business Consolidated Capital Properties VI (the "Partnership") was organized on May 23, 1984, as a limited partnership under the California Uniform Limited Partnership Act. On December 7, 1984, the Partnership registered with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (File No. 2-93900) and commenced a public offering for sale of $50 million of Units. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The Partnership subsequently filed a Form 8-A Registration Statement with the SEC and registered under the Securities Exchange Act of 1934 (File No. 0-14099) on December 23, 1985. The sale of Units closed on December 6, 1985, with 181,808 Units sold at $250 each, or gross proceeds of approximately $45.5 million to the Partnership. By the end of fiscal 1987, approximately 51% of the monies raised was invested in seven properties and a 75% interest in a joint venture with an affiliated partnership which acquired one property. Of the remaining 49%, 11% was required for organizational and offering expenses, sales commissions and acquisition fees, and 38% was retained in Partnership reserves for project improvements and working capital as required by the Partnership Agreement (herein so called). The General Partner of the Partnership is ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The principal place of business for the Partnership and for the General Partner is One Insignia Financial Plaza, Greenville, South Carolina 29602. The Partnership's primary business and only industry segment is real estate related operations. The Partnership was formed to acquire, own, operate and ultimately dispose of income-producing real properties for the benefit of its partners. At December 31, 1995, the Partnership owns two properties as described in "Item 2 - Description of Property." Previously, the Partnership disposed of six properties. As of December 31, 1995, the Partnership's working capital reserves are less than the 5% of Net Invested Capital, as required by its Partnership Agreement. Reserves, consisting of cash and cash equivalents and securities available for sale totalling $1,796,000 are less than the reserve requirements of $2,266,000 at December 31, 1995. The Partnership intends to replenish the working capital reserve from cash flow from operations. The working capital requirement must be met prior to any consideration for distributions to the partners. See "Item 6 - Management's Discussion and Analysis or Plan of Operations" for discussion of Partnership liquidity and capital resources. The real estate business is highly competitive. The Registrant's real property investments are subject to competition from similar types of properties in the vicinities in which they are located and the Partnership is not a significant factor in its industry. In addition, various limited partnerships have been formed by related parties to engage in business which may be competitive with the Registrant. The Registrant has no employees. Management and administrative services are performed by affiliates of Insignia Financial Group, Inc. ("Insignia"), an affiliate of the General Partner. The property manager is responsible for the day-to-day operations of each property. The General Partner has also selected an affiliate of Insignia to provide real estate advisory and asset management services to the Partnership. As advisor, such affiliate provides all partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. For a further discussion of property and partnership management, see Item 12. 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 Partnerships dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limited 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 other rights of a limited partner except for the economic interest previously held as a general partner. Pursuant to an 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. All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which, among other things, MAE-ICC, Inc., a wholly owned subsidiary of Metropolitan Asset Enhancement, L.P., ("MAE") and an affiliate of Insignia, acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As a part of the Insignia Transaction, MAE-ICC, Inc. 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, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, MAE-ICC, Inc. exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. Item 2. Description of Property The Partnership originally acquired seven properties of which two were sold, two were conveyed to lenders, two of three phases in a property were conveyed to the lender and the remaining phase was sold, and one property was foreclosed on, in fiscal years prior to 1994. The Partnership also originally acquired a 75% interest in a real estate joint venture. In April 1994, the Partnership purchased the remaining 25% interest in the real estate joint venture. As of December 31, 1995, the Partnership owns two properties as noted below:
Date of Property Purchase Type of Ownership Use Celina Plaza Apartments 08/07/85 Fee ownership subject Apartment El Paso, Texas to first, second and 289 units third mortgages. Colony of Springdale Apartments 02/20/87 Fee ownership subject Apartment Springdale, Ohio to first mortgage. 261 units
Schedule of Properties:
Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (dollar amounts in thousands) Celina Plaza Apartments $ 6,823 $3,460 5-19 years S/L $3,082 Colony of Springdale 9,483 2,992 5-30 years S/L 5,774 Apartments Totals $16,306 $6,452 $8,856
See Note A of the Financial Statements included in Item 7 for a description of the Partnership's depreciation policy. Schedule of Mortgages: Principal Principal Balance At Balance December 31, Interest Maturity Due At Property 1995 Rate Date Maturity (dollar amounts in thousands) Celina Plaza Apartments 1st mortgage $ 1,835 8.75% 07/97 $1,587 2nd mortgage 56 8.75% 07/97 49 3rd mortgage 4,025 (1) 07/97 4,025 Colony of Springdale Apartments 1st mortgage 4,523 9.50% 05/01 4,152 10,439 $9,813 Mortgage discount (307) $10,132 (1) The net wrap-around mortgage loan collateralized by Celina Plaza Apartments requires quarterly contingent interest payments based on 50% of Celina Plaza's cash flow as defined in the Promissory Note. Contingent interest payments of $42,000 were required in 1995, and $138,000 were required in 1994. This loan is evidenced by an all-inclusive note which wraps around the 1st and 2nd mortgages but is presented above as net of these loans. Schedule of Rental Rates and Occupancy: Average Annual Average Rental Rates Occupancy Property 1995 1994 1995 1994 (per unit) (per unit) Celina Plaza Apartments $6,294 $6,187 90% 94% Colony of Springdale Apartments $6,124 $5,908 88% 96% As noted under "Item 1. Description of Business," the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other residential apartment complexes in the area. The General Partner believes that all of the properties are adequately insured. The properties' lease terms are for one year or less and no tenant leases 10% or more of the available rental space. The decrease in occupancy at the Celina Plaza Apartments is due to a decline in the El Paso market resulting from military spending cuts. In December of 1994, the managing agent evaluated the tenant base at the Colony of Springdale Apartments and identified several tenants with large delinquent balances. In an effort to improve the tenant base, the tenants who did not pay their outstanding balances were evicted, thereby decreasing the property's occupancy level. This occupancy decrease is expected to be short term as capital improvements were madein the fourth quarter of 1995 which are expected to increase the curb appeal of the property thereby enhancing the property's ability to attract higher quality tenants. Ongoing property improvements at both locations, resulting in improved consumer appeal, are expected to positively impact rental rates and occupancy. Schedule of Real Estate Taxes and Rates: Real estate taxes and rates in 1995 for each property were: 1995 1995 Taxes Rate (in thousands) Celina Plaza Apartments $157 2.8% Colony of Springdale Apartments 108 4.2% Item 3. Legal Proceedings In November 1994, Robert L. Lewis filed a class action in the Northern District of California against ConCap Equities, Inc., LP 6 Acceptance Corporation ("LP 6") and one other party, seeking injunctive and declaratory relief, but not monetary damages, alleging, among other things, that a tender offer by LP 6 for limited partnership units of the Partnership violated federal securities laws and the partnership agreement and breached the general partner's fiduciary duties. That tender offer closed and LP 6 purchased the tendered units without Lewis having brought a motion of preliminary injunctive relief. Insignia thereafter acquired LP 6 together with all of the tendered units purchased by it. Plaintiff Lewis filed a Stipulation for Dismissal of Case Without Prejudice in June of 1995 which requested the Court to dismiss the above action without prejudice and without costs to any party. The Court approved the stipulation on July 21, 1995. In November 1994, Mr. C.E. Patterson and his wife, Berniece Patterson, each of whom is a limited partner in two other affiliated partnerships (Consolidated Capital Properties III ("CCP III") and Consolidated Capital Properties IV ("CCP IV")), filed actions in the United States District Court for the Northern District of California seeking declaratory and injunctive relief, but not monetary damages, alleging, among other things, that a tender offer by LP 4 Acceptance Corporation for limited partnership units of CCP III and a tender offer by LP 5 Acceptance Corporation for limited partnership units of CCP IV violated the federal securities laws and the partnership agreements and breached the general partner's fiduciary duties. The complaints named ConCap Equities, Inc., the general partner of the Partnership and the affiliated partnerships, and others as defendants. These actions were filed by the Pattersons as individuals and are not class actions. In December 1994, the complaints in these actions were amended to include Insignia, MAE and MAE-ICC, Inc. and others as defendants in connection with a tender offer commenced in December 1994 by Insignia CCP III Acquisition, L.L.C. for limited partnership units of CCP III and a tender offer commenced in December 1994 by Insignia CCP IV Acquisition, L.L.C. for limited partnership units of CCP IV. On January 20, 1995, the District Court denied Plaintiffs' motion for a preliminary injunction to enjoin each of the tender offers. The tender offers closed on January 20, 1995, and the offeror purchased the tendered units. On March 31, 1995, the parties to the above referenced actions entered into a settlement agreement and a standstill agreement for all actions pursuant to which (i) Plaintiffs filed a notice of dismissal with respect to the first amended complaints in the actions; (ii) Plaintiffs and defendants released each other from all claims which were or could have been asserted in connection with the first amended complaints in the actions; (iii) Plaintiffs and MacKenzie Patterson, Inc. ("MacKenzie") will refrain from certain activities relating to the acquisition of limited partnership interests in any partnership of which Insignia or any of its affiliates is a general partner; (iv) Plaintiffs and their affiliates granted to a subsidiary of Insignia a right of first refusal in connection with the sale of limited partnership interests in the Partnership by the Plaintiffs; and (v) Plaintiffs and their affiliates will assign to a subsidiary of Insignia irrevocable proxies to vote any limited partnership interests in the Partnership acquired by MacKenzie as a result of the tender offer by MacKenzie and affiliates to acquire limited partnership interests in the Partnership or thereafter. On December 2, 1994, an unsolicited tender offer for up to 20,000 units of the Partnership was filed with the Securities Exchange Commission ("SEC") by MacKenzie and other affiliates of MacKenzie. The offer was subsequently amended four times in January and February 1995. On January 31, 1995, the General Partner, acting on behalf of the Partnership, commenced an action against MacKenzie in the United States District Court for the Southern District of New York. The complaint alleged that false and misleading statements in and omissions from the amended MacKenzie Offer Materials violated federal securities laws. In response to the complaint, MacKenzie filed amendments 3 and 4 with the SEC. The General Partner, acting on behalf of the Partnership, amended its complaint, alleging that the supplemental offer material contained new misstatements and did not cure the false and misleading statements in and the omissions from the amended MacKenzie Offer Materials. The Partnership sought relief from MacKenzie's actions in the form of an injunction against the amended MacKenzie offer, and a judgement declaring that the untrue statements in and the omissions from the Amended MacKenzie Offer constituted violations of federal securities laws. On March 31, 1995, the parties to the above-referenced action entered into the settlement agreement noted above settling the action. The Partnership is not a party to, nor is any of the Partnership's property the subject of, any material pending legal proceedings, other than ordinary litigation routine to the Partnership's business as of December 31, 1995. Item 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of the year ended December 31, 1995, no matters were submitted to a vote of the Unitholders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters (A) No established public trading market for the Partnership's Units exists nor is one expected to develop. (B) Title of Class Number of Unit Holders of Record Limited Partnership Units 3,770 as of December 31, 1995 (C) On November 3, 1994, an affiliate of the General Partner, LP6 Acceptance Corporation, distributed an offer to purchase up to 81,585 Limited Partner units (the "Tender Offer") for a cash price of $17.00 per Unit to Limited Partners of record as of October 1, 1994. The Tender Offer expired on December 2, 1994. Approximately 1,216 Limited Partners holding 41,228 Units (22.74% of total Units) accepted the Tender Offer and sold their Units to LP6 Acceptance Corporation for an aggregate sales price of approximately $701,000. As a part of the Insignia Transaction, Insignia acquired all of the outstanding capital stock of LP6 Acceptance Corporation which had then recently consummated the Tender Offer. (D) In March 1995, the General Partner declared and paid distributions, attributable to cash flow from operations, totalling approximately $275,000 to the partners. There were no cash distributions to the Limited Partners during the year ended December 31, 1994. See "Item 6 - Management's Discussion and Analysis or Plan of Operations." Item 6. Management's Discussion and Analysis or Plan of Operations Results of Operations The Partnership realized a net loss from operations of $750,000 for the year ended December 31, 1995, compared to a net loss from operations of $295,000 for the year ended December 31, 1994. Rental income, property operations expense, interest expense and depreciation expense increased for the year ended December 31, 1995, primarily due to the purchase of the remaining 25% of the Colony of Springdale Apartments in April of 1994 (See Note C in the Notes to Consolidated Financial Statements in Item 7). Property operations expense also increased due to advertising and rental costs incurred in efforts to increase occupancy. Interest expense for the year ended December 31, 1995, was also increased by the refinancing of the debt on the Colony of Springdale Apartments in April of 1994 with an interest rate of 9.5% compared to the 8.5% rate that was in effect in the first quarter of 1994. This increase in interest expense for the year ended December 31, 1995, was partially offset by a decrease in interest paid on the debt at the Celina Plaza Apartments for the year ended December 31, 1995. Under the terms of the Celina Plaza loan, the Partnership is obligated to remit a portion of the property's cash flow to the lien-holder as additional interest. Due to the property's need for capital improvements, additional interest expense of $42,000 was paid for the year ended December 31, 1995, as opposed to additional interest of $138,000 paid for the year ended December 31, 1994. Administrative expenses increased due to approximately $193,000 in legal costs, net of insurance, associated with the Partnership's required responses to various tender offers and other litigation (See Item 3. Legal Proceedings). The administrative expense increase was also affected by the special management fee of approximately $24,000 paid in conjunction with the distribution made to the Limited Partners in March of 1995 (See Note G in the Notes to Consolidated Financial Statements in Item 7) and increased expense reimbursements related to the combined efforts of the Dallas and Greenville partnership administration staffs during the management transition period in the first and second quarters of 1995. The reimbursements for the Dallas office amounted to $53,000 for the year ended December 31, 1995. The increased costs related to the transition efforts were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. The General Partner expects recurring administrative expenses to be reduced now that the management transition is completed. The Partnership's proportionate income in the affiliated joint venture was eliminated due to the purchase of the Colony of Springdale Apartments in April of 1994. (See Note C in the Notes to Consolidated Financial Statements in Item 7). As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources As of December 31, 1995, the Partnership had unrestricted cash of $1,311,000 as compared to $414,000 at December 31, 1994. Net cash provided by operating activities decreased primarily due to an increase in restricted cash and increased property operating costs. Net cash provided by investing activities increased primarily due to the nonrecurring purchase of the remaining 25% interest in the Colony of Springdale Apartments impacting 1994 cash flows. The increase in cash provided by investing activities was also affected by the increase in proceeds from the sale of securities available for sale and the decrease in deposits to restricted escrows, which was offset by the increase in property improvements in 1995. Net cash used in financing activities increased due to increased distributions to partners and the absence of any refinancing activity in 1995. 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 and securities available for sale totalling $1,796,000 are less than the reserve requirement of $2,266,000 at December 31, 1995. The Partnership intends to replenish the working capital reserve from cash flow from operations. The working capital requirement must be met prior to any consideration for distributions to the partners. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and meet other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $10.1 million, net of discounts, matures at various times with balloon payments due at maturity, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, capital expenditure requirements, property sales and the availability of cash reserves. During the year of 1995, distributions of $275,000 were declared and paid. No cash distributions were made in 1994. At January 1, 1994, the Partnership owned a 75% interest in a real estate joint venture which held title to the Colony of Springdale Apartments, a 261-unit apartment complex located in Springdale, Ohio. The joint venture's note payable of $3.1 million, which was secured by the property, was scheduled to mature in March 1995. Preliminary discussions with lenders indicated that a refinancing would be difficult under the joint venture ownership structure. In order to facilitate the refinancing, title to the property was transferred to Colony Associates, a limited partnership in which the Partnership owned a 75% interest, in March 1994. In April 1994, the Partnership acquired the remaining 25% interest in Colony Associates, the limited partnership which holds fee title to the Colony of Springdale Apartments, in a business combination accounted for as a purchase. The total cost of the acquisition, which was based on the appraised value of a 25% undivided partial interest in the joint venture, totaled $908,000. The acquisition price exceeded the current book value of 25% of the net assets of Colony Associates by $74,000, which was related to land, buildings and improvements, and is being amortized using the straight-line method over the estimated remaining useful lives of the assets. In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark's Chapter 11 bankruptcy proceeding. These claims related to Southmark's activities while it exercised control (directly, or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the other affiliated partnerships' allowed claim at $11 million, in the aggregate. In March 1994, the Partnership received 901 shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,589 shares of Southmark Corporation New Common Stock with an aggregate market value on the date of receipt of approximately $7,000 and approximately $49,000 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. Item 7. Financial Statements CONSOLIDATED CAPITAL PROPERTIES VI LIST OF FINANCIAL STATEMENTS Reports of Independent Auditors Consolidated Balance Sheet - December 31, 1995 Consolidated Statements of Operations - Years ended December 31, 1995 and 1994 Consolidated Statement of Changes in Partners Capital (Deficit) - Years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows - Years ended December 31, 1995 and 1994 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, 1995, and the related consolidated statements of operations, changes in partners capital (deficit) and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties VI as of December 31, 1995, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Greenville, South Carolina February 5, 1996 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Consolidated Capital Properties VI: We have audited the accompanying consolidated statements of operations, partners' capital (deficit) and cash flows of Consolidated Capital Properties VI (a California limited partnership) for the year ended December 31, 1994. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Consolidated Capital Properties VI for the year ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ Arthur Andersen, LLP Dallas, Texas March 23, 1995
CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 1995 Assets Cash and cash equivalents: Unrestricted $1,311 Restricted--tenant security deposits 95 Securities available for sale 390 Prepaid and other assets 652 Investment properties: Land $ 1,652 Buildings and personal property 14,654 16,306 Less accumulated depreciation (6,452) 9,854 $12,302 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable and accrued expenses $ 485 Mortgage notes and interest payable 10,314 Partners' Capital (Deficit) General partners $ (5) Special limited partners (70) Limited partners (181,288 units issued and outstanding) 1,578 1,503 $12,302 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1995 1994 Revenues: Rental income $3,139 $2,719 Interest and other income 150 180 Proportionate income in affiliated joint venture -- 21 Total revenues 3,289 2,920 Expenses: Property operations 2,029 1,632 Depreciation 676 539 Interest 874 835 Administrative 460 209 Total expenses 4,039 3,215 Net loss $ (750) $ (295) Net loss allocated to general partners (0.2%) $ (2) $ (1) Net loss allocated to limited partners (99.8%) (748) $ (294) $ (750) $ (295) Net loss per limited partnership unit $(4.13) $(1.62) See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data)
Limited Special Partnership General Limited Limited Units Partner Partner Partners Total Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453 Partners' capital (deficit) at December 31, 1993 181,340 (1) (77) 2,901 2,823 Abandonment of limited partnership units (40) -- -- -- -- Net loss for the year ended December 31, 1994 -- (1) -- (294) (295) Amortization of timing difference -- -- 9 (9) -- Partners' capital (deficit) at December 31, 1994 181,300 $ (2) $ (68) $ 2,598 $ 2,528 Abandonment of limited partnership units (12) -- -- -- -- Net loss for the year ended December 31, 1995 -- (2) -- (748) (750) Amortization of timing difference -- -- 9 (9) -- Distributions paid -- (1) (11) (263) (275) Partners' capital (deficit) at December 31, 1995 181,288 $ (5) $ (70) $ 1,578 $ 1,503 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except unit data)
Years Ended December 31, 1995 1994 Cash flows from operating activities: Net loss $ (750) $ (295) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization of discounts and loan costs 904 753 Proportionate income in affiliated joint venture -- (21) Change in accounts: Tenant security deposits (95) -- Prepaid and other assets (26) (160) Accounts payable and accrued expenses 53 172 Interest payable 33 28 Net cash provided by operating activities 119 477 Cash flows from investing activities: Property improvements and replacements (483) (226) Purchase of securities available for sale (5,713) (1,656) Proceeds from sale of securities available for sale 7,519 889 Distribution from investment in affiliated joint venture -- 60 Deposits to restricted escrows (80) (152) Purchase of remaining interest in joint venture -- (908) Cash received in purchase of interest in affiliated joint venture -- 92 Net cash provided by (used in) investing activities 1,243 (1,901) Cash flows from financing activities: Payments on mortgage notes payable (190) (163) Partners distributions (275) -- Proceeds from refinancing -- 4,600 Repayment of note payable -- (3,073) Direct financing costs -- (114) Net cash (used in) provided by financing activities (465) 1,250 Net increase (decrease) in cash 897 (174) Cash at beginning of period 414 588 Cash at end of period $ 1,311 $ 414 Supplemental disclosure of cash flow information: Cash paid for interest $ 614 $ 608 See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Note A - Organization and Summary of Significant Accounting Policies Organization Consolidated Capital Properties VI, a California limited partnership (the "Partnership"), was formed on May 23, 1984, to acquire and operate commercial and residential properties. As of December 31, 1995 the Partnership owns two residential properties located in or near major urban areas in the United States. 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, ConCap Equities, Inc. (the "General Partner" or "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. All of CEI's outstanding stock is owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which among other things, MAE-ICC, Inc., a wholly owned subsidiary of Metropolitan Asset Enhancement, L.P., ("MAE") 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, MAE-ICC, Inc. 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, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, MAE-ICC, Inc. exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. On December 31, 1991, the non-corporate general partner interest of CCG was converted to that of a Special Limited Partner, as more fully described in Note E. Note A - Organization and Summary of Significant Accounting Policies (continued) Consolidation As of January 1, 1994, the Partnership owned a 75% interest in a real estate joint venture which held title to the Colony of Springdale Apartments. On March 8, 1994, title to the property was transferred to Colony of Springdale Associates, Ltd. ("Colony Associates"), a limited partnership in which the Partnership owned a 75% interest. On April 22, 1994, the Partnership purchased the remaining 25% interest in Colony Associates, (See Note C). The Partnership's financial statements include the accounts of Colony Associates, which holds fee title to the Colony of Springdale Apartments. The results of its operations are included in the Partnership's financial statements from the date of acquisition of the remaining 25% interest. All intercompany transactions between the Partnership and Colony Associates have been eliminated. Investment Properties Prior to the fourth quarter of 1995, investment properties were carried at the lower of cost or estimated fair value, which was determined using the higher of the property's non-recourse debt amount, when applicable, or the net operating income of the investment property capitalized at a rate deemed reasonable for the type of property. During the fourth quarter of 1995 the Partnership adopted FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The effect of adoption was not material. Depreciation Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 5 to 30 years. Cash and cash equivalents Unrestricted - Unrestricted cash includes cash on hand, demand deposits, money market funds, and U.S. Treasury Bills with original maturities of three months or less. At certain times the amount of cash deposited at a bank may exceed the limit on insured deposits. Restricted cash - tenant security deposits - The Partnership requires security deposits from new lessees for the duration of the lease with such deposits being considered restricted cash. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Note A - Organization and Summary of Significant Accounting Policies (continued) Restricted Escrows The Partnership maintains tax and insurance escrows and a repair escrow with the lenders totalling approximately $293,000 at December 31, 1995, which are included in prepaid and other assets. Reclassification Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Securities Available For Sale In 1994, the Partnership adopted Statements of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Securities available for sale ("Securities") are stated at fair value. As the Securities' fair value approximate their cost, any unrealized gains or losses are immaterial and therefore have not been recorded in the accompanying financial statements. The cost of Securities sold is determined using the specific identification method. The Securities mature as follows: Description Cost Maturity (in thousands) U.S. Treasury Bills $ 34 May 1996 U.S. Treasury Notes 51 July 1996 U.S. Treasury Notes 298 February 1998 Equity Securities 7 N/A $ 390 Fair Value In 1995, the Partnership implemented Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," which requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value. The carrying amount of the Partnership's cash and cash equivalents approximates fair value due to short-term maturities. The Partnership estimates the fair value of its fixed rate mortgages by discounted cash flow analysis, based on estimated borrowing rates currently available to the Partnership. Note A - Organization and Summary of Significant Accounting Policies (continued) Discounts on Notes Payable Discounts on notes payable are amortized using the straight-line method over the remaining terms of the related notes. Rental Income The Partnership leases its residential property under short-term operating leases. Lease terms are generally one year or less in duration. Income Taxes No provision has been made in the financial statements for Federal income taxes because, under current law, no Federal income taxes are paid directly by the Partnership. The Partners are responsible for their respective shares of Partnership net income or loss. The tax basis of the Partnership's assets and liabilities is approximately $5.2 million greater than the assets and liabilities as reported in the financial statements. Allocation of Net Income and Net Loss The Partnership Agreement, as amended and as described more fully in Note E, provides for net income and net losses for both financial and tax reporting purposes to be allocated 99.8% to the Limited Partners and .2% to the General Partner. Advertising Costs Advertising costs of approximately $62,000 in 1995, and $36,000 in 1994 are charged to expenses as incurred and are included in operating expenses. Use 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. Note B - Related Party Transactions The Partnership has no employees and is dependent on the General Partner and affiliates of Insignia for the management and administration of all of the Partnership activities, as provided for in the Partnership agreement. The Partnership has paid the property management fees noted below based upon collected gross rental revenues ("Rental Revenues") for property management services in each of the years ended December 31, 1995, and 1994, respectively. For the year ended December 31, 1994, a portion of such property management fees equal to 4% of Rental Revenues was paid to the property management companies performing day-to-day property management services and a portion equal to 1% of Rental Revenues was paid to Partnership Services, Inc. ("PSI") for advisory services related to day-to-day operations. Coventry Properties, Inc. ("Coventry") an affiliate of the General Partner provided the day-to-day property management responsibilities for one of the Partnership's properties during 1994. In late December 1994, an affiliate of Insignia assumed day-to-day property management responsibilities for all of the Partnership's properties. Fees paid to Insignia and affiliates for the year ended December 31, 1995, and fees paid to PSI and Coventry for the year ended December 31, 1994, have been reflected in the following table as compensation to related parties in the applicable periods: Years Ended December 31, 1995 1994 (in thousands) Property management fees $159 $ 97 The Limited Partnership Agreement ("Partnership Agreement") provides for a special management fee equal to 9% of the total distributions made to the limited partners to be paid to the General Partner for executive and administrative management services. The Partnership paid approximately $24,000 to affiliates of the General Partner during 1995 under this provision of the Partnership Agreement. No such fees were paid or accrued in 1994. The Partnership Agreement also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its affiliates, which includes Coventry for the year ended December 31, 1994, received reimbursements as reflected in the following table: Years Ended December 31, 1995 1994 (in thousands) Reimbursement for services of affiliates $115 $98 In July 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner, who receives payment on these Note B - Related Party Transactions (continued) obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. On November 3, 1994, an affiliate of the General Partner, LP6 Acceptance Corporation, distributed an offer to purchase up to 81,585 Limited Partner units (the "Tender Offer") for a cash price of $17.00 per Unit to Limited Partners of record as of October 1, 1994. The Tender Offer expired on December 2, 1994. Approximately 1,216 Limited Partners holding 41,228 Units (22.74% of total Units) accepted the Tender Offer and sold their Units to LP6 Acceptance Corporation for an aggregate sales price of approximately $701,000. As a part of the Insignia Transaction, Insignia acquired all of the outstanding capital stock of LP6 Acceptance Corporation which had then recently consummated the Tender Offer. Note C - Purchase of Remaining Interest in Affiliated Joint Venture As of January 1, 1994, the Partnership owned a 75% interest in a real estate joint venture which held title to the Colony of Springdale Apartments, a 261-unit apartment complex located in Springdale, Ohio. The joint venture's note payable of $3.1 million, which was secured by the property, was scheduled to mature in March 1995. Preliminary discussions with lenders indicated that a refinancing would be difficult under the joint venture ownership structure. In order to facilitate the refinancing, title to the property was transferred to Colony Associates, a limited partnership in which the Partnership owned a 75% interest, in March 1994. In April 1994, the Partnership acquired the remaining 25% interest in Colony Associates, the limited partnership which holds fee title to the Colony of Springdale Apartments, in a business combination accounted for as a purchase. The total cost of the acquisition, which was based on the appraised value of a 25% undivided partial interest in the joint venture, totaled $908,000. The acquisition price exceeded the current book value of 25% of the net assets of Colony Associates by $74,000, which was related to land, buildings and improvements, and is being amortized using the straight-line method over the estimated remaining useful lives of the assets. The results of operations of Colony Associates are included in the accompanying statements of operations from the date of acquisition. The original 75% investment in Colony Associates was accounted for under the equity method. Accordingly, the results of operations of Colony Associates prior to the acquisition are included in "Proportionate income (loss) in affiliated joint venture" in the accompanying statements of operations. Note C - Purchase of Remaining Interest in Affiliated Joint Venture (continued) The following table sets forth the assets and liabilities of Colony Associates as of the acquisition date: As of April 22, 1994 (date of acquisition) (in thousands) Net real estate $ 6,406 Cash received in purchase (a) 92 Other assets 79 6,577 Note and interest payable (3,088) Other liabilities (154) $ 3,335 (a) Cash received in purchase represents cash balances in the property's bank accounts as of the purchase date and is reflected in the 1994 statement of cash flows as "cash received in purchase of interest in affiliated joint venture." 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 and securities available for sale totalling $1,796,000 are less than the reserve requirement of $2,266,000 at December 31, 1995. The Partnership intends to replenish the working capital reserve from cash flow from operations. The working capital requirement must be met prior to any consideration for distributions to the partners. Note E - Change in Status of Non-Corporate General Partner In 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 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. Note E - Change in Status of Non-Corporate General Partner (continued) 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 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 Partner's 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. Note F - Other Income In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark's Chapter 11 bankruptcy proceeding. These claims related to Southmark's activities while it exercised control (directly, or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the other affiliated partnerships' allowed claim at $11 million, in the aggregate. In March 1994, the Partnership received 901 shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,589 shares of Southmark Corporation New Common Stock with an aggregate market value on the date of receipt of approximately $7,000 and approximately $49,000 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. Note G - Distributions In March 1995, the Partnership declared and paid distributions, attributable to cash flow from operations, totalling approximately $275,000 to the partners. Note H - Notes Payable In April 1994, the General Partner obtained a refinancing of $3.1 million of mortgage debt secured by the Colony of Springdale Apartments. Under the terms of the refinancing agreement, the new first-lien mortgage of approximately $4.6 million bears interest at 9.5% and matures in May 2001. After repayment of the existing debt, payment of refinancing and closing costs, and establishment of a capital improvement escrow, the Partnership received net proceeds of approximately $1.2 million.
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 1995 Interest Rate Date Maturity (dollar amounts in thousands) Celina Plaza Apartments 1st mortgage $ 1,835 $ 26 8.75% 07/97 $ 1,587 2nd mortgage 56 1 8.75% 07/97 49 3rd mortgage 4,025 -- (1) 07/97 4,025 Colony of Springdale Apartments 1st mortgage 4,523 40 9.50% 05/01 4,152 10,439(2) Mortgage discount (307) Totals $ 10,132 $ 67 $ 9,813 (1) The net wrap-around mortgage loan collateralized by Celina Plaza Apartments requires quarterly contingent interest payments based on 50% of Celina Plaza's cash flow as defined in the Promissory Note. Contingent interest payments of $42,000 were required in 1995, and $138,000 were required in 1994. This loan is evidenced by an all-inclusive note which wraps around the 1st and 2nd mortgages but is presented above as net of these loans. (2) The estimated fair values of the Partnership's aggregate debt (excluding the Celina Plaza 3rd mortgage) is $6,680,000. This value represents a general approximation of possible value and is not necessarily indicative of the amounts Partnership may pay in actual market transactions. Due to the difficulty of forecasting the future cash flows of the Celina Plaza Apartments, the Partnership has determined that it is not practicable to estimate the fair value of the $4,025,000 third mortgage.
Note H - Notes Payable (continued) Scheduled maturities of principal are as follows: Years Ending December 31, (in thousands) 1996 $ 212 1997 5,820 1998 66 1999 73 2000 80 Thereafter 4,188 $10,439 Note I - Investment Properties and Accumulated Depreciation Initial Cost To Partnership (in thousands) Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition Celina Plaza Apartments El Paso, Texas $ 5,916 $ 736 $ 4,930 $1,157 Colony of Springdale Apartments Springdale, Ohio 4,523 909 8,358 216 Totals $10,439 $1,645 $13,288 $1,373
Gross Amount At Which Carried At December 31, 1995 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Celina Plaza Apartments El Paso, Texas $ 736 $ 6,087 $ 6,823 $3,460 8/07/85 5-19 Colony of Springdale Springdale, Ohio 916 8,567 9,483 2,992 2/20/87 5-30 Totals $1,652 $14,654 $16,306 $6,452
Note I - Investment Properties and Accumulated Depreciation (continued) Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 1995 1994 (in thousands) Investment Properties Balance at beginning of year $15,823 $ 6,711 Property improvements: 483 226 Consolidation of investment previously reported under the equity method -- 8,886 Balance at End of Year $16,306 $15,823 Accumulated Depreciation Balance at beginning of year $ 5,776 $ 2,831 Additions charged to expense 676 539 Consolidation of investment previously reported under the equity method -- 2,406 Balance at end of year $ 6,452 $ 5,776 The aggregate cost of the real estate for Federal income tax purposes at December 31, 1995 and 1994 is approximately $15,469,000 and $14,987,000. The accumulated depreciation taken for Federal income tax purposed at December 31, 1995 and 1994 is approximately $6,613,000 and $6,026,000, respectively. Note J - Abandoned Limited Partnership Units For the years ended December 31, 1995 and 1994, the number of Limited Partnership Units decreased by 12 and 40 units respectively, due to limited partners abandoning their units. In abandoning Limited Partnership Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure As reported in the Partnership's Form 8-K filed May 10, 1995, as of May 3, 1995, Arthur Andersen L.L.P., the independent accountant previously engaged as the principal accountant to audit the financial statements of the Partnership was dismissed. As of the same date, the firm of Ernst & Young L.L.P. was engaged to provide that service for the Partnership. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act The Registrant has no officers or directors. The General Partner manages and controls the Registrant and has general responsibility and authority in all matters affecting its business. The name of the directors and executive officers of ConCap Equities, Inc. ("CEI"), the Partnership's General Partner, as of December 31, 1995, 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 and directors. Name Age Position Carroll D. Vinson 55 President, Director Robert D. Long, Jr. 28 Controller, Principal Accounting Officer William H. Jarrard, Jr. 49 Vice President John K. Lines 36 Secretary Kelley M. Buechler 38 Assistant Secretary Carroll D. Vinson has been President of CEI since December 1994 and President of the Metropolitan Asset Enhancement, L.P. ("MAE") subsidiaries since August 1994. Prior to that, during 1993 to August 1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (a regional CPA firm) and engaged in various other investment and consulting activities, which included portfolio acquisitions, asset dispositions, debt restructurings and financial reporting. Briefly, in early 1993, Mr. Vinson served as President and Chief Executive Officer of Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr. Vinson was employed by Insignia in various capacities including Managing Director-President during 1991. From 1986 to 1990, Mr. Vinson was President and Director of U.S. Shelter Corporation, a real estate services company, which sold substantially all of its assets to Insignia in December 1990. Robert D. Long, Jr. has been Controller and Chief Accounting Officer of CEI since December 1994 and Chief Accounting Officer and Controller of the MAE subsidiaries since February 1994. Prior to joining MAE in September 1993, Mr. Long served as a senior regional accountant with Insignia Management Group, Inc. since December 1991. From January 1991 until December 1991, Mr. Long was associated with the accounting firm of Harshman, Lewis and Associates. From July 1989 until January 1991, Mr. Long was an auditor for the State of Tennessee. He is a graduate of the University of Memphis. William H. Jarrard, Jr. has been Vice President of CEI since December 1994, Vice President of the MAE subsidiaries since January 1992 and Managing Director- Partnership Administration of Insignia since January 1991. During the five years prior to joining Insignia in 1991, he served in a similar capacity for U.S. Shelter. Mr. Jarrard is a graduate of the University of South Carolina and a certified public accountant. John K. Lines has been Secretary of CEI since December 1994, Secretary of the MAE subsidiaries since August 1994 and General Counsel and Secretary of Insignia since July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach, Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney with Banc One Corporation in Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was employed as an associate with Squire Sanders & Dempsey in Columbus, Ohio. Kelley M. Buechler has been Assistant Secretary of CEI since December 1994, Assistant Secretary of the MAE subsidiaries since January 1992, and Assistant Secretary of Insignia since January 1991. During the five years prior to joining Insignia in 1991, she served in a similar capacity for U.S. Shelter. Ms. Buechler is a graduate of the University of North Carolina. CEI is the general partner of the Partnership and 13 other Affiliated Partnerships as of December 31, 1995. Item 10. Executive Compensation No direct compensation was paid or payable by the Partnership to directors or officers for the year ended December 31, 1995, nor was any direct compensation paid or payable by the Partnership to directors or officers of the General Partner for the year ended December 31, 1995. The Partnership has no plans to pay any such remuneration to any directors or officers of the General Partner in the future. See "Item 7 - Financial Statements," Note B - Related Party Transactions, for amounts of compensation and reimbursement of salaries paid by the Partnership to the General Partner and its affiliates and the former general partner and former affiliates. Item 11. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as provided below, as of February 1996, no person was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership. Number of Percent Name and Address Units Of Total LP6 Acceptance Corporation 41,188 22.72% One Insignia Financial Greenville, SC 29602 The Units reflected above were acquired by LP6 Acceptance Corporation, an affiliate of the Partnership and CEI, pursuant to its offer dated November 3, 1994, to purchase Units for a purchase price of $17.00 per Unit (the "Tender Offer"). LP6 Acceptance Corporation is owned 100% by Insignia. As of February 1996, no other person was known to CEI to own of record or beneficially more than 5 percent (5%) of the Units of the Partnership. (b) Beneficial Owners of Management Neither CEI nor any of the directors or officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of February 1996, the following persons were known to CEI to be the beneficial owners of more than 5 percent (5%) of its common stock: Number of Percent Name and Address CEI Shares Of Total GII Realty, Inc. 100,000 100% One Insignia Financial Greenville, SC 29602 GII Realty, Inc. is owned by MAE-ICC, Inc. (See Item 1). Item 12. Certain Relationships and Related Transactions Transactions with Current Management and Others Except for the transactions described below, neither CEI nor any of its directors, officers or associates, or any associates of any of them, has had any interest in any other transaction to which the Partnership is a party. Please refer to "Item 7 - Financial Statements," Note B - Related Party Transactions, for the amounts and items of permissible compensation and fees paid to the General Partner and its affiliates and other related parties for the last two years. The Partnership has paid property management fees based upon collected gross rental revenues ("Rental Revenues") for property management services in each of the years ended December 31, 1995, and 1994, respectively. For the year ended December 31, 1994, a portion of such property management fees equal to 4% of Rental Revenues was paid to the property management companies performing day-to- day property management services and a portion equal to 1% of Rental Revenues was paid to Partnership Services, Inc. ("PSI") for advisory services related to day- to-day operations. Coventry Properties, Inc. ("Coventry") an affiliate of the General Partner provided the day-to-day property management responsibilities for one of the Partnership's properties during 1994. In late December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day property management responsibilities for all of the Partnership's properties. All of the above-referenced agreements with affiliates of CEI and related parties of the Partnership are subject to the conditions and limitations imposed by the Partnership Agreement. 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. Purchase of Remaining Interest in Affiliated Joint Venture In February 1987, the Partnership, together with an affiliated limited partnership, Consolidated Capital Properties VII ("CCP VII"), entered into a joint venture to acquire Colony of Springdale Apartments, a 261-unit complex, located in Springdale, Ohio. The Partnership owned a 75% interest in the joint venture and CCP VII owned the remaining 25% interest. The total purchase price of the property was $7.9 million. The Partnership's investment in the joint venture was accounted for using the equity method, under which the Partnership's share of the joint venture's earnings or losses were included in operations and under which distributions were credited to the investment when received. In March 1994, title to the property was transferred to Colony of Springdale Associates, Ltd. ("Colony Associates"), a limited partnership in which the Partnership owned a 75% interest. In April 1994, the Partnership acquired the remaining 25% interest in Colony Associates, the limited partnership which holds fee title to the Colony of Springdale Apartments, in a business combination accounted for as a purchase. The total cost of the acquisition, which was based on the appraised value of a 25% undivided partial interest in the joint venture, totaled $908,000. The acquisition price exceeded the net book value of 25% of the net assets of Colony Associates by $74,000, which was allocated to land, buildings and improvements, and is being depreciated using the straight-line method over the estimated remaining useful lives of the assets. Litigation with Former Related Parties Please refer to "Item 7 - Financial Statements" and "Note B - Related Party Transactions," for the amounts and items of compensation and fees paid to former affiliates. In 1991, the Partnership (and simultaneously other affiliated partnerships) entered claims in Southmark's Chapter 11 bankruptcy proceeding. These claims related to Southmark's activities while it exercised control (directly, or indirectly through its affiliates) over the Partnership. The Bankruptcy Court set the Partnership's and the other affiliated partnerships' allowed claim at $11 million, in the aggregate. In March 1994, the Partnership received 901 shares of Southmark Corporation Redeemable Series A Preferred Stock and 6,589 shares of Southmark Corporation New Common Stock with an aggregate market value on the date of receipt of approximately $7,000 and approximately $49,000 in cash representing the Partnership's share of the recovery, based on its pro rata share of the claims filed. Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Exhibits: See Exhibit Index contained herein. Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K filed during the fourth quarter of 1995: A Form 8-K dated October 24, 1995 was filed reporting a change in the ownership of GII Realty, Inc., the sole stockholder of the general partner of the Registrant. SIGNATURES In accordance with Section 13 or 15(d) 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/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Controller and Principal Accounting Officer Date: March 22, 1996 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/Carroll D. Vinson President Date: March 22, 1996 Carroll D. Vinson /s/Robert D. Long, Jr. Controller and Principal Date: March 22, 1996 Robert D. Long, Jr. Accounting Officer
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION 3 Certificates 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 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 CertainProperty Management Services dated April9, 1991, by and between CCMLP and ConCapCapital 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 October23, 1990, by and between the Partnership and CCEC (Incorporated by reference to theQuarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.6 Assignment and Assumption Agreement (Investor Services Agreement) dated October23, 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. 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 CertainProperty 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) 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note 1 of Item 8 - Financial Statements of this Form 10-K). 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)
EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Captial Properties VI 1995 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000755908 CONSOLIDATED CAPITAL PROPERTIS VI 1,000 12-MOS DEC-31-1995 DEC-31-1995 1,311 390 0 0 0 0 16,306 6,452 12,302 0 10,314 0 0 0 1,503 12,302 0 3,289 0 0 4,039 0 874 0 0 0 0 0 0 (750) (4.13) 0 The Partnership has an unclassified balance sheet.
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