-----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, BAi/KKQLe7PtBbHisbPOcpEsPrLYXSuMz4lC36szmdbX9eu12JJsO6Eupk5A9Ib3 6mPb4/0+pKwysRsEtAhuGg== 0000711642-02-000047.txt : 20020415 0000711642-02-000047.hdr.sgml : 20020415 ACCESSION NUMBER: 0000711642-02-000047 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 3 CENTRAL INDEX KEY: 0000768890 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942940208 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14187 FILM NUMBER: 02587229 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10KSB 1 ccip3.txt CCIP3 FORM 10-KSB--Annual or Transitional Report Under Section 13 or 15(d) Form 10-KSB (Mark one) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 2001 [ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934[No Fee Required] For the transition period _________to _________ Commission file number 0-14187 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 (Name of small business issuer in its charter) California 94-2940208 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number 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 of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $14,110,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2001. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business Consolidated Capital Institutional Properties/3 (the "Registrant" or "Partnership") was organized on May 23, 1984, as a limited partnership under the California Uniform Limited Partnership Act. Commencing July 23, 1985, the Partnership offered 800,000 Units of Limited Partnership Interests (the "Units") at a purchase price of $250 per unit pursuant to a Registration Statement filed with the Securities and Exchange Commission. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units terminated on May 15, 1987, with 383,033 units sold for an aggregate of approximately $95,758,000. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. The general partner of the Partnership is ConCap Equities, Inc. ("CEI" or the "General Partner"), a Delaware corporation. The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2015 unless terminated prior to such date. The Partnership is engaged in the business of operating and holding real estate properties for investment. The Partnership was formed for the benefit of its Limited Partners (herein so called and together with the General Partner shall be called the "Partners") to lend funds to ConCap Equity Partners/3, ConCap Equity Partners/4, and ConCap Equity Partners/5 ("EP/3", "EP/4" and "EP/5", respectively). EP/3, EP/4 and EP/5 represent California limited partnerships in which certain of the partners were former shareholders and former management of Consolidated Capital Equities Corporation ("CCEC"), the former corporate general partner of the Partnership. Through December 31, 1994, the Partnership had made twelve specific loans against a Master Loan agreement and advanced a total of $67,300,000 (the "Master Loan"). EP/3 used $17,300,000 of the loaned funds to purchase two apartment complexes and one office building. EP/4 used $34,700,000 of the loaned funds to purchase four apartment complexes and one office building, which was subsequently sold in 1989. EP/5 used $15,300,000 of the loaned funds to purchase two apartment complexes and two office buildings. Through a series of transactions, the Partnership has acquired all of EP/3, EP/4 and EP/5's properties in full settlement of their liability under the Master Loan. For a brief description of the properties owned by the Partnership refer to "Item 2. Description of Properties". Upon the Partnership's formation in 1984, CCEC, a Colorado corporation, was the corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the limited partners in the Partnership and in each of the Affiliated Partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership. As of December 31, 2001, Insignia Properties, L.P. an affiliate of AIMCO, owned 100% of the outstanding stock of CEI. At December 31, 2001, the Partnership owned seven apartment complexes located in Florida, North Carolina, Washington, Michigan, Utah and Colorado, which range in age from 16 to 33 years old. The Registrant has no employees. Management and administrative services are provided by the General Partner and by agents retained by the General Partner. An affiliate of the General Partner provides such property management services. The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the General Partner, in such market area could have a material effect on the rental market for the apartments at the Partnership's properties and the rents that may be charged for such apartments. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state, and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in "Item 6." of this Form 10-KSB. Item 2. Description of Properties The following table sets forth the Registrant's investment in properties:
Date of Property Acquisition Type of Ownership Use Cedar Rim 4/12/91 Fee ownership subject to Apartment New Castle, Washington first mortgage. 104 units Hidden Cove by the Lake 3/23/90 Fee ownership subject to Apartment Belleville, Michigan first mortgage. 120 units Lamplighter Park 4/12/91 Fee ownership subject to Apartment Bellevue, Washington first mortgage. 174 units Park Capital 4/13/90 Fee ownership subject to Apartment Salt Lake City, Utah first mortgage. 135 units Tamarac Village 6/10/92 Fee ownership subject to Apartment I,II,III and IV first mortgage. 564 units Denver, Colorado Williamsburg Manor 11/30/94 Fee ownership subject to Apartment Cary, North Carolina first mortgage. 183 units Sandpiper I & II 11/30/94 Fee ownership subject to Apartment St. Petersburg, Florida first mortgage. 276 units
Schedule of Properties Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Cedar Rim $ 5,385 $ 2,695 3-30 yrs S/L $ 4,319 Hidden Cove 6,098 3,404 3-30 yrs S/L 3,996 Lamplighter Park 7,979 3,083 3-30 yrs S/L 6,288 Park Capital 3,671 1,919 5-30 yrs S/L 2,375 Tamarac Village 16,762 6,771 5-30 yrs S/L 11,712 Williamsburg Manor 7,482 2,253 5-30 yrs S/L 5,591 Sandpiper I & II 9,109 2,585 5-30 yrs S/L 6,881 $56,486 $22,710 $41,162
See "Note A" of the Notes to Financial Statements included in "Item 7" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Registrant's properties.
Principal Principal Balance At Stated Balance December 31, Interest Maturity Due At Property 2001 Rate Date Maturity (1) (in thousands) (in thousands) Cedar Rim $ 4,963 7.49% 08/01/21 $ -- Hidden Cove 2,849 6.81% 10/01/21 -- Lamplighter Park 7,927 7.48% 07/01/21 -- Park Capital 2,725 6.95% 12/01/05 2,725 Tamarac Village 20,807 7.45% 07/01/21 -- Williamsburg Manor 4,150 6.95% 12/01/05 4,150 Sandpiper I & II 3,950 6.95% 12/01/05 3,950 $47,371 $10,825
(1) See "Item 7. Financial Statements - Note C" for information with respect to the Registrant's ability to prepay the loans and other specific details about the loans. On June 27, 2001, the Partnership refinanced the mortgage encumbering Tamarac Village Apartments. The refinancing replaced indebtedness of approximately $9,400,000 with a new mortgage of $21,000,000. The new mortgage carries a stated interest rate of 7.45% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $136,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $587,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $66,000 due to the write-off of unamortized loan costs. On June 29, 2001, the Partnership refinanced the mortgage encumbering Lamplighter Park Apartments. The refinancing replaced indebtedness of approximately $3,500,000 with a new mortgage of $8,000,000. The new mortgage carries a stated interest rate of 7.48% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $2,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $245,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $35,000 due to the write-off of unamortized loan costs. On July 23, 2001, the Partnership refinanced the mortgage encumbering Cedar Rim Apartments. The refinancing replaced indebtedness of approximately $2,000,000 with a new mortgage of $5,000,000. The new mortgage carries a stated interest rate of 7.49% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on August 1, 2021 at which time the loan is scheduled to be fully amortized. Total capitalized loan costs were approximately $172,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $28,000 due to the write-off of unamortized loan costs. On September 19, 2001, the Partnership refinanced the mortgage encumbering Hidden Cove Apartments. The refinancing replaced indebtedness of approximately $2,200,000 with a new mortgage of $2,860,000. The new mortgage carries a stated interest rate of 6.81% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on October 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $152,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $120,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $27,000 due to the write-off of unamortized loan costs. Schedule of Rental Rates and Occupancy Average annual rental rates and occupancy for 2001 and 2000 for each property were as follows: Average Annual Rental Rate Average Annual (per unit) Occupancy Property 2001 2000 2001 2000 Cedar Rim $11,834 $11,381 91% 93% Hidden Cove 9,216 9,325 88% 94% Lamplighter Park 10,840 10,294 94% 97% Park Capital 8,655 8,361 93% 95% Tamarac Village 8,369 7,954 93% 96% Williamsburg Manor 9,303 9,217 95% 97% Sandpiper I & II 8,179 7,797 96% 97% The Managing General Partner attributes the decrease in occupancy at Hidden Cove Apartments to more stringent tenant screening at the property. The decrease in occupancy at Lamplighter Park Apartments is attributed to an overall decline in the market and the loss of jobs in the area. The decrease in occupancy at Tamarac Village Apartments is attributed to an overall decline in the multi-family market for the area due to increased home purchases and layoffs. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. The Partnership's properties are subject to competition from other residential apartment complexes in the area. The General Partner believes that all of the properties are adequately insured. The multifamily residential properties' lease terms are for one year or less. No residential tenant leases 10% or more of the available rental space. All of the properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. Schedule of Real Estate Taxes and Rates Real estate taxes and rates for each property were as follows: 2001 2001 Taxes Rate (in thousands) Cedar Rim $ 95 1.21% Hidden Cove 71 4.60% Lamplighter Park 78 0.95% Park Capital 50 0.79% Tamarac Village 186 0.54% Williamsburg Manor 95 1.02% Sandpiper I & II 206 2.37% Capital Improvements Cedar Rim During the year ended December 31, 2001, the Partnership completed approximately $191,000 of capital improvements at the property, consisting primarily of structural improvements, carpet and vinyl replacements, and interior decoration. These improvements were funded from replacement reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $31,200. Additional improvements may be considered and will depend on the physical condition of the property and anticipated cash flow generated by the property. Hidden Cove by the Lake During the year ended December 31, 2001, the Partnership completed approximately $118,000 of capital improvements, consisting primarily of carpet and vinyl replacements, air conditioning unit replacements, and structural improvements. These improvements were funded from replacement reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $36,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Lamplighter Park During the year ended December 31, 2001, the Partnership completed approximately $167,000 of capital improvements, consisting primarily of grounds lighting, window treatments, appliances, structural improvements and carpet and vinyl replacements. These improvements were funded from replacement reserves, insurance proceeds, and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $52,200. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Park Capital During the year ended December 31, 2001, the Partnership completed approximately $316,000 of capital improvements, consisting primarily of structural improvements, installing washers and dryers and carpet and vinyl replacements. These improvements were funded from operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $40,500. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Tamarac Village During the year ended December 31, 2001, the Partnership completed approximately $637,000 of capital improvements, consisting primarily of electrical upgrades, carpet and vinyl replacements, roof replacement, appliances, garage and carport improvements, and interior decoration. These improvements were funded from replacement reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $169,200. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Williamsburg Manor During the year ended December 31, 2001, the Partnership completed approximately $145,000 of capital improvements, consisting primarily of plumbing fixtures, air conditioning unit replacements, and carpet and vinyl replacements. These improvements were funded from replacement reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $54,900. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Sandpiper I and II During the year ended December 31, 2001, the Partnership completed approximately $231,000 of capital improvements consisting primarily of carpet and vinyl replacements, structural improvements, air conditioning unit replacements, recreational facility improvements, appliances, and cabinet replacements. These improvements were funded from replacement reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $82,800. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Item 3. Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders During the quarter ended December 31, 2001, no matter was submitted to a vote of the Unit holders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters The Partnership, a publicly held limited partnership, sold 383,033 limited partnership units aggregating approximately $95,758,000. The Partnership currently has 10,200 holders of record of Limited Partnership Units owning an aggregate of 383,033 units. Affiliates of the General Partner owned 197,350 units or 51.52% at December 31, 2001. No public trading market has developed for the units, and it is not anticipated that such a market will develop in the future. The following table sets forth the distributions made by the Partnership for the years ended December 31, 2000 and 2001 (see "Item 6" for further details). Distributions Per Limited Aggregate Partnership Unit (in thousands) 01/01/00 - 12/31/00 $ 7,996 (1) $20.67 01/01/01 - 12/31/01 22,656 (2) 58.56 (1) Distributions were made from cash from operations. (2) Consists of $4,271,000 of cash from operations and $18,385,000 of cash from the refinancing proceeds of Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments during 2001. Future cash distributions will depend on the levels of cash generated from operations, timing of debt maturities, refinancings, and/or property sales and the availability of cash reserves. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit distributions to its partners in 2002 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 197,350 limited partnership units in the Partnership representing 51.52% of the outstanding units at December 31, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 51.52% of the outstanding units, AIMCO is in a position to control all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Item 6. Management's Discussion and Analysis of Financial Conditions and Results of Operations The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. Results of Operations The Partnership had net income of approximately $1,916,000 for the year ended December 31, 2001, compared to approximately $2,984,000 for the year ended December 31, 2000. Net income decreased for the year ended December 31, 2001 partially due to the extraordinary loss on early extinguishment of debt and additional interest expense relating to the refinancing of the mortgages encumbering Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments during 2001 (see discussion in "Liquidity and Capital Resources" below). The Partnership had income before the extraordinary item of approximately $2,072,000 for the year ended December 31, 2001, compared to approximately $2,984,000 for the year ended December 31, 2000. The decrease in income before the extraordinary item is due to an increase in total expenses partially offset by an increase in total revenues. Total expenses increased for the year ended December 31, 2001 primarily due to increased operating, property tax, depreciation and interest expenses, partially offset by reduced general and administrative expenses. Operating expenses increased due to increases in hazard insurance at all of the Partnership`s properties, increased utility expenses primarily at Tamarac Village Apartments and Lamplighter Village Apartments and increased property management fees at all of the Partnership's properties. Property tax expense increased primarily due to increased assessed values at Tamarac Village Apartments and Cedar Rim Apartments and the timing of the receipt of the tax bills at Hidden Cove and Tamarac Village Apartments which impacted the accruals at December 31, 2001 and 2000. These invoices were partially offset by a refund received during the year ended December 31, 2001 at Williamsburg Manor Apartments for taxes paid in prior years. Depreciation expense increased due to capital improvements completed during the past twelve months that are now being depreciated. Interest expense increased due to the refinancing of the mortgages encumbering Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments during 2001, which increased the average debt balance at the properties for 2001. General and administrative expenses decreased due to a decrease in the cost of services included in the management reimbursements to the General Partner as allowed under the Partnership Agreement, reduced legal expenses and professional fees associated with the management of the Partnership. Also included in general and administrative expenses at December 31, 2001 and 2000 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. Total revenues increased due to increases in both rental and other income. Rental income increased due to increased average annual rental rates at all of the Partnership's properties, with the exception of Hidden Cove Apartments and increased bad debt collections at Tamarac Village Apartments and Sandpiper I & II Apartments, which was partially offset by decreases in occupancy at all of the Partnership's properties and increased concession costs at all the Partnership's properties except Williamsburg Apartments. Other income increased primarily due to increased utility reimbursements at Sandpiper I & II Apartments, Tamarac Village Apartments, and Lamplighter Park Apartments and increases in corporate unit revenue at Park Capital Apartments which were partially offset by a decrease in interest income due to lower average cash balances in interest bearing accounts. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 2001, the Partnership held cash and cash equivalents of approximately $510,000 compared to approximately $2,010,000 at December 31, 2000. The decrease in cash and cash equivalents for the year ended December 31, 2001, from the Partnership's year ended December 31, 2000, was approximately $1,500,000. This decrease is due to approximately $4,334,000 of cash used in financing activities and approximately $1,771,000 of cash used in investing activities, which was partially offset by approximately $4,605,000 of cash provided by operating activities. Cash used in financing activities consisted of distributions to the partners, repayments of mortgage notes payable, loan costs paid, and principal payments on mortgage notes payable which were partially offset by proceeds from mortgage notes payable. Cash used in investing activities consisted of property improvements and replacements which was partially offset by insurance proceeds received and net receipts from restricted escrows maintained by the mortgage lender. The Partnership invests its working capital reserves in interest bearing accounts. On June 27, 2001, the Partnership refinanced the mortgage encumbering Tamarac Village Apartments. The refinancing replaced indebtedness of approximately $9,400,000 with a new mortgage of $21,000,000. The new mortgage carries a stated interest rate of 7.45% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $136,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $587,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $66,000 due to the write-off of unamortized loan costs. On June 29, 2001, the Partnership refinanced the mortgage encumbering Lamplighter Park Apartments. The refinancing replaced indebtedness of approximately $3,500,000 with a new mortgage of $8,000,000. The new mortgage carries a stated interest rate of 7.48% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $2,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $245,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $35,000 due to the write-off of unamortized loan costs. On July 23, 2001, the Partnership refinanced the mortgage encumbering Cedar Rim Apartments. The refinancing replaced indebtedness of approximately $2,000,000 with a new mortgage of $5,000,000. The new mortgage carries a stated interest rate of 7.49% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on August 1, 2021 at which time the loan is scheduled to be fully amortized. Total capitalized loan costs were approximately $172,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $28,000 due to the write-off of unamortized loan costs. On September 19, 2001, the Partnership refinanced the mortgage encumbering Hidden Cove Apartments. The refinancing replaced indebtedness of approximately $2,200,000 with a new mortgage of $2,860,000. The new mortgage carries a stated interest rate of 6.81% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on October 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $152,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $120,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $27,000 due to the write-off of unamortized loan costs. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. The Partnership is currently evaluating the capital improvement needs of the properties for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $466,800. Additional improvements may be considered and will depend on the physical condition of the properties as well as replacement reserves and anticipated cash flow generated by the properties. The capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are required, the Registrant's distributable cash flow, if any, may be adversely affected. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $47,371,000 has maturity dates ranging from December 2005 to October 2021. The mortgage indebtedness of approximately $36,546,000 that was refinanced during 2001 requires monthly payments until the loans mature between July 2021 and October 2021 at which time the loans are scheduled to be fully amortized. The Partnership's other mortgage indebtedness of $10,825,000 requires interest only payments, matures in December 2005 and has balloon payments due at maturity. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant may risk losing such properties through foreclosure. During the year ended December 31, 2001, the Registrant declared and paid distributions of approximately $22,656,000 (approximately $22,429,000 to the limited partners or $58.56 per limited partnership unit) consisting of approximately $4,271,000 (approximately $4,228,000 to the limited partners or $11.04 per limited partnership unit) from operations and approximately $18,385,000 (approximately $18,201,000 to the limited partners or $47.52 per limited partnership unit) from the refinancing proceeds of Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments. During the year ended December 31, 2000, the Partnership paid cash distributions generated from operations of approximately $7,996,000 (approximately $7,916,000 to the limited partners or $20.67 per limited partnership unit). Future cash distributions will depend on the levels of cash generated from operations, timing of debt maturities, refinancings, and/or property sales, and the availability of cash reserves. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit distributions to its partners in the year 2002 or subsequent periods. Until October 17, 2000, the Partnership was required by the Partnership Agreement 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 were made from this reserve, operating revenues were to be allocated to such reserve to the extent necessary to maintain the foregoing level. During the third quarter of 2000, the Partnership solicited the vote of the Limited Partners to approve an amendment to the Partnership Agreement. The effect of the amendment was to change such provision to require the Partnership to maintain reasonable reserves for normal working capital and contingencies in an amount determined from time to time by the General Partner in its sole discretion. The Solicitation Statement was mailed to Limited Partners on September 16, 2000. Upon the expiration of the solicitation period (close of business on October 16, 2000), the requisite number of positive votes were received to effect this amendment. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 197,350 limited partnership units in the Partnership representing 51.52% of the outstanding units at December 31, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 51.52% of the outstanding units, AIMCO is in a position to control all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Item 7. Financial Statements CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Balance Sheet - December 31, 2001 Statements of Operations - Years ended December 31, 2001 and 2000 Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 2001 and 2000 Statements of Cash Flows - Years ended December 31, 2001 and 2000 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Institutional Properties/3 We have audited the accompanying balance sheet of Consolidated Capital Institutional Properties/3 as of December 31, 2001, and the related statements of operations, changes in partners' (deficit) capital, and cash flows for each of the two years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Capital Institutional Properties/3 as of December 31, 2001, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina February 15, 2002 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 BALANCE SHEET (in thousands, except unit data) December 31, 2001
Assets Cash and cash equivalents $ 510 Receivables and deposits 897 Restricted escrows 445 Other assets 1,360 Investment properties (Notes C and F) Land $ 8,641 Buildings and related personal property 47,845 56,486 Less accumulated depreciation (22,710) 33,776 $ 36,988 Liabilities and Partners' Deficit Liabilities Accounts payable $ 168 Tenant security deposit liabilities 315 Accrued property taxes 211 Other liabilities 413 Mortgage notes payable (Note C) 47,371 Partners' Deficit General partner $ (956) Limited partners (383,033 units outstanding) (10,534) (11,490) $ 36,988 See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF OPERATIONS (in thousands, except per unit data)
For the Years Ended December 31, 2001 2000 Revenues: Rental income $12,827 $12,803 Other income 1,283 1,165 Total revenues 14,110 13,968 Expenses: Operating 4,797 4,532 General and administrative 671 765 Depreciation 2,902 2,870 Interest 2,863 2,127 Property taxes 805 690 Total expenses 12,038 10,984 Income before extraordinary item 2,072 2,984 Extraordinary loss on early extinguishment of debt (Note C) (156) -- Net income (Note G) $ 1,916 $ 2,984 Net income allocated to general partner (1%) $ 19 $ 30 Net income allocated to limited partners (99%) 1,897 2,954 $ 1,916 $ 2,984 Per limited partnership unit: Income before extraordinary item $ 5.35 $ 7.71 Extraordinary loss on early extinguishment of debt (0.40) -- Net income $ 4.95 $ 7.71 Distributions per limited partnership unit $ 58.56 $ 20.67 See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 383,033 $ 1 $ 95,758 $ 95,759 Partners' (deficit) capital at December 31, 1999 383,033 $ (698) $ 14,960 $ 14,262 Net income for the year ended December 31, 2000 -- 30 2,954 2,984 Distributions to partners -- (80) (7,916) (7,996) Partners' (deficit) capital at December 31, 2000 383,033 (748) 9,998 9,250 Net income for the year ended December 31, 2001 -- 19 1,897 1,916 Distributions to partners -- (227) (22,429) (22,656) Partners' deficit at December 31, 2001 383,033 $ (956) $(10,534) $(11,490) See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2001 2000 Cash flows from operating activities: Net income $ 1,916 $ 2,984 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,902 2,870 Amortization of loan costs 116 121 Extraordinary loss on early extinguishment of debt 156 -- Casualty loss 9 -- Changes in accounts: Receivables and deposits (28) (79) Other assets (5) (37) Accounts payable (159) (51) Due to affiliate -- (125) Tenant security deposit liabilities (30) 64 Accrued property taxes 59 (35) Other liabilities (331) 294 Net cash provided by operating activities 4,605 6,006 Cash flows from investing activities: Property improvements and replacements (1,784) (1,873) Net receipts from restricted escrows 1 422 Insurance proceeds received 12 -- Net cash used in investing activities (1,771) (1,451) Cash flows from financing activities: Repayment of mortgage notes payable (17,100) -- Proceeds from mortgage notes payable 36,860 -- Loan costs paid (1,124) -- Payments on mortgage notes payable (314) -- Distributions to partners (22,656) (7,996) Net cash used in financing activities (4,334) (7,996) Net decrease in cash and cash equivalents (1,500) (3,441) Cash and cash equivalents at beginning of year 2,010 5,451 Cash and cash equivalents at end of year $ 510 $ 2,010 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,619 $ 2,006 Supplemental disclosure of non-cash activity: Property improvements and replacements in accounts payable $ 21 $ -- Insurance receivable for casualty at Lamplighter Park Apartments $ 237 $ -- See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 NOTES TO FINANCIAL STATEMENTS December 31, 2001 Note A - Organization and Significant Accounting Policies Organization Consolidated Capital Institutional Properties/3 (the "Partnership" or the "Registrant"), a California limited partnership, was formed on May 23, 1984, to lend funds through non-recourse notes with participation interests (the "Master Loan"). The loans were made to, and the real properties that secure the Master Loan were purchased and owned by, ConCap Equity Partners/3, ConCap Equity Partners/4, and ConCap Equity Partners/5, ("EP/3", "EP/4", and "EP/5", respectively), California limited partnerships, in which certain of the partners were former shareholders and former management of Consolidated Capital Equities Corporation ("CCEC"). The Partnership entered into a Master Loan Agreement with EP/3, EP/4, and EP/5, pursuant to which the aggregate principal would not exceed the net amount raised by the Partnership's offering of approximately $96,000,000. Through a series of transactions, the Partnership has acquired all of EP/3, EP/4 and EP/5's properties in full settlement of their liability under the Master Loan. Upon the Partnership's formation in 1984, CCEC, a Colorado corporation, was the corporate general partner. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). In 1990, as part of CCEC's reorganization plan, ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI") acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships and replaced CCEC as managing general partner in all 16 partnerships. The General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The directors and officers of the General Partner also serve as executive officers of AIMCO. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2015 unless terminated prior to such date. The Partnership operates seven apartment properties located throughout the United States. Cash and Cash Equivalents Includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $365,000 at December 31, 2001 that is maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Tenant Security Deposits The Partnership requires security deposits from lessees for the duration of the lease, and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Restricted Escrows As a result of the refinancing of Williamsburg Manor Apartments, Sandpiper I & II Apartments and Park Capital Apartments in 1995 a replacement reserve was established. Each property makes monthly deposits to establish and maintain a Replacement Reserve designated for repairs and replacements at the properties. At December 31, 2001, this reserve totaled approximately $155,000. As a result of the refinancing of the mortgages encumbering Lamplighter Park Apartments, Tamarac Village Apartments, and Hidden Cove Apartments in 2001, capital improvement escrows were established for $2,000, $136,000 and $152,000, respectively. These capital improvement escrows are designated for certain capital replacements at the properties. At December 31, 2001, this reserve balance totaled approximately $290,000. Investment Properties Investment properties consist of seven apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of investment properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in the years ended December 31, 2001 or 2000. See "Recent Accounting Pronouncements" below. Depreciation Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for real property over 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal property additions over 5 years. Leases The Partnership leases its residential properties under short-term operating leases. Lease terms are generally one year or less in duration. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during periods of declining occupancy or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Loan Costs At December 31, 2001, loan costs of approximately $1,493,000, less accumulated amortization of approximately $265,000 are included in other assets. Loan costs are amortized on a straight-line basis over the life of the loans. Allocation of Net Income and Net Loss The Partnership Agreement provides for net income and net losses for both financial and tax reporting purposes to be allocated 99% to the Limited Partners and 1% to the General Partner. Fair Value of Financial Instruments SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair values due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Segment Reporting SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Advertising The Partnership expenses the costs of advertising as incurred. Advertising expense of approximately $209,000 and $229,000 for the years ended December 31, 2001 and 2000, respectively, were charged to operating expense. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Note B - Related Party Transactions The Partnership has no employees and is dependent on the General Partner and/or its affiliates for the management and administration of all Partnership activities. The limited partnership agreement ("Partnership Agreement") provides for payments to affiliates for property management services based on a percentage of revenue. 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 following amounts were paid or accrued to the General Partner and affiliates during each of the years ended December 31, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $748 $688 Reimbursements for services of affiliates (included in investment properties and general and administrative expenses) 993 590 Loan costs (included in other assets) 369 -- During the years ended December 31, 2001 and 2000, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Partnership's residential properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $748,000 and $688,000 for management fees for the years ended December 31, 2001 and 2000, respectively. Affiliates of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $993,000 and $590,000 for the years ended December 31, 2001 and 2000, respectively. Included in these amounts are construction oversight fees paid to an affiliate of the General Partner of approximately $509,000 and $48,000 for the years ended December 31, 2001 and 2000, respectively. This fee is related to construction management services provided by AIMCO and its affiliates. The fee was calculated based on a percentage of current and certain prior year additions to investment properties and is being depreciated over 15 years. In addition to reimbursement for services of affiliates, an affiliate of the General Partner was paid approximately $369,000 for services related to the refinancing of the mortgages encumbering Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments during the year ended December 31, 2001. These costs were capitalized and are included in other assets on the balance sheet. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $121,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 197,350 limited partnership units in the Partnership representing 51.52% of the outstanding units at December 31, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 51.52% of the outstanding units, AIMCO is in a position to control all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Note C - Mortgage Notes Payable Mortgage notes payable at December 31, 2001, consist of the following:
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At 2001 Interest Rate Date Maturity Property (in thousands) (in thousands) Cedar Rim $ 4,963 $ 40 7.49% 08/01/21 $ -- Hidden Cove 2,849 22 6.81% 10/01/21 -- Lamplighter Park 7,927 64 7.48% 07/01/21 -- Park Capital 2,725 16 (1) 6.95% 12/01/05 2,725 Tamarac Village 20,807 169 7.45% 07/01/21 -- Williamsburg Manor 4,150 24 (1) 6.95% 12/01/05 4,150 Sandpiper I & II 3,950 23 (1) 6.95% 12/01/05 3,950 $47,371 $358 $10,825
(1) Interest only payments. The mortgage notes payable are non-recourse and are secured by pledge of the respective properties. Also, all notes require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. On June 27, 2001, the Partnership refinanced the mortgage encumbering Tamarac Village Apartments. The refinancing replaced indebtedness of approximately $9,400,000 with a new mortgage of $21,000,000. The new mortgage carries a stated interest rate of 7.45% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $136,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $587,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $66,000 due to the write-off of unamortized loan costs. On June 29, 2001, the Partnership refinanced the mortgage encumbering Lamplighter Park Apartments. The refinancing replaced indebtedness of approximately $3,500,000 with a new mortgage of $8,000,000. The new mortgage carries a stated interest rate of 7.48% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on July 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $2,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $245,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $35,000 due to the write-off of unamortized loan costs. On July 23, 2001, the Partnership refinanced the mortgage encumbering Cedar Rim Apartments. The refinancing replaced indebtedness of approximately $2,000,000 with a new mortgage of $5,000,000. The new mortgage carries a stated interest rate of 7.49% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on August 1, 2021 at which time the loan is scheduled to be fully amortized. Total capitalized loan costs were approximately $172,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $28,000 due to the write-off of unamortized loan costs. On September 19, 2001, the Partnership refinanced the mortgage encumbering Hidden Cove Apartments. The refinancing replaced indebtedness of approximately $2,200,000 with a new mortgage of $2,860,000. The new mortgage carries a stated interest rate of 6.81% as compared to the 7.33% interest rate on the old mortgage. Payments on the mortgage loan are due monthly until the loan matures on October 1, 2021 at which time the loan is scheduled to be fully amortized. In addition, the Partnership was required to establish a repair escrow of approximately $152,000 with the lender for certain capital replacements. Total capitalized loan costs were approximately $120,000 during the year ended December 31, 2001. The Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $27,000 due to the write-off of unamortized loan costs. Scheduled principal payments of mortgage notes payable subsequent to December 31, 2001 are as follows (in thousands): 2002 $ 856 2003 923 2004 993 2005 11,895 2006 1,152 Thereafter 31,552 $47,371 Note D - Commitment Until October 17, 2000, the Partnership was required by the Partnership Agreement 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 were made from this reserve, operating revenue were to be allocated to such reserve to the extent necessary to maintain the foregoing level. During the third quarter of 2000, the Partnership solicited the vote of the Limited Partners to approve an amendment to the Partnership Agreement. The effect of the amendment was to change such provision to require the Partnership to maintain reasonable reserves for normal working capital and contingencies in an amount determined from time to time by the General Partner in its sole discretion. The Solicitation Statement was mailed to Limited Partners on September 16, 2000. Upon the expiration of the solicitation period (close of business on October 16, 2000), the requisite number of positive votes were received to effect this amendment. Note E - Distributions During the year ended December 31, 2001, the Registrant declared and paid distributions of approximately $22,656,000 (approximately $22,429,000 to the limited partners or $58.56 per limited partnership unit) consisting of approximately $4,271,000 (approximately $4,228,000 to the limited partners or $11.04 per limited partnership unit) from operations and approximately $18,385,000 (approximately $18,201,000 to the limited partners or $47.52 per limited partnership unit) from the refinancing proceeds of Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments. During the year ended December 31, 2000, the Partnership paid cash distributions generated from operations of approximately $7,996,000 (approximately $7,916,000 to the limited partners or $20.67 per limited partnership unit). Note F - Investment Properties and Accumulated Depreciation
Initial Cost To Partnership (in thousands) Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) Cedar Rim $ 4,963 $ 778 $ 4,322 $ 285 Hidden Cove 2,849 184 4,416 1,498 Lamplighter Park 7,927 2,458 5,167 354 Park Capital 2,725 280 2,100 1,291 Tamarac Village 20,807 2,464 10,536 3,762 Williamsburg Manor 4,150 1,281 5,124 1,077 Sandpiper I & II 3,950 1,463 5,851 1,795 Totals $47,371 $ 8,908 $37,516 $10,062
Gross Amount At Which Carried At December 31, 2001 (in thousands) Buildings And Related Date of Personal Accumulated Construc- Date Depreciable Description Land Property Total Depreciation tion Acquired Life-Years (in thousands) Cedar Rim $ 618 $ 4,767 $ 5,385 $ 2,695 1980 04/12/91 3-30 Hidden Cove 184 5,914 6,098 3,404 1972 03/23/90 3-30 Lamplighter Park 2,351 5,628 7,979 3,083 1968 04/12/91 3-30 Park Capital 280 3,391 3,671 1,919 1974 04/13/90 5-30 Tamarac Village 2,464 14,298 16,762 6,771 1978 06/10/92 5-30 Williamsburg Manor 1,281 6,201 7,482 2,253 1970 11/30/94 5-30 Sandpiper I & II 1,463 7,646 9,109 2,585 1976/1985 11/30/94 5-30 $ 8,641 $47,845 $56,486 $22,710
Reconciliation of "Investment Properties and Accumulated Depreciation": For the Years Ended December 31, 2001 2000 (in thousands) Investment Properties: Balance at beginning of year $55,210 $53,428 Additions 1,805 1,782 Property disposal (529) -- Balance at end of year $56,486 $55,210 Accumulated Depreciation: Balance at beginning of year $20,079 $17,209 Additions charged to expense 2,902 2,870 Property disposal (271) -- Balance at end of year $22,710 $20,079 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2001 and 2000 is approximately $59,080,000 and $57,805,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2001 and 2000 is approximately $17,918,000 and $15,381,000, respectively. Note G - Income Taxes The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net income and Federal taxable income (in thousands, except per unit data): 2001 2000 Net income as reported $ 1,916 $ 2,984 Add (deduct): Fixed asset write-offs and casualty gain 237 -- Depreciation differences 364 392 Change in prepaid rental income (182) 60 Other (204) (58) Federal taxable income $ 2,131 $ 3,378 Federal taxable income per limited partnership unit $ 5.51 $ 8.73 The following is a reconciliation at December 31, 2001, between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net liabilities as reported $(11,490) Land and buildings 2,594 Accumulated depreciation 4,792 Syndication fees 11,298 Other 358 Net assets - Federal tax basis $ 7,552 Note H - Casualty In October 2001, a fire occurred at Lamplighter Park Apartments which caused damage to thirty units of the complex. As a result, the assets and related accumulated depreciation were written off in 2001. At December 31, 2001, the anticipated proceeds are recorded in insurance receivable. Therefore, no gain or loss relating to this fire was recognized during the year ended December 31, 2001. Note I - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 9. Directors and Executive Officers of the Registrant Consolidated Capital Institutional Properties/3 (the "Partnership" or the "Registrant") has no officers or directors. ConCap Equities, Inc. ("CEI" or the "General Partner") manages and controls the Registrant and has general responsibility and authority in all matters affecting its business. The names of the directors and executive officers of the General Partner, their ages and the nature of all positions with CEI presently held by them are set forth below. There are no family relationships between or among any officers or directors. Name Age Position Patrick J. Foye 44 Executive Vice President and Director Martha L. Long 42 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under auditing standards generally accepted in the United States. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner have approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2001 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were audit services of approximately $75,000 and non-audit services (principally tax-related) of approximately $38,000. Item 10. Executive Compensation None of the directors or officers of the General Partner received any remuneration from the Registrant. Item 11. Security Ownership of Certain Beneficial Owners and Management Security Ownership of Certain Beneficial Owners Except as provided below, as of December 31, 2001, no person was known to CEI to own of record or beneficially more than 5 percent of the Units of the Partnership: Name and address Number of Units Percent of Total Insignia Properties, LP 44,867.7 11.71% (an affiliate of AIMCO) Madison River Properties, LLC 46,747.4 12.21% (an affiliate of AIMCO) Cooper River Properties, LLC 28,039.3 7.32% (an affiliate of AIMCO) AIMCO Properties, LP 77,695.6 20.28% (an affiliate of AIMCO) Insignia Properties LP, Cooper River Properties, LLC and Madison River Properties, LLC are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, South Carolina 29602. AIMCO Properties, LP, is also indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Boulevard, Denver, Colorado 80222. Beneficial Owners of Management Except as described in Item 12 above, neither CEI nor any of the directors or officers of CEI own any Units of the Partnership of record or beneficially. Changes in Control Beneficial Owners of CEI As of December 31, 2001, the following persons were known to CEI to be the beneficial owners of more than 5 percent of its common stock: Name and address Number of CEI Shares Percent of Total Insignia Properties, L.P. 100,000 100% 55 Beattie Place Greenville, SC 29602 Insignia Properties, L.P. is an affiliate of AIMCO (see "Item 1. Description of Business"). Item 12. Certain Relationships and Related Transactions The Partnership has no employees and is dependent on the General Partner and/or its affiliates for the management and administration of all Partnership activities. The limited partnership agreement ("Partnership Agreement") provides for payments to affiliates for property management services based on a percentage of revenue. 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 following amounts were paid or accrued to the General Partner and affiliates during each of the years ended December 31, 2001 and 2000: 2001 2000 (in thousands) Property management fees $748 $688 Reimbursements for services of affiliates 993 590 Loan costs 369 -- During the years ended December 31, 2001 and 2000, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Partnership's residential properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $748,000 and $688,000 for management fees for the years ended December 31, 2001 and 2000, respectively. Affiliates of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $993,000 and $590,000 for the years ended December 31, 2001 and 2000, respectively. Included in these amounts are construction oversight fees paid to an affiliate of the General Partner of approximately $509,000 and $48,000 for the years ended December 31, 2001 and 2000, respectively. This fee is related to construction management services provided by AIMCO and its affiliates. The fee was calculated based on a percentage of current and certain prior year additions to investment properties and is being depreciated over 15 years. In addition to reimbursement for services of affiliates, an affiliate of the General Partner was paid approximately $369,000 for services related to the refinancing of the mortgages encumbering Lamplighter Park Apartments, Tamarac Village Apartments, Cedar Rim Apartments, and Hidden Cove Apartments during the year ended December 31, 2001. These costs were capitalized and are included in other assets on the balance sheet. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $121,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 197,350 limited partnership units in the Partnership representing 51.52% of the outstanding units at December 31, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 51.52% of the outstanding units, AIMCO is in a position to control all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K filed in the fourth quarter of calendar year 2001: None. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 By: CONCAP EQUITIES, INC. General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: 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 on the dates indicated. /s/Patrick J. Foye Executive Vice President Date: Patrick J. Foye and Director /s/Martha L. Long Senior Vice President Date: Martha L. Long and Controller CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT incorporated by reference to Current Report on Form 8-K dated October 1, 1998. 3 Certificates of Limited Partnership, as amended. 10.3 Participating Note Master Loan Agreement (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985). 10.4 Participating Note Security Agreement (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985). 10.5 Form of Deed of Trust and Rider (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23,1985). 10.6 Several Promissory Notes (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985). 10.7 Property Management Agreement No. 101 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). 10.8 Property Management Agreement No. 301 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 Property Management Agreement No. 315 dated April 12, 1991, by and between the Partnership and CCMLP. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.10Bill 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). 10.11Assignment and Assumption 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). 10.12Assignment and Agreement as to Certain Property Management Services dated October 23, 1990, by and between CCMLP and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.13Assignment and Agreement as to Certain Property Management Services dated April 12, 1991, by and between CCMLP and ConCap Capital Company (Incorporated by reference to the 1991 Annual Report on Form 10-K for the year ended December 31, 1991). 10.14Assignment and Agreement dated October 23, 1990, by and between CCMLP and The Hayman Company (100 Series of Property Management Contracts) (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.15Assignment and Agreement dated October 23, 1990, by and between CCMLP and Metro ConCap, Inc. (300 Series of Property Management Contracts) (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.16Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Metro ConCap, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.17Construction Management Cost Reimbursement Agreement dated April 12, 1991, by and between the Partnership and Metro ConCap, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.18Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and The Hayman Company. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.19Investor 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). 10.20Assignment and Assumption Agreement October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1990). 10.21Letter 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). 10.22Financial 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). 10.23Assignment 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). 10.24Letter 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). 10.25Joint Application for Approval of Settlement Agreement dated August 10, 1990, between James W. Cunningham (EP/4's Trustee) and the Partnership (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.26Property Management Agreement No. 415 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). 10.27Assignment and Assumption Agreement (Property Management Agreement No. 415) 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). 10.28Assignment and Agreement as to Certain Property Management Services as related to Property Management Agreement No. 415 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). 10.29Property Management Agreement No. 425 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). 10.30Assignment and Assumption Agreement (Property Management Agreement No. 425) 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). 10.31Assignment and Agreement as to Certain Property Management Services as related to Property Management Agreement No. 425 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). 10.32Property Management Agreement No. 509 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.33Assignment and Assumption Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.34Multifamily Note dated November 30, 1995 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1995). 10.35Multifamily Note dated November 30, 1995 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1995). 10.36 Multifamily Note dated November 30, 1995 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1995). 10.37Multifamily Note dated November 1, 1996 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1996). 10.38Multifamily Note dated November 1, 1996 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1996). 10.39Multifamily Note dated November 1, 1996 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1996). 10.40Multifamily Note dated November 1, 1996 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1996). 10.41Multifamily Note dated November 1, 1996 between CCIP/3, a California limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1996). 10.42Purchase and Sale Contract between Registrant and Eastgate Technology Partnership, L.P., a California limited partnership, dated April 30, 1999. (Incorporated by reference to the Current Report on Form 8-K dated June 18, 1999.) 10.43Amendment to Purchase and Sale Contract between Registrant and Eastgate Technology Partners, L.P., dated May 28, 1999. (Incorporated by reference to the Current Report on Form 8-K dated June 18, 1999.) 10.44Purchase and Sale Contract between Registrant and FR Acquisitions, Inc., a Maryland corporation, dated June 15, 1999. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1999.) 10.45Amendment to Purchase and Sale Contract between Registrant and FR Acquisitions, Inc., a Maryland corporation, dated August 31, 1999. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1999.) 10.46Second Amendment to Purchase and Sale Contract between Registrant and FR Acquisitions, Inc., a Maryland corporation, dated September 16, 1999. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1999.) 10.47Third Amendment to Purchase and Sale Contract between Registrant and FR Acquisitions, Inc., a Maryland corporation, dated September 27, 1999. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1999.) 10.48Multifamily Note dated June 27, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001.) 10.49Multifamily Note dated June 29, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001.) 10.50Multifamily Note dated July 23, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001.) 10.51Multifamily Note dated September 19, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended September 30, 2001.) 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note A of Item 7 - Financial Statements of this Form 10-KSB). 16 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). 28.1 Fee Owner's General Partnership Agreement (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985). 28.2 Fee Owner's Certificate of Partnership (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985). -----END PRIVACY-ENHANCED MESSAGE-----