-----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, HC/cf2pNaCIQkcdehs6qggUEauVib8kOWMrkLkKXtGCU/Ir2XucOMtemoq9YKZXS HgU25vFf4I5xSlu6gkG8Nw== 0000768890-96-000005.txt : 19960813 0000768890-96-000005.hdr.sgml : 19960813 ACCESSION NUMBER: 0000768890-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14187 FILM NUMBER: 96607941 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29802 10-Q 1 FORM 10-Q--Quarterly Report Under Section 13 or 15(d) Of the Securities Exchange Act of 1934 (As last amended by Rel. No. 312905, eff. 4/26/93.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1996 or [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from.........to......... (Amended by Exch Act Rel No. 312905. eff 4/26/93.) Commission file number 0-14187 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 (Exact name of registrant as specified in its charter) California 94-2940208 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Registrant's telephone number (864) 239-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 BALANCE SHEET (in thousands, except unit data)
June 30, December 31, 1996 1995 (Unaudited) (Note) Assets Cash: Unrestricted $ 7,185 $ 9,871 Restricted - tenant security deposits 354 349 Note receivable -- 4,400 Investments 109 109 Restricted escrows 901 1,188 Other assets 1,071 1,069 Investment properties: Land 12,345 10,365 Building and related personal property 48,380 45,470 60,725 55,835 Less accumulated depreciation (11,268) (9,958) 49,457 45,877 $ 59,077 $ 62,863 Liabilities and Partners' Capital (Deficit) Liabilities Mortgage notes payable and accrued interest $ 17,965 $ 18,029 Accounts payable and accrued expenses 599 857 Tenant security deposits 350 339 Accrued taxes 320 177 19,234 19,402 Partners' Capital (Deficit) General partner (418) (407) Limited partners (383,033 units outstanding) 40,261 43,868 39,843 43,461 $ 59,077 $ 62,863 Note: The balance sheet at December 31, 1995, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See Accompanying Notes to Financial Statements
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Revenues: Rental income $ 3,109 $ 2,713 $ 6,232 $ 5,571 Interest and other income 329 565 450 780 Total revenues 3,438 3,278 6,682 6,351 Expenses: Operating 1,815 1,560 3,591 2,818 General and administrative 161 196 321 434 Depreciation 672 643 1,336 1,217 Interest 363 330 732 620 Write-down of note receivable -- 1,755 -- 1,755 Total expenses 3,011 4,484 5,980 6,844 Net income (loss) $ 427 $ (1,206) $ 702 $ (493) Net income (loss) allocated to general partners (1%) $ 4 $ (12) $ 7 $ (5) Net income (loss) allocated to limited partners (99%) 423 (1,194) 695 (488) $ 427 $ (1,206) $ 702 $ (493) Net income (loss) per limited partnership unit $ 1.10 $ (3.12) $ 1.81 $ (1.28) See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 383,033 $ 1 $95,758 $95,759 Partners' capital (deficit) at December 31, 1994 383,033 $ (355) $49,084 $48,729 Distributions to partners -- (18) (1,804) (1,822) Net income for the six months ended June 30, 1995 -- (5) (488) (493) Partners' capital (deficit) at June 30, 1995 383,033 $ (378) $46,792 $46,414 Partners' capital (deficit) at December 31, 1995 383,033 $ (407) $43,868 $43,461 Distributions to partners -- (18) (4,302) (4,320) Net income for the six months ended June 30, 1996 -- 7 695 702 Partners' capital (deficit) at June 30, 1996 383,033 $ (418) $40,261 $39,843 See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 1996 1995 Cash flows from operating activities: Net income (loss) $ 702 $ (493) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,336 1,217 Amortization of lease commissions and loan costs 28 29 Write-down of note receivable -- 1,755 Loss on disposal of property 61 -- Change in accounts: Restricted cash (5) (231) Other assets 56 (140) Interest, taxes, accounts payable and tenant security deposits (75) 686 Net cash provided by operating activities 2,103 2,823 Cash flows from investing activities: Property improvements and replacements (651) (323) Deposits to restricted escrows (12) -- Receipts from restricted escrows 299 -- Purchase of investments -- (6,852) Proceeds from sales of investments -- 6,254 Cash received from borrower on foreclosed property 74 -- Net cash used in investing activities (290) (921) Cash flows from financing activities: Loan costs paid (86) -- Payments on mortgage notes payable (93) (213) Distributions to partners (4,320) (1,822) Net cash used in financing activities (4,499) (2,035) Net decrease in cash (2,686) (133) Cash at beginning of period 9,871 3,642 Cash at end of period $ 7,185 $ 3,509 Supplemental disclosure of cash flow information: Cash paid for interest $ 683 $ 553 See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CASH FLOW (Continued) (Unaudited) SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY Acquisition On February 14, 1996, the Partnership foreclosed on South City Business Center, the investment property collateralizing the note receivable between the Partnership and Lincoln South City Business Center Limited Partnership. In connection with this transaction, the following accounts were adjusted by the amounts noted in 1996: Receipt of cash $ 74,000 Investment properties 4,326,000 Note receivable (4,400,000) No gain or loss was recorded upon the foreclosure due to the carrying value of the note receivable being adjusted to the value of the underlying collateral during 1995. e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements of Consolidated Capital Institutional Properties/3 (the "Registrant" or "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner (ConCap Equities, Inc.), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended December 31, 1995. Presentation of Accounts Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Investments Investments consisting primarily of commercial paper with original maturities of more than ninety days are considered to be held-to-maturity securities. Note B - Investment Property Acquired During 1995, it was determined that the note secured by the South City Business Center was impaired. Accordingly, during 1995, the Partnership recorded a write-down of $3,255,000 on the note receivable to adjust the note balance to the estimated net realizable value of the collateral. Foreclosure proceedings were completed on February 14, 1996, at which time the Partnership assumed operations at the property. The estimated net realizable value of the collateral at the time of acquisition was $4,400,000 including cash of $74,000 which the partnership received along with the South City assets of approximately $4,326,000. Note C - Related Party Transactions The Partnership has paid property management fees based upon collected gross rental revenues for property management services in each of the six months ended June 30, 1996 and 1995. Fees paid to affiliates of the General Partner for each of the six months ended June 30, 1996 and 1995, are presented below. These property management fees are included in operating expenses. SIX MONTHS ENDED JUNE 30, COMPENSATION 1996 1995 (in thousands) Property management fees $321 $279 The Partnership Agreement also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its affiliates received reimbursements as noted below: SIX MONTHS ENDED JUNE 30, REIMBURSEMENTS 1996 1995 (in thousands) Reimbursement for services of affiliates $ 182 $ 266 Additionally, the Partnership paid $23,000 and $11,000 during the six months ended June 30,1996 and 1995, respectively, to an affilate of the General Partner for lease comissions related to new leases of the Partnership's commercial properties. These lease commissions are included in other assets and amortized over the term of the respective leases. On July 1, 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The agent assumed the financial obligations to the affiliate of the General Partner who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. Note D - Commitment The Partnership is 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. Cash, tenant security deposits and investments, totalling approximately $7.6 million were greater than the reserve requirement of approximately $3.9 million at June 30, 1996. Note E - Notes Payable The Partnership had two notes payable, originally maturing in January 1995, which were extended to June 1995. Lamplighter Park Apartments secured a first mortgage of approximately $4.6 million, and Tamarac Village secured a third mortgage of approximately $2.5 million. On June 30, 1995, an extension agreement was reached on the indebtedness secured by Lamplighter Park Apartments which extends the maturity of this mortgage debt to June 30, 1997. In December 1995, the third mortgage indebtedness secured by Tamarac Village was satisfied. The mortgage notes payable are nonrecourse and are secured by pledge of the respective properties. All notes require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. Beginning March 1, 1996, the lender has the right, upon six months written notice, to call the second mortgage on Tamarac Village. The lender has thus far expressed no intent to call the mortgage. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership's investment properties consist of eight apartment complexes and two commercial properties. The following table sets forth the average occupancy of the properties for each of the six months ended June 30, 1996 and 1995: Average Occupancy Property 1996 1995 Cedar Rim Apartments 92% 87% Renton, Washington City Heights Apartments 96% 83% Seattle, Washington Corporate Center Office Complex 94% 98% Tampa, Florida Hidden Cove by the Lake Apartments 92% 96% Belleville, Michigan Lamplighter Park Apartments 98% 94% Belleview, Washington Park Capitol Apartments 98% 95% Salt Lake City, Utah Sandpiper I & II Apartments 87% 86% St. Petersburg, Florida Tamarac Village I, II, III & IV Apartments 92% 91% Denver, Colorado Williamsburg Manor Apartments 95% 97% Cary, North Carolina South City Business Center 86% (1) Chula Vista, California (1) The South City Business Center was foreclosed on by the Partnership in February of 1996. The 1995 occupancy information is not available. The General Partner attributes the increase in occupancy at Cedar Rim to property improvements and increased leasing efforts. The increase in occupancy at City Heights Apartments is attributed to a stronger employment market in the area and to water damage to six units which negatively impacted 1995 occupancy levels. The damage was caused by a poor drainage system between the buildings. Subsequent to repairs being made, the occupancy has increased. Lamplighter Park's increased occupancy is due to a growing local economy as well as exterior renovations to the property. The increase in occupancy at Park Capitol Apartments is attributed to increased economic growth in the area. The occupancy decrease at Corporate Center is due to the move-out of a tenant who had leased 4,800 square feet. The occupancy decrease at Hidden Cove resulted from management's effort to increase resident qualification standards in order to reduce unit damages and delinquencies and is expected to be temporary. The Partnership's net income for the six months ended June 30, 1996, was $702,000 compared to a net loss of $493,000 for the six months ended June 30, 1995. The Partnership realized net income of $427,000 for the three months ended June 30, 1996, compared to a net loss of $1,206,000 for the corresponding period of 1995. The increase in net income for both the three and six month periods ended June 30, 1996, is primarily attributable to the write-down recorded in 1995 on the note receivable between the Partnership and Lincoln South City Business Center Limited Partnership. This note receivable was subsequently foreclosed on in February 1996. In addition, rental income increased due to improved occupancy and increased rental rates at several properties. General and administrative expenses decreased due to lower expense reimbursements related to the combined efforts of the Dallas and Greenville partnership administration staffs during the transition period in the first quarter of 1995. The increased costs related to the transition efforts were incurred to minimize any disruption in the year end reporting function including the financial reporting and K-1 preparation and distribution. Offsetting these changes were increases in operating, depreciation and amortization expenses, which are due in part to the acquisition of South City Business Center. The increase in operating expenses was also impacted by increased repair and maintenance expenditures resulting from efforts to increase the curb appeal of several of the Partnership's properties. Depreciation and amortization expenses increased due to an increase in the depreciable asset base at several of the Partnership's properties from capital additions of approximately $1,401,000 in 1995. Also contributing to the reduced net income is a decrease in other income resulting from no interest income being recognized on the South City note receivable in 1996 while $275,000 of interest income was collected in 1995. The increase in interest expense is due primarily to debt balances increasing approximately $6,000,000 as a result of the refinancing of Williamsburg Manor, Park Capitol and Sandpiper I and II, partially offset by the retirement of the third mortgage secured by Tamarac Village in December 1995. During 1995, it was determined that the note secured by the South City Business Center was impaired. Accordingly, during 1995, the Partnership recorded a write-down of $3,255,000 on the note receivable to adjust the note balance to the estimated net realizable value of the collateral. Foreclosure proceedings were completed on February 14, 1996, at which time the Partnership assumed operations of the property. The estimated net realizable value of the collateral at the time of acquisition was $4,400,000 including cash of $74,000 which the partnership received along with the South City assets of approximately $4,326,000. 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. At June 30, 1996, the Partnership held unrestricted cash of approximately $7,185,000 compared to approximately $3,509,000 at June 30, 1995. Net cash provided by operations decreased primarily due to increased operating expenses, interest payments and reduced interest income mitigated by higher rental revenue collections and lower general and administrative expenses. Net cash used in investing activities decreased due to fewer purchases of long-term investments as the partnership moved to invest in primarily short-term cash equivalents during 1996. Net cash used in financing activities increased due to greater distributions to partners during the first six months of 1996 compared to 1995. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the various properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. Notes payable of approximately $17,965,000 (including accrued interest) have maturity dates ranging from 1997 to 2007, at which time the individual properties will be refinanced or sold. The mortgage notes payable are nonrecourse and are secured by pledges of the respective properties. All notes require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. Beginning March 1, 1996, the lender has the right, upon six months written notice, to call the second mortgage on Tamarac Village. The lender has thus far expressed no intent to call the mortgage. Distributions of approximately $4,320,000 and $1,822,000 were made to the partners during the six months ended June 30, 1996 and 1995, respectively. Future cash distributions will depend on the levels of net cash generated from operations or property sales, if any, and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K: None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 By: CONCAP EQUITIES, INC. General Partner By:/s/ Carroll D. Vinson Carroll D. Vinson President By:/s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: August 12, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties/3 1996 Second Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000768890 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 1,000 6-MOS DEC-31-1996 JUN-30-1996 7,185 109 0 0 0 0 60,725 11,268 59,077 0 17,965 0 0 0 39,843 59,077 0 6,682 0 0 5,980 0 732 0 0 0 0 0 0 702 1.81 0 The Registrant has an unclassified balance sheet. Multiplier is 1.
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