-----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, H1IwSwjj+ntrUomoCOaVaIK33H5wA1uWZb1W/P1wP1Jm2p7JWzkW/kvNKUr/fGHM NN6TzEe6qAvPnk9oiuzEPw== 0000812564-98-000009.txt : 19980810 0000812564-98-000009.hdr.sgml : 19980810 ACCESSION NUMBER: 0000812564-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 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: SEC FILE NUMBER: 000-14187 FILM NUMBER: 98679029 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from.........to......... Commission file number 0-14187 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) (864) 239-1000 (Registrant's telephone number, including area code) 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 SHEETS (in thousands, except unit data) June 30, December 31, 1998 1997 Assets (Unaudited) (Note) Cash and cash equivalents $ 7,870 $ 5,054 Receivables and deposits 964 960 Investments 5 105 Restricted escrows 1,701 2,141 Other assets 905 974 Investment properties: Land 12,371 12,371 Building and related personal property 51,630 50,955 64,001 63,326 Less accumulated depreciation (16,875) (15,474) 47,126 47,852 $ 58,571 $ 57,086 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 186 $ 172 Tenant security deposit liabilities 463 460 Accrued property taxes 291 264 Other liabilities 435 440 Mortgage notes payable 30,525 30,525 31,900 31,861 Partners' Capital (Deficit) General partner's (575) (589) Limited partners' (383,033 units outstanding) 27,246 25,814 26,671 25,225 $ 58,571 $ 57,086 Note:The balance sheet at December 31, 1997 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 b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) For the Three Months For the Six Months Ended June 30, Ended June 30, 1998 1997 1998 1997 Revenues: Rental income $3,585 $3,416 $7,156 $6,753 Other income 324 329 584 719 Gain on casualty event -- (5) -- 16 Total revenues 3,909 3,740 7,740 7,488 Expenses: Operating 1,445 1,589 2,993 3,158 General and administrative 162 140 322 261 Depreciation 711 703 1,414 1,394 Interest 579 579 1,158 1,158 Property taxes 191 211 407 443 Total expenses 3,088 3,222 6,294 6,414 Net income $ 821 $ 518 $1,446 $1,074 Net income allocated to general partner (1%) $ 8 $ 5 $ 14 $ 11 Net income allocated to limited partners (99%) 813 513 1,432 1,063 $ 821 $ 518 $1,446 $1,074 Net income per limited partnership unit $ 2.12 $ 1.34 $ 3.74 $ 2.78 Distributions per limited partnership unit $ -- $18.27 $ -- $18.27 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's Partners' Total Original capital contributions 383,033 $ 1 $95,758 $95,759 Partners' (deficit) capital at December 31, 1996 383,033 $ (443) $37,739 $37,296 Distributions to partners -- (8) (6,997) (7,005) Net income for the six months ended June 30, 1997 -- 11 1,063 1,074 Partners' (deficit) capital at June 30, 1997 383,033 $ (440) $31,805 $31,365 Partners' (deficit) capital at December 31, 1997 383,033 $ (589) $25,814 $25,225 Net income for the six months ended June 30, 1998 -- 14 1,432 1,446 Partners' (deficit) capital at June 30, 1998 383,033 $ (575) $27,246 $26,671 See Accompanying Notes to Financial Statements d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net income $ 1,446 $ 1,074 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,414 1,394 Amortization of lease commissions and loan costs 77 71 Gain on casualty event -- (16) Loss on disposal of property 58 41 Change in accounts: Receivables and deposits (4) (26) Other assets (8) (94) Accounts payable 14 (379) Tenant security deposit liabilities 3 22 Accrued property taxes 27 113 Other liabilities (5) (84) Net cash provided by operating activities 3,022 2,116 Cash flows from investing activities: Property improvements and replacements (746) (732) Net receipts from restricted escrows 440 195 Proceeds from sale of investment 100 -- Dividends received -- 4 Net cash used in investing activities (206) (533) Cash flows from financing activities: Loan costs paid -- (2) Distribution to partners -- (7,005) Net cash used in financing activities -- (7,007) Net increase (decrease) in cash and cash equivalents 2,816 (5,424) Cash and cash equivalents at beginning of period 5,054 15,813 Cash and cash equivalents at end of period $ 7,870 $10,389 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,098 $ 1,098 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 STATEMENTS OF CASH FLOWS (Continued) (Unaudited) SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY Casualty Event At June 30, 1997, as a result of a fire at Hidden Cove by the Lake Apartments, investment properties, receivables and deposits and accounts payable were adjusted $26,000, $119,000 and $129,000, respectively, for non-cash activity. 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 "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 ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. 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, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - RELATED PARTY TRANSACTIONS The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. The General Partner is wholly-owned by Insignia Properties Trust ("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia"). 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 payments were paid to affiliates of the General Partner during each of the six month periods ended June 30, 1998 and 1997 (in thousands): 1998 1997 Property management fees (included in operating expenses) $ 384 $ 361 Reimbursements for services of affiliates (included in general and administrative expenses) 177 167 In addition, the Partnership paid approximately $22,000 and $18,000 during the six month periods ended June 30, 1998 and 1997, respectively, to an affiliate of the General Partner for construction oversight reimbursements related to capital improvements and major repair projects. Construction oversight reimbursements are included in operating expenses and investment properties. The Partnership also paid approximately $25,000 and $23,000 during the six months ended June 30, 1998 and 1997, respectively, to an affiliate of the General Partner for lease commissions at the Partnership's commercial properties. These lease commissions are included in other assets and are amortized over the terms of the respective leases. From the period from January 1997 to August 1997, the Partnership insured its properties under a master policy through an agency affiliated with the General Partner with an 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 master policy. The agent assumed the financial obligations to the affiliate of the General Partner which received payments on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the General Partner of the Partnership. During the first quarter of 1998, Insignia Properties, L.P. acquired an additional 47,865.5 units in the Partnership as a result of a tender offer commenced in December 1997. During July 1998, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partnership interests in five real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 125,000 of the outstanding units of limited partnership interest in the Partnership at $100 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 30, 1998 (the "Offer to Purchase"). Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission on July 30, 1998), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. In addition, because of these conflicts of interest, the manner in which the Purchaser votes its limited partner interest in the Partnership may not always be consistent with the best interests of the other limited partners. NOTE C - 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. Reserves, including cash and securities available for sale totaling approximately $7.9 million were greater than the reserve requirement of approximately $3.4 million at June 30, 1998. NOTE D - DISTRIBUTIONS The Partnership distributed cash generated from operations of approximately $844,000 and approximately $6,161,000 from surplus funds for the six months ended June 30, 1997. 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 month periods ended June 30, 1998 and 1997: Average Occupancy Property 1998 1997 Cedar Rim 97% 94% New Castle, Washington City Heights 96% 95% Seattle, Washington Corporate Center 98% 97% Tampa, Florida Hidden Cove by the Lake 92% 92% Belleville, Michigan Lamplighter Park 96% 95% Bellevue, Washington Park Capitol 91% 98% Salt Lake City, Utah Sandpiper I and II 95% 95% St. Petersburg, Florida South City Business Center 92% 91% Chula Vista, California Tamarac Village I, II, III, IV 96% 94% Denver, Colorado Williamsburg Manor 97% 97% Cary, North Carolina The General Partner attributes the increase in occupancy at Cedar Rim to the property's improved appearance resulting from the painting of all the buildings during 1997 and improved market conditions. The decrease in occupancy at Park Capitol is due to more limited access to the property resulting from road construction as Salt Lake City prepares for the upcoming 2000 Winter Olympics. The Partnership realized net income of approximately $1,446,000 for the six months ended June 30, 1998, compared to approximately $1,074,000 for the six months ended June 30, 1997. Net income for the three months ended June 30, 1998 was approximately $821,000 compared to $518,000 for the three months ended June 30, 1997. The increase in net income is primarily attributable to increased rental income resulting from overall improved occupancy and increased rental rates. This increase was partially offset by decreased interest income on lower average cash balances in 1998. Cash balances declined as a result of distributions paid to the partners in 1997. Also partially offsetting the increase in rental revenue for the six month period was a casualty gain of $16,000 relating to fire damage at Hidden Cove by the Lake Apartments that was recorded in 1997. The fire damaged ten units in one building at the complex. The units affected were primarily smoke and water damaged, and the restoration was completed in the second quarter of 1997. Total expenses decreased for the three and six month periods ended June 30, 1998 compared to the corresponding periods in 1997 primarily due to a reduction in major repairs and maintenance. Included in operating expense for the six months ended June 30, 1998 was $88,000 in major repairs and maintenance compared to $236,000 in 1997. The major repairs and maintenance for 1998 included exterior building repairs, exterior painting, and landscaping. The 1997 major repairs and maintenance were comprised primarily of exterior renovations, exterior painting, landscaping, and swimming pool repairs. This decrease was partially offset by an increase in general and administrative expenses due to increased printing and mailing costs related to correspondence with the limited partners. 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, 1998, the Partnership held cash and cash equivalents of approximately $7,870,000 compared to approximately $10,389,000 at June 30, 1997. The net increase in cash and cash equivalents for the six months ended June 30, 1998 was $2,816,000 compared to a net decrease of $5,424,000 for the six months ended June 30, 1997. Net cash provided by operating activities increased primarily due to decreased cash used for accounts payable due to the timing of payments and to increased rental revenue, as discussed above. Net cash used in investing activities decreased primarily due to increased receipts from restricted escrows in 1998. In addition, a long term investment matured in May of 1998, yielding proceeds of $100,000. Net cash used in financing activities decreased due to distributions paid to partners during the six months ended June 30, 1997. 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. The notes payable of $30,525,000 have maturity dates ranging from 2003 to 2005, 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. Distributions of $7,005,000 were made to the partners during the six months ended June 30, 1997. Future cash distributions will depend on the levels of net cash generated from operations, property sales, refinancings, and the availability of cash reserves. Currently, the General Partner anticipates that a distribution of cash flow from operations will be made in the third quarter of 1998. Year 2000 The Partnership is dependent upon the General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in Superior Court of the State of California for the County of San Mateo. The Plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia and its affiliates of interests in certain general partner entities, past tender offers by Insignia affiliates to acquire limited partnership units, the management of partnerships by Insignia affiliates, as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. The General Partner believes the action to be without merit, and intends to vigorously defend it. On June 24, 1998, the General Partner filed a motion seeking dismissal of the action. In March 1998, a limited partner of the Partnership commenced an arbitration proceeding against the General Partner claiming that the General Partner had breached certain contractual and fiduciary duties allegedly owed to the claimant. The General Partner believes the claims to be without merit and intends to vigorously defend the claims. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner of the Partnership believes all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition or operations of the partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3 By: CONCAP EQUITIES, INC. Its General Partner By: /s/William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/Ronald Uretta Ronald Uretta Vice President/Treasurer Date: August 7, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Institutional Properties/3 1998 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-31-1998 JUN-30-1998 7,870 0 0 0 0 0 64,001 16,875 58,571 0 30,525 0 0 0 26,671 58,571 0 7,740 0 0 6,294 0 1,158 0 0 0 0 0 0 1,446 3.74 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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