-----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, JmBJKpbFRR8pr6wP+h9SetHKs4KJXUBRVpaWOaJzPnfsY2kU+k8bs7dxvRlDS4o5 1VNHMUPOFoErwxbjTJ4+iw== 0000310303-98-000018.txt : 19980817 0000310303-98-000018.hdr.sgml : 19980817 ACCESSION NUMBER: 0000310303-98-000018 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSTOWN CONSOLIDATED INCOME PARTNERS CENTRAL INDEX KEY: 0000787621 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 943004963 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16010 FILM NUMBER: 98690962 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391513 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED CAPITAL INCOME GROWTH PARTNERS DATE OF NAME CHANGE: 19860401 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (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 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from.........to......... Commission file number 0-16010 JOHNSTOWN/CONSOLIDATED INCOME PARTNERS (Exact name of small business issuer as specified in its charter) California 94-3004963 (State or other jurisdiction of (IRS Employer incorporation or organization) (Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 1998 Assets Cash and cash equivalents $ 1,729 Receivables and deposits, net of allowance of $127 192 Restricted escrows 295 Other assets 392 Investment properties: Land $ 1,571 Buildings and related personal property 11,801 13,372 Less accumulated depreciation (6,365) 7,007 $ 9,615 Liabilities and Partners' (Deficit) Capital Accounts payable $ 117 Tenant security deposit liabilities 54 Accrued property taxes 85 Other liabilities 68 Notes payable 2,325 Partners' (Deficit) Capital General partner $ (176) Corporate limited partner on behalf of the Unitholders - (128,810 Units issued and outstanding) 7,142 6,966 $ 9,615 See Accompanying Notes to Financial Statements b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
For the Three Months Ended For the Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues: Rental income $ 546 $ 531 $ 1,117 $ 1,082 Other income 80 59 144 97 Casualty gain 107 -- 215 -- Gain on sale of investment property -- 437 -- 437 Total revenues 733 1,027 1,476 1,616 Expenses: Operating 211 229 444 452 General and administrative 74 63 139 115 Depreciation 135 122 264 244 Interest 46 46 92 92 Property taxes 42 37 85 78 Bad debt (recovery) expense (3) 38 (18) 48 Total expenses 505 535 1,006 1,029 Net income $ 228 $ 492 $ 470 $ 587 Net income allocated to general partner (1%) $ 2 $ 5 $ 5 $ 6 Net income allocated to limited partners (99%) 226 487 465 581 Net income $ 228 $ 492 $ 470 $ 587 Net income per Unit of Depository Receipt $ 1.75 $ 3.78 $ 3.61 $ 4.51 Distributions per Unit of Depository Receipt $ -- $ -- $ 7.69 $ -- See Accompanying Notes to Financial Statements
c) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data) Unitholders Units of Units of Depositary Depositary General Receipt Receipt Partner (Note A) Total Original capital contributions 129,266 $ 1 $32,317 $32,318 Partners' (deficit) capital at December 31, 1997 128,810 $ (171) $ 7,667 $ 7,496 Net income for the six months ended June 30, 1998 -- 5 465 470 Distributions to partners -- (10) (990) (1,000) Partners' (deficit) capital at June 30, 1998 128,810 $ (176) $ 7,142 $ 6,966 See Accompanying Notes to Financial Statements d) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net income $ 470 $ 587 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 264 244 Amortization of lease commissions and loan costs 31 24 Gain on sale of investment property -- (437) Bad debt (recovery) expense (18) 48 Casualty gain (215) -- Change in accounts: Receivables and deposits (59) (67) Other assets (112) (6) Accounts payable (286) (88) Tenant security deposit liabilities -- 2 Accrued property taxes 85 23 Other liabilities 10 4 Net cash provided by operating activities 170 334 Cash flows from investing activities: Proceeds from sale of investment property -- 1,287 Property improvements and replacements (431) (29) Net deposits to restricted escrows (34) (8) Net insurance proceeds from casualty gain 254 -- Net cash (used in) provided by investing activities (211) 1,250 Cash flows from financing activities: Loan costs paid -- (11) Distributions to partners (1,000) -- Net cash used in financing activities (1,000) (11) Net (decrease) increase in cash and cash equivalents (1,041) 1,573 Cash and cash equivalents at beginning of period 2,770 1,583 Cash and cash equivalents at end of period $ 1,729 $ 3,156 Supplemental disclosure of cash flow information Cash paid for interest: $ 85 $ 85 See Accompanying Notes to Financial Statements
e) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Johnstown/Consolidated Income Partners, (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (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-KSB for the fiscal year ended December 31, 1997. Certain reclassifications have been made to the 1997 balances to conform to the 1998 presentation. Units of Depositary Receipt Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"), an affiliate of the General Partner, serves as a depositary of certain Units of Depositary Receipt ("Units"). The Units represent economic rights attributable to the limited partnership interests in the Partnership and entitle the Unitholders thereof ("Unitholders") to certain economic benefits, allocations and distributions of the Partnership. For this reason, Partners' (deficit) capital is herein represented as an interest of the Unitholder. NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all of the Partnership activities. The General Partner is wholly-owned by Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred on behalf of the Partnership. The following transactions with affiliates of the General Partner were incurred for the six months ended June 30, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $ 58 $ 57 Reimbursement for services of affiliates (included in general and administrative expense) 47 43 The Partnership Agreement provides that the Partnership shall pay in monthly installments to the General Partner, or an affiliate, a yearly asset management fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans outstanding at the end of the month preceding the installment payment; (ii) 1/8 of 1% of the market value of guaranteed mortgage-backed securities as of the end of the Partnership quarter immediately preceding the installment payment; and (iii) 5/8 of 1% of the purchase price of the properties plus improvements for managing the Partnership's assets. In the event the property was not owned at the beginning or end of the year, such fee shall be pro rated for the short-year period of ownership. Under this provision, fees of approximately $46,000 and $49,000 were paid to the General Partner and its affiliates for the six months ended June 30, 1998 and 1997, respectively, and are included in general and administrative expense. In addition to the reimbursement for services of affiliates, there were $13,000 and $20,000 of construction oversight costs for the six months ended June 30, 1998 and 1997, respectively. These amounts are included in investment property and operating expense. Also, lease commissions of $78,000 and $6,000 for the six months ended June 30, 1998 and 1997, respectively, were paid to affiliates and are included in other assets. For the period January 1, 1997 to August 31, 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 payment 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 was not significant. On December 19, 1997, Insignia affiliates (the "Purchaser") commenced tender offers for limited partnership interests in ten real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 39,000 units of the outstanding units of limited partnership interest in the Partnership, at $68.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 19, 1997, (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on December 19, 1997. 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), 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. During February 1998, the tender offers were completed and an affiliate of Insignia purchased 13,985.5 units of limited partnership interest in the Partnership. 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. NOTE C - COMMITMENT The Partnership is required by the Partnership Agreement to maintain working capital for contingencies of not less than 5% of Net Invested Capital as defined in the Partnership Agreement. In the event expenditures are made from these reserves, operating revenues shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash and cash equivalents and tenant security deposits totaling approximately $1,784,000 at June 30, 1998, exceeded the Partnership's reserve requirement of approximately $1,385,000. NOTE D - DISTRIBUTIONS During the six months ended June 30, 1998, the Partnership paid distributions attributable to cash flow from operations of approximately $1,000,000. During the six months ended June 30, 1997, no distributions were declared or paid. In May 1997, the Partnership sold its one-third undivided interest in the Florida #6 Mini-Warehouse, located in Lauderhill, Florida, to an unaffiliated party, Shurgard Storage Centers, Inc., a Delaware corporation. The Partnership's share of the net proceeds was $1,287,000, after payment of closing costs. The Partnership realized a gain of $437,000 on the sale during the second quarter of 1997. The sales transaction is summarized as follows (amounts in thousands): Cash proceeds received $1,287 Net real estate (1) (850) Gain on sale of investment property $ 437 (1) Real estate at cost, net of accumulated depreciation of $729,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of one apartment complex and two commercial properties. The following table sets forth the average occupancy of the properties for the six months ended June 30, 1998 and 1997: Average Occupancy 1998 1997 Cedar Brooke Apartments Independence, Missouri 95% 97% Florida #11 Mini-Warehouse Davie, Florida 96% 99% Phoenix Business Campus College Park, Georgia 71% 70% The Partnership realized net income of approximately $228,000 and $470,000 for the three and six months ended June 30, 1998, respectively, compared to net income of approximately of $492,000 and $587,000 for the three and six months ended June 30, 1997, respectively. The decrease in net income is primarily due to an overall decrease in revenues attributable to the gain on the sale of the Florida #6 Mini-Warehouse recorded during the six months ended June 30, 1997 (see discussion below). Partially offsetting this decrease in revenue was an increase in rental income related to increased rental rates at all of the investment properties and an increase in other income attributable to lease cancellation fees received from a tenant at Phoenix Business Campus. In addition, for the six months ended June 30, 1998, there was a casualty gain related to a fire at Cedar Brooke Apartments (see discussion below) and a recovery on bad debt at Phoenix Business Campus. In May 1997, the Partnership sold its one-third undivided interest in the Florida #6 Mini-Warehouse, located in Lauderdale, Florida (see Note E). The Partnership's share of the net proceeds was $1,287,000, after payment of closing costs. As a result of the sale, the Partnership realized a gain of $437,000 during the second quarter of 1997. In the fourth quarter of 1997, there was a fire at Cedar Brooke Apartments that caused extensive damage to the clubhouse. Insurance proceeds of approximately $254,000 were received and replacement efforts began during the first part of 1998. The Partnership recorded a casualty gain of approximately $215,000 as a result of combining the proceeds received less the write off of the undepreciated balance of the assets destroyed in the fire. For the six months ended June 30, 1998, approximately $7,000 of major repairs and maintenance, comprised primarily of construction oversight costs, is included in operating expense. For the six months ended June 30, 1997, approximately $45,000 of major repairs and maintenance, comprised primarily of exterior building improvements and construction oversight costs related to repair projects at Cedar Brooke Apartments, is included in operating expense. 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 $1,729,000 compared to approximately $3,156,000 at June 30, 1997. Cash and cash equivalents had a net decrease of approximately $1,041,000 for the six months ended June 30, 1998 as compared to a net increase of approximately $1,573,000 for the same period in 1997. Net cash provided by operating activities decreased primarily due to a large decrease in accounts payable and an increase in other assets. Accounts payable decreased due to the payment of tenant improvements at Phoenix Business Campus while other assets increased as a result of an increase in lease commissions, primarily due to a new tenant that is scheduled to move in at Phoenix Business Campus. Net cash used in investing activities increased as a result of increased property improvements and replacements primarily attributable to the reconstruction of the clubhouse at Cedar Brooke Apartments and tenant improvements at Phoenix Business Campus. In addition, the Partnership received sales proceeds due to the sale of the Florida #6 Mini-Warehouse in 1997. These unfavorable variances were partially offset by insurance proceeds received related to the Cedar Brooke casualty. The increase in net cash used in financing activities can be attributed to the cash distribution paid to partners during the six months ended June 30, 1998. 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 investment 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 mortgage indebtedness of $2,325,000, which carries a stated interest rate of 7.33% (interest only) matures in November 2003, at which time the debt will either be refinanced or the related property (Cedar Brooke Apartments) sold. During the six months ended June 30, 1998, the Partnership made a distribution to the partners of $1,000,000. No cash distributions were declared or paid during the six months ended June 30, 1997. Future cash distributions will depend on the levels of net cash generated from operations, capital expenditure requirements, property sales and the availability of cash reserves. 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 no 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 or 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 the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia and its affiliates of interests in certain general partner entities, past tender offers by Insignia affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The General Partner believes the action to be without merit, and intends to vigorously defend it. 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 believed the claim to be without merit and intends to vigorously defend the claims. On July 30, 1998 certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners are affiliates of Insignia filed a complaint in the Superior Court of the State of California, County of Los Angeles. The action involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs alledgedly own interests and which Inisgnia affliates alledgedly manager or control (the "Subject Partnerships"). The complaint names as defendant limited partnerships, the Partnership and the Managing General Partner. Plaintiffs allege that they have requested from, but have been denied by each of the Subject Partnerships, lists of their respective limited partners for the purpose of making tender offers to purchase up to 4.9% of the limited partner units of each of the Subject Partnerships. The complaint also alleges that certain of the defendants made tender offers to purchase limited partner units in many of the Subject Partnerships, with the alleged result that plaintiffs have been deprived of the benefits they would have realized from ownership of the additional units. The plaintiffs assert eleven causes of action, including breach of contract, unfair business practices, and violations of the partnership statutes of the states in which the Subject Partnerships are organized. Plaintiffs seek compensatory, punitive and treble damages. The Partnership was only recently served with the complaint and has not yet responded to it. The Partnership believes the claims to be without merit and intends to defend the action vigorously. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner believes that all such other pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial conditions, 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. SIGNATURES In accordance with the requirements of the Exchange Act, the Partnership caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JOHNSTOWN/CONSOLIDATED INCOME PARTNERS 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 14, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Johnstown/Consolidated Income Partners 1998 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000787621 JOHNSTOWN/CONSOLIDATED INCOME PARTNERS 1,000 6-MOS DEC-31-1998 JUN-30-1998 1,729 0 192 0 0 0 13,372 (6,365) 9,615 0 2,325 0 0 0 6,966 9,615 0 1,476 0 0 1,006 0 92 0 0 0 0 0 0 470 7.69 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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