-----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, AzyGOv101PveSSA0uhr8R8QP46pF4oX26aUbioZTLq8rK9fwFmDSRjtjD0Y4qFdH SG8Zk89lkKTTMUsmx/OIQg== 0000711642-00-000054.txt : 20000329 0000711642-00-000054.hdr.sgml : 20000329 ACCESSION NUMBER: 0000711642-00-000054 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000328 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-16010 FILM NUMBER: 580137 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED CAPITAL INCOME GROWTH PARTNERS DATE OF NAME CHANGE: 19860401 10KSB 1 YEAR END REPORT March 28, 2000 United States Securities and Exchange Commission Washington, D.C. 20549 RE: Johnstown/Consolidated Income Partners Form 10-KSB File No. 0-16010 To Whom it May Concern: The accompanying Form 10-KSB for the year ended December 31, 1999 describes a change in the method of accounting to capitalize exterior painting and major landscaping, which would have been expensed under the old policy. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the General Partner. Please do not hesitate to contact the undersigned with any questions or comments that you might have. Very truly yours, Stephen Waters Real Estate Controller 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, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from to Commission file number 0-16010 JOHNSTOWN/CONSOLIDATED INCOME PARTNERS (Name of small business issuer in its charter) California 94-3004963 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. 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 Depositary Receipt (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 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. [ ] State issuer's revenues for its most recent fiscal year: $1,157,000 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, 1999. 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 Johnstown/Consolidated Income Partners (the "Partnership" or "Registrant") was organized on January 9, 1986, as a limited partnership under the California Revised Limited Partnership Act. The Partnership is engaged in the business of operating and holding real estate properties for investment. On June 20, 1986, the Partnership commenced a public offering for the sale of $150,000,000 of units (the "Units"). The Units represent economic rights attributable to the limited partnership interests in the Partnership and entitle the holders thereof (hereinafter referred to as "Unitholders") to the economic benefits attributable to equity interests in the Partnership and to participate in certain allocations and distributions of the Partnership. The sale of Units closed on June 19, 1987, with 129,266 Units sold at $250 each, for gross proceeds of approximately $32,317,000 to the Partnership. By the end of fiscal year 1988, approximately 79% of the proceeds raised had been invested in four (4) properties, five (5) mortgage loans, and approximately $1,600,000 in guaranteed mortgage-backed securities ("MBS"). Of the remaining 21%, 11.8% was required for organizational and offering expenses and sales commissions and 9.2% was retained in Partnership reserves for working capital as required by the Partnership Agreement. The limited partner of the Partnership is Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"), an affiliate of the general partner (as hereinafter defined). The Corporate Limited Partner serves as depositary for the Units pursuant to a Depositary Agreement entered into with the Partnership. Since its initial offering, the Registrant has not received, nor are Unitholders required to make, additional capital contributions. As of December 31, 1999, the Partnership held and operated one residential property. (See "Item 2. Description of Property"). The general partner of the Partnership is ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The General Partner and the Corporate Limited Partner shall together be called the "Partners." The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"). The Partnership Agreement provides that the Partnership is to terminate on December 31, 2017 unless terminated prior to such date. The business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership's property. 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 property 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 apartments is local. The Registrant has no employees. Partnership management and administrative services as well as property management services are provided by an affiliate of the General Partner. The General Partner has also selected affiliates to provide real estate advisory and asset management services to the Partnership. As advisor, such affiliates provided all partnership accounting and administrative services, investment management, and supervisory services over property management. Both the income and expenses of operating the property 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 property owned by the Partnership. The Partnership monitors its property 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 or Plan of Operation" included in "Item 6" of this Form 10-KSB. Transfers of Control Upon the Partnership's formation in 1986, Consolidated Capital Equities Corporation ("CCEC") was the sole general partner of the Partnership, and Johnstown/Consolidated Depositary Corporation, a wholly-owned subsidiary of CCEC, was the sole Limited Partner. In 1988, Southmark Corporation ("Southmark") gained control of CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. As part of its reorganization plan, CEI acquired CCEC's general partner interest in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and 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 Unitholders in the Partnership and the limited partners in each of the Affiliated Partnerships pursuant to a solicitation of the Unitholders dated August 10, 1990. As part of this solicitation, the Unitholders also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership. Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of the General Partner acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As a part of the Insignia Transaction, the General Partner affiliate also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity and Insignia Financial Group, Inc. ("Insignia") acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, the General Partner affiliate exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. As of December 31, 1999, Insignia Properties Trust ("IPT") owned 100% of the outstanding stock of CEI. Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Item 2. Description of Property The following table sets forth the property held by the Partnership. Date of Property Purchase Type of Ownership Use Cedar Brooke Apartments 02/27/87 Fee ownership subject Apartment Independence, Missouri to first mortgage 158 units Schedule of Property Set forth below for the Partnership's property 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 Brooke Apartments $4,699 $2,962 5-19 yrs S/L $2,542
See "Note A" to the financial statements in "Item 7. Financial Statements" for a description of the Partnership's depreciation policy and "Note M - Change in Accounting Principle. Schedule of Property Indebtedness The following table sets forth certain information relating to the loan encumbering the Partnership's investment property:
Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 1999 Rate Amortized Date Maturity (2) in thousands) (in thousands) Cedar Brooke Apartments 1st mortgage $2,325 7.33% (1) 11/03 $2,325
(1) Monthly payments of interest only at the stated rate until maturity. (2) See "Item 7. Financial Statements - Note F" for information with respect to the Partnership's ability to prepay this loan and other specific details about the loan. Schedule of Rental Rates and Occupancy Average annual rental rate and occupancy for 1999 and 1998 for the property: Average Annual Average Rental Rate Occupancy (per unit) Property 1999 1998 1999 1998 Cedar Brooke Apartments $6,888 $6,486 97% 94% The increase in average occupancy at Cedar Brooke Apartments is due to increased marketing efforts and the clubhouse becoming fully functional late in 1998 after repairs for the fire in the fourth quarter of 1997 (See "Item 7. Financial Statements - Note I"). As noted under "Item 1. Description of Business", the real estate industry is highly competitive. The Partnership's property is subject to competition from other similar properties in the area. The General Partner believes that the property is adequately insured and in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. The property's lease terms are for one year or less and no tenant leases 10% or more of the available rental space. Schedule of Real Estate Taxes and Rates Real estate taxes and rates in 1999 for the property are as follows: 1999 1999 Billing Rate (in thousands) Cedar Brooke Apartments $ 66 6.6% Capital Improvements Cedar Brooke Apartments During 1999, the Partnership completed approximately $262,000 of capital improvements at Cedar Brooke Apartments consisting primarily of roof replacement, carpet and vinyl replacement, cabinet replacement, heating upgrades, parking lot upgrades, major landscaping, and appliance replacement. 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 $47,400. 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. 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 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia 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 and the Insignia Merger (see "Item 7. Financial Statements, Note B - Transfer of Control"). 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 have 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 final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, 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 class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case 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, 1999, no matters were submitted to a vote of the Unitholders, through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Units of Depository Receipt and Related Security Holder Matters No established public trading market for the Units exists nor is one expected to develop. As of December 31, 1999, the approximate number of holders of Units of Depositary Receipt was 1,524. Affiliates of the General Partner held 59,996 Units or 46.577% as of December 31, 1999. The following table sets forth the distributions made by the Partnership for the years ended December 31, 1998 and 1999, as well as for the subsequent period from January 1, 2000 to February 29, 2000 (See "Item 6. Management's Discussion and Analysis or Plan of Operation" for further details): Distributions Per Unit of Aggregate Depositary Receipt (in thousands) 1/1/98 - 12/31/98 $1,000 (1) $ 7.69 1/1/99 - 12/31/99 $ 575 (1) $ 4.42 1/1/00 - 2/29/00 $8,000 (2) $61.49 (1) Distribution was made from cash from operations. (2) Consists of approximately $262,000 ($2.01 per unit of depositary receipt) of cash from operations and approximately $7,738,000 ($59.48 per unit of depositary receipt) of sale proceeds from the sale of Florida #11 Mini Warehouse and Phoenix Business Campus during the fourth quarter of 1999. Future cash distributions will depend on the levels of net cash generated from operations, the availability of working capital reserves and the timing of the debt maturity, refinancing, and/or property sale. The Partnership's distribution policy is reviewed on an annual basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures and required working capital reserves to permit any additional distributions to its partners in the year 2000 or subsequent periods (See "Item 6" for further details). Several tender offers were made by various parties, including affiliates of the General Partner, during the years ended December 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 59,996 units of depositary receipt in the Partnership representing 46.577% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional units of depositary receipt in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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 their affiliation with the General Partner. Item 6. Management's Discussion and Analysis or Plan of Operation 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 disclosure contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Partnership from time to time. The discussion of the Partnership'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 Partnership's business and results of operation. 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 $3,626,000 for the year ended December 31, 1999, compared to approximately $639,000 for the year ended December 31, 1998. The increase in net income is primarily attributable to the gain on sale of discontinued operations from the sale of Florida #11 Mini-Warehouse and Phoenix Business Campus during 1999 as discussed below. Excluding the operations of the discontinued commercial segment discussed below, the Partnership had a loss from continuing operations of approximately $27,000 for the year ended December 31, 1999, compared to income of approximately $160,000 for the year ended December 31, 1998. The loss is primarily attributable to a decrease in total revenues and an increase in total expenses. Total revenues decreased due to a decrease in other income and the fact that no casualty gain was recognized in 1999 as was in 1998, all of which more than offset an increase in rental income. Rental income increased due to increased average rental rates and occupancy at Cedar Brooke. Other income decreased due to lower cash balances in interest bearing accounts which was partially offset by increased tenant charges at Cedar Brooke. The casualty gain in 1998 was due to insurance proceeds received less the write-off of the undepreciated value of the assets destroyed in a fire at Cedar Brooke which caused extensive damage to the clubhouse. The increase in total expenses is due to an increase in depreciation expense, general and administrative expense, and property tax expense partially offset by a decrease in operating expense. Depreciation expense increased due to capital improvements completed during the last twelve months which are now being depreciated. General and administrative expenses increased due primarily to increased legal expenses due to the settlement of a lawsuit as disclosed in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998, partially offset by decreased general partner reimbursements. Included in general and administrative expenses at December 31, 1999 and 1998, are reimbursements to the General Partner allowed under the Partnership Agreement associated with its management of the Partnership. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are included. Property tax expense increased due to an increase in the assessed value of Cedar Brooke Apartments. Operating expense decreased due to decreased maintenance expenses at Cedar Brooke, and decreased property insurance expense due to a change in insurance carriers late in 1998. These decreases were partially offset by increased employee payroll costs at Cedar Brooke. On November 4, 1999, the Partnership sold the Florida #11 Mini Warehouse to an unaffiliated third party for net sales proceeds of approximately $4,470,000 after payment of closing costs. For financial statement purposes, the sale resulted in a gain of approximately $2,525,000. On December 30, 1999, Phoenix Business Campus, located in College Park, Georgia, was sold to an unaffiliated party for $4,200,000. After payment of closing expenses, the net sales proceeds received by the Partnership were approximately $4,084,000. For financial statement purposes, the sale resulted in a gain of approximately $619,000. Florida #11 Mini Warehouse and Phoenix Business Campus were the only commercial properties owned by the Partnership and represented one segment of the Partnership's operations. Due to the sale of these properties, the results of the commercial segment have been shown as income from discontinued operations and gain on sale of discontinued operations. The revenues of these properties were approximately $1,334,000 and $1,376,000 for 1999 and 1998, respectively. Income from discontinued operations were approximately $509,000 and $479,000 for 1999 and 1998, respectively. The increase in income from discontinued operations is due to increased rental rates and occupancy at Phoenix Business Campus, as well as a reduction in property tax expense due to refunds received during the first quarter of 1999 on behalf of Phoenix Business Campus for 1997 and 1998 taxes. These increases in net income were partially offset by the sale of Florida #11 Mini-Warehouse in early November which resulted in only ten months of operations for 1999 compared to a full twelve months in 1998. Effective January 1, 1999, the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping on a prospective basis. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the General Partner. The effect of the change on net income in 1999 is not material. The cumulative effect, had this change been applied to prior periods, is not material. The accounting principle change will not have an effect on cash flow, funds available for distribution or fees payable to the General Partner and affiliates. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment property 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, 1999, the Partnership held cash and cash equivalents of approximately $10,579,000, compared to approximately $1,754,000 at December 31, 1998. The net increase in cash and cash equivalents for the year ended December 31, 1999 was approximately $8,825,000. The net increase in cash and cash equivalents is due to approximately $1,197,000 of cash provided by operating activities and approximately $8,203,000 of cash provided by investing activities, which was partially offset by approximately $575,000 of cash used in financing activities. Cash provided by investing activities consisted of proceeds from the sale of Florida's #11 Mini-Warehouse and Phoenix Business Campus, partially offset by property improvements and replacements and net deposits to escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of distributions paid to the partners. The Partnership invests its working capital reserves in money market accounts. 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. In the event expenditures are made from these reserves, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash and cash equivalents and tenant security deposits of both continuing and discontinued operations totaling approximately $10,654,000 at December 31, 1999, exceed the Partnership's reserve requirement of approximately $1,339,000. 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 property to adequately maintain the physical assets and other operating needs of the Partnership, and to comply with Federal, state, and local legal and regulatory requirements. The minimum amount to be budgeted is expected to be $300 per unit or $47,400. 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. 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 completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are currently thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness on Cedar Brooke Apartments of $2,325,000, which carries a stated interest rate of 7.33% (interest only), matures in 2003. The General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. During the year ended December 31, 1999, a cash distribution attributable to cash flow from operations of approximately $575,000 (approximately $569,000 to the limited partners, $4.42 per unit of depositary receipt) was paid to the Partners. During the year ended December 31, 1998, a cash distribution from operations of approximately $1,000,000 (approximately $990,000 to the limited partners, $7.69 per unit of depositary receipt) was paid to the Partners. Subsequent to December 31, 1999, a distribution of approximately $8,000,000 was declared and paid. Of this amount, approximately $262,000 (approximately $259,000 to the limited partners, $2.01 per unit of depositary receipt) was paid from operations and approximately $7,738,000 (approximately $7,661,000 to the limited partners, $59.48 per unit of depositary receipt) was paid from the sales proceeds of the Florida #11 Mini Warehouse and Phoenix Business Campus which were sold during the fourth quarter of 1999. Future cash distributions will depend on the levels of net cash generated from operations, the availability of working capital reserves, and the timing of the debt maturity, refinancing, and/or property sale. The Partnership's distribution policy is reviewed on an annual basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures and required working capital reserves to permit further distributions to its partners in the year 2000 or subsequent periods. Tender Offers Several tender offers were made by various parties, including affiliates of the General Partner, during the years ended December 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 59,996 units of depositary receipt in the Partnership representing 46.577% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional units of depositary receipt in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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 their affiliation with the General Partner. Year 2000 Compliance General Description The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the Managing Agent's computer programs or hardware that had date-sensitive software or embedded chips might have recognized a date using "00" as the year 1900 rather than the year 2000. This could have resulted in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Computer Hardware, Software and Operating Equipment In 1999, the Managing Agent completed all phases of its Year 2000 program by completing the replacement and repair of any hardware or software system or operating equipment that was not yet Year 2000 compliant. The Managing Agent's hardware and software systems and its operating equipment are now Year 2000 compliant. To date, no material failure or erroneous results have occurred in the Managing Agent's computer applications related to the failure to reference the Year 2000. Third Parties To date, the Managing Agent is not aware of any significant supplier or subcontractor (external agent) or financial institution of the Partnership that has a Year 2000 issue that would have a material impact on the Partnership's results of operations, liquidity or capital resources. However, the Managing Agent has no means of ensuring or determining the Year 2000 compliance of external agents. At this time, the Managing Agent does not believe that a Year 2000 issue of any non-compliant external agent will have a material impact on the Partnership's financial position or results of operations. Costs The total cost of the Managing Agent's Year 2000 project was approximately $3.2 million and was funded from operating cash flows. Risks Associated with the Year 2000 The Managing Agent completed all necessary phases of its Year 2000 program in 1999, and did not experience system or equipment malfunctions related to a failure to reference the Year 2000. The Managing Agent or Partnership have not been materially adversely effected by disruptions in the economy generally resulting from the Year 2000 issue. At this time, the Managing Agent does not believe that the Partnership's businesses, results of operations or financial condition will be materially adversely effected by the Year 2000 issue. Contingency Plans Associated with the Year 2000 The Managing Agent has not had to implement contingency plans such as manual workarounds or selecting new relationships for its banking or elevator operation activities in order to avoid the Year 2000 issue. Item 7. Financial Statements JOHNSTOWN/CONSOLIDATED INCOME PARTNERS LIST OF FINANCIAL STATEMENTS Report of Ernst and Young, LLP, Independent Auditors Balance Sheet - December 31, 1999 Statements of Operations - Years ended December 31, 1999 and 1998 Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 1999 and 1998 Statements of Cash Flows - Years ended December 31, 1999 and 1998 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors To the Partners Johnstown/Consolidated Income Partners We have audited the accompanying balance sheet of Johnstown/Consolidated Income Partners as of December 31, 1999, 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, 1999. 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 Johnstown/Consolidated Income Partners at December 31, 1999, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina February 24, 2000 JOHNSTOWN/CONSOLIDATED INCOME PARTNERS BALANCE SHEET (in thousands, except unit data) December 31, 1999
Assets Cash and cash equivalents $ 10,579 Receivables and deposits (net of allowance of $159,000) 172 Restricted escrows 223 Other assets 92 Investment property (Notes F and G): Land $ 213 Buildings and related personal property 4,486 4,699 Less accumulated depreciation (2,962) 1,737 $ 12,803 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 97 Tenant security deposit liabilities 35 Accrued property taxes 67 Other liabilities 93 Mortgage note payable (Note F) 2,325 Partners' (Deficit) Capital General partner $ (145) Corporate limited partner on behalf of the Unitholders - (128,810 units issued and outstanding) 10,331 10,186 $ 12,803 See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31,
1999 1998 (restated) Revenues: Rental income $ 1,045 $ 960 Other income 112 135 Casualty gain (Note I) -- 205 Total revenues 1,157 1,300 Expenses: Operating 438 471 General and administrative 281 265 Depreciation 213 170 Interest 185 185 Property taxes 67 49 Total expenses 1,184 1,140 (Loss) income from continuing operations (27) 160 Income from discontinued operations 509 479 Gain on sale of discontinued operations 3,144 -- Net income (Note J) $ 3,626 $ 639 Net income allocated to general partner (1%) $ 36 $ 6 Net income allocated to limited partners (99%) 3,590 633 $ 3,626 $ 639 Per Unit of Depositary Receipt: (Loss) income from continuing operations (.20) 1.23 Income from discontinued operations 3.91 3.68 Gain on sale of discontinued operations 24.16 -- Net income per Unit of Depositary Receipt $ 27.87 $ 4.91 Distributions per Unit of Depositary Receipt $ 4.42 $ 7.69 See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (in thousands, except unit data)
Unitholders Units of Units of Depositary General Depositary Receipt Partner Receipt Total (Note A) Original capital contributions 129,266 $ 1 $32,317 $32,318 Partners' (deficit) capital at December 31, 1997 128,810 $ (171) $ 7,667 $ 7,496 Distribution paid -- (10) (990) (1,000) Net income for the year ended December 31, 1998 -- 6 633 639 Partners' (deficit) capital at December 31, 1998 128,810 (175) 7,310 7,135 Distribution paid -- (6) (569) (575) Net income for the year ended December 31, 1999 -- 36 3,590 3,626 Partners' (deficit) capital at December 31, 1999 128,810 $ (145) $10,331 $10,186 See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 1999 1998 Cash flows from operating activities: Net income $ 3,626 $ 639 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 582 537 Amortization of lease commissions and loan costs 14 62 Gain on sale of discontinued operations (3,144) -- Casualty gain -- (205) Change in accounts: Receivables and deposits 6 (91) Other assets 52 (27) Accounts payable 84 (381) Tenant security deposit liabilities (38) 18 Accrued property taxes 18 49 Other liabilities (3) 40 Net cash provided by operating activities 1,197 641 Cash flows from investing activities: Proceeds from sale of discontinued operations 8,554 -- Property improvements and replacements (342) (837) Net (deposits to) receipts from restricted escrows (9) 47 Lease commissions paid -- (160) Net insurance proceeds from casualty -- 293 Net cash provided by (used in) investing activities 8,203 (657) Cash flows used in financing activities: Distributions to partners (575) (1,000) Net increase (decrease) in cash and cash equivalents 8,825 (1,016) Cash and cash equivalents at beginning of year 1,754 2,770 Cash and cash equivalents at end of year $10,579 $ 1,754 Supplemental disclosure of cash flow information: Cash paid for interest $ 170 $ 170 See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS NOTES TO FINANCIAL STATEMENTS December 31, 1999 Note A - Organization and Summary of Significant Accounting Policies Organization Johnstown/Consolidated Income Partners (the "Partnership" or "Registrant"), a California limited partnership, was formed on January 9, 1986, to operate and hold commercial and residential properties and to invest in mortgage loans and mortgage-backed securities. Consolidated Capital Equities Corporation ("CCEC"), the former general partner, and Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"), which serves as depositary of certain Units of Depositary Receipt ("Units"), contributed $1,000 and $100,000, respectively. The Units represent economic rights attributable to the limited partnership interests in the Partnership and entitle the holders thereof ("Unitholders") to the economic benefits attributable to equity interests in the Partnership and to participate in certain allocations and distributions of the Partnership. For this reason, partners' (deficit) capital is herein represented as an interest of the Unitholders. The general partner of the Partnership is ConCap Equities, Inc. ("CEI" or the "General Partner"), a Delaware corporation. Additionally, the General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO") (See "Note B - Transfer of Control"). The Partnership Agreement provides that the Partnership is to terminate on December 31, 2017 unless terminated prior to that date. As of December 31, 1999, the Partnership owned one residential property, which is located in Missouri. At the time of the Partnership's formation, CCEC was the sole general partner of the Partnership, and the Corporate Limited Partner was a wholly-owned subsidiary of CCEC. In 1988, Southmark Corporation ("Southmark") gained control of CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. As part of its reorganization plan, CEI acquired CCEC's general partner interest in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and acquired the stock of the Corporate Limited Partner, replacing CCEC as managing general partner in all 16 partnerships. Prior to December 1994, all of CEI's outstanding stock was owned by GII Realty, Inc. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of the General Partner acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As a part of the Insignia Transaction, the General Partner affiliate also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity and Insignia Financial Group, Inc., ("Insignia") acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, the General Partner affiliate exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. As of December 31, 1999, Insignia Properties Trust ("IPT") owned 100% of the outstanding stock of CEI. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, in banks and money market accounts. At certain times the amount of cash deposited at a bank may exceed the limit on insured deposits. 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. Depreciation Depreciation is provided by the straight-line method over the estimated lives of the investment property and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) 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, and (2) for personal property over 5 years for additions prior to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the alternative depreciation system is used for depreciation of (1) real property over 40 years and (2) personal property additions over 5-20 years. Effective January 1, 1999, the Partnership changed its method of accounting to capitalize the costs of exterior painting and major landscaping (Note M). Investment Properties The Partnership's investment property consists of one apartment complex, which is 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. For the years ended December 31, 1999 and 1998, no adjustments for impairment of value were recorded. 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 amount of its financial instruments (except for long term debt) approximates their fair value 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. Replacement Reserves The Partnership maintains a replacement reserve with the holder of the mortgage note payable on Cedar Brooke Apartments. These funds are available for the maintenance of the property. The balance at December 31, 1999 was approximately $223,000. Leases The Partnership generally leases apartment units for one year or less. The Partnership recognizes income as earned on its residential leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Loan Costs Loan costs are approximately $101,000 net of accumulated amortization of approximately $45,000, at December 31, 1999 and are amortized using the straight-line method over the life of the related mortgage note. Unamortized loan costs are included in other assets. Amortization of loan costs is included in interest expense. 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 Unitholders and 1% to the General Partner. Advertising Costs The Partnership expenses the cost of advertising as incurred. Advertising expense for Cedar Brooke Apartments, which is included in operating expenses, was approximately $33,000 and $37,000 for the years ended December 31, 1999 and 1998, respectively. Units of Depositary Receipt The Corporate Limited Partner, an affiliate of the General Partner, serves as a depositary of the Units. The Units represent economic rights attributable to the limited partnership interests in the Partnership and entitle the 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. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 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 (see "Note K" for required disclosures). Reclassifications Certain reclassifications have been made to the 1998 balances to conform to the 1999 presentation. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - 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 Partnership activities, as provided for in the Partnership Agreement. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to the General Partner and affiliates during the years ended December 31, 1999 and 1998: 1999 1998 (in thousands) Asset management fees (included in general and administrative expense) $ 94 $ 91 Property management fees (included in operating expenses) 97 110 Reimbursement for services of affiliates (included in operating and general and administrative expenses, and investment properties) 44 111 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 $94,000 and $91,000 were paid to the General Partner and its affiliates for the years ended December 31, 1999 and 1998, respectively. During the years ended December 31, 1999 and 1998, affiliates of the General Partner were entitled to receive 5% of gross receipts from the Partnership's residential property for providing property management services. The Partnership paid to such affiliates approximately $55,000 and $50,000 for the years ended December 31, 1999 and 1998, respectively. For the years ended December 31, 1999 and 1998, affiliates of the General Partner were entitled to receive varying percentages of gross receipts from the Partnership's Florida #11 Mini-Warehouse commercial property for property management services. The Partnership paid to such affiliates approximately $42,000 and $45,000 for the years ended December 31, 1999 and 1998, respectively. For the nine months ended September 30, 1998, affiliates of the General Partner were entitled to receive varying percentages of gross receipts from the Partnership's Phoenix Business Campus commercial property for providing property management services. For the nine months ended September 30, 1998, the Partnership paid approximately $15,000 to such affiliates for providing property management services for Phoenix Business Campus. Effective October 1, 1998 (the effective date of the Insignia Merger) these services for the Phoenix Business Campus commercial property were provided by an unrelated party. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $44,000 and $111,000 for the years ended December 31, 1999 and 1998, respectively. The Partnership paid leasing commissions of approximately $80,000 to an affiliate of the General Partner during the year ended December 31, 1998. No lease commissions were paid to affiliates during the year ended December 31, 1999. Leasing commissions were capitalized and amortized over the lives of the respective leases. Several tender offers were made by various parties, including affiliates of the General Partner, during the years ended December 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 59,996 units of depositary receipt in the Partnership representing 46.577% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional units of depositary receipt in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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 their affiliation with the General Partner. 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. 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 of both continuing and discontinued operations totaling approximately $10,654,000 at December 31, 1999, exceed the Partnership's reserve requirement of approximately $1,339,000. Note E - Distributions During the year ended December 31, 1999, the General Partner declared and paid a distribution attributable to cash flow from operations of approximately $575,000 (approximately $569,000 to the limited partners, $4.42 per Unit). In March of 1998, the Partnership paid a distribution attributable to cash flow from operations of approximately $1,000,000 (approximately $990,000 to the limited partners, $7.69 per Unit). Subsequent to December 31, 1999, a distribution of approximately $8,000,000 was declared and paid. Of this amount, approximately $262,000 (approximately $259,000 to the limited partners, $2.01 per Unit) was paid from operations and approximately $7,738,000 (approximately $7,661,000 to the limited partners, $59.48 per Unit) was paid from the sales proceeds of the Florida #11 Mini Warehouse and Phoenix Business Campus which were sold during the fourth quarter of 1999. See "Note H" for additional information about the property sales. Note F - Mortgage Note Payable The principle terms of the mortgage note payable are as follows:
Principal Monthly Principal Balance At Payment Stated Balance December 31, Interest Interest Maturity Due At Property 1999 Only Rate Date Maturity (in thousands) (in thousands) Cedar Brooke Apartments 1st mortgage $2,325 $ 14 7.33% 11/03 $2,325
The mortgage note is non-recourse and is secured by pledge of the apartment property and by pledge of revenues from the apartment property. The note requires prepayment penalties if repaid prior to maturity and prohibits resale of the property subject to existing indebtedness. Note G - Real Estate and Accumulated Depreciation
Initial Cost To Partnership (in thousands) Buildings Net Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) Cedar Brooke Apartments $2,325 $ 275 $4,040 $ 384
Gross Amount At Which Carried At December 31, 1999 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years (in thousands) Cedar Brooke Apartments $ 213 $4,486 $4,699 $2,962 02/27/87 5-19
Reconciliation of "Real Estate and Accumulated Depreciation": Years Ended December 31, 1999 1998 (in thousands) Real Estate Balance at beginning of year $13,720 $13,092 Property improvements 342 837 Property dispositions -- (209) Sale of discontinued operations (9,363) -- Balance at end of year $ 4,699 $13,720 Accumulated Depreciation Balance at beginning of year $ 6,609 $ 6,193 Additions charged to expense 582 537 Property dispositions -- (121) Sale of discontinued operations (4,229) -- Balance at end of year $ 2,962 $ 6,609 The aggregate cost of the Partnership's investment properties for Federal income tax purposes at December 31, 1999 and 1998, respectively, is approximately $5,033,000 and $14,463,000. The accumulated depreciation taken for Federal income tax purposes at December 31, 1999 and 1998, respectively, is approximately $2,491,000 and $6,928,000. Note H - Sale of Discontinued Operations On November 4, 1999, the Partnership sold the Florida #11 Mini Warehouse to an unaffiliated third party for net sales proceeds of approximately $4,470,000 after payment of closing costs. For financial statement purposes, the sale resulted in a gain of approximately $2,525,000. The sales transaction is summarized as follows (amounts in thousands): Net sale price, net of selling costs $ 4,470 Net real estate (1) (1,945) Gain on sale of real estate $ 2,525 (1) Net of accumulated depreciation of approximately $813,000. On December 30, 1999, Phoenix Business Campus, located in College Park, Georgia, was sold to an unaffiliated party for $4,200,000. After payment of closing expenses, the net sales proceeds received by the Partnership were approximately $4,084,000. For financial statement purposes, the sale resulted in a gain of approximately $619,000. The Phoenix Business Campus sale transaction is summarized as follows (amounts in thousands): Net sales price, net of selling costs $ 4,084 Net real estate (1) (3,187) Other assets (278) Gain on sale of real estate $ 619 (1) Net of accumulated depreciation of approximately $3,416,000. The following pro-forma information reflects the operations of the Partnership for the years ended December 31, 1999 and 1998 as if Phoenix Business Campus and Florida #11 Mini-Warehouse had been sold January 1, 1998: 1999 1998 (in thousands, except per unit data) Revenues $ 1,157 $ 1,300 Net (loss) income (27) 160 Net (loss) income per Unit Depositary Receipt (.20) 1.23 Florida #11 Mini Warehouse and Phoenix Business Campus were the only commercial properties owned by the Partnership and represented one segment of the Partnership's operations. Due to the sale of these properties, the results of the commercial segment have been shown as income from discontinued operations and gain on sale of discontinued operations. The revenues of these properties were approximately $1,334,000 and $1,376,000 for 1999 and 1998, respectively. Income from discontinued operations was approximately $509,000 and $479,000 for 1999 and 1998, respectively. Note I - Casualty Gain 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 $293,000 were received and reconstruction of the clubhouse was completed in 1998. The Partnership recorded a casualty gain of approximately $205,000 during the year ended December 31, 1998 as a result of the proceeds received less the write-off of the undepreciated balance of the assets destroyed in the fire. Note J - 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 unit data): 1999 1998 Net income as reported $ 3,626 $ 639 Add (deduct): Depreciation differences (54) (86) Unearned income (35) (7) Allowance for bad debt -- (22) Other 32 51 Casualty gain -- (220) Gain on sale of property 283 -- Accruals and prepaids 45 23 Federal taxable income $ 3,897 $ 378 Federal taxable income per unit of Depositary Receipt $ 29.95 $ 2.91 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net assets as reported $10,186 Land and buildings 334 Accumulated depreciation 471 Syndication and distribution costs 3,825 Other (14) Net assets - Federal tax basis $14,802 Note K - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership had two reportable segments: residential properties and commercial properties. The Partnership's residential property segment consists of one apartment complex located in Independence, Missouri. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The commercial property segment consisted of an office building located in Atlanta, Georgia, and a self-storage mini-warehouse located in Davie, Florida. The two commercial properties held by the Partnership were sold to unrelated parties during 1999. Therefore, the commercial segment is reflected as discontinued operations (see "Note H - Sale of Discontinued Operations" for further discussion regarding the commercial sales). Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments consisted of investment properties that offered different products and services. The reportable segments were each managed separately because they provided distinct services with different types of products and customers. Segment information for the years 1999 and 1998 is shown in the tables below. The "Other" column includes Partnership administration related items and income and expense not allocated to the reportable segments (in thousands).
1999 Residential Commercial Other Totals (discontinued) Rental income $ 1,045 $ -- $ -- $ 1,045 Other income 51 -- 61 112 Interest expense 185 -- -- 185 Depreciation 213 -- -- 213 General and administrative expense -- -- 281 281 Gain on sale of discontinued operations -- 3,144 -- 3,144 Income from discontinued operations -- 509 -- 509 Segment profit (loss) 193 3,653 (220) 3,626 Total assets 2,332 360 10,111 12,803 Capital expenditures for investment properties 262 80 -- 342
1998 Residential Commercial Other Totals (discontinued) Rental income $ 960 $ -- $ -- $ 960 Other income 54 -- 81 135 Interest expense 185 -- -- 185 Depreciation 170 -- -- 170 General and administrative expense -- -- 265 265 Casualty gain 205 -- -- 205 Income from discontinued operations -- 479 -- 479 Segment profit (loss) 344 479 (184) 639 Total assets 2,159 6,510 1,024 9,693 Capital expenditures for investment properties 488 349 -- 837
Note L - 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 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia 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 and the Insignia Merger (see "Note B - Transfer of Control"). 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 have 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 final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, 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 class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case 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. Note M - Change in Accounting Principle Effective January 1, 1999, the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping on a prospective basis. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the General Partner. The effect of the change on net income in 1999 is not material. The cumulative effect, had this change been applied to prior periods, is not material. The accounting principle change will not have an effect on cash flow, funds available for distribution or fees payable to the General Partner and affiliates. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Johnstown/Consolidated Income Partners (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 and directors. Name Age Position Patrick J. Foye 42 Executive Vice President and Director Martha L. Long 40 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 and AIMCO since October 1998, as a result of the acquisition of Insignia Financial Group, Inc. 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. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal year and Form 5 and amendments thereto furnished to the Registrant with respect to its most recent fiscal year, the Registrant is not aware of any director, officer, beneficial owner of more than ten percent of the units of limited partnership interest in the Registrant that failed to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years except as follows: AIMCO and its joint filers failed to timely file a Form 4 with respect to its acquisition of Units. Item 10. Executive Compensation None of the directors and officers of the General Partner received any remuneration from the Registrant during the year ended December 31, 1999. Item 11. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as provided below, as of December 31, 1999, no person was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership. Number of Percent Name and Address Units of Total Insignia Properties LP (1) 12,146.0 9.429% (an affiliate of AIMCO) Madison River Properties LLC (1) 14,061.5 10.917% (an affiliate of AIMCO) AIMCO Properties LP (2) 33,788.5 26.231% (an affiliate of AIMCO) (1) Entity is indirectly ultimately owned by AIMCO. Its business address is 55 Beattie Place, Greenville, SC 29601. (2) Entity is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Boulevard, Denver, CO 80222. (b) Beneficial Owners of Management Except as noted below, neither CEI nor any of the directors or officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of December 31, 1999, the following persons were known to CEI to be the beneficial owners of more than 5 percent (5%) of its common stock: Number of Percent Name and Address CEI Shares of Total Insignia Properties Trust 100,000 100% 55 Beattie Place Greenville, SC 29601 Insignia Properties Trust is indirectly ultimately owned by AIMCO. Item 12. Certain Relationships and Related 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, as provided for in the Partnership Agreement. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to an affiliate of the General Partner and affiliates during the years ended December 31, 1999 and 1998: 1999 1998 ---- ---- (in thousands) Asset management fees $ 94 $ 91 Property management fees 97 110 Reimbursement for services of affiliates 44 111 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 $94,000 and $91,000 were paid to the General Partner and its affiliates for the years ended December 31, 1999 and 1998, respectively. During the years ended December 31, 1999 and 1998, affiliates of the General Partner were entitled to receive 5% of gross receipts from the Partnership's residential property for providing property management services. The Partnership paid to such affiliates approximately $55,000 and $50,000 for the years ended December 31, 1999 and 1998, respectively. For the years ended December 31, 1999 and 1998, affiliates of the General Partner were entitled to receive varying percentages of gross receipts from the Partnership's Florida #11 Mini-Warehouse commercial property for property management services. The Partnership paid to such affiliates approximately $42,000 and $45,000 for the years ended December 31, 1999 and 1998, respectively. For the nine months ended September 30, 1998, affiliates of the General Partner were entitled to receive varying percentages of gross receipts from the Partnership's Phoenix Business Campus commercial property for providing property management services. For the nine months ended September 30, 1998, the Partnership paid approximately $15,000 to such affiliates for providing property management services for Phoenix Business Campus. Effective October 1, 1998 (the effective date of the Insignia Merger) these services for the Phoenix Business Campus commercial property were provided by an unrelated party. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $44,000 and $111,000 for the years ended December 31, 1999 and 1998, respectively. The Partnership paid leasing commissions of approximately $80,000 to an affiliate of the General Partner during the year ended December 31, 1998. No leasing commissions were paid to affiliates during the year ended December 31, 1999. Leasing commissions were capitalized and amortized over the lives of the respective leases. Several tender offers were made by various parties, including affiliates of the General Partner, during the years ended December 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 59,996 units of depositary receipt in the Partnership representing 46.577% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional units of depositary receipt in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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 their affiliation with the General Partner. Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Exhibits: Exhibit 18, Independent Accountants' Preferability Letter for Change in Accounting Principle, is filed as an exhibit to this report. Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K filed in the fourth quarter of calendar year 1999: Current Report on Form 8-K dated November 4, 1999 and filed November 30, 1999, disclosing sale of Florida #11 Mini-Warehouse on November 4, 1999. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JOHNSTOWN/CONSOLIDATED INCOME PARTNERS 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 and on the date 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 JOHNSTOWN CONSOLIDATED INCOME PARTNERS INDEX OF EXHIBITS EXHIBIT NO. DOCUMENT DESCRIPTION 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT; incorporated by reference to the Registrant's Current Report on Form 8-K dated October 1, 1998. 3 Certificates of Limited Partnership, as amended to date (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991) 10.1 Property Management Agreement No. 114 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). 10.2 Property Management Agreement No. 309 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). 10.3 Bill of Sale and Assignment dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.4 Assignment 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). 10.5 Assignment 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). 10.6 Assignment and Assumption 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). 10.7 Assignment and Assumption 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). 10.8 Property Management Agreement No. 121 dated October 1, 1991, by and between the Partnership, Johnstown/Consolidated Income Partners/2 ("JCIP/2") and CCMLP (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.9 Property Management Agreement No. 122 dated October 1, 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). 10.10 Assignment and Assumption Agreement dated October 1, 1991, by and between CCMLP and The Hayman Company (Property Management Agreements No. 121 and 122) (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.11 Assignment and Agreement as to Certain Property Management Services dated October 1, 1991, by and between CCMLP and ConCap Capital Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.12 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership, and JCIP Associates, Ltd. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.13 Construction 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). 10.14 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and The Hayman Company (the "Hayman Construction Management Agreement") (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.15 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership, and JCIP Associates, Ltd. (Hayman Construction Management Agreement) (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.16 Construction Management Cost Reimbursement Agreement dated October 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). 10.17 Construction Management Cost Reimbursement Agreement dated October 1, 1991, by and between the Partnership, Johnstown/Consolidated Income Partners/2 and The Hayman Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.18 Investor 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). 10.19 Assignment and Assumption Agreement (Investor Services Agreement) dated 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). 10.20 Letter of Notice dated December 20, 1991, from Partnership Services, Inc. ("PSI") to the Partnership regarding the change in ownership and dissolution of ConCap Services Company whereby PSI assumed the Investor Services Agreement (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.21 Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.22 Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.23 Letter of Notice dated December 20, 1991, from PSI to the Partnership regarding the change in ownership and dissolution of ConCap Capital Company whereby PSI assumed the Financial Services Agreement (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.24 Property Management Agreement No. 502 dated February 16, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 10.25 Property Management Agreement No. 516 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.26 Property Management Agreement No. 517 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.27 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.28 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. 10.29 Stock and Asset Purchase Agreement, dated December 8, 1994 (the "Gordon Agreement"), among MAE-ICC, Inc.("MAE-ICC"), Gordon Realty Inc. ("Gordon"), GII Realty, Inc. ("GII Realty"), and certain other parties. Incorporate by reference to Form 8-K dated December 8, 1994) 10.30 Exercise of the Option (as defined in the Gordon Agreement), dated December 8, 1994, between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated December 8, 1994) 10.31 Exercise of the remaining portion of the option (as defined in the Gordon Agreement), dated December 8, 1994, between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated October 24, 1995). 10.32 Multifamily Note dated November 1, 1996, between Johnstown/Consolidated Income Partners, a California limited partnership, and Lehman Brokers 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) 10.33 Agreement for Purchase and Sale of Existing Facilities dated March 19, 1997, executed by and between Johnstown/Consolidated Income Partners and Johnstown/Consolidated Income Partners/2, each a California limited partnership and Shurgard Storage Centers, Inc., a Delaware corporation, covering certain real property situated in Broward County, Florida (the "Property"). 10.34 Special Warranty Deed dated May 8, 1997, executed by Johnstown/Consolidated Income Partners and Johnstown/Consolidated Income Partners/2, each a California limited partnership in favor of Shurgard Storage Center, Inc., a Delaware corporation. 10.35 Assignment of Rental Agreements dated May 8, 1997, executed by Johnstown/Consolidated Income Partners and Johnstown/Consolidated Income Partners/2, each a California limited partnership and Shurgard Storage Center, Inc., a Delaware corporation. 10.36 Purchase and Sale Contract between Johnstown/Consolidated Income Partners and Everest Storage Holdings, LLC dated July 2, 1999, documenting the sale of Florida #11 Mini Warehouse located in Davie, Florida. (Incorporated by reference to current report on Form 8-K dated November 4, 1999). 10.37 First Amendment to Purchase and Sale Contract between Johnstown/Consolidated Income Partners and Everest Storage Holdings, LLC dated September 7, 1999, documenting the sale of Florida #11 Mini Warehouse located in Davie, Florida. (Incorporated by reference to current report on Form 8-K dated November 4, 1999). 10.38 Purchase and Sale Contract between Registrant and Cadle's Phoenix Business Center, an Ohio Limited Liability Company, dated October 8, 1999. (Incorporated by reference to current report on Form 8-K dated December 30, 1999). 10.39 Addendum to Purchase and Sale Contract between Registrant and Cadle's Phoenix Business Center, an Ohio Limited Liability Company, dated December 8, 1999.(Incorporated by reference to current report on Form 8-K dated December 30, 1999) 11 Statement regarding computations of Net Income per Limited Partnership Unit (Incorporated by reference to Note 1 of Item 8 - Financial Statements of this Form 10-K). 16.1 Letter, dated August 12, 1992, from Ernst & Young to the Securities and Exchange Commission regarding change in certifying accountant. (Incorporated by reference to Form 8-K dated August 6, 1992). 16.2 Letter dated May 9, 1995 from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant regarding a change in the certifying accountant. (Incorporated by reference to Form 8-K dated May 3, 1995) 18 Independent Accountants' Preferability Letter for Change in Accounting Principle. 27 Financial Data Schedule. Exhibit 18 February 7, 2000 Mr. Patrick J. Foye Executive Vice President ConCap Equities, Inc. General Partner of Johnstown/Consolidated Income Partners 55 Beattie Place P.O. Box 1089 Greenville, South Carolina 29602 Dear Mr. Foye: Note M of Notes to the Financial Statements of Johnstown/Consolidated Income Partners included in its Form 10-KSB for the year ended December 31, 1999 describes a change in the method of accounting to capitalize exterior painting and major landscaping, which would have been expensed under the old policy. You have advised us that you believe that the change is to a preferable method in your circumstances because it provides a better matching of expenses with the related benefit of the expenditures and is consistent with policies currently being used by your industry and conforms to the policies of the General Partner. There are no authoritative criteria for determining a preferable method based on the particular circumstances; however, we conclude that the change in the method of accounting for exterior painting and major landscaping is to an acceptable alternative method which, based on your business judgment to make this change for the reasons cited above, is preferable in your circumstances. Very truly yours, /s/ Ernst & Young LLP EX-27 2 YEAR END 10-KSB
5 This schedule contains summary financial information extracted from Johnstown/Consolidated Income Partners 1999 Fourth Quarter 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000787621 Johnstown/Consolidated Income Partners 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 10,579 0 172 0 0 0 4,699 2,962 12,803 0 2,325 0 0 0 10,186 12,803 0 1,157 0 0 1,184 0 185 0 0 0 3,653 0 0 3,626 27.87 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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