FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.......to........
Commission file number 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of small business issuer as specified in its charter)
California 94-2382571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
June 30, 1997
Assets
Cash:
Unrestricted $ 2,012
Restricted--tenant security deposits 332
Accounts receivable 32
Escrow for taxes 462
Restricted escrows 574
Other assets 692
Investment properties:
Land $ 4,610
Buildings and related personal property 37,203
41,813
Less accumulated depreciation (21,642) 20,171
$24,275
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 143
Tenant security deposits 332
Accrued taxes 296
Other liabilities 365
Mortgage notes payable 30,690
Partners' Capital (Deficit)
General partner $ (4,183)
Limited partners (49,196 units
issued and outstanding) (3,368) (7,551)
$24,275
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $2,706 $2,631 $5,325 $5,225
Interest income 27 32 67 78
Other income 151 149 282 273
Total revenues 2,884 2,812 5,674 5,576
Expenses:
Operating 896 874 1,831 1,685
General and administrative 76 143 156 218
Partnership management fees -- -- 82 123
Maintenance 295 427 654 743
Depreciation 494 466 975 921
Interest 561 441 1,119 939
Property taxes 154 175 308 350
Total expenses 2,476 2,526 5,125 4,979
Income before extraordinary item 408 286 549 597
Extraordinary loss on early
extinguishment of debt -- -- -- (119)
Net income $ 408 $ 286 $ 549 $ 478
Net income allocated
to general partner (1%) $ 4 $ 3 $ 5 $ 5
Net income allocated
to limited partners (99%) 404 283 544 473
Net income $ 408 $ 286 $ 549 $ 478
Per limited partnership unit:
Income before extraordinary item $ 8.21 $ 5.75 $11.05 $12.01
Extraordinary item -- -- -- (2.40)
Net income per limited
partnership unit $ 8.21 $ 5.75 $11.05 $ 9.61
See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except for unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $49,196 $49,197
Partners' capital (deficit)
at December 31, 1996 49,196 $(3,339) $ 2,131 $(1,208)
Distributions to partners -- (849) (6,043) (6,892)
Net income for the six months
ended June 30, 1997 -- 5 544 549
Partners' capital (deficit)
at June 30, 1997 49,196 $(4,183) $(3,368) $(7,551)
See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL GROWTH FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income $ 549 $ 478
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 975 921
Amortization of loan costs 41 25
Extraordinary loss on early extinguishment of debt -- 119
Change in accounts:
Restricted cash 14 (15)
Accounts receivable 14 10
Escrows for taxes (239) (247)
Other assets (14) 25
Accounts payable (84) (53)
Tenant security deposit liabilities (14) 15
Accrued taxes 296 337
Other liabilities (2) 85
Net cash provided by operating activities 1,536 1,700
Cash flows from investing activities:
Property improvements and replacements (736) (544)
Receipts from restricted escrows 574 96
Deposits to restricted escrows (233) (11)
Net cash used in investing activities (395) (459)
Cash flows from financing activities:
Payments on mortgage notes payable -- (32)
Repayment of mortgage notes payable -- (1,282)
Prepayment penalties -- (23)
Distributions to partners (6,892) (1,579)
Net cash used in financing activities (6,892) (2,916)
Net decrease in cash and cash equivalents (5,751) (1,675)
Cash and cash equivalents at beginning of period 7,763 4,717
Cash and cash equivalents at end of period $ 2,012 $ 3,042
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,078 $ 810
See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Growth Fund (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of ConCap Equities, Inc. ("General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the year
ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership paid property management fees based upon collected gross rental
revenues for property management services as noted below for the six month
periods ended June 30, 1997 and 1996 respectively. Such fees are included in
operating expense on the consolidated statement of operations and are reflected
in the following table. The Limited Partnership Agreement ("Agreement")
provides for reimbursement to the General Partner and its affiliates for costs
incurred in connection with the administration of Partnership activities. The
General Partner and its affiliates received reimbursements and fees as reflected
in the following table:
For the Six Months Ended
June 30,
1997 1996
(in thousands)
Property management fees $279 $274
Reimbursement for services of affiliates 94 99
Partnership management fees (1) 82 123
(1) The Agreement provides for a fee equal to 9% of the total distributions
made to the limited partners from "cash available for distribution" to the
limited partners (as defined in the Agreement) to be paid to the General
Partner for executive and administrative management services.
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
NOTE C - EARLY EXTINGUISHMENT OF DEBT
In March 1996, the Partnership paid off the first and second mortgages of Tahoe
Springs totaling approximately $1,282,000, with a portion of the refinancing
proceeds received in December 1995 from the refinancing of Breckinridge Square,
Churchill Park and The Lakes. An extraordinary gain on early extinguishment of
debt in the amount of approximately $119,000 was recorded upon payoff of the
mortgage notes. Of this amount, approximately $96,000 was recorded due to the
write off of the remaining mortgage note discount and approximately $23,000 was
recorded due to prepayment penalties incurred.
NOTE D - MORTGAGE NOTES PAYABLE
On November 13, 1996, the Partnership financed Tahoe Springs. The Partnership
received $6 million in gross proceeds from the financing. The mortgage note
requires monthly interest only payments at a stated interest rate of 7.33% and
has a balloon payment due November 1, 2003. The Partnership recognized an
extraordinary loss of approximately $119,000 on the early extinguishment of debt
at Tahoe Springs as a result of the write-off of the related mortgage note
discounts and prepayment penalties paid in connection with the early payoff of
the mortgage notes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consists of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Breckinridge Square
Louisville, Kentucky 93% 94%
Churchill Park
Louisville, Kentucky 91% 92%
The Lakes
Raleigh, North Carolina 92% 95%
Tahoe Springs
Miami, Florida 94% 95%
Results of Operations
The Partnership's net income for the six months ended June 30, 1997, was
approximately $549,000 versus net income of approximately $478,000 for the six
months ended June 30, 1996. The Partnership's net income for the three months
ended June 30, 1997 was approximately $408,000 versus net income of
approximately $286,000 for the three months ended June 30, 1996. The increase
in net income for the three and six months ended June 30, 1997, is primarily
attributed to decreases in general and administrative expenses, partnership
management fees, maintenance, property taxes and extraordinary loss on early
extinguishment of debt. General and administrative expenses decreased as the
result of a decrease in occupational license fees and audit expense. During the
six months ended June 30, 1996, the Partnership paid approximately $36,000 for
occupational license fees for Breckinridge Square and Churchill Park. No such
fees have been incurred in 1997. Audit expense has decreased as a result of an
under accrual of audit and tax expense at December 31, 1995. Additional fees
related to the 1995 audit were billed and paid in 1996, thereby increasing the
1996 audit expense. Partnership management fees decreased due to the decrease in
distributions made to limited partners from "cash available for distribution"
(as defined in the Partnership Agreement). Maintenance expense decreased due to
major landscaping performed during the six months ended June 30, 1996 at The
Lakes to deter water retention. Included in maintenance expense for the six
months ended June 30, 1997 and 1996, is approximately $117,000 and $251,000,
respectively, of major repairs and maintenance comprised primarily of office
equipment, exterior painting, major landscaping and exterior building
improvements. The decrease in property taxes is a result of a decrease in tax
estimates for 1997. The tax expense for the six months ended June 30, 1996, was
calculated based on the taxes paid in 1995. Subsequent to March 31, 1996, the
Partnership received a tax refund on the 1995 taxes at Tahoe Springs. The tax
expense for the six months ended June 30, 1997, was calculated based on the
reduced taxes paid in 1996. Also contributing to the increase in net income for
the six months ended June 30, 1997, was an extraordinary loss of approximately
$119,000 recognized by the Partnership in 1996, due to the early extinguishment
of debt at Tahoe Springs. These decreases were offset by a decrease in interest
income and an increase in interest expense. The decrease in interest income is
the result of decreased cash balances invested in interest bearing accounts.
The increase in interest expense is due to the financing of Tahoe Springs in
November 1996, as discussed in Note D to the Notes to Consolidated Financial
Statements.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. 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 June 30, 1997, the Partnership had unrestricted cash of approximately
$2,012,000 versus approximately $3,042,000 at June 30, 1996. Net cash provided
by operating activities decreased as a result of a decrease in accrued taxes and
other liabilities. Net cash used in investing activities decreased primarily due
to an increase in receipts from restricted escrows. This increase was partially
offset by increases in the purchases of property improvements and replacements
and deposits to restricted escrows. Net cash used in financing activities
increased primarily due to an increase in distributions made to the partners in
1997.
Major capital programs budgeted for 1997 include a chiller replacement at
Churchill Park and an HVAC replacement at The Lakes. The Partnership has no
other material capital programs scheduled to be performed in 1997, although
certain routine capital expenditures and maintenance expenses have been
budgeted. These capital expenditures and maintenance expenses will be incurred
only if cash is available from operations or is received from the capital
reserve account.
In March 1996, the Partnership paid off the first and second mortgages of Tahoe
Springs totaling approximately $1,282,000, with a portion of the refinancing
proceeds received in December 1995 from the refinancing of Breckinridge Square,
Churchill Park and The Lakes. An extraordinary loss on early extinguishment of
debt in the amount of approximately $119,000 was recorded upon payoff of the
mortgage notes. Of this amount, approximately $96,000 was recorded due to the
write off of the remaining mortgage note discount and approximately $23,000 was
recorded due to prepayment penalties incurred.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $30,690,000 requires monthly interest
only payments. These notes require balloon payments on November 1, 2003, and
December 1, 2005, at which time the properties will either be refinanced or
sold. During the six months ended June 30, 1997, the Partnership distributed
approximately $6,043,000 to the limited partners and approximately $849,000 to
the General Partner. During the six months ended June 30, 1996, a distribution
of approximately $1,363,000 was made to the limited partners and a distribution
of approximately $14,000 was made to the General Partner. Also, during the six
months ended June 30, 1996, the Partnership paid $137,000 and $65,000,
respectively, to the Georgia Department of Revenue and the North Carolina
Department of Revenue for withholding taxes on behalf of the partners related to
income generated by properties located in those states. These taxes were
treated as distributions to the partners and were allocated $201,000 to the
limited partners and $1,000 to the General Partner. Future cash distributions
will depend on the levels of cash generated from operations, capital expenditure
requirements, property sales, refinancings and the availability of cash
reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1997.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL GROWTH FUND
By: CONCAP EQUITIES, INC.
the General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: July 28, 1997