FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO 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, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1998
Assets
Cash and cash equivalents $ 3,346
Receivables and deposits 762
Restricted escrows 604
Other assets 552
Investment properties:
Land $ 4,610
Buildings and related personal property 38,063
42,673
Less accumulated depreciation (23,653) 19,020
$ 24,284
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 257
Tenant security deposit liabilities 305
Accrued property taxes 304
Other liabilities 368
Mortgage notes payable 30,690
Partners' Deficit
General partner $ (4,378)
Limited partners (49,196 units
issued and outstanding) (3,262) (7,640)
$ 24,284
See Accompanying Notes to Financial Statements
b)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 2,636 $ 2,654 $ 5,239 $ 5,185
Other income 193 178 349 349
Total revenues 2,829 2,832 5,588 5,534
Expenses:
Operating 1,093 1,138 2,244 2,345
General and administrative 80 77 176 238
Depreciation 514 494 1,023 975
Interest 559 561 1,117 1,119
Property taxes 154 154 308 308
Total expenses 2,400 2,424 4,868 4,985
Net income $ 429 $ 408 $ 720 $ 549
Net income allocated to
general partner (1%) $ 4 $ 4 $ 7 $ 5
Net income allocated to
limited partners (99%) 425 404 713 544
$ 429 $ 408 $ 720 $ 549
Net income per limited partnership unit $ 8.64 $ 8.21 $ 14.49 $ 11.06
See Accompanying Notes to Financial Statements
c)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $ 49,196 $ 49,197
Partners' deficit
at December 31, 1997 49,196 $ (4,260) $ (3,205) $ (7,465)
Distributions -- (125) (770) (895)
Net income for the six months
ended June 30, 1998 -- 7 713 720
Partners' deficit
at June 30, 1998 49,196 $ (4,378) $ (3,262) $ (7,640)
See Accompanying Notes to Financial Statements
d)
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 720 $ 549
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,023 975
Amortization of loan costs 39 41
Change in accounts:
Receivables and deposits 33 (212)
Other assets 45 (14)
Accounts payable 127 (84)
Tenant security deposit liabilities 14 (14)
Accrued property taxes 145 296
Other liabilities 18 (2)
Net cash provided by operating activities 2,164 1,535
Cash flows from investing activities:
Property improvements and replacements (415) (736)
Net (deposits to) receipts from restricted escrows (1) 341
Net cash used in investing activities (416) (395)
Cash flows used in financing activities:
Distributions paid (895) (6,892)
Net increase (decrease) in cash and cash equivalents 853 (5,752)
Cash and cash equivalents at beginning of period 2,493 7,763
Cash and cash equivalents at end of period $ 3,346 $ 2,011
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,078 $ 1,078
See Accompanying Notes to Financial Statements
e)
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited 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. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the year ended December 31,
1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 General Partner is wholly-owned by Insignia Properties Trust ("IPT"), an
affiliate of Insignia Financial Group, Inc. ("Insignia"). 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, 1998
and 1997, respectively. 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,
1998 1997
(in thousands)
Property management fees (included in $283 $279
operating expense)
Reimbursement for services of affiliates
(included in general and administrative
expenses) 101 94
Partnership management fees (included in
general and administrative expenses) (1) -- 82
(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.
Reimbursements for construction oversight costs, included in operating expense
for the periods ended June 30, 1998 and 1997, were approximately $1,000 and
$3,000, respectively.
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner, which 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 was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 15,000 of the outstanding
units of limited partnership interest in the Partnership, at $300 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 19, 1997 (the "Offer to Purchase") and the
related Assignment of Partnership Interest attached as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally
filed with the Securities and Exchange Commission on December 19, 1997. Because
of the existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the General Partner expressed
any opinion as to the Offer to Purchase and made no recommendation as to whether
unit holders should tender their units in response to the Offer to Purchase. In
addition, because of these conflicts of interest, including as a result of the
Purchaser's affiliation with various Insignia affiliates that provide property
management services to the Partnership's properties, the manner in which the
Purchaser votes its limited partner interest in the Partnership may not always
be consistent with the best interests of the other limited partners. During
February 1998, the tender offers were completed and an affiliate of Insignia
tendered 2,690 units of limited partnership interest in the Partnership.
NOTE C - DISTRIBUTIONS
During the six months ended June 30, 1998, the Partnership distributed
approximately $770,000 to the limited partners and approximately $125,000 to the
General Partner. Payments made by the Partnership to the Georgia Department of
Revenue and the North Carolina Department of Revenue for withholding taxes
related to income generated by the Partnership's investment properties located
in these states were treated as distributions to the partners and are included
in the distribution amounts above. During the six months ended June 30, 1997, a
distribution of approximately $6,723,000 was made to the limited partners and a
distribution of approximately $169,000 was made to the General Partner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Breckinridge Square
Louisville, Kentucky 92% 93%
Churchill Park
Louisville, Kentucky 91% 91%
The Lakes (1)
Raleigh, North Carolina 89% 92%
Tahoe Springs
Miami, Florida 94% 94%
(1)The low occupancy at The Lakes is due to a softening real estate market and
increased competition from new complexes in the Raleigh area. The General
Partner is offering incentives to prospective tenants in an effort to
increase occupancy.
Results of Operations
The Partnership's net income for the three and six months ended June 30, 1998,
was approximately $429,000 and $720,000, respectively, versus net income of
approximately $408,000 and $549,000, respectively, for the three and six months
ended June 30, 1997. The increase in net income is primarily the result of an
increase in rental income and a decrease in operating and general and
administrative expenses. Rental income increased due to an increase in average
annual rental rates at all of the investment properties, despite decreases in
occupancy at Breckinridge Square and The Lakes. General and administrative
expenses decreased due to the decrease in the distribution of funds "available
from operations" as defined in the Partnership Agreement. During the period
ended June 30, 1998, approximately $895,000 was distributed from surplus funds
as compared to approximately $5,975,000 from surplus funds and $917,000 from
operations during the period ended June 30, 1997. As noted in "Note B -
Transactions with Affiliated Parties", the Partnership 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
Partnership Agreement) to be paid to the General Partner for executive and
management services. Operating expense decreased due to a decrease in interior
building repairs at Breckinridge Square. Also, maintenance expense decreased at
Churchill Park as a result of exterior painting and at The Lakes due to gutter
repairs completed during 1997. In addition, office enhancements were done at The
Lakes and Churchill Park during the six months ended June 30, 1997.
Included in operating expenses for the period ended June 30, 1998, is
approximately $43,000 of major repairs and maintenance mainly comprised of
exterior building repairs, exterior painting, major landscaping, and window
covering replacements. Included in operating expenses for the period ended June
30, 1997, is approximately $117,000 of major repairs and maintenance mainly
comprised of exterior building repairs, exterior painting, office equipment,
gutter repairs, major landscaping, and window covering replacements.
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, 1998, the Partnership had cash and cash equivalents of approximately
$3,346,000 versus approximately $2,011,000 at June 30, 1997. The net increase
in cash and cash equivalents for the period ended June 30, 1998 is approximately
$853,000 versus a net decrease in cash and cash equivalents of $5,752,000 for
the period ended June 30, 1997. Net cash provided by operating activities
increased as a result of the increase in net income, as described above, along
with a decrease in receivables and deposits and an increase in accounts payable,
offset partially by a lesser increase in accrued property taxes. Receivables
and deposits decreased due to the receipt of a reimbursement for expended funds
covered by the replacement reserve at The Lakes Apartments which was accrued at
December 31, 1997. Accounts payable increased due to the timing of the payment
of various invoices. The change in accrued taxes is due to the timing of tax
payments. Net cash used in investing activities increased primarily due to an
increase in net deposits to restricted escrows. This was partially offset by a
smaller increase in property improvements and replacements due to a chiller
replacement project at Churchill Park and an HVAC replacement project at The
Lakes, during the six months ended June 30, 1997. Net cash used in financing
activities decreased due to a decrease in distributions made to the partners.
The Partnership has no material capital programs scheduled to be performed in
1998, 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.
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, 1998, the Partnership distributed
approximately $770,000 to the limited partners and approximately $125,000 to the
General Partner. Payments made by the Partnership to the Georgia Department of
Revenue and the North Carolina Department of Revenue for withholding taxes
related to income generated by the Partnership's investment properties located
in these states were treated as distributions to the partners and are included
in the distribution amounts above. During the six months ended June 30, 1997, a
distribution of approximately $6,723,000 was made to the limited partners and a
distribution of approximately $169,000 was made to the General Partner. The
General Partner is planning on making a distribution in the third quarter of
1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1998.
SIGNATURES
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/Director
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: August 6, 1998