FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 04/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (803) 239-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, December 31,
1995 1994
Assets
Cash and cash equivalents $ 5,433 $ 1,554
Securities available for sale 5,264 8,329
Prepaid expenses and other assets 178 276
Due from affiliates -- 935
Net investment in master loan to affiliate 92,319 91,786
Investment properties:
Land 1,053 1,053
Building and related personal property 5,236 5,202
6,289 6,255
Less accumulated depreciation (1,821) (1,505)
4,468 4,750
$107,662 $107,630
Liabilities and Partners' Capital (Deficit)
Accounts payable and accrued expenses $ 62 $ 55
Tenant security deposits 33 47
Distributions payable 324 324
419 426
Partners' Capital (Deficit)
General partner (293) (294)
Limited partners (199,052 and 199,045
units outstanding at September 30,
1995, and December 31, 1994,
respectively) 107,536 107,498
107,243 107,204
$107,662 $107,630
[FN]
See Accompanying Notes to Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rental income $ 360 $ 333 $1,117 $ 974
Interest income on investment
in Master Loan to affiliate 967 752 2,503 1,661
Interest and dividend income
on investments 146 174 364 509
Reduction of allowance for
possible losses 533 -- 533 --
Total revenues 2,006 1,259 4,517 3,144
Expenses:
Property operations 198 171 528 455
Depreciation 106 106 316 313
Administrative 168 88 607 347
Total expenses 472 365 1,451 1,115
Other income -- -- -- 56
Casualty gain -- -- 9 --
Net income $1,534 $ 894 $3,075 $2,085
Net income allocated
to general partner (1%) $ 15 $ 9 $ 31 $ 21
Net income allocated
to limited partners (99%) 1,519 885 3,044 2,064
$1,534 $ 894 $3,075 $2,085
Net income per limited
partnership unit $ 7.63 $ 4.45 $15.29 $10.38
[FN]
See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342 $ 1 $200,342 $200,343
Partners' capital (deficit) at
December 31, 1993 199,046 $ (287) $108,220 $107,933
Distributions -- (37) (3,686) (3,723)
Net income for the nine months
ended September 30, 1994 (1) 20 2,065 2,085
Partners' capital (deficit) at
September 30, 1994 199,045 $ (304) $106,599 $106,295
Partners' capital (deficit) at
December 31, 1994 199,045 $ (294) $107,498 $107,204
Distributions -- (30) (3,006) (3,036)
Net income for the nine months
ended September 30, 1995 7 31 3,044 3,075
Partners' capital (deficit) at
September 30, 1995 199,052 $ (293) $107,536 $107,243
[FN]
See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income $ 3,075 $ 2,085
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 316 313
Casualty gain (9) --
Reduction of allowance for possible losses (533) --
Change in accounts:
Prepaid expenses and other assets 97 44
Interest receivable on master loan -- (221)
Due from affiliates 935 --
Accounts payable and accrued expenses 17 (99)
Tenant security deposits (14) (11)
Net cash provided by
operating activities 3,884 2,111
Cash flows from investing activities:
Property improvements and replacements (34) (28)
Purchase of securities available for sale (2,115) (3,392)
Proceeds from sale of securities available
for sale 5,180 5,320
Advances on master loan -- (40)
Net cash provided by
investing activities 3,031 1,860
Cash flows used in financing activities:
Distributions (3,036) (3,717)
Net cash used in financing activities (3,036) (3,717)
Net increase in cash and cash equivalents 3,879 254
Cash and cash equivalents at
beginning of period 1,554 222
Cash and cash equivalents at
end of period $ 5,433 $ 476
[FN]
See Accompanying Notes to Financial Statements
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of 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 nine month periods ended
September 30, 1995, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1995. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-K for the year ended December 31, 1994.
Investment in Master Loan
Beginning in 1995, the Partnership adopted Financial Accounting Standards
Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan."
Under the new standard, the 1995 allowance for credit losses related to loans
that are identified for evaluation in accordance with Statement 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Prior to
1995, the allowance for credit losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans.
Accounting Change - Investments
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Partnership adopted Statement 121 at September 30, 1995, and the adoption had no
effect on the financial statements of the Partnership.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Related Party Transactions
Consolidated Capital Institutional Properties ("Partnership") paid property
management fees based upon collected gross rental revenues for property
management services as noted below for the nine month periods ended September
30, 1995 and 1994. For the nine months ended September 30, 1994, a portion of
such property management fees were paid to Coventry Properties, Inc.
("Coventry"), an affiliate of the General Partner, for day-to-day property
management services and a portion was paid to Partnership Services, Inc. ("PSI")
for advisory services related to day-to-day property operations. In late
December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia")
assumed day-to-day property management responsibilities for all of the
Partnership's properties. Fees paid to affiliates of Insignia during the nine
months ended September 30, 1995, and fees paid to Coventry and PSI for the nine
months ended September 30, 1994, are reflected in the following table:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Property management fees $51 $48
The Partnership Agreement ("Agreement") also 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 current
and former affiliates, which includes Coventry for the nine months ended
September 30, 1994, received reimbursements as reflected in the following table:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Reimbursement for services of affiliates $253 $159
At September 30, 1995, the Partnership had accrued approximately $15,000 of
reimbursements to Insignia Mortgage & Investment Company ("IMIC") related to
refinancing costs, which is included in Reimbursement for services of affiliates
above.
On July 1, 1995, the Partnership began insuring 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 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 - Net Investment in Master Loan
The net investment in master loan consists of the following:
September 30, 1995 December 31, 1994
(in thousands)
Master Loan funds advanced $124,116 $124,116
Accrued deferred basic interest 5,289 5,289
Accrued additional interest 4,829 4,829
Collection reserve (6,548) (6,548)
127,686 127,686
Less: allowance for possible loss (35,367) (35,900)
Net investment in Master Loan $ 92,319 $ 91,786
At September 30, 1995, the recorded investment in Master Loan is considered
to be impaired under Statement 114. The Partnership measured the impairment of
the loan based upon the fair value of the collateral due to the fact repayment
of the loan is expected to be provided solely by the collateral. For the nine
months ended September 30, 1995, the Partnership recorded approximately
$533,000 in income based upon an increase in the fair value of the collateral.
Interest due to the Partnership pursuant to the terms of the Master Loan
Agreement, but not recognized in the income statements, totaled approximately
$20.2 and $18.6 million for the nine months ended September 30, 1995 and 1994,
respectively. At September 30, 1995, and December 31, 1994, such cumulative
unrecognized interest totalling approximately $130 million and $110.8 million
was not included in the balance of the investment in Master Loan.
In February 1994, the Partnership advanced $40,000 to Consolidated Capital
Equity Partners, L.P. ("CCEP") as an advance on the Master Loan. CCEP then
advanced $40,000 to New Carlton House Partners as an advance on the note
receivable secured by the Carlton House Apartment and Office Building ("Carlton
House") to pay the remaining balance of 1993 property taxes.
Note D - Other Income
In 1991, the Partnership (and simultaneously other affiliated partnerships)
entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding.
These claims related to Southmark Corporation's activities while it exercised
control (directly, or indirectly through its affiliates) over the Partnership.
The Bankruptcy Court set the Partnership's and the affiliated partnerships'
allowed claim at $11 million, in the aggregate. In March 1994, the Partnership
received 909 shares of Southmark Corporation Redeemable Series A Preferred Stock
and 6,651 shares of Southmark Corporation New Common Stock with an aggregate
market value on the date of receipt of $6,690 and $49,847 in cash representing
the Partnership's share of the recovery, based on its pro rata share of the
claims filed.
Note E - Commitment
The Partnership is required by the Agreement to maintain working capital
reserves for contingencies of not less than 5% of Net Invested Capital, as
defined in the Agreement. In the event expenditures are made from this reserve,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, including cash and cash equivalents and
securities available for sale, totalling approximately $10.7 million, were
greater than the reserve requirement of approximately $8.0 million at September
30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of this property for the nine
months ended September 30, 1995 and 1994:
Average
Occupancy
Property 1995 1994
The Loft Apartments
Raleigh, North Carolina 91% 96%
The General Partner attributes the decrease in occupancy to increased market
competition and increased rental rates.
The Partnership's net income for the nine months ended September 30, 1995,
was approximately $3,075,000 as compared to approximately $2,085,000 for the
nine months ended September 30, 1994. The Partnership realized net income of
approximately $1,534,000 for the three months ended September 30, 1995, as
compared to net income of approximately $894,000 for the three months ended
September 30, 1994. The increase in net income for the three and nine month
periods ended September 30, 1995, is due primarily to the reduction of the
allowance for possible losses of the Master Loan as determined under SFAS 114
and an increase in interest income on the investment in Master Loan. Also,
increasing net income is an increase in rental income due to higher rental rates
which more than offset the increase in vacancy loss. Also, the increase in net
income for the nine months ended September 30, 1995, is attributable to $9,000
in casualty income related to insurance proceeds from prior year damages.
Offsetting these increases in net income is a decrease in interest and dividend
income on investments due to lower investment balances as compared to the prior
year. For the three months ended September 30, 1995, interest income on the
Master Loan increased due to an additional payment that was made to the
Partnership although no payment was required (interest payments are required
based on the cash flow of the properties collateralized by the Master Loan).
Also, property operations expenses for the three and nine months ended September
30, 1995, increased due to higher maintenance expenses. The increase in
maintenance expenses is the result of increased interior and exterior painting
and other miscellaneous maintenance work being done at the property.
Administrative expenses increased for the three and nine months ended September
30, 1995. For the three months ended September 30, 1995, this increase was a
result of increased insurance costs and printing costs related to printing
additional 10-K's for investors. The increase for the nine months ended
September 30, 1995, is due to the items noted above and to expenses related to
the combined efforts of the Dallas and Greenville offices during the transition
period that ended June 30, 1995. The increased costs related to the transition
efforts were incurred to minimize any disruption in the year-end reporting
function including the financial reporting and K-1 preparation and
distribution. These expenses decreased in the third quarter of 1995 as the
transition efforts were completed.
Other income realized in the nine months ended September 30, 1994, is due to
the receipt of its pro rata share of the claims filed in Southmark's Chapter 11
bankruptcy proceedings. (See Note D).
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 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.
At September 30, 1995, the Partnership reported cash of approximately
$5,433,000 versus approximately $476,000 for the corresponding period in 1994.
Net cash provided by operating activities increased primarily due to an increase
in net income, a decrease in the amount due from affiliates, and a decrease in
interest receivable on the Master Loan offset partially by the reduction of the
allowance for possible losses of the Master Loan. The decrease in amounts due
from affiliates is the result of the Master Loan interest payment received from
Consolidated Capital Equity Partners, L.P. during the nine months ended
September 30, 1995. Net cash provided by investing activities increased
primarily due to a decrease in the purchase of securities available for sale.
Net cash used in financing activities decreased due to a decrease in
distributions as compared to the prior year.
The Partnership and CCEP are discussing the financing of certain capital
improvements that are planned for various properties owned by CCEP which are
collateral for the Master Loan. Also, they are discussing certain transactions
concerning the Carlton House Note, which CCEP holds. The note held by CCEP is
collateral for the Master Loan.
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 property 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. Distributions of
approximately $1,485,000 or $7.46 per Unit were made to the limited partners in
both September and March 1995. A matching distribution of approximately $15,000
was made to the General Partner for each distribution. In July 1995, a
distribution of approximately $36,000 was made to pay the limited partners'
income taxes due to the State of North Carolina for income generated by the
Partnership's investment property located in North Carolina and a matching
distribution of approximately $350 was made to the General Partner. Future cash
distributions will depend on the levels of cash generated from operations,
Master Loan interest income, capital expenditure requirements, property sales,
and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
S-K Reference
Number Description
27 Financial Data Schedule is filed as an
exhibit to this report.
28.1 Consolidated Capital Equity Partners, L.P.,
unaudited financial statements for the
nine months ended September 30, 1995 and
1994.
(b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1995.
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 INSTITUTIONAL
PROPERTIES
By: CONCAP EQUITIES, INC.
General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 14, 1995