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. 4/26/93.)
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 EX
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant issuer as specified in its charter)
California 94-2768742
(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)
Issuer'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 PROPERTIES IV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except for unit data)
September 30, December 31,
1995 1994
Assets
Cash and cash equivalents $ 10,092 $ 4,674
Investments 2,637 4,343
Prepaid expenses and other assets 4,303 4,108
Note and interest receivable 1,162 1,189
Investment properties:
Land 12,930 12,930
Buildings and personal property 111,012 109,288
123,942 122,218
Less accumulated depreciation (84,619) (79,720)
39,323 42,498
$ 57,517 $ 56,812
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued expenses $ 3,345 $ 2,502
Notes and interest payable 72,085 70,825
75,430 73,327
Partners' Deficit
General partners (5,922) (5,866)
Limited partners (342,783 and 342,803
units outstanding in 1995 and 1994,
respectively) (11,991) (10,649)
(17,913) (16,515)
$ 57,517 $ 56,812
[FN]
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED 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 $6,795 $ 6,759 $19,867 $20,853
Interest and dividend income 140 102 503 264
Total revenues 6,935 6,861 20,370 21,117
Expenses:
Property operations 3,624 4,327 9,945 12,713
Depreciation and amortization 1,653 1,812 4,940 5,679
Interest 1,661 2,091 4,954 6,289
Administrative 428 188 1,258 640
Total expenses 7,366 8,418 21,097 25,321
Income (loss) from operations (431) (1,557) (727) (4,204)
Gain on sale of real estate (Note H) -- 284 -- 284
Gain on disposition of real estate
(Note I) -- 8,639 -- 8,639
Other income (Note E) -- 199 -- 394
Income (loss) before extraordinary
items (431) 7,565 (727) 5,113
Extraordinary items:
Gain on refinancing (Note F) -- -- 250 --
Gain on extinguishment of debt
(Note I) -- 6,614 -- 6,614
Net income (loss) $ (431) $14,179 $ (477) $11,727
Net income (loss) allocated to general
partners (4%) $ (17) $ 567 $ (19) $ 469
Net income (loss) allocated to limited
partners (96%) (414) 13,612 (458) 11,258
Net income (loss) $ (431) $14,179 $ (477) $11,727
Net income (loss) per weighted average
limited partnership unit:
Income (loss) before extraordinary
items $(1.21) $ 21.19 $ (2.04) $ 14.32
Extraordinary items -- 18.52 .70 18.52
Net income(loss) per weighted average
limited partnership unit $(1.21) $ 39.71 $ (1.34) $ 32.84
[FN]
See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at December 31, 1993 342,839 $(6,335) $(21,897) $(28,232)
Abandonment of limited partnership
units (Note G) (36) -- -- --
Net loss for the nine months ended
September 30, 1994 -- 469 11,258 11,727
Partners' deficit at September 30, 1994 342,803 $(5,866) $(10,639) $(16,505)
Partners' deficit at December 31, 1994 342,783 $(5,866) $(10,649) $(16,515)
Net loss for the nine months ended
September 30, 1995 -- (19) (458) (477)
Distributions paid (Note J) -- (37) (884) (921)
Partners' deficit at September 30, 1995 342,783 $ (5,922) $(11,991) $(17,913)
[FN]
See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income (loss) $ (477) $11,727
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization of loan costs
and lease commissions 5,171 6,165
Gain on sale of real estate -- (284)
Gain on disposition of real estate -- (8,639)
Gain on refinancing (250) --
Gain on extinguishment of debt -- (6,614)
Change in accounts:
Prepaid expenses and other assets (548) (168)
Accounts payable and accrued expenses 907 (555)
Note interest payable 144 704
Net cash provided by operating activities 4,947 2,336
Cash flows from investing activities:
Property improvements and replacements (1,769) (1,444)
Purchase of securities (7,176) (1,705)
Proceeds from sale of securities 8,882 200
Proceeds from sale of real estate -- 881
Deposits to restricted escrows (556) --
Receipts from restricted escrows 978 150
Collections on notes receivable 27 --
Net cash provided by (used in) investing
activities 386 (1,918)
Cash flows from financing activities:
Payments on notes payable (560) (586)
Repayment of notes payable (5,573) --
Proceeds from long-term borrowings 7,500 --
Loan costs paid (361) --
Distributions to partners (921) --
Net cash provided by (used in)
financing activities 85 (586)
Net increase (decrease) in cash and cash equivalents 5,418 (168)
Cash and cash equivalents at beginning of period 4,674 4,390
Cash and cash equivalents at end of period $10,092 $ 4,222
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,562 $ 5,116
[FN]
See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED 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 annual
report on Form 10-K for the fiscal year ended December 31, 1994, for
Consolidated Capital Properties IV (the "Partnership").
Consolidation
The Partnership's consolidated financial statements include the Partnership's
equity interest in a joint-venture partnership which owns South Port
Apartments. No minority interest has been reflected for the joint venture
partnership because the minority interests are limited to the extent of their
equity capital, and losses in excess of the minority interest equity capital
are charged against the Partnership's interest.
The Partnership's financial statements include the accounts of certain
wholly-owned limited partnerships: ConCap Citadel Associates, Ltd., Apartment
Associates, Ltd., ConCap River's Edge Associates, Ltd., ConCap Stratford
Associates, Ltd., Briar Bay Apartments Associates, Ltd., CCP IV Associates,
Ltd., Greenbriar Associates, Ltd., Nob Hill Villa Associates, L.P., Point West
Associates, L.P., ConCap Metro Centre Associates, Ltd., Post Ridge Associates,
Ltd., Westwood Apartments Associates, Ltd., and Overlook Associates, Ltd. The
Partnership's financial statements also include the Partnership's majority
interest in a joint-venture partnership and certain other single-asset limited
partnerships. All intercompany transactions have been eliminated.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, demand deposits, money market funds, and commercial paper and U.S.
Treasury Bills with original maturities of three months or less.
Net Loss Per Weighted Average Limited Partnership Unit
Net loss per weighted average Limited Partnership Unit is computed by
dividing net loss allocated to the Limited Partners by the weighted average
number of Units outstanding. Per Unit information has been computed based on
weighted average Units outstanding of 342,783 and 342,826 for the nine months
ended September 30, 1995 and 1994, respectively.
Presentation of Accounts
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Related Party Transactions
The Partnership has paid the property management fees noted below based on
collected gross rental revenues ("Rental Revenues") for property management
services in each of the nine month periods ended September 30, 1995 and 1994,
respectively. For the nine months ended September 30, 1994, a portion of such
property management fees equal to 4% of Rental Revenues was paid to the property
management companies performing day-to-day property management services and a
portion equal to 1% of Rental Revenues was paid to Partnership Services, Inc.
("PSI") or its predecessor for advisory services related to day-to-day property
operations. Prior to July 1993, day-to-day property management services were
provided to the Partnership properties by unaffiliated management companies. In
July 1993, Coventry Properties, Inc. ("Coventry"), an affiliate of the General
Partner, assumed day-to-day property management responsibilities for two of the
Partnership's properties under the same management fee arrangement as the
unaffiliated management companies. Coventry assumed day-to-day property
management responsibilities for four additional Partnership properties in
January 1994. In late December 1994, an affiliate of Insignia Financial Group,
Inc., ("Insignia"), assumed day-to-day property management responsibilities for
fifteen of the Partnership's eighteen properties. On February 15, 1995, an
affiliate of Insignia assumed day-to-day property management responsibilities
for Lake Forest and Post Ridge Apartments. South Port Apartments is currently
managed by an unaffiliated management company.
Fees paid to Insignia and affiliates for the nine months ended September 30,
1995, and fees paid to PSI and Coventry for the nine months ended September 30,
Note B - Related Party Transactions - continued
1994, have been reflected in the following table as compensation to related
parties in the applicable periods:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Property management fees $926 $422
Special management fee 80(1) --
(1) The Limited Partnership Agreement ("Partnership Agreement") provides for a
fee equal to 9% of the total distributions made to the limited partners to
be paid to the General Partner for executive and administrative
management services.
The Partnership 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
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 $554 $382
During the nine months ended September 30, 1995, the Partnership incurred
approximately $42,000 of expense reimbursements to an affiliate of the General
Partner related to evaluating the feasibility of refinancing the debt on several
of the Partnership's investment properties. The Partnership has also paid this
affiliate approximately $27,000 of capitalized loan costs which related to the
refinancing of the Nob Hill Villa Apartments (See Note F).
In July 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 current agent
assumed the financial obligations to the affiliate of the General Partner, who
receives payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
Note C - Chapter 11 Proceeding
Greenbriar Associates
In December 1990, the Partnership ceased debt service on the note and
interest payable secured by Greenbriar Apartments because the property's
operations did not support scheduled debt service payments. As a result of the
Partnership's non-performance under the terms of the mortgage note, the lien-
holder moved to foreclose on the property in October 1991. In December 1991,
Greenbriar Associates, a wholly-owned limited partnership that holds title to
the Greenbriar Apartments, filed for Chapter 11 protection. Property management
services for the property were transferred to a management company employed by
the lender in December 1991. In March 1994, the General Partner, on behalf of
Greenbriar Associates, executed a deed-in-lieu of foreclosure after Greenbriar
Associates was unable to obtain the debt concessions proposed in its
reorganization plan. In July 1994, the property was transferred to the
lienholder resulting in a net gain of approximately $9.5 million on the property
disposition and extinguishment of debt.
Note D - Commitments and Contingencies
Commitments
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 securities available for sale totalling approximately
$12.7 million at September 30, 1995, exceeded the Partnership's reserve
requirement of $8.6 million. These cash reserves include $949,000 of cash and
cash equivalents restricted for use at the Partnership's U.S. Department of
Housing and Urban Development ("HUD") financed property.
Note D - Commitments and Contingencies - continued
Contingencies
Approximately $14.3 million of nonrecourse debt secured by two of the
Partnership's properties, Foothill Place Apartments and Chimney Hill Apartments,
was scheduled to mature in 1994. In July 1994, the Partnership exercised its
option to extend the notes' maturities until September 1995 by paying a 1% loan
extension fee of $143,000 to the lender as provided for in the loan agreement.
In September 1995, the Partnership signed an extension agreement extending the
maturity date of the notes to June 1997.
Approximately $2.5 million of nonrecourse mortgage debt secured by the Metro
Centre Office Building, located in Southern California, matured July 1, 1995.
The property has historically had difficulty making its scheduled debt service
payments. Since 1985, the property has made quarterly cash flow payments
pursuant to a modified and restructured loan agreement. Given current economic
conditions in Southern California, property operations are not expected to
improve sufficiently to enable the Partnership to refinance the existing
indebtedness under current market terms. In September 1995, a Notice of Default
and Election to Sell Under Deed of Trust was filed by the lender. The
Partnership currently has no plans to contest this foreclosure notice.
Greenbriar Associates, Ltd. ("Greenbriar Associates"), a wholly-owned limited
partnership that holds fee title to the Greenbriar Apartments, filed for
protection under Chapter 11 of the United States Bankruptcy Code ("Chapter 11")
with the District of Arizona, Bankruptcy Court, in December 1991. This Chapter
11 proceeding was dismissed in 1994.
Lake Forest Apartments secures a HUD-guaranteed mortgage note and accrued
interest totalling approximately $4.3 million at September 30, 1995. Post Ridge
Apartments secures a mortgage note and accrued interest totalling approximately
$4.5 million at September 30, 1995, which was formerly guaranteed by HUD.
Operating cash flow from the Post Ridge Apartments has not supported its
scheduled debt service payments. As a result, in January 1991, the Partnership
suspended scheduled debt service for Post Ridge Apartments. Since 1991, the
Partnership has remitted excess cash flow from the properties' operations as
debt service. On March 28, 1995, this debt was sold to an unaffiliated third
party. Accordingly, since the closing of the sale on May 8, 1995, this debt is
no longer regulated by HUD.
Note E - Other Income
In 1991, the Partnership (and simultaneously other affiliated partnerships)
entered claims in the Southmark Corporation's Chapter 11 bankruptcy proceeding.
These claims related to the 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 other
affiliated partnerships' allowed claim at $11 million, in the aggregate. In
March 1994, the Partnership received 3,143 shares of Southmark Corporation
Redeemable Series A Preferred Stock and 22,985 shares of Southmark Corporation
New Common Stock with an aggregate market value on the date of receipt of
approximately $23,000 and $172,000 in cash, representing the Partnership's share
of the recovery, based on its pro rata share of the claims filed.
In July 1994, the Partnership was able to recover $199,000, representing the
refund of a repair escrow relating to a property that was previously sold. The
recovery has been recorded as "Other income" in the accompanying statements of
operations.
Note F - Note Refinancing
In March of 1995, the General Partner refinanced two nonrecourse mortgage
notes totalling approximately $5.8 million which were secured by the Nob Hill
Villa Apartments. Under the terms of the refinancing agreement, the new $7.5
million mortgage note bears interest at 9.2% and matures in April 2005. As a
result of the refinancing, the Partnership realized a $250,000 discount on the
second mortgage which resulted in an extraordinary gain on refinancing. Through
the refinancing, a capital improvement reserve of $218,750 was established and
$298,000 in loan costs were incurred. These loan costs will be amortized over
the life of the loan.
Note G - Abandoned Limited Partnership Units
For the nine months ended September 30, 1994, the number of Limited
Partnership Units decreased by 36 units due to limited partners abandoning their
units. In abandoning Limited Partnership Units, a limited partner relinquishes
all right, title and interest in the Partnership as of the date of abandonment.
The net loss per weighted average Limited Partnership Unit in the accompanying
Statements of Operations is calculated based on weighted average Units
outstanding during the period.
Note H - Sale of Real Estate
In August 1994, the Partnership sold the Denbigh Woods Apartments. In
connection with the sale, the Partnership accepted a $1.2 million wrap note
receivable and received net sales proceeds of $881,000. The new wrap note
receivable bears interest at an annual rate of 9%, requires monthly payments of
principal and interest totalling $11,814, and matures in March 1996. The
Partnership remains obligated under two underlying first lien mortgages
totalling approximately $1.3 million which are secured by the Denbigh Woods
Apartments. Pursuant to the sale contract, the Partnership received, from the
purchaser, a capital improvement escrow totalling $150,000. Upon completion of
certain repairs and capital improvements at the property, the Partnership will
reimburse the purchaser from the escrow account. The Partnership recognized a
gain of 284,000 on the sale during the third quarter of 1994. The sales
transaction is summarized in the following table:
For The Nine Months
Ended September 30, 1994
(in thousands)
Sales Value:
Cash proceeds received $ 881
Wrap note receivable 1,200
Total sales value 2,081
Cost of sales:
Net real estate (a) (1,788)
Other liabilities, net of other assets (9)
Total costs of sales (1,797)
Gain on sale of real estate $ 284
(a) Real estate at cost, net of accumulated depreciation of approximately $2.3
million.
Note I - Disposition of Real Estate
In January 1991, the Partnership suspended the scheduled debt service on the
HUD-financed loan secured by the Westwood Apartments because cash flow from the
property's operations did not support the scheduled payments and because the
property was leveraged in excess of its economic value. The Partnership
submitted two workout proposals to HUD, however, HUD rejected both proposals.
In 1993, HUD notified the Partnership that it intended to foreclose on the
Westwood Apartments and in September 1994, the property was foreclosed upon.
The Partnership recognized a gain of approximately $5.4 million on the
disposition of the real estate and an extraordinary gain of $426,000 on
extinguishment of the related debt.
Note I - Disposition of Real Estate - continued
As more fully described in Note C, the General Partner, on behalf of
Greenbriar Associates, executed a deed-in-lieu of foreclosure on Greenbriar
Apartments and in July 1994, the property was transferred to the lienholder.
The Partnership recognized a gain of approximately $3.3 million on the
disposition of the real estate and an extraordinary gain of approximately $6.2
million on extinguishment of the related debt.
The transactions are summarized as follows:
For The Nine Months
Ended September 30, 1994
(in thousands)
Net real estate (a) $(5,866)
Other assets, net of other liabilities 455
(5,411)
Debt discharged (b) 20,664
Net gain on foreclosure $15,253
Gain on disposition of real estate (c) $ 8,639
Extraordinary gain on extinguishment of
debt (d) 6,614
Net gain on foreclosure $15,253
(a) Real estate, at cost, net of accumulated depreciation of approximately
$14.9 million.
(b) Amount includes accrued interest.
(c) The gain on disposition of real estate represents the difference between
the carrying value of the real estate and the estimated fair value of the
property at disposition. The gain is included in "Gain on disposition of
real estate" in the accompanying statements of operations.
(d) The gain on extinguishment of debt represents the difference between the
estimated fair value of the property at foreclosure and the amount of debt,
including accrued interest, extinguished. The gain is reflected as an
extraordinary item in the accompanying statements of operations.
Note J - Distributions
In September 1995, the General Partner declared and paid distributions
attributable to cash flow from operations totalling approximately $884,000 or
$2.58 per Unit to the Unitholders along with a corresponding General Partner
distribution of approximately $37,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of seventeen apartment
complexes and one commercial property. The following table sets forth the
average occupancy of the properties for the nine months ended September 30, 1995
and 1994:
Average
Occupancy
1995 1994
The Apartments
Omaha, NE 95% 93%
Arbor East Apartments
Nashville, TN 98% 98%
Briar Bay Racquet Club Apartments
Miami, FL 92% 74%
Chimney Hills Apartments
Marietta, GA 96% 98%
Citadel Apartments
El Paso, Tx 93% 95%
Citadel Village Apartments
Colorado Springs, CO 97% 97%
Foothill Place Apartments
Salt Lake City, UT 97% 96%
Knollwood Apartments
Nashville, TN 98% 97%
*Lake Forest Apartments
Omaha, NE 98% 95%
Metro Centre Office Building
Fountain Valley, CA 57% 60%
Nob Hill Villa Apartments
Nashville, TN 98% 99%
Overlook Apartments
Memphis, TN 89% 96%
Point West Apartments
Charleston, SC 90% 88%
Post Ridge Apartments
Nashville, TN 97% 100%
Rivers Edge Apartments
Auburn, WA 93% 92%
South Port Apartments
Tulsa, OK 83% 83%
Stratford Place Apartments
Austin, TX 93% 92%
Village East Apartments
Cimarron Hills, CO 99% 98%
* Property is regulated by the U.S. Department of Housing and Urban
Development.
The Briar Bay Racquet Club Apartments was devastated by Hurricane Andrew,
which resulted in the unusually low occupancy experienced for the nine months
ended September 30, 1994. Subsequent to the restorations and refurbishments
done at the property, the occupancy has returned to normal levels. Occupancy
for the Overlook Apartments decreased for the nine months ended September 30,
1995, compared to the nine months ended September 30, 1994, due to increased
competition in the Memphis market. The Metro Centre Office Building's low
occupancy is due to the current poor economic conditions in the Southern
California area.
The Partnership realized a loss from operations of $727,000 for the nine
months ended September 30, 1995, compared to losses from operations of
$4,204,000 for the nine months ended September 30, 1994. For the three months
ended September 30, 1995 and 1994, the Partnership realized loss from operations
of $431,000 and $1,557,000, respectively. The decreased net loss is due
primarily to the foreclosure of the Greenbriar and Westwood Apartments and the
sale of the Denbigh Woods Apartments during the third quarter of 1994.
Rental income decreased for the three and nine months ended September 30,
1995, compared to the corresponding periods ended September 30, 1994, due
primarily to the sale and foreclosures noted above. The decreases to rental
income were partially offset by increased occupancy at the Briar Bay Racquet
Club Apartments and rental increases at several of the Partnership's apartment
properties for the nine months ended September 30, 1995. Interest and dividend
income increased for the three and nine months ended September 30, 1995,
compared to the three and nine months ended September 30, 1994, due to higher
cash balances being available for investment in 1995. Also, dividends of
$61,000 were received on the Partnership's investment in Southmark preferred
stock during the nine months ended September 30, 1995, compared to $36,000
during the nine months ended September 30, 1994.
Property operations, depreciation and amortization and interest expense
decreased for the three and nine months ended September 30, 1995, compared to
the three and nine months ended September 30, 1994, due primarily to the
disposition of Greenbriar, Westwood and Denbigh Woods Apartments in the third
quarter of 1994. Administrative expenses increased for the three and nine
months ended September 30, 1995, compared to the three and nine months ended
September 30, 1994, due to increased legal, printing and postage costs
associated with the Partnership's required responses to various tender offers
(See Part II Item 1. Legal Proceedings). The increase in administrative
expenses was also impacted by increased expense reimbursements related to the
combined efforts of the Dallas and Greenville partnership administration staffs
during the transition period in the first and second quarters of 1995. The
reimbursements for the Dallas office amounted to $306,000 during the nine months
ended September 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. The General Partner
expects recurring administrative expenses to be reduced now that the management
transition is complete.
The $284,000 gain on sale of real estate realized in the nine months ended
September 30, 1994, is due to the sale of Denbigh Woods Apartments in August
1994 (See Note H in the Notes to Consolidated Financial Statements in Item 1).
The $8.6 million gain on disposition of real estate is due to a gain of
approximately $5.4 million on the foreclosure of Westwood Apartments by HUD in
September 1994, and a gain of approximately $3.2 million due to the deed-in-lieu
transfer of Greenbriar Apartments to the lienholder in July 1994 (See Note I in
the Notes to Consolidated Financial Statements in Item 1).
Other income realized in the nine months ended September 30, 1994, is due to
the receipt of the Partnership's pro rata share of the claims filed in
Southmark's Chapter 11 bankruptcy proceeding, and due to the recovery of a
repair escrow relating to a property that was previously sold (See Note E in the
Notes to Consolidated Financial Statements in Item 1).
The $250,000 gain on refinancing realized during the nine months ended
September 30, 1995, is due to the refinancing of Nob Hill Villa Apartments.
Through this refinancing, a new $7.5 million mortgage note which bears interest
at 9.2% and matures in April 2005, was obtained. As a result of the
refinancing, the Partnership realized a $250,000 discount on the second mortgage
resulting in an extraordinary gain on refinancing (See Note F in the Notes to
Consolidated Financial Statements in Item 1).
The $6.6 million gain on extinguishment of debt was due to extraordinary
gains of approximately $426,000 and $6.2 million related to the transfer of
Westwood Apartments and Greenbriar Apartments, respectively, to lienholders (See
Note I in the Notes to Consolidated Financial Statements in Item 1).
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that
the General Partner will be able to sustain such a plan.
As of September 30, 1995, the Partnership held cash and cash equivalents of
approximately $10.1 million compared to approximately $4.2 million at September
30, 1994. Net cash provided by operating activities increased primarily due to
the absence of negative cash flows from the properties disposed of in 1994, as
noted above, and an increase in accounts payable and accrued expenses at the
remaining properties. Net cash provided by investing activities increased
primarily due to increased net proceeds from sales of securities and net
receipts from restricted escrows, partially offset by increased property
improvements and replacements. Net cash provided by financing activities
increased as a result of the refinancing of the Nob Hill Villa Apartments debt,
partially offset by distributions to partners in 1995.
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 meet 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 $71 million matures at various times with
balloon payments due at maturity, at which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of net
cash generated from operations, capital expenditure requirements, property sales
and the availability of cash reserves. During the nine months ended September
30, 1995, cash distributions of approximately $921,000 were declared and paid.
No cash distributions were made in 1994.
On January 20, 1995, an affiliate of the General Partner, Insignia CCP IV
Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for
a cash price of $60.00 per Unit for Limited Partners of record as of December
15, 1994. Approximately 3,370 Limited Partners holding 64,175 Units (18.72% of
total Units) accepted the Tender Offer and sold their Units to Insignia CCP IV
Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of
approximately $3.9 million.
Approximately $14.3 million of nonrecourse mortgage debt secured by the
Foothill Place Apartments and the Chimney Hill Apartments matured in 1994. The
Partnership exercised its option to extend the debt maturities until September
1995 by paying a 1% loan extension fee of $143,000 to the current lender as
provided for in the loan agreement. In September 1995, the Partnership signed
an extension agreement extending the maturity date of the notes to June 1997.
Approximately $2.5 million of nonrecourse mortgage debt secured by the Metro
Centre Office Building, located in Southern California, matured July 1, 1995.
The property has historically had difficulty making its scheduled debt service
payments. Since 1985, the property has made quarterly cash flow payments
pursuant to a modified and restructured loan agreement. Given current economic
conditions in Southern California, property operations are not expected to
improve sufficiently to enable the Partnership to refinance the existing
indebtedness under current market conditions. In September 1995, a Notice of
Default and Election to Sell Under Deed of Trust was filed by the lender. The
Partnership currently has no plans to contest this foreclosure notice.
Lake Forest Apartments secures a mortgage note guaranteed by the U.S.
Department of Housing and Urban Development ("HUD") and accrued interest
totalling approximately $4.3 million at September 30, 1995. Post Ridge
Apartments secures a mortgage note and accrued interest totalling approximately
$4.5 million at September 30, 1995, which was formerly guaranteed by HUD.
Operating cash flow from the Post Ridge Apartments has not supported its
scheduled debt service payments. As a result, in January 1991, the Partnership
suspended scheduled debt service for Post Ridge Apartments. Since 1991, the
Partnership has remitted excess cash flow from the properties' operations as
debt service. On March 28, 1995, this debt was sold to an unaffiliated third
party. Accordingly, since the closing of the sale on May 8, 1995, this debt is
no longer regulated by HUD.
Greenbriar Associates Chapter 11 Proceeding
In December 1990, the Partnership ceased debt service on the note and
interest payable of $12.7 million secured by Greenbriar Apartments because the
property's operations did not support scheduled debt service payments. As a
result of the Partnership's nonperformance under the terms of the mortgage note,
the lien-holder moved to foreclose on the property in October 1991. In December
1991, Greenbriar Associates, a wholly-owned limited partnership that holds title
to the Greenbriar Apartments, filed for Chapter 11 protection. In March 1994,
the General Partner, on behalf of Greenbriar Associates, executed a deed-in-lieu
of foreclosure after Greenbriar Associates was unable to obtain the debt
concessions proposed in its reorganization plan. In July 1994, the property was
transferred to the lienholder resulting in a net gain of approximately $9.5
million on the property disposition and extinguishment of debt.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November of 1994, C.E. and Berniece Patterson, each of whom is a limited
partner of the Partnership, filed an action in the United States District Court
for the Northern District of California seeking declaratory and injunctive
relief, but not monetary damages, alleging, among other things, that a tender
offer by LP 5 Acceptance Corporation for limited partnership units of the
Partnership violated the federal securities laws and the partnership agreements
and breached the general partner's fiduciary duties. The complaint named ConCap
Equities, Inc., the general partner of the Partnership and others as
defendants. These actions were filed by the Pattersons as individuals and were
not class actions. The tender offer was terminated in December 1994. In
December 1994, the complaint in this action was amended to include Insignia,
MAE and MAE-ICC, Inc. and others as defendants in connection with a tender
offer commenced in December 1994, by Insignia CCP IV Acquisition, L.L.C. for
limited partnership units of the Partnership. On January 20, 1995, the
District Court denied Plaintiffs' motion for a preliminary injunction to enjoin
the tender offer. The tender offer closed on January 20, 1995, and the offeror
purchased the tendered units. C.E. and Berniece Patterson had also initiated
other causes of action against two affiliated entities, which held limited
partnership units in Consolidated Capital Properties III and Consolidated
Capital Properties VI, regarding other tender offers. On March 31, 1995, the
parties to the above referenced actions entered into a settlement agreement and
a standstill agreement for all actions pursuant to which (i) Plaintiffs filed a
notice of dismissal with respect to the first amended complaints in the
actions; (ii) Plaintiffs and defendants released each other from all claims
which were or could have been asserted in connection with the first amended
complaints in the actions; (iii) Plaintiffs and an affiliate known as MacKenzie
Patterson, Inc. ("MacKenzie") will refrain from certain activities relating to
the acquisition of limited partnership units in any partnership of which
Insignia or any of its affiliates is a general partner; (iv) Plaintiffs and
their affiliates granted to a subsidiary of Insignia a right of first refusal
in connection with the sale of limited partnership interests in the Partnership
by plaintiffs; and (v) Plaintiffs and their affiliates will assign to a
subsidiary of Insignia irrevocable proxies to vote any limited partnership
interests in the Consolidated Capital Properties VI acquired by MacKenzie as a
result of the tender offer by MacKenzie Patterson, Inc. and affiliates to
acquire limited partnership interests in Consolidated Capital Properties VI or
thereafter.
Except for the above proceedings, the Partnership is not a party to, nor are
any of the Partnership's properties the subject of, any material pending legal
proceedings, other than ordinary litigation routine to the Partnership's
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 25, 1995, the General Partner proxied the Limited Partners to
modify the Partnership Agreement for certain Proposals as defined in the proxy
statement.
The General Partner formulated the Proposals as a means of increasing
operational flexibility and improving Partnership operations. The Proposals
seek to achieve these goals by amending the Partnership Agreement to modify
certain existing capital reserves and mandatory distribution requirements as
well as certain property disposition limitations. Proposal 1 would provide the
General Partner with additional flexibility in establishing the timing and
amount of distributions by modifying the requirements that the Partnership
maintain reserves equal to at least 5% of Invested Capital (which as of
September 30, 1995, required reserves of approximately $8.6 million and
distribute Surplus Funds, up to the amount of any net economic gains realized
upon the sale of any Partnership assets, within 90 days of the close of the
fiscal year in which such gains are realized. Proposal 2 would provide the
General Partner with the authority to take advantage of certain property
disposition opportunities by authorizing the General Partner to sell multiple
properties that represent less than 50% of the net book value of all of the
Partnership's properties as of the end of the most recently completed calendar
quarter to the same purchaser or its affiliates in any six-month period or any
single partnership property, without obtaining Limited Partner approval.
Importantly, Proposal 2 does not seek to modify the Partnership Agreement
provision prohibiting Partnership property sales to the General Partner or its
affiliates.
This matter, originally open until October 25, 1995, was extended until
November 24, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES IV
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