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 March 31, 1996
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period.........to.........
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant 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 (864) 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 unit data)
March 31, December 31,
1996 1995
Assets
Cash and cash equivalents:
Unrestricted $ 7,604 $ 10,865
Restricted - tenant security deposits 664 665
Investments 2,637 2,637
Prepaid expenses and other assets 5,650 6,900
Note and interest receivable 1,143 1,155
Investment Properties:
Land 12,491 12,868
Buildings and personal property 111,799 112,350
124,290 125,218
Less accumulated depreciation (86,817) (86,294)
37,473 38,924
$ 55,171 $ 61,146
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued expenses $ 2,560 $ 3,443
Notes and interest payable 72,246 76,336
74,806 79,779
Partners' Deficit
General partner (6,024) (5,951)
Limited partners (342,783 units
outstanding in 1996 and 1995, (13,611) (12,682)
(19,635) (18,633)
$ 55,171 $ 61,146
<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
March 31,
1996 1995
Revenues:
Rental income $6,648 $6,453
Interest and other income 213 118
Total revenues 6,861 6,571
Expenses:
Property operations 3,368 3,099
Depreciation and amortization 1,717 1,716
Interest 1,527 1,635
Administrative 527 440
Total expenses 7,139 6,890
Loss before extraordinary items (278) (319)
Extraordinary items:
Gain on refinancing -- 250
Gain on foreclosure of investment
property 2,999 --
Net income (loss) $2,721 $ (69)
Net income (loss) allocated to general
partner (4%) $ 109 $ (3)
Net income (loss) allocated to limited
partners (96%) 2,612 (66)
$2,721 $ (69)
Net income (loss) per weighted average
partnership unit:
Loss before extraordinary items $ (.78) $ (.89)
Extraordinary items 8.40 .70
Net income (loss) per weighted average
limited partnership unit $ 7.62 $ (.19)
See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Three Months Ended March 31, 1996 and 1995
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partner Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 1994 342,783 $(5,866) $(10,649) $(16,515)
Net loss for the three months
ended March 31, 1995 -- (3) (66) (69)
Partners' deficit at
March 31, 1995 342,783 $(5,869) $(10,715) $(16,584)
Partners' deficit at
December 31, 1995 342,783 $(5,951) $(12,682) $(18,633)
Net income for the three months
ended March 31, 1996 -- 109 2,612 2,721
Distributions to Partners -- (182) (3,541) (3,723)
Partners' deficit at
March 31, 1996 342,783 (6,024) (13,611) (19,635)
<FN>
See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 2,721 $ (69)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,787 1,788
Loss on disposition of investment property 25 --
Extraordinary gains on foreclosure or (2,999) (250)
Change in accounts:
Tenant security deposits (11) --
Prepaid expenses and other assets 1,183 (791)
Accounts payable and accrued expenses (859) 223
Accrued interest 46 131
Net cash provided by operating activities 1,893 1,032
Cash flows from investing activities:
Property improvements and replacements (817) (177)
Purchase of investments -- (697)
Proceeds from sale of investments -- 1,656
Deposits to restricted escrows (419) (261)
Receipts from restricted escrows 445 148
Collections of note receivable 13 6
Net cash (used in) provided by
investing activities (778) 675
Cash flows from financing activities:
Payments on notes payable (134) (161)
Repayment of notes payable (484) (5,573)
Proceeds on long-term borrowings -- 7,500
Distributions to partners (3,723) --
Loan costs (35) (201)
Net cash (used in) provided by
financing activities (4,376) 1,565
Net (decrease) increase in cash and cash
equivalents (3,261) 3,272
Cash and cash equivalents at beginning of period 10,865 4,674
Cash and cash equivalents at end of period $ 7,604 $ 7,946
<FN>
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $1,404,000 and $1,432,000 for the three
months ended March 31, 1996 and 1995, respectively.
Foreclosure
During the three months ended March 31, 1996, Metro Centre Office Building was
foreclosed upon by the lender. In connection with this foreclosure, the
following balance sheet accounts were adjusted by the amounts noted below.
March 31, 1996
(in thousands)
Tenant security deposits remitted to the lender $ (12)
Prepaid expenses and other assets (5)
Buildings and personal property (1,605)
Accumulated depreciation 1,079
Accounts payable and accrued expenses 24
Interest payable 1,021
Notes payable 2,497
Gain on foreclosure of investment property (2,999)
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 consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership") 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 month period ended March 31, 1996, are not necessarily
indicative of the results that may be expected for the fiscal year ending December
31, 1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-K for
the fiscal year ended December 31, 1995.
Consolidation
The 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 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 consolidated financial statements include the accounts of its
wholly-owned limited partnerships, certain other majority-owned limited
partnerships and the Partnership's majority interest in a joint venture
partnership. All intercompany transactions have been eliminated.
Presentation of Accounts
Certain reclassifications have been made to the 1995 information to conform to the
1996 presentation.
Investments
Investments consisting primarily of U.S. Treasury Notes with original maturities
of more than ninety days, are considered to be held-to-maturity securities.
Note B - Transactions with Affiliated Parties
The Partnership has paid the property management fees noted below based on
collected gross rental revenues for property management services in each of the
three months ended March 31, 1996 and 1995. In late December 1994, an affiliate
of Insignia Financial Group, Inc., ("Insignia"), assumed day-to-day property
management responsibilities for all of the Partnerships' properties except Lake
Forest, Post Ridge and SouthPort Apartments. On February 15, 1995, an affiliate
of Insignia assumed day-to-day property management responsibilities for Lake
Forest and Post Ridge Apartments. Fees paid to Insignia and affiliates for the
three months ended March 31, 1996 and 1995, are presented below. These expenses
are included in operating expenses.
Note B - Transactions with Affiliated Parties (continued)
For the Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $322 $284
The Limited Partnership Agreement ("Partnership Agreement") provides for a special
management fee equal to 9% of the total distributions made to the limited partners
from cash flow from operations to be paid to the General Partner for executive and
administrative management services. The Partnership paid approximately $313,000
to affiliates of the General Partner during the three months ended March 31, 1996,
under this provision of the Partnership Agreement. No such fees were paid or
accrued during the three months ended March 31, 1995.
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 received
reimbursements as reflected in the following table:
For the Three Months Ended
March 31,
1996 1995
(in thousands)
Reimbursement for services of affiliates $157 $217
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 - Commitment and Contingencies
Commitments
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies. On September 25, 1995, the partners were
proxied and approved a reduction of the capital reserve requirements to $500 per
apartment unit and $1.00 per square foot of gross leasable commercial space owned
by the Partnership, or approximately $2.1 million. 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. Cash and cash equivalents,
Note C - Commitments and Contingencies (continued)
tenant security deposits and investments, totalling approximately $10.9 million at
March 31, 1996, exceeded the Partnership's reserve requirements of approximately
$2.1 million. Such reserves include approximately $532,000 of cash and cash
equivalents restricted for use at the Partnership's U.S. Department of Housing and
Urban Development ("HUD") financed property.
Contingencies
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 had historically had difficulty making its scheduled debt service
payments. Since 1985, the property had made quarterly cash flow payments pursuant
to a modified and restructured loan agreement, however, no payments were made in
1995 or 1996. Given current economic conditions in Southern California, property
operations were 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 did not contest this foreclosure notice and the
property was foreclosed on February 7, 1996, resulting in a gain on foreclosure of
approximately $2,999,000 to the Partnership.
Lake Forest Apartments secures a HUD-guaranteed mortgage note and accrued interest
totalling approximately $4.2 million at March 31, 1996. Post Ridge Apartments
secures a mortgage note and accrued interest totalling approximately $4.4 million
at December 31, 1996, 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 and this debt is currently in default. Since
1991, the Partnership has remitted excess cash flow from the properties'
operations as debt service. During 1995 and 1996, Post Ridge has made payments to
reduce its accrued interest payable from $395,000 at December 31, 1994 to $125,000
at March 31, 1996. 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. The General Partner is currently attempting to refinance
the remaining debt on Post Ridge.
Note D - 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 approximately $219,000 was
established and approximately $201,000 in loan costs were incurred. These loan
costs will be amortized over the life of the loan.
Note E - Distributions
In March 1996, the General Partner declared and paid distributions attributable to
cash flow from operations totalling approximately $3,617,000 and approximately
$71,000 representing a return of capital. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $35,000 was distributed to the general partners of the
majority-owned sub-tier limited partnerships.
Note F - Note Payoff
In February of 1996 the $484,000 balance of the first-lien note secured by the
Point West Apartments, with an original maturity of May 2001, was paid off to
retire debt with interest rates higher than the current market rate.
Note G - Note and Interest Receivable
When the Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a 9% interest-bearing promissory note which matured in March 1996. The
Partnership has negotiated with the purchaser to extend the note until April 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of seventeen apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 1996 and 1995:
Average Occupancy
1996 1995
The Apartments
Omaha, NE 90% 96%
Arbor East Apartments
Nashville, TN 94% 98%
Briar Bay Racquet Club Apartments
Miami, FL 96% 93%
Chimney Hills Apartments
Marietta, GA 96% 97%
Citadel Apartments
El Paso, TX 85% 96%
Citadel Village Apartments
Colorado Springs, CO 97% 95%
Foothill Place Apartments
Salt Lake City, UT 98% 98%
Knollwood Apartments
Nashville, TN 99% 98%
Lake Forest Apartments
Omaha, NE 96% 97%
Nob Hill Villa Apartments
Nashville, TN 95% 99%
Overlook Apartments
Memphis, TN 85% 89%
Point West Apartments
Charleston, SC 80% 89%
Post Ridge Apartments
Nashville, TN 98% 97%
Average Occupancy
1996 1995
Rivers Edge Apartments
Auburn, WA 96% 91%
South Port Apartments
Tulsa, OK 96% 79%
Stratford Place Apartments
Austin, TX 94% 95%
Village East Apartments
Cimarron Hills, CO 99% 98%
Occupancy for The Apartments has decreased due to efforts to improve the tenant
base by evicting tenants with large delinquent tenant receivables. The decrease
in occupancy for Arbor East and Nob Hill Villa Apartments is due to a combination
of an usually harsh winter, high unemployment and an outflow of tenants who left
to buy homes based on the expectation of increasing interest rates. The decrease
in occupancy at the Overlook Apartments is due to increased competition in the
Memphis market resulting from the renovation of surrounding properties in the
area. Occupancy for the Citadel Apartments decreased due to a decline in the El
Paso market resulting from military spending cuts and the re-deployment of
military personnel. The re-deployment has caused increased competition from
similar properties in the area. Point West Apartments' occupancy decreased due to
increased competition and rental rates being higher than the market would support.
Currently rental rates have been lowered slightly to adjust to the market and to
increase occupancy. Occupancy at Rivers Edge Apartments increased due to a strong
market in the Auburn area. The increase in occupancy at South Port Apartments is
a result of rental rates being lowered slightly as well as a decrease in the
apartment supply in the Tulsa market.
The Partnership realized a loss before extraordinary items of approximately
$278,000 for the three months ended March 31, 1996, compared to a loss before
extraordinary items of $319,000 for the three months ended March 31, 1995. The
decreased loss is due primarily to increases in rental and interest and other
income, partially offset by increases in property operations and administrative
expenses.
Rental income increased for the three months ended March 31, 1996, compared to the
three months ended March 31, 1995, due primarily to an increase in rents,
partially offset by a decrease in occupancy for the three months ended March 31,
1996, at several of the Partnership's properties, as discussed above. Interest
and other income increased for the three months ended March 31, 1996, compared to
the three months ended March 30, 1995, due to higher average cash balances being
available for investment in 1996.
Property operations expense increased for the three months ended March 31, 1996,
compared to the three months ended March 31, 1995, due primarily to increased
maintenance expenses in efforts to increase the curb appeal of several of the
Partnership's properties. Administrative expenses increased for the three months
ended March 31, 1996, compared to the three months ended March 31, 1995, due
primarily to a $313,000 special management fee related to the first quarter
distribution, partially offset by decreased expense reimbursements related
primarily to the efforts of the Dallas partnership administration staff during the
management transition period in 1995.
In February of 1996, the $484,000 balance of the first-lien note secured by the
Point West Apartments, with an original maturity of May 2001 was repaid so that
the Partnership could retire debt with interest rates higher than the current
market rate.
The $2,999,000 extraordinary gain on disposition of investment property realized
in the three months ended March 31, 1996, is due to the foreclosure of the Metro
Centre Office Building in February of 1996.
The $250,000 gain on refinancing realized during the quarter ended March 31, 1995,
related 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 the
extraordinary gain.
When the Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a 9% interest-bearing promissory note which matured in March 1996. The
Partnership has negotiated with the purchaser to extend the note until April 1997.
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 March 31, 1996, the Partnership held cash and cash equivalents of
approximately $7,604,000 compared to approximately $7,946,000 at March 31, 1995.
Net cash provided by operating activities increased primarily due to increased
rental revenues, the receipt of an insurance refund, an escrow receipt in 1996
from the refinancing of the debt secured by the Knollwood Apartments in December
of 1995, and the collection of insurance proceeds resulting from a fire at the
Overlook Apartments in December 1995, which was primarily covered by insurance and
did not have a material effect on the Partnership. Net cash used in investing
activities increased primarily due to increased property improvements and
replacements, partially offset by the absence of proceeds from the sale of
investments. The Partnership has primarily invested in short-term cash
equivalents during 1996. Net cash used in financing activities increased as a
result of the distribution to partners in 1996.
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 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 $72 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 three months ended March 31, 1996, cash
distributions of approximately $3,723,000 were declared and paid. No cash
distributions were made during the three months ended March 31, 1995.
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 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.
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.
Vice President/CAO
Date: May 13, 1996