FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11002
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.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
2000 1999
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 7,676 $ 8,921
Receivables and deposits 1,168 2,162
Restricted escrows 1,159 1,402
Other assets 1,771 1,403
Investment properties:
Land 12,094 12,094
Buildings and related personal property 122,976 122,539
135,070 134,633
Less accumulated depreciation (105,086) (104,057)
29,984 30,576
$ 41,758 $ 44,464
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 609 $ 960
Tenant security deposit liabilities 508 506
Accrued property taxes 810 1,284
Distribution payable 3,707 4,318
Other liabilities 1,433 1,287
Mortgage notes payable 72,542 70,997
79,609 79,352
Partners' Deficit
General partners (6,753) (6,634)
Limited partners (342,773 units issued and
outstanding) (31,098) (28,254)
(37,851) (34,888)
$ 41,758 $ 44,464
Note: The balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
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,
2000 1999
Revenues:
Rental income $ 6,879 $ 7,088
Other income 520 463
Total revenues 7,399 7,551
Expenses:
Operating 2,758 2,718
General and administrative 456 761
Depreciation 1,029 1,052
Interest 1,441 1,421
Property taxes 496 463
Total expenses 6,180 6,415
Income before extraordinary item 1,219 1,136
Extraordinary loss on early extinguishment
of debt (59) --
Net income $ 1,160 $ 1,136
Net income allocated
to general partners (4%) $ 46 $ 45
Net income allocated
to limited partners (96%) 1,114 1,091
$ 1,160 $ 1,136
Per limited partnership unit:
Income before extraordinary item $ 3.41 $ 3.18
Extraordinary loss on early extinguishment
of debt (.16) --
Net income $ 3.25 $ 3.18
Distribution per limited partnership unit $ 11.55 $ 25.61
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partners Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit
at December 31, 1998 $342,773 $ (6,175) $(17,230) $(23,405)
Distributions to partners -- (366) (8,778) (9,144)
Net income for the three months
ended March 31, 1999 -- 45 1,091 1,136
Partners' deficit
at March 31, 1999 342,773 $ (6,496) $(24,917) $(31,413)
Partners' deficit
at December 31, 1999 342,773 $ (6,634) $(28,254) $(34,888)
Distribution to partners -- (165) (3,958) (4,123)
Net income for the three months
ended March 31, 2000 -- 46 1,114 1,160
Partners' deficit
at March 31, 2000 342,773 $ (6,753) $(31,098) $(37,851)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net income $ 1,160 $ 1,136
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,029 1,052
Amortization of loan costs 74 79
Extraordinary loss on early extinguishment of debt 59 --
Change in accounts:
Receivables and deposits 772 584
Other assets (200) (150)
Accounts payable (351) (97)
Tenant security deposit liabilities 2 (10)
Accrued property taxes (474) (572)
Other liabilities 146 166
Net cash provided by operating activities 2,217 2,188
Cash flows from investing activities:
Property improvements and replacements (437) (383)
Net withdrawals from restricted escrows 243 642
Insurance proceeds 222 --
Net cash provided by investing activities 28 259
Cash flows from financing activities:
Payments on mortgage notes payable (104) (109)
Repayment of mortgage note payable (7,836) --
Proceeds from mortgage note payable 9,485 --
Distribution to partners (4,734) (9,144)
Prepayment penalties paid (29) --
Loan costs paid (272) --
Net cash used in financing activities (3,490) (9,253)
Net decrease in cash and cash equivalents (1,245) (6,806)
Cash and cash equivalents at beginning of period 8,921 13,241
Cash and cash equivalents at end of period $ 7,676 $ 6,435
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $1,314,000 and $1,343,000 for the three
months ended March 31, 2000 and 1999, respectively.
Distribution payable and distributions to partners were each adjusted by
approximately $3,491,000 for non-cash activity for the three months ended March 31, 2000.
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" or "Registrant") 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 ConCap Equities, Inc. ("CEI" or the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 2000, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1999. 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, 1999.
Consolidation
The consolidated financial statements include the Partnership's majority
interest in a joint venture which owns South Port Apartments. The Partnership
has the ability to control the major operating and financial policies of the
joint venture. No minority interest has been reflected for the joint venture
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. Should the losses reverse, the Partnership would be
credited with the amount of minority interest losses previously absorbed.
The Partnership's consolidated financial statements also include the accounts of
the Partnership, its wholly-owned partnerships and its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
ConCap Rivers Edge Associates, Ltd., Foothill Chimney Associates, L.P., and
ConCap Stratford Associates, Ltd. Because the Partnership may remove the general
partner of its 99% owned partnerships, these partnerships are controlled and
consolidated by the Partnership. All significant interpartnership balances have
been eliminated.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - Transactions with Affiliated Partners
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and reimbursements of certain expenses incurred by affiliates on behalf
of the Partnership. The following transactions with the General Partner and/or
its affiliates were incurred during the three months ended March 31, 2000 and
1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 375 $ 379
Reimbursement for services of affiliates (included in
investment properties and general and administrative
and operating expenses) 139 137
Partnership management fee (included in general and
administrative expenses) 207 555
Loan costs (included in other assets) 95 --
During the three months ended March 31, 2000 and 1999, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all the Partnership's
properties as compensation for providing property management services. The
Partnership paid to such affiliates approximately $375,000 and $379,000 for the
three months ended March 31, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $139,000 and $137,000 for the
three months ended March 31, 2000 and 1999, respectively.
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 provided by operations to be paid to the General
Partner for executive and administrative management services. The Partnership
paid approximately $207,000 and $555,000 under this provision of the Partnership
Agreement to the General Partner during the three months ended March 31, 2000
and 1999, respectively.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $95,000 for loan costs related to
the refinancing of two of the Partnership's properties during the three months
ended March 31, 2000. These costs were capitalized and are included in other
assets on the consolidated balance sheet.
AIMCO and its affiliates currently own 168,262 limited partnership units in the
Partnership representing approximately 49.09% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. As a
result of its ownership of approximately 49.09% of the outstanding units, AIMCO
is in a position to significantly influence all voting decisions with respect to
the Registrant. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the General Partner
because of their affiliation with the General Partner.
Note D - Contingencies
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of $500 per apartment unit owned by the
Partnership, or approximately $2,004,000. 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, totaling approximately $7,676,000 at March 31, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
Note E - Distributions
During the three months ended March 31, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared a distribution of approximately $4,123,000
(approximately $3,958,000 to the limited partners or $11.55 per limited
partnership unit) in the first quarter of 2000, consisting of approximately
$1,724,000 (approximately $1,655,000 to the limited partners or $5.03 per
limited partnership unit) of refinance proceeds from The Apartments and Citadel
Apartments and sale proceeds from Overlook Apartments which sold in December of
1999, and approximately $2,399,000 (approximately $2,304,000 to the limited
partners or $6.72 per limited partnership unit) from operations. Approximately
$632,000 of this distribution was paid to affiliates of the General Partner
during the quarter ended March 31, 2000. The remaining $3,491,000 will be paid
subsequent to March 31, 2000.
In January 1999, the General Partner declared and paid a distribution
attributable to cash flow from operations of approximately $6,422,000
(approximately $6,165,000 or $17.99 per limited partnership unit) and
approximately $2,722,000 (approximately $2,613,000 or $7.62 per limited
partnership unit) representing a return of capital.
Note F - Casualty Gains
In January 2000, Stratford Place Apartments had a fire which damaged 12
apartment units and 30% of the roof. Insurance proceeds of approximately
$214,000 were received during the three months ended March 31, 2000. The
Managing General Partner is still negotiating with the insurance carrier and the
financial impact is still being determined.
Note G - Extraordinary Loss on Early Extinguishment of Debt
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $141,000.
The Partnership wrote off approximately $11,000 in unamortized loan costs and
paid prepayment penalties of approximately $22,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $33,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $130,000. The Partnership wrote off approximately $19,000 in
unamortized loan costs and paid prepayment penalties of approximately $7,000
resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
Note H - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties. The Partnership's residential property segment consists
of sixteen apartment complexes in ten states in the southeastern, western, and
mid-western United States. The Partnership rents apartment units to tenants for
terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segment are the same as those described in the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Factors management used to identify the Partnership's reportable segments: The
Partnership's reportable segments are investment properties that offer similar
products and services. Although each of the investment properties are managed
separately, they have been aggregated into one segment as they provide services
with similar types of products and customers.
Segment information for the three months ended March 31, 2000 and 1999, is shown
in the tables below. The "Other" column includes Partnership administration
related items and income and expense not allocated to the reportable segments.
2000 Residential Other Totals
(in thousands)
Rental income $ 6,879 $ -- $ 6,879
Other income 485 35 520
Interest expense 1,438 3 1,441
Depreciation 1,029 -- 1,029
General and administrative
expenses -- 456 456
Extraordinary loss on early extinguishment
of debt (59) -- (59)
Segment profit (loss) 1,584 (424) 1,160
Total assets 36,634 5,124 41,758
Capital expenditures for investment
properties 437 -- 437
1999 Residential Other Totals
(in thousands)
Rental income $ 7,088 $ -- $ 7,088
Other income 396 67 463
Interest expense 1,417 4 1,421
Depreciation 1,052 -- 1,052
General and administrative expenses -- 761 761
Segment profit (loss) 1,834 (698) 1,136
Total assets 35,779 6,262 42,041
Capital expenditures for investment
properties 383 -- 383
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Partnership's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Partnership's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of sixteen apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 2000 and 1999:
Average Occupancy
Property 2000 1999
The Apartments 94% 94%
Omaha, NE
Arbours of Hermitage Apartments 94% 95%
Nashville, TN
Briar Bay Racquet Club Apartments 97% 96%
Miami, FL
Chimney Hill Apartments 94% 94%
Marietta, GA
Citadel Apartments 93% 95%
El Paso, TX
Citadel Village Apartments 95% 97%
Colorado Springs, CO
Foothill Place Apartments 95% 97%
Salt Lake City, UT
Knollwood Apartments 93% 96%
Nashville, TN
Lake Forest Apartments 91% 86%
Omaha, NE
Nob Hill Villa Apartments 98% 93%
Nashville, TN
Point West Apartments 99% 95%
Charleston, SC
Post Ridge Apartments 94% 98%
Nashville, TN
Rivers Edge Apartments 99% 96%
Auburn, WA
South Port Apartments 97% 95%
Tulsa, OK
Stratford Place Apartments 96% 91%
Austin, TX
Village East Apartments 97% 98%
Cimarron Hills, CO
The decrease in occupancy at Knollwood Apartments and Post Ridge Apartments is
due to increased competition in the local market. The increase in occupancy at
Lake Forest Apartments, Nob Hill Villa Apartments, Point West Apartments, Rivers
Edge Apartments and Stratford Place Apartments is due to increased marketing
efforts and strong local markets.
Results of Operations
The Partnership's net income for the three months ended March 31, 2000, totaled
approximately $1,160,000 as compared to net income of approximately $1,136,000
for the corresponding period of 1999. The increase in net income for the three
months ended March 31, 2000, is due to a decrease in total expenses, partially
offset by a decrease in total revenues and an extraordinary loss on early
extinguishment of debt. Total expenses and total revenues decreased largely due
to the sale of Overlook Apartments in December 1999 as discussed below.
Excluding Overlook Apartment's operations, total expenses decreased and total
revenues increased for the Partnership's remaining properties for the three
months ended March 31, 2000.
Total expenses on the remaining properties decreased due to a decrease in
general and administrative expenses partially offset by increases in operating,
depreciation, property tax and interest expenses. The decrease in general and
administrative expenses is due to the fact that a smaller special management fee
of 9% on distributions from operations was paid during the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999. While there
was a distribution from operations of approximately $6,432,000 during the three
months ended March 31, 1999, the distribution from operations during the three
months ended March 31, 2000 was approximately $2,606,000, so the special
management fee paid during 2000 was lower. Operating expenses increased due
primarily to increased utility expenses and reduced net insurance proceeds on
casualties. In the three months ended March 31, 1999 there were several small
insurance claims made and proceeds received. Fewer similar claims were made
during the three months ended March 31, 2000. Depreciation expense on the
remaining properties increased due to capital improvements completed during the
past twelve months. Property tax expense increased due to increased assessed
values at some of the Partnership's properties, as well as the timing of the
receipt of the 1999 tax bills which affected the accruals recorded at March 31,
2000 and 1999. The increase in interest expense is primarily due to the new
financing at Point West Apartments late in 1999 and to increased debt balances
at The Apartments and Citadel Apartments due to the refinancings in February
2000.
Total revenues for the Partnership's remaining properties increased due to an
increase in rental income and an increase in other income. Rental income
increased due to increased average rental rates at most of the Partnership's
properties, partially offset by an increase in concession costs and bad debt
expenses. Other income increased primarily due to increased utility income,
telephone commissions, and corporate housing income, partially offset by a
decrease in interest income due to lower cash balances in interest bearing
accounts and reduced security deposit forfeitures.
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.
Liquidity and Capital Resources
At March 31, 2000, the Partnership held cash and cash equivalents of
approximately $7,676,000, compared to approximately $6,435,000 at March 31,
1999. Cash and cash equivalents decreased approximately $1,245,000 for the three
months ended March 31, 2000 from the Partnership's year ended December 31, 1999.
This net decrease was comprised of approximately $3,490,000 of cash used in
financing activities partially offset by approximately $2,217,000 of cash
provided by operating activities and approximately $28,000 of cash provided by
investing activities. Cash used in financing activities consisted primarily of
the repayment of the mortgages encumbering The Apartments and Citadel
Apartments, distributions to the partners, loan costs and prepayment penalties
paid and payments of principle made on the mortgages encumbering some of the
Partnership's properties, partially offset by proceeds from the new loans on The
Apartments and Citadel Apartments. Cash provided by investing activities
consisted of net withdrawals from restricted escrows and insurance proceeds
received, largely offset by property improvements and replacements and
additional costs for the sale of Overlook in December 1999. The Partnership
invests its working capital reserves in money market accounts.
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 and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
The Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $5,000 on budgeted capital improvements at the property,
consisting primarily of carpet and vinyl replacement. These improvements were
funded from operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $61,000 for 2000 at this
property which consists primarily of carpet and vinyl replacement.
Arbours of Hermitage Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $73,000 on budgeted capital improvements at the property,
consisting primarily of appliance and carpet replacement. These improvements
were funded from Partnership reserves and operating cash flow. The Partnership
has budgeted, but is not limited to, capital improvements of approximately
$205,000 for 2000 at this property which consist primarily of structural
improvements, floor covering replacement, countertop replacements, appliance
replacement, and air conditioning upgrades.
Briar Bay Racquet Club Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $38,000 on budgeted capital improvements at the property,
consisting primarily of electrical upgrades, elevator upgrades, other building
improvements and carpet and vinyl replacement. These improvements were funded
from operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $81,000 for 2000 at this property which
consist primarily of appliance replacements, carpet replacements, structural
improvements, elevator upgrades, cabinet replacements, major landscaping, and
air conditioning upgrades.
Chimney Hill Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $75,000 on budgeted capital improvements at the property,
consisting primarily of roof replacements, carpet and vinyl replacements,
cabinet and countertop replacements, and other building improvements. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $427,000 for 2000
at this property which consist primarily of appliance replacements, plumbing
upgrades, roof replacement, carpet and vinyl replacement, electrical upgrades,
interior decorating, and air conditioning upgrades.
Citadel Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $27,000 for budgeted capital improvements at the property,
consisting primarily of roof replacements, carpet and vinyl replacements, and
other building improvements. These improvements were funded from Partnership
reserves and operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $78,000 for 2000 at this
property which consist primarily of carpet and vinyl replacements, air
conditioning upgrades, structural improvements, appliance replacements, window
covering replacements, and roof replacements.
Citadel Village Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $12,000 for budgeted capital improvements at the property,
consisting primarily of carpet and vinyl replacements. These improvements were
funded from Partnership reserves and operating cash flow. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $41,000
for 2000 at this property which consist primarily of carpet and vinyl
replacement, and appliance replacements.
Foothill Place Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $38,000 on budgeted capital improvements at the property,
consisting primarily of carpet and vinyl replacements and appliance
replacements. These improvements were funded from Partnership reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $225,000 for 2000 at this property which consist primarily of
carpet and vinyl replacement, light fixture enhancements and appliance
replacements.
Knollwood Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $26,000 for budgeted capital improvements at the property,
consisting primarily of carpet replacement and appliance replacements. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $239,000 for 2000
at this property which consist primarily of carpet and vinyl replacement, air
conditioning upgrades, plumbing enhancements, and appliance replacements.
Lake Forest Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $34,000 for budgeted capital improvements at the property,
consisting primarily of electrical upgrades, appliance replacements, and
equipment replacements. These improvements were primarily funded from operating
cash flow. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $94,000 for 2000 at this property which consist
primarily of carpet and vinyl replacement, and appliance replacements.
Nob Hill Villa Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $31,000 for budgeted capital improvements at the property,
consisting primarily of carpet replacement, and appliance replacements. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $178,000 for 2000
at this property which consist primarily of floor covering replacement,
appliance replacements, structural improvements, cabinet replacements, and water
heater upgrades.
Point West Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $8,000 for budgeted capital improvements at the property,
consisting primarily of carpet and vinyl replacement, and appliance
replacements. These improvements were funded from the Partnership's operating
cash flow. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $202,000 for 2000 at this property which consist
primarily of carpet and vinyl replacement and interior decoration.
Post Ridge Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $17,000 for budgeted capital improvements at the property,
consisting primarily of appliance replacements, carpet replacements, and roof
replacements. These improvements were primarily funded from operating cash flow.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $138,000 for 2000 at this property which consist primarily of
carpet replacements, plumbing enhancements, appliance replacements, and air
conditioning upgrades.
Rivers Edge Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $12,000 for budgeted capital improvements at the property,
consisting primarily of carpet replacements, and appliance replacements. These
improvements were funded from Partnership's reserves. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $56,000
for 2000 at this property which consist primarily of carpet and vinyl
replacement, appliance replacements, and landscaping and plumbing enhancements.
South Port Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $18,000 for budgeted capital improvements at the property,
consisting primarily of floor covering replacement, and appliance replacements.
These improvements were funded from operating cash flow. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $221,000
for 2000 at this property which consists primarily of floor covering
replacements, roof replacements, plumbing enhancements, and appliance
replacements
Stratford Place Apartments
During the three months ended March 31, 2000, the Partnership expended
approximately $23,000 for budgeted capital improvements at the property,
consisting primarily of floor covering replacement, and appliance replacements.
These improvements were funded from Partnership reserves. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $69,000
for 2000 at this property which consists primarily of floor covering
replacements, roof replacements, air conditioning upgrades, and maintenance
equipment replacements.
Village East Apartments
During the three months ended March 31, 2000, the Partnership did not complete
any capital improvements at the property. The Partnership has budgeted, but is
not limited to, capital improvements of approximately $41,000 for 2000 at this
property which consists of carpet and vinyl replacement, air conditioning
upgrades, and major landscaping.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. The
mortgage indebtedness of approximately $72,542,000 matures at various dates
between 2000 and 2020. The General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $141,000.
The Partnership wrote off approximately $11,000 in unamortized loan costs and
paid prepayment penalties of approximately $22,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $33,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $130,000. The Partnership wrote off approximately $19,000 in
unamortized loan costs and paid prepayment penalties of approximately $7,000
resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
During the three months ended March 31, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared a distribution of approximately $4,123,000
(approximately $3,958,000 to the limited partners or $11.55 per limited
partnership unit) in the first quarter of 2000, consisting of approximately
$1,724,000 (approximately $1,655,000 to the limited partners or $5.03 per
limited partnership unit) of refinance proceeds from The Apartments and Citadel
Apartments and sale proceeds from Overlook Apartments which sold in December of
1999, and approximately $2,399,000 (approximately $2,304,000 to the limited
partners or $6.72 per limited partnership unit) from operations. Approximately
$632,000 of this distribution was paid to affiliates of the General Partner
during the quarter ended March 31, 2000. The remaining $3,491,000 will be paid
subsequent to March 31, 2000.
In January 1999, the General Partner declared and paid a distribution
attributable to cash flow from operations of approximately $6,422,000
(approximately $6,165,000 or $17.99 per limited partnership unit) and
approximately $2,722,000 (approximately $2,613,000 or $7.62 per limited
partnership unit) representing a return of capital.
The Partnership wrote off approximately $19,000 in unamortized loan costs and
paid prepayment penalties of approximately $28,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $47,000.
The Partnership's distribution policy is reviewed on a quarterly basis. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations,
after planned capital improvement expenditures, to permit any distributions to
its partners in 2000 or subsequent periods.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of $500 per apartment unit owned by the
Partnership, or approximately $2,004,000. 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, totaling approximately $7,676,000 at March 31, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. Based on interest rates at March 31, 2000, a 1%
increase or decrease in market interest rates would not have a material impact
on the Partnership.
The following table summarizes the Partnership's debt obligations at March 31,
2000. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of March 31, 2000.
Principal amount by expected maturity:
Long Term
Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2000 $ 4,730 7.58%
2001 454 7.45%
2002 493 7.45%
2003 9,286 7.45%
2004 4,696 7.46%
Thereafter 52,883 7.48%
Total $72,542
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part I - Financial Information, Item I. Financial Statements, Note B - Transfer
of Control"). The plaintiffs seek monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the General
Partner filed a motion seeking dismissal of the action. In lieu of responding to
the motion, the plaintiffs have filed an amended complaint. The General Partner
filed demurrers to the amended complaint which were heard February 1999. Pending
the ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement, settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
General Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
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 March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly 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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: May 15, 2000