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 September 30, 2000
or
[ ] 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)
September 30, December 31,
2000 1999
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 4,831 $ 8,921
Receivables and deposits 1,865 2,162
Restricted escrows 1,199 1,402
Other assets 1,844 1,403
Investment properties:
Land 12,094 12,094
Buildings and related personal property 125,998 122,539
138,092 134,633
Less accumulated depreciation (107,152) (104,057)
30,940 30,576
$ 40,679 $ 44,464
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 426 $ 960
Tenant security deposit liabilities 548 506
Accrued property taxes 1,462 1,284
Distribution payable 402 4,318
Other liabilities 975 1,287
Mortgage notes payable 76,447 70,997
80,260 79,352
Partners' Deficit
General partners (6,865) (6,634)
Limited partners (342,773 units issued and
outstanding) (32,716) (28,254)
(39,581) (34,888)
$ 40,679 $ 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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
Rental income $ 6,972 $ 7,194 $20,756 $21,311
Other income 567 552 1,730 1,575
Total revenues 7,539 7,746 22,486 22,886
Expenses:
Operating 2,820 2,759 8,435 8,317
General and administrative 484 224 1,287 1,248
Depreciation 1,014 969 3,095 3,070
Interest 1,483 1,435 4,368 4,268
Property taxes 483 490 1,454 1,440
Total expenses 6,284 5,877 18,639 18,343
Income before extraordinary item 1,255 1,869 3,847 4,543
Extraordinary loss on early extinguishment
of debt -- -- (64) --
Net income $ 1,255 $ 1,869 $ 3,783 $ 4,543
Net income allocated to general partners (4%) $ 50 $ 75 $ 151 $ 182
Net income allocated to limited partners (96%) 1,205 1,794 3,632 4,361
$ 1,255 $ 1,869 $ 3,783 $ 4,543
Per limited partnership unit:
Income before extraordinary item $ 3.52 $ 5.23 $ 10.78 $ 12.72
Extraordinary loss on early extinguishment
of debt -- -- (0.18) --
Net income $ 3.52 $ 5.23 $ 10.60 $ 12.72
Distributions per limited partnership unit $ 6.94 $ 3.22 $ 23.61 $ 28.83
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 -- (412) (9,883) (10,295)
Net income for the nine months
ended September 30, 1999 -- 182 4,361 4,543
Partners' deficit at
September 30, 1999 342,773 $ (6,405) $(22,752) $(29,157)
Partners' deficit at
December 31, 1999 342,773 $ (6,634) $(28,254) $(34,888)
Distributions to partners -- (382) (8,094) (8,476)
Net income for the nine months
ended September 30, 2000 -- 151 3,632 3,783
Partners' deficit at
September 30, 2000 342,773 $ (6,865) $(32,716) $(39,581)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
Net income $ 3,783 $ 4,543
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,095 3,070
Amortization of loan and other costs 215 237
Extraordinary loss on early extinguishment of debt 64 --
Change in accounts:
Receivables and deposits 297 177
Other assets (166) (329)
Accounts payable (534) 41
Tenant security deposit liabilities 42 (3)
Accrued property taxes 178 122
Other liabilities (312) 107
Net cash provided by operating activities 6,662 7,965
Cash flows from investing activities:
Property improvements and replacements (3,459) (2,687)
Net withdrawals from restricted escrows 203 1,218
Net cash used in investing activities (3,256) (1,469)
Cash flows from financing activities:
Payments on mortgage notes payable (361) (337)
Repayment of mortgage notes payable (12,224) --
Proceeds from mortgage notes payable 18,035 --
Distribution to partners (12,392) (10,295)
Prepayment penalties paid (30) --
Loan costs paid (524) --
Net cash used in financing activities (7,496) (10,632)
Net decrease in cash and cash equivalents (4,090) (4,136)
Cash and cash equivalents at beginning of period 8,921 13,241
Cash and cash equivalents at end of period $ 4,831 $ 9,105
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $4,167,000 and $4,021,000 for the nine
months ended September 30, 2000 and 1999, respectively.
Distribution payable and distributions to partners were each adjusted by
approximately $197,000 for non-cash activity for the nine months ended September
30, 2000.
Distributions to partners of approximately $4,318,000 were declared at December
31, 1999 and approximately $4,113,000 of this balance was paid during the nine
months ended September 30, 2000. The remaining balance is deferred per the
Partnership Agreement.
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 and nine month periods ended September 30, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. 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.
Reclassifications
Certain reclassifications have been made to the 1999 amounts to conform to the
2000 presentation.
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.
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 nine months ended September 30, 2000 and
1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $1,128 $1,155
Reimbursement for services of affiliates (included in
investment properties and general and administrative
and operating expenses) 768 451
Partnership management fee (included in general and
administrative expenses) 298 555
Loan costs (included in other assets) 180 --
During the nine months ended September 30, 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 $1,128,000 and
$1,155,000 for the nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $768,000 and $451,000 for the
nine months ended September 30, 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 $298,000 and $555,000 under this provision of the Partnership
Agreement to the General Partner during the nine months ended September 30, 2000
and 1999, respectively.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $180,000 for loan costs related
to the refinancing of four of the Partnership's properties during the nine
months ended September 30, 2000. These costs were capitalized and are included
in other assets on the consolidated balance sheet.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 179,454.5 limited
partnership units in the Partnership representing approximately 52.35% 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, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the General
Partner. As a result of its ownership of approximately 52.35% of the outstanding
units, AIMCO is in a position to 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 $4,831,000 at September 30, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to $500 per apartment unit owned by the Partnership
and instead permit the General Partner to determine reasonable reserve
requirements of the Partnership. The vote was sought pursuant to a Consent
Solicitation that expired on October 16, 2000 at which time the amendment was
approved by the requisite percent of limited partnership interests. Upon
expiration of the consent period, a total number of 241,311.5 units had voted of
which 230,010.5 units had voted in favor of the amendment, 7,675 voted against
the amendment and 3,626 units abstained.
Note E - Distributions
During the nine months ended September 30, 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 distributions of approximately $8,431,000
(approximately $8,094,000 to the limited partners or $23.61 per limited
partnership unit) during the nine months ended September 30, 2000 consisting of
approximately $4,989,000 (approximately $4,789,000 to the limited partners or
$13.97 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, Rivers Edge Apartments, and Stratford Place Apartments and
sale proceeds from Overlook Apartments which sold in December of 1999, and
approximately $3,442,000 (approximately $3,305,000 to the limited partners or
$9.64 per limited partnership unit) from operations. Approximately $197,000 of
the distribution from operations was payable at September 30, 2000 to the
General Partner and special limited partners as this property is subordinated
and deferred per the Partnership Agreement until the limited partners receive
100% of their original capital contributions from surplus funds. In conjunction
with the transfer of funds from certain majority-owned sub-tier limited
partnerships to the Partnership, approximately $45,000 was distributed to the
general partner of the majority owned sub-tier limited partnerships.
Subsequent to September 30, 2000, the General Partner declared and paid a
distribution from operations of approximately $2,752,000 (approximately
$2,642,000 to the limited partners or $7.71 per limited partnership unit).
Note E - Distributions (continued)
During the nine months ended September 30, 1999, the General Partner declared
and paid distributions attributable to cash flow from operations of
approximately $7,573,000 (approximately $7,270,000 to the limited partners or
$21.21 per limited partnership unit) and approximately $2,722,000 (approximately
$2,613,000 to the limited partners or $7.62 per limited partnership unit)
representing a return of capital.
Note F - Casualty Event
In January 2000, Stratford Place Apartments had a fire which damaged 12
apartment units and 30% of the roof. Insurance proceeds of approximately
$257,000 were received during the nine months ended September 30, 2000. The
Managing General Partner is repairing the damage and the financial impact is
still being determined.
Note G - Mortgage Refinancings and Extraordinary Losses on Early Extinguishment
of Debt
On September 1, 2000, the Partnership refinanced the mortgage encumbering Rivers
Edge Apartments. The refinancing replaced mortgage indebtedness of approximately
$1,895,000 with a new mortgage of $4,000,000. The mortgage was refinanced at a
rate of 7.82% compared to a prior rate of 8.40% and matures on September 1,
2020. Capitalized loan costs incurred for the refinancing were approximately
$90,000. There was no extraordinary loss recognized due to the refinancing
occurring at the maturity of the prior mortgage.
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place Apartments. The refinancing replaced mortgage indebtedness of
approximately $2,493,000 with a new mortgage of $4,550,000. The mortgage was
refinanced at a rate of 8.48% compared to the prior rate of 8.65% and matures on
June 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $124,000. The Partnership wrote off approximately $4,000 in
unamortized loan costs and paid prepayment penalties of approximately $1,000
resulting in an extraordinary loss on early extinguishment of debt of
approximately $5,000.
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 $153,000.
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 $141,000. 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.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the nine months ended
September 30, 2000.
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 and nine month periods ended September 30,
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.
For the Three Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 6,972 $ -- $ 6,972
Other income 529 38 567
Interest expense 1,483 -- 1,483
Depreciation 1,014 -- 1,014
General and administrative expenses -- 484 484
Segment profit (loss) 1,701 (446) 1,255
For the Nine Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $20,756 $ -- $20,756
Other income 1,635 95 1,730
Interest expense 4,368 -- 4,368
Depreciation 3,095 -- 3,095
General and administrative expenses -- 1,287 1,287
Extraordinary loss on early extinguishment
of debt (64) -- (64)
Segment profit (loss) 4,975 (1,192) 3,783
Total assets 35,469 5,210 40,679
Capital expenditures for investment
properties 3,459 -- 3,459
For the Three Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 7,194 $ -- $ 7,194
Other income 537 15 552
Interest expense 1,435 -- 1,435
Depreciation 969 -- 969
General and administrative expenses -- 224 224
Segment profit (loss) 2,078 (209) 1,869
For the Nine Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $21,311 $ -- $21,311
Other income 1,468 107 1,575
Interest expense 4,268 -- 4,268
Depreciation 3,070 -- 3,070
General and administrative expenses -- 1,248 1,248
Segment profit (loss) 5,684 (1,141) 4,543
Total assets 39,312 5,537 44,849
Capital expenditures for investment
properties 2,687 -- 2,687
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. 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
nine months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
The Apartments 94% 93%
Omaha, NE
Arbours of Hermitage Apartments 95% 96%
Nashville, TN
Briar Bay Racquet Club Apartments 97% 97%
Miami, FL
Chimney Hill Apartments 94% 95%
Marietta, GA
Citadel Apartments 92% 94%
El Paso, TX
Citadel Village Apartments 96% 98%
Colorado Springs, CO
Foothill Place Apartments 96% 97%
Salt Lake City, UT
Knollwood Apartments 94% 96%
Nashville, TN
Lake Forest Apartments 91% 87%
Omaha, NE
Nob Hill Villa Apartments 96% 94%
Nashville, TN
Point West Apartments 98% 96%
Charleston, SC
Post Ridge Apartments 92% 96%
Nashville, TN
Rivers Edge Apartments 98% 96%
Auburn, WA
South Port Apartments 96% 96%
Tulsa, OK
Stratford Place Apartments 95% 94%
Austin, TX
Village East Apartments 97% 98%
Cimarron Hills, CO
The decrease in occupancy at Post Ridge Apartments is due to increased
competition in the local market. The increase in occupancy at Lake Forest
Apartments is due to increased marketing efforts and a strong local market.
Results of Operations
The Partnership's net income for the nine months ended September 30, 2000,
totaled approximately $3,783,000 as compared to a net income of approximately
$4,543,000 for the corresponding period of 1999. The Partnership's net income
for the three month period ended September 30, 2000 was approximately $1,255,000
as compared to approximately $1,869,000 for the corresponding period in 1999.
The decrease in net income for the nine months ended September 30, 2000, is due
to an increase in total expenses, an extraordinary loss on early extinguishments
of debt recognized in 2000 and a decrease in total revenues. The decrease in net
income for the three months ended September 30, 2000 is due to an increase in
total expense and a decrease in total revenues. Total revenues for both the
three and nine month periods ended September 30, 2000, decreased largely due to
the sale of Overlook Apartments in December 1999. Excluding Overlook Apartments'
operations, total revenues and total expenses increased for the Partnership's
remaining properties for the three and nine months ended September 30, 2000.
Total expenses on the remaining properties increased due to an increase in
operating, interest, depreciation, and property tax expenses as well as an
increase in general and administrative expenses. Operating expenses increased
primarily due to reduced net insurance proceeds on casualties, increased utility
charges, and increased salary expenses. In the nine months ended September 30,
1999, there were several small insurance claims made and proceeds received with
one notable one at Nob Hill Villa Apartments. Fewer similar claims were made
during the nine months ended September 30, 2000 at various Partnership
properties. The increase in interest expense is primarily due to the new
financing at Point West Apartments late in 1999 and due to increased debt
balances at The Apartments, Stratford Place, Rivers Edge, and Citadel Apartments
due to refinancings in 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 1999 tax bills
effecting the accruals recorded at September 30, 2000 and 1999. The increase in
general and administrative expense is primarily due to an increase in the cost
of services included in the management reimbursements to the General Partner as
allowed under the Partnership Agreement. This increase was partially offset by
smaller special management fee of 9% on distributions from operations being paid
during the nine months ended September 30, 2000, as compared to the nine months
ended September 30, 1999, as distributions from operations decreased.
Total revenues for the 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 and
utility reimbursements partially offset by an increase in bad debt expenses at
most of the Partnership's properties and decreases in occupancy at eight of the
investment properties. Other income increased primarily due to increased
telephone income, various tenant charges, and interest income due to an increase
in average cash balances held in interest bearing accounts partially offset by a
decrease in laundry income.
Also included in general and administrative expenses for the nine months ended
September 30, 2000 and 1999, are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
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 September 30, 2000, the Partnership held cash and cash equivalents of
approximately $4,831,000, compared to approximately $9,105,000 at September 30,
1999. Cash and cash equivalents decreased approximately $4,090,000 for the nine
months ended September 30, 2000 from the Partnership's year ended December 31,
1999. This net decrease was comprised of approximately $7,496,000 of net cash
used in financing activities and approximately $3,256,000 of cash used in
investing activities, partially offset by net cash provided by operating
activities of approximately $6,662,000. Cash used in financing activities
consisted of the repayment of the mortgages encumbering The Apartments, Citadel
Apartments, Rivers Edge Apartments, and Stratford Place Apartments,
distributions to the partners, loan costs and prepayment penalties paid and
payments of principal made on the mortgages encumbering some of the
Partnership's properties, partially offset by proceeds from the new loans on The
Apartments, Citadel Apartments, Rivers Edge Apartments, and Stratford Place
Apartments. Cash used in investing activities consisted primarily of property
improvements and replacements, partially offset by net withdrawals from
restricted escrows. 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 nine months ended September 30, 2000, the Partnership expended
approximately $47,000 on capital improvements at the property, consisting
primarily of carpet and vinyl replacement, air conditioning replacements, and
major landscaping. These improvements were funded from Partnership reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $61,000 for 2000 at this property which consist primarily of
carpet and vinyl replacement.
Arbours of Hermitage Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $738,000 on capital improvements at the property, consisting
primarily of structural improvements, construction in progress, and floor
covering and appliance replacement. These improvements were funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $1,525,000 for 2000 at this property which
consist primarily of structural improvements, appliance replacement, fencing
upgrades, and floor covering replacement.
Briar Bay Racquet Club Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $109,000 on budgeted and non-budgeted capital improvements at the
property, consisting primarily of plumbing upgrades, carpet and vinyl
replacement, and other building improvements. These improvements were funded
from operating cash flow and Partnership reserves. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $134,000 for 2000
at this property which consist primarily of structural improvements, carpet
replacements, and elevator upgrades.
Chimney Hill Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $320,000 on budgeted and non-budgeted capital improvements at the
property, consisting primarily of counter top replacement, plumbing
replacements, floor covering replacement, roof replacement, electrical upgrades,
and structural upgrades. These improvements were funded from operating cash flow
and Partnership reserves. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $216,000 for 2000 at this property which
consist primarily of appliance replacements, plumbing upgrades, carpet and vinyl
replacement, major landscaping, and air conditioning upgrades.
Citadel Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $80,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of roof replacements, carpet replacements, and
water heater upgrades. 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 replacement, appliance replacements, structural
improvements, and air conditioning upgrades.
Citadel Village Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $104,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of plumbing upgrades and carpet and vinyl
replacements. These improvements were funded from operating cash flow and
Partnership reserves. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $103,000 for 2000 at this property which
consist primarily of carpet and vinyl replacement, other building improvements,
and plumbing upgrades.
Foothill Place Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $337,000 on budgeted and non-budgeted capital improvements at the
property, consisting primarily of lighting upgrades, appliance and carpet and
vinyl replacements, air conditioning replacements, structural improvements, and
water heater upgrades. These improvements were funded from Partnership reserves
and operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $329,000 for 2000 at this property which
consist primarily of light fixture enhancements, carpet and vinyl replacement,
structural improvements, and appliance replacements.
Lake Forest Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $183,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of carpet and vinyl replacement and water heater
replacements. These improvements were funded from operating cash flow and
Partnership reserves. 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.
Knollwood Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $438,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of appliance replacements, plumbing upgrades, and
carpet and vinyl replacement. These improvements were primarily funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $499,000 for 2000 at this property which
consist primarily of carpet and vinyl replacement, appliance replacements, and
air conditioning replacements.
Nob Hill Villa Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $156,000 for capital improvements at the property, consisting
primarily of floor covering replacement and appliance replacements. These
improvements were funded from operating cash flow and Partnership reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $234,000 for 2000 at this property which consist primarily of
appliance replacements, floor covering replacement, and structural improvements.
Point West Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $38,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacements, and air
conditioning 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 $100,000 for 2000 at this property which
consist primarily of carpet and vinyl replacement, appliance replacements, and
air conditioning replacements.
Post Ridge Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $237,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of plumbing upgrades, carpet replacements,
appliance replacements, structural improvements, and interior decorations. These
improvements were primarily funded from operating cash flow and Partnership
reserves. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $219,000 for 2000 at this property which consist
primarily of interior decoration, plumbing enhancements, carpet replacements,
appliance replacements, and air conditioning upgrades.
Rivers Edge Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $42,000 for capital improvements at the property, consisting
primarily of carpet replacements and appliance replacements. These improvements
were funded from Partnership reserves. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $94,000 for 2000 at this
property which consist primarily of appliance replacements, plumbing
enhancements, and carpet and vinyl replacement.
South Port Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $341,000 for budgeted and non-budgeted capital improvements at the
property, consisting primarily of roof replacements, floor covering replacement,
plumbing upgrades, and appliance replacements. These improvements were funded
from operating cash flow and Partnership reserves. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $221,000 for 2000
at this property which consist primarily of appliance replacements, plumbing
enhancements, floor covering replacements, and roof replacements.
Stratford Place Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $224,000 for budgeted and non-budgeted capital improvements at the
property consisting primarily of fencing upgrades, floor covering replacement,
appliance replacements, and roof replacement. These improvements were funded
from operating cash flow, Partnership reserves, and insurance proceeds. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $84,000 for 2000 at this property which consists primarily of
floor covering replacements, roof replacements, air conditioning upgrades,
maintenance equipment replacements, and other building improvements.
Village East Apartments
During the nine months ended September 30, 2000, the Partnership expended
approximately $65,000 for capital improvements at the property, consisting
primarily of plumbing upgrades, carpet replacements, and electrical upgrades.
These improvements were funded primarily from operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $68,000 for 2000 at this property which consists of plumbing and
electrical enhancements and carpet and vinyl replacement.
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 $76,447,000 matures at various dates
between 2003 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 September 1, 2000, the Partnership refinanced the mortgage encumbering Rivers
Edge Apartments. The refinancing replaced mortgage indebtedness of approximately
$1,895,000 with a new mortgage of $4,000,000. The mortgage was refinanced at a
rate of 7.82% compared to a prior rate of 8.40% and matures on September 1,
2020. Capitalized loan costs incurred for the refinancing were approximately
$90,000. There was no extraordinary loss recognized due to the refinancing
occurring at the maturity date of the prior mortgage.
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place. The refinancing replaced mortgage indebtedness of approximately
$2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a
rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $124,000.
The Partnership wrote off approximately $4,000 in unamortized loan costs and
paid prepayment penalties of approximately $1,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $5,000.
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 $153,000.
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 $141,000. 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.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the nine months ended
September 30, 2000.
During the nine months ended September 30, 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 distributions of approximately $8,431,000
(approximately $8,094,000 to the limited partners or $23.61 per limited
partnership unit) during the nine months ended September 30, 2000 consisting of
approximately $4,989,000 (approximately $4,789,000 to the limited partners or
$13.97 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, Rivers Edge Apartments, and Stratford Place Apartments and
sale proceeds from Overlook Apartments which sold in December of 1999, and
approximately $3,442,000 (approximately $3,305,000 to the limited partners or
$9.64 per limited partnership unit) from operations. Approximately $197,000 of
the distribution from operations was payable at September 30, 2000 to the
General Partner and special limited partners as this portion is subordinated and
deferred per the Partnership Agreement until the limited partners receive 100%
of their original capital contributions from surplus funds. In conjunction with
the transfer of funds from certain majority-owned sub-tier limited partnerships
to the Partnership, approximately $45,000 was distributed to the general partner
of the majority owned sub-tier limited partnerships.
Subsequent to September 30, 2000, the General Partner declared and paid a
distribution from operations of approximately $2,752,000 (approximately
$2,642,000 to the limited partners or $7.71 per limited partnership unit).
During the nine months ended September 30, 1999, the General Partner declared
and paid distributions attributable to cash flow from operations of
approximately $7,573,000 (approximately $7,270,000 to the limited partners or
$21.21 per limited partnership unit) and approximately $2,722,000 (approximately
$2,613,000 to the limited partners or $7.62 per limited partnership unit)
representing a return of capital.
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 further 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 $4,831,000 at September 30, 2000,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to $500 per apartment unit owned by the Partnership
and instead permit the General Partner to determine reasonable reserve
requirements of the Partnership. The vote was sought pursuant to a Consent
Solicitation that expired on October 16, 2000 at which time the amendment was
approved by the requisite percent of limited partnership interests. Upon
expiration of the consent period, a total number of 241,311.5 units had voted of
which 230,010.5 units had voted in favor of the amendment, 7,675 voted against
the amendment and 3,626 units abstained.
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 September 30, 2000,
an increase or decrease of 100 basis points in market interest rates would not
have a material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at September
30, 2000. The interest rates represent the average rates. The fair value of the
debt obligations approximated the recorded value as of September 30, 2000.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2000 $ 151 7.53%
2001 638 7.53%
2002 693 7.53%
2003 9,503 7.53%
2004 4,930 7.56%
Thereafter 60,532 7.56%
Total $76,447
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to $500 per apartment unit owned by the Partnership
and instead permit the General Partner to determine reasonable reserve
requirements of the Partnership. The vote was sought pursuant to a Consent
Solicitation that expired on October 16, 2000 at which time the amendment was
approved by the requisite percent of limited partnership interests. Upon
expiration of the consent period, a total number of 241,311.5 units had voted of
which 230,010.5 units had voted in favor of the amendment, 7,675 voted against
the amendment and 3,626 units abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.81, Multifamily Note dated August 29, 2000
between ConCap Rivers Edge Associates, Ltd., a Texas Limited
Partnership, and GMAC Commercial Mortgage Corporation, a
California Corporation.
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 September 30, 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:
Exhibit 10.81
FHLMC Loan No. 002647109
(River's Edge Apartments)
MULTIFAMILY NOTE
(WASHINGTON)
US $4,000,000.00 As of August 29, 2000
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Four Million and
00/100 Dollars (US $4,000,000.00), with interest on the unpaid principal balance
at the annual rate of ______________________________________ percent
(_________________%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of ____________________________________ (US $_________________), shall be
payable on the first day of each month beginning on October 1, 2000, until the
entire unpaid principal balance evidenced by this Note is fully paid. Any
accrued interest remaining past due for 30 days or more shall be added to and
become part of the unpaid principal balance and shall bear interest at the rate
or rates specified in this Note, and any reference below to "accrued interest"
shall refer to accrued interest which has not become part of the unpaid
principal balance. Any remaining principal and interest shall be due and payable
on September 1, 2020 or on any earlier date on which the unpaid principal
balance of this Note becomes due and payable, by acceleration or otherwise (the
"Maturity Date"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to five percent (5%) percent
of such amount. Borrower acknowledges that its failure to make timely payments
will cause Lender to incur additional expenses in servicing and processing the
loan evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for 30 days or more, or (b) any other Event of Default has occurred and
is continuing, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable, at a rate (the
"Default Rate") equal to the lesser of 4 percentage points above the rate stated
in the first paragraph of this Note or the maximum interest rate which may be
collected from Borrower under applicable law. If the unpaid principal balance
and all accrued interest are not paid in full on the Maturity Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate. Borrower also acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment under
this Note is delinquent for more than 30 days, Lender will incur additional
costs and expenses arising from its loss of the use of the money due and from
the adverse impact on Lender's ability to meet its other obligations and to take
advantage of other investment opportunities, and that it is extremely difficult
and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note
is delinquent for more than 30 days or any other Event of Default has occurred
and is continuing, Lender's risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on the last Business Day of a calendar month if Borrower has given Lender
at least 30 days prior notice of its intention to make such prepayment. Such
prepayment shall be made by paying (A) the amount of principal being prepaid,
(B) all accrued interest, (C) all other sums due Lender at the time of such
prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.
For all purposes including the accrual of interest, any prepayment received by
Lender on any day other than the last calendar day of the month shall be deemed
to have been received on the last calendar day of such month. For purposes of
this Note, a "Business Day" means any day other than a Saturday, Sunday or any
other day on which Lender is not open for business. Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made no more than 180 days
before the Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of
investigation, incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to
enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower in connection with the Loan is
interpreted so that any interest or other charge provided for in any Loan
Document, whether considered separately or together with other charges provided
for in any other Loan Document, violates that law, and Borrower is entitled to
the benefit of that law, that interest or charge is hereby reduced to the extent
necessary to eliminate that violation. The amounts, if any, previously paid to
Lender in excess of the permitted amounts shall be applied by Lender to reduce
the unpaid principal balance of this Note. For the purpose of determining
whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness that
constitutes interest, as well as all other charges made in connection with the
Indebtedness that constitute interest, shall be deemed to be allocated and
spread ratably over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of
the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
X Schedule A Prepayment Premium (required)
X Schedule B Modifications to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or
has caused this Instrument to be signed and delivered by its duly authorized
representative.
CONCAP RIVER'S EDGE ASSOCIATES, LTD., a Texas
limited partnership
By: Concap CCP/IV River's Edge Properties,
Inc., a Texas corporation, its general
partner
By: ________________________
Patti K. Fielding
Senior Vice President
75-2470335
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS _____ DAY OF SEPTEMBER, 2000.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date that is
180 months after the first day of the first calendar month following the date of
this Note (the "Yield Maintenance Period"), the prepayment premium shall be the
greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment
Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in any other case, the date on which
Lender accelerates the unpaid principal balance of the Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as of
the date 5 Business Days before the Prepayment Date, on the
_________________% U.S. Treasury Security due _________________, as
reported in The Wall Street Journal, expressed as a decimal calculated
to five digits. In the event that no yield is published on the
applicable date for the Treasury Security used to determine the
Assumed Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the publication
of such yield rates in The Wall Street Journal is discontinued for any
reason, Lender shall select a security with a comparable rate and term
to the Treasury Security used to determine the Assumed Reinvestment
Rate. The selection of an alternate security pursuant to this
Paragraph shall be made in Lender's discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during
the months remaining in the Yield Maintenance Period, using the
Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield Maintenance
Period but more than 180 days before the Maturity Date, the prepayment premium
shall be 1.0% of the unpaid principal balance of this Note.
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
3. The modifications set forth in this Schedule B shall apply only to the
Borrower named in this Note, and shall not be applicable to any other
entity or any natural person which may assume or otherwise become liable
for any of Borrower's obligations under this Note.