FORM 10-K--ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
UNITED STATE SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[No Fee Required]
For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[No Fee Required]
For the transition period from _________to _________
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interests
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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___
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 2000. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
General
Consolidated Capital Institutional Properties (the "Partnership" or
"Registrant") was organized on April 28, 1981, as a Limited Partnership under
the California Uniform Limited Partnership Act. On July 23, 1981, the
Partnership registered with the Securities and Exchange Commission under the
Securities Act of 1933 (File No. 2-72384) and commenced a public offering for
the sale of $200,000,000 of limited partnership units (the "Units"). The sale of
Units terminated on July 21, 1983, with 200,342 Units sold for $1,000 each, or
gross proceeds of approximately $200,342,000 to the Partnership. In accordance
with its Partnership Agreement (the original partnership agreement of the
Partnership together with all amendments thereto shall be referred to as the
"Agreement"), the Partnership has repurchased and retired a total of 1,296.8
Units for a total purchase price of $1,000,000. The Partnership may repurchase
any Units, at its absolute discretion, but is under no obligation to do so.
Since its initial offering, the Registrant has not received, nor are limited
partners required to make, additional capital contributions. The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2011
unless terminated prior to such date.
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC") was the Corporate General Partner. In 1988, through a
series of transactions, Southmark Corporation ("Southmark") acquired controlling
interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter
11 of the United States Bankruptcy Code. In 1990, as part of CCEC's
reorganization plan, ConCap Equities, Inc. ("CEI") acquired CCEC's general
partner interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships"), and CEI replaced CCEC as managing
general partner in all 16 partnerships. The selection of CEI as the sole
managing general partner was approved by a majority of the limited partners in
the Partnership and in each of the Affiliated Partnerships pursuant to a
solicitation of the Limited Partners dated August 10, 1990. As part of this
solicitation, the Limited Partners also approved an amendment to the Agreement
to limit changes of control of the Partnership. All of CEI's outstanding stock
was owned by Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT
was merged into Apartment Investment and Management Company ("AIMCO"). Hence,
CEI is now a wholly-owned subsidiary of AIMCO. (See "Transfer of Control" below)
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership was formed for the benefit of its Limited
Partners (herein so called and together with the General Partner shall be called
the "Partners"), to lend funds to Consolidated Capital Equity Partners ("EP"), a
California general partnership in which certain of the partners were former
shareholders and former management of CCEC, the former Corporate General Partner
of the Partnership. See "Status of the Master Loan" for a description of the
loan and settlement of EP's bankruptcy.
Through December 31, 2000, the Partnership had advanced a total of approximately
$180,500,000 to EP and its successor under the Master Loan (as defined in
"Status of the Master Loan"). As of December 31, 2000, the balance of the Master
Loan, net of the allowance for possible losses, was approximately $31,055,000.
EP used the proceeds from these loans to acquire 18 apartment buildings and 4
office complexes, which served as collateral for the Master Loan. EP's successor
in bankruptcy (as more fully described in "Status of the Master Loan") currently
has 11 apartment buildings. The Partnership acquired The Loft Apartments through
foreclosure in November 1990. Prior to that time, The Loft Apartments had been
collateral on the Master Loan. The Partnership acquired a multiple-use building,
The Sterling Apartment Homes and Commerce Center ("The Sterling"), through a
deed-in-lieu of foreclosure transaction on November 30, 1995. The Sterling was
also collateral on the Master Loan. For a brief description of the properties
refer to "Item 2 - Description of Property".
The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the General Partner.
Property management services were performed at the Partnership's properties by
an affiliate of the General Partner.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential and commercial properties within the
market area of the Registrant's properties. The number and quality of
competitive properties, including those which may be managed by an affiliate of
the General Partner in such market area, could have a material effect on the
rental market for the apartments and the commercial space at the Registrant's
properties and the rents that may be charged for such apartments and space.
While the General Partner and its affiliates own and/or control a significant
number of apartment units in the United States, such units represent an
insignificant percentage of total apartment units in the United States and
competition for the apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential and
commercial properties because such properties are susceptible to the impact of
economic and other conditions outside of the control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in "Item 7" of this Form 10-K.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. ("Insignia") and IPT merged
into AIMCO, a publicly traded real estate investment trust, with AIMCO being the
surviving corporation. 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.
Segments
Segment data for the years ended December 31, 2000, 1999 and 1998 is included in
"Item 8. Financial Statements - Note L" and is an integral part of the Form
10-K.
Status of the Master Loan
Prior to 1989, the Partnership had loaned funds totaling $170,400,000 to EP
subject to a nonrecourse note with a participation interest (the "Master Loan"),
pursuant to the Master Loan Agreement dated July 22, 1981, between the
Partnership and EP. The Partnership secured the Master Loan with deeds of trust
or mortgages on real property purchased with the funds advanced, as well as by
the assignment and pledge of promissory notes from the partners of EP.
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the bankruptcy court approved EP's consensual
plan of reorganization (the "Plan"). In November 1990, EP and the Partnership
consummated a closing under the Plan pursuant to which, among other things, the
Partnership and EP executed an amended and restated loan agreement (the "New
Master Loan Agreement"), EP was converted from a California General Partnership
to a California Limited Partnership, Consolidated Capital Equity Partners, L.P.,
("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure
the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole General Partner of CCEP and an affiliate of the Partnership.
The General Partners of EP became Limited Partners in CCEP. CHI has full
discretion with respect to conducting CCEP's business, including managing CCEP's
properties and initiating and approving capital expenditures and asset
dispositions and refinancings.
Under the terms of the New Master Loan Agreement (as adopted in November 1990),
interest accrues at a fluctuating rate per annum adjusted annually on July 15 by
the percentage change in the U.S. Department of Commerce Implicit Price Deflator
for the Gross National Product subject to an interest rate ceiling of 12.5%.
Interest payments are currently payable quarterly in an amount equal to "Excess
Cash Flow". If such Excess Cash Flow payments are less than the current accrued
interest during the quarterly period, the unpaid interest is added to principal,
compounded annually, and is payable at the loan's maturity. If such Excess Cash
Flow payments are greater than the current accrued interest, the excess amount
is applied to the principal balance of the loan. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to the Partnership under the
terms of the New Master Loan Agreement. The New Master Loan Agreement matured in
November 2000. The Registrant is currently evaluating its options as to the
Master Loan currently being in default. Those options include foreclosing on the
properties which collateralize the Master Loan or extending the terms of the
loan. If the Partnership forecloses on the properties securing the new Master
Loan, title in the properties owned by CCEP would be vested in the Partnership,
subject to the existing liens on such properties, including the first mortgage
loans. As a result, the Partnership would become responsible for the operations
of such properties.
For 1992, Excess Cash Flow was generally defined in the New Master Loan
Agreement as net cash flow from operations after third-party debt service.
Effective January 1, 1993, the Partnership and CCEP amended the New Master Loan
Agreement to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the Master
Loan from the Partnership to CCEP. This amendment and change in the definition
of Excess Cash Flow has had the effect of reducing income on the investment in
the Master Loan by the amount of CCEP's capital expenditures since such amounts
were previously excluded from Excess Cash Flow.
Item 2. Description of Properties:
The following table sets forth the Partnership's investment in real estate as of
December 31, 2000:
Date of
Property Acquisition Type of Ownership Use
The Loft Apartments 11/19/90 Fee ownership, subject to Apartment
Raleigh, NC a first mortgage 184 units
The Sterling Apartment Homes 12/01/95 Fee ownership subject to Apartment
and Commerce Center a first mortgage (1) 536 units
Philadelphia, PA Commercial
110,368 sq ft
(1) Property is held by a Limited Partnership in which the Registrant
ultimately owns a 100% interest.
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis at December 31, 2000.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
The Loft Apartments $ 7,143 $ 3,544 5-20 yrs S/L $ 5,010
The Sterling Apartment
Homes and Commerce
Center 35,183 9,445 5-25 yrs S/L 28,163
$42,326 $12,989 $33,173
See "Note A" of the consolidated financial statements included in "Item 8.
Financial Statements and Supplementary Data" for a description of the
Partnership's depreciation policy.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the mortgages
encumbering the Registrant's properties at December 31, 2000.
Principal
Balance At Principal
December Balance
31, 2000 Interest Period Maturity Due At
Property Rate Amortized Date Maturity
(1)
The Loft Apartments
1st mortgage $ 4,276 6.95% 360 months 12/01/05 $ 3,903
The Sterling
Apartment
Homes and Commerce
Center
1st mortgage 22,486 6.77% 120 months 10/01/08 19,975
$ 26,762 $ 23,878
(1) See "Item 8. Financial Statements and Supplementary Data - Note E" for
information with respect to the Registrant's ability to prepay these
mortgages and other specific details about the mortgages.
Rental Rate and Occupancy:
Average annual rental rates and occupancy for 2000 and 1999 for each property:
Average Annual Average
Rental Rates Occupancy
Property 2000 1999 2000 1999
The Loft Apartments $ 8,941/unit $ 8,771/unit 93% 96%
The Sterling Apartment Homes
(residential) 15,523/unit 14,371/unit 94% 91%
The Sterling Commerce Center
(commercial) 16.22/s.f. 14.90/s.f. 89% 84%
The General Partner attributes the increase in occupancy at the Sterling
Commerce Center and the Sterling Apartment Homes to major capital improvements
including exterior renovations, elevator rehabilitation and common area
renovations. The decrease in occupancy at The Loft is attributed to a large
number of new apartment complexes in the area.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes and commercial property in the area. The General
Partner believes that all of the properties are adequately insured. Each
apartment complex leases properties for terms of one year or less. No
residential tenant leases 10% or more of the available rental space. All of the
properties are in good physical condition, subject to normal depreciation and
deterioration as is typical for assets of this type and age.
The following is a schedule of the lease expirations of the commercial space for
The Sterling Commerce Center for the years beginning 2001 through the maturities
of the current leases.
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
2001 5 10,666 $176,651 12.03%
2002 6 18,817 273,168 18.60%
2003 9 18,969 265,442 18.07%
2004 1 2,835 41,122 2.80%
2005 3 4,268 88,674 6.04%
2006 1 3,838 62,440 4.25%
2007 3 31,559 561,165 38.21%
The following schedule reflects information on tenants occupying 10% or more of
the leasable square footage of The Sterling Commerce Center as of December 31,
2000.
Square Footage Annual Rent
Nature of Business Leased Per Square Foot Lease Expiration
Business Services 33,747 $14.82 9,335 sq. ft. - exp. 4/30/02
24,412 sq. ft. - exp. 7/31/07
Real Estate Taxes and Rates:
Real estate taxes and rates in 2000 for each property were:
Billing Rate
(in thousands)
The Loft Apartments $ 91 .99%
The Sterling Apartment Homes and
Commerce Center 506 8.79%
Capital Improvements:
The Loft Apartments: During the year ended December 31, 2000, the Partnership
completed approximately $100,000 of capital improvements at The Loft Apartments,
consisting primarily of floor covering, appliance, water heater and air
conditioning unit replacements. These improvements were funded from operating
cash flow and replacement reserves. The Partnership is currently evaluating the
capital improvements needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $275 per unit or $50,600. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
The Sterling Apartment Homes and Commerce Center: During the year ended December
31, 2000, the Partnership completed approximately $1,547,000 of capital
improvements at The Sterling Apartment Homes and Commerce Center, consisting
primarily of plumbing and electrical upgrades, new appliances, cabinet, floor
covering and furniture replacements, interior decoration and interior building
improvements. These improvements were funded from operating cash flow and
replacement reserves. The Partnership is currently evaluating the capital
improvements needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $147,400 for the apartments and
$.54 per square foot or approximately $60,000 for the Commerce Center.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Item 3. 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, among other things, 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; management of
the 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 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 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 and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. 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 4. Submission of Matters to a Vote of Security Holders
During the fiscal quarter ended December 31, 2000, no matter was submitted to a
vote of unit holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for Partnership Equity and Related Partner Matters
The Partnership, a publicly-held limited partnership, offered and sold 200,342
limited partnership units (the "Units") aggregating $200,342,000. The
Partnership currently has 12,301 holders of record owning an aggregate of
199,045.2 Units. Affiliates of the General Partner owned 125,866 units or 63.23%
at December 31, 2000. No public trading market has developed for the Units, and
it is not anticipated that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998, 1999 and 2000 and subsequent to December 31, 2000
(See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.):
Distributions
Per Limited
Aggregate Partnership Unit
01/01/98 - 12/31/98 $28,598,000 (1) $143.58
01/01/99 - 12/31/99 22,621,000 (2) 113.65
01/01/00 - 12/31/00 47,880,000 (3) 240.55
Subsequent to 12/31/2000 7,767,000 (4) 39.02
(1) Consists of $1,798,000 of cash from operations and $26,800,000 of cash
from surplus funds.
(2) Distributions were made from surplus funds.
(3) Distributions were made from surplus funds, approximately $28,770,000 of
which was from the receipt of net financing and refinancing proceeds from
CCEP.
(4) Distributions were from surplus funds, approximately $6,776,000 of which
was from residual proceeds from financing and refinancing proceeds from
CCEP.
The Registrant's distribution policy is reviewed on a quarterly basis. Future
distributions will depend on the levels of 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 that the Partnership will
generate sufficient funds from operations, after planned capital expenditures,
to permit any additional distributions to its partners in 2001 or subsequent
periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 125,866 limited partnership
units in the Partnership representing 63.23% 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 63.23% 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 its affiliation with
the General Partner.
Item 6. Selected Financial Data
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in "Item 8. Financial
Statements and Supplementary Data".
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998 1997 1996
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Total revenues $ 14,193 $ 13,545 $ 14,394 $ 11,608 $ 9,414
Total expenses (10,823) (9,773) (9,087) (8,041) (8,586)
Reduction in provision
for impairment loss 14,241 -- 23,269 -- --
Net income $ 17,611 $ 3,772 $ 28,576 $ 3,567 $ 828
Net income per Limited
Partnership Unit $ 87.59 $ 18.76 $ 142.12 $ 17.74 $ 4.12
Distributions per Limited
Partnership Unit $ 240.55 $ 113.65 $ 143.58 $ 9.94 $ 85.33
Limited Partnership Units
outstanding 199,045.2 199,045.2 199,045.2 199,052 199,052
AS OF DECEMBER 31,
BALANCE SHEETS 2000 1999 1998 1997 1996
(in thousands)
Total assets $ 65,383 $ 95,668 $115,182 $ 91,628 $ 91,657
Mortgage note payable $ 26,762 $ 27,074 $ 27,360 $ 4,448 $ 4,498
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-K 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-K and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant'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 Registrant's business and results of
operation. 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.
This item should be read in conjunction with "Item 8. Financial Statements and
Supplementary Data" and other items contained elsewhere in this report.
Results of Operations
2000 compared to 1999
The Registrant's net income for the year ended December 31, 2000 was
approximately $17,611,000 compared to net income of approximately $3,772,000 for
the year ended December 31, 1999. The increase in net income for the year ended
December 31, 2000 was primarily due to the $14,241,000 reduction of the
provision for impairment loss on the investment in the Master Loan recognized in
2000 due to an increase in the net realizable value of the collateral
properties. There was no adjustment to the provision for impairment loss during
1999. The General Partner evaluates the net realizable value on a semi-annual
basis. The General Partner has seen a consistent increase in the net realizable
value of the collateral properties, taken as a whole, over the past two years.
The increase is deemed to be attributable to major capital improvement projects
and the concerted effort to complete deferred maintenance items that have been
ongoing over the past few years at the properties. This has enabled the
properties to increase their respective occupancy levels or, in some cases, to
maintain the properties' high occupancy levels. The vast majority of this work
was funded by cash flow from the collateral properties themselves as no amounts
have been borrowed on the master loan or from other sources in the past few
years in order to fund such improvements.
Excluding the reduction of provision for impairment loss, the partnership's net
income for the year ended December 31, 2000 and 1999 was approximately
$3,370,000 and $3,772,000, respectively. The decrease in net income for the year
ended December 31, 2000 was primarily due to an increase in total expenses,
partially offset by an increase in total revenues.
The increase in total expenses for the year ended December 31, 2000 is primarily
due to an increase in depreciation, operating expenses and general and
administrative expenses. The increase in operating expense is the result of an
increase in utilities expense and salaries and benefits at The Sterling,
slightly offset by a decrease in advertising expense. Advertising expense
decreased at The Sterling due to an increase in occupancy thus eliminating the
needs for extensive advertising. Depreciation expense increased due to major
capital improvements and replacements at The Sterling during 2000 and 1999 which
are now being depreciated.
The increase in total revenues for the year ended December 31, 2000 is
attributable to an increase in rental income, interest income, other income and
a property tax refund which more than offset the decrease in interest income on
investment in Master Loan to affiliate. The decrease in interest income related
to the Master Loan is a factor of the method used to recognize income. Income is
only recognized to the extent that actual cash is received. The receipt of cash
is dependent on the operating cash flow of the properties which secure the
Master Loan. Operating cash flow for these properties was lower for the year
ended December 31, 2000 as a result of capital expenditures at the properties.
The increase in rental income for the years ended December 31, 2000 as compared
to the same period in 1999, was due to increases in average rental rates at the
Registrant's investment properties along with an increase in occupancy at the
Sterling which was offset slightly by a decrease in occupancy at The Loft
Apartments. In addition, there has been a decrease in concessions offered at The
Sterling as a result of the complex completing its renovation during 2000. The
increase in interest income is the result of higher average balances in interest
bearing accounts. The property tax refund was due to The Sterling receiving a
refund on prior year tax bills which were appealed.
General and administrative expenses increased for the year ended December 31,
2000 due to an increase in the costs of services provided by the General Partner
allowed under the Partnership Agreement. In addition, costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included in
general and administrative expenses.
1999 Compared with 1998
The Registrant's net income for the year ended December 31, 1999, was
approximately $3,772,000 compared to net income of approximately $28,576,000 for
the corresponding period in 1998. The decrease in the net income for the year
ended December 31, 1999 was primarily due to the $23,269,000 reduction of
provision for impairment loss recognized in 1998. No reduction of allowance for
impairment loss was recorded for December 31, 1999 as the fair value of the
collateral properties underlying the Master Loan did not significantly change
from the fair value at December 31, 1998 and accordingly no change to the
allowance was deemed necessary during 1999. Excluding the reduction of provision
for impairment loss, the Registrant's net income for the year ended December 31,
1998 was approximately $5,307,000. For the comparable years, total revenues
decreased, exclusive of the reduction of provision for impairment loss, due to a
decline in interest income related to the Master Loan, which was partially
offset by an increase in rental income. Income on the Master Loan is only
recognized to the extent that actual cash is received. The receipt of cash is
dependent on the operating cash flow of the properties which secure the Master
Loan. Operating cash flow for these properties was lower for the year ended
December 31, 1999 as a result of capital expenditures at the properties. The
increase in rental income was due to an increase in occupancy at The Loft and
The Sterling Commerce Center and an increase in the average annual rental rates
at all of the properties which more than offset a slight decrease in occupancy
at The Sterling Apartment Homes.
The increase in total expenses for the year ended December 31, 1999 is primarily
attributable to increases in interest and depreciation expenses, partially
offset by decreases in operating, general and administrative and property tax
expenses. Interest expense increased due to the financing of The Sterling in
September 1998. Depreciation expense increased due to major capital improvements
and replacements at The Sterling during 1999 and 1998. The decrease in operating
expenses was mainly due to the completion of interior building improvements at
The Sterling during the year ended December 31, 1998. Also contributing to the
decrease in operating expense is a decrease in insurance expense due to a change
in insurance carriers and a decrease in legal fees which were incurred during
the year ended December 31, 1998 to defend the Partnership's objection to an
increase in assessment values at The Sterling. General and administrative
expense decreased due to a decrease in reimbursements to the General Partner for
accountable administrative expenses, which is partially offset by an increase in
legal fees due to the settlement of legal matters as previously disclosed in
prior quarters. Property tax expense decreased due to a refund received at The
Sterling during the year ended December 31, 1999 as a result of the successful
appeal of the increase in the property's assessment value.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was not
material. The cumulative effect, had this change been applied to prior periods,
is not material. The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the General Partner
and affiliates.
The General Partner attributes the increase in 1998 on the net realizable value
of the collateral properties securing the Master Loan to the increase in
occupancy and/or average rental rates at the properties collateralizing the
loan. The increase in occupancy at the properties was attributable to
approximately $8,403,000 of combined capital improvements made at most of the
properties for the three years ended December 31, 1998. These improvements were
funded primarily from property operations and cash flows as the only advances
from the Partnership to CCEP totaled approximately $367,000 during 1998, 1997
and 1996.
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 expense. As part of this
plan, the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Capital Resources and Liquidity
At December 31, 2000, the Partnership had cash and cash equivalents of
approximately $2,036,000 compared to approximately $11,175,000 at December 31,
1999, a decrease of approximately $9,139,000. The decrease is due to
approximately $48,204,000 of cash used in financing activities, offset by
approximately $32,060,000 of cash provided by investing activities and
approximately $7,005,000 of cash provided by operating activities. Cash used in
financing activities consisted primarily of distributions to partners and, to a
lesser extent, principal payments made on the mortgages encumbering the
Registrant's properties and payment of loan costs. Cash provided by investing
activities consisted primarily of principal repayments received on the Master
Loan and, to a lesser extent, net receipts from escrow accounts maintained by
the mortgage lender, partially offset by property improvements and replacements
and lease commissions paid. The Registrant invests its working capital reserves
in interest bearing 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 various properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, and local legal and regulatory requirements. The Partnership is
currently evaluating the capital improvements needs of all the properties for
the upcoming year. The minimum amount to be budgeted for the Partnership is
expected to be $275 per unit or $198,000 for all the apartments and $.54 per
square foot or approximately $60,000 for the Sterling Commerce Center.
Additional improvements may be considered and will depend on the physical
condition of the properties as well as replacement reserves and anticipated cash
flow generated by the properties.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $26,762,000 requires monthly payments of principal
and interest and balloon payments of approximately $3,903,000 and $19,975,000 on
December 1, 2005 and October 1, 2008, respectively. The General Partner will
attempt to refinance such indebtedness and/or sell the properties prior to such
maturity date. If the properties cannot be refinanced or sold for a sufficient
amount, the Registrant will risk losing such properties through foreclosure.
Distributions from surplus cash of approximately $47,880,000 were paid to the
limited partners ($240.55 per limited partnership unit) during the year ended
December 31, 2000 of which approximately $28,770,000 was from the receipt of net
financing and refinancing proceeds from CCEP. Distributions from surplus cash of
approximately $22,621,000 were paid to limited partners ($113.65 per limited
partnership unit) during the year ended December 31, 1999. During the year ended
December 31, 1998, the Partnership paid approximately $1,798,000 in
distributions from operations (approximately $1,780,000 to limited partners or
$8.94 per limited partnership unit). Also, during the year ended December 31,
1998, the Partnership paid approximately $26,800,000 in distributions from
surplus funds to limited partners ($134.64 per limited partnership unit).
Subsequent to December 31, 2000 the Partnership distributed approximately
$7,767,000 of surplus cash to the limited partners ($39.02 per limited
partnership unit). The Registrant'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
that the Partnership will generate sufficient funds from operations, after
planned capital improvement expenditures, to permit further distributions to its
partners in 2001 or subsequent periods. 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 at
least 5% of the limited partner's capital contributions less distributions to
limited partners 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 140,565.90
units had voted of which 136,767.20 units had voted in favor of the amendment,
2,805.70 voted against the amendment and 993.00 units abstained.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 125,866 limited partnership
units in the Partnership representing 63.23% 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 63.23% 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 its affiliation with
the General Partner.
During the years ended December 31, 2000, 1999 and 1998, the Partnership
received approximately $33,634,000, $20,713,000, and $2,687,000, respectively,
as principal payments on the Master Loan from CCEP. For 2000, approximately
$238,000 was received on certain investments by CCEP, which are required to be
transferred to the Partnership per the Master Loan Agreement. Approximately
$4,526,000 was received representing net proceeds from the sale of Shirewood and
approximately $28,870,000 was received representing net proceeds received for
the refinancing of the mortgages encumbering nine of the investment properties.
For 1999, approximately $163,000 was received on certain investments by CCEP.
Approximately $20,550,000 was received representing the net proceeds from the
sale of 444 DeHaro. For 1998, approximately $581,000 was received on certain
investments by CCEP. Approximately $2,106,000 was part of the net proceeds from
the sale of Northlake Quadrangle.
CCEP Property Operations
For the years ended December 31, 2000, 1999 and 1998, CCEP's net loss totaled
approximately $37,493,000, $20,178,000 and $33,266,000, respectively, with total
revenues of approximately $22,747,000, $19,262,000, and $18,922,000,
respectively. CCEP recognizes interest expense on the Master Loan Agreement
obligation according to the note terms, although payments to the Partnership are
required only to the extent of Excess Cash Flow, as defined therein. During the
year ended December 31, 2000, 1999 and 1998, CCEP's statement of operations
includes total interest expense attributable to the Master Loan of approximately
$41,287,000, $39,609,000, and $36,333,000, respectively, all but $2,000,000,
$2,744,000, and $4,138,000, respectively, of which represents interest accrued
in excess of required payments. CCEP is expected to continue to generate
operating losses as a result of such interest accruals and noncash charges for
depreciation.
The Master Loan Agreement matured in November 2000. The holder of the note has
two options which include foreclosing on the properties that collateralize the
Master Loan or extending the terms of the note. If CCIP were to foreclose on its
collateral, CCEP would no longer hold title to its properties and would be
dissolved.
Item 7a. Market Risk Factors
The Partnership is exposed to market risks associated with its Master Loan to
Affiliate ("Loan"). Receipts (interest income) on the Loan are based upon the
operations and cash flow of the underlying investment properties that
collateralize the Loan. Both the income and expenses of operating the investment
properties are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment, population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws or changes in the patterns or needs of users.
The investment properties are also susceptible to the impact of economic and
other conditions outside of the control of the Partnership as well as being
affected by current trends in the market area which they operate. In this
regard, the General Partner of the Partnership closely monitors the performance
of the properties collateralizing the loans. Based upon the fact that the loan
is considered impaired under Statement of Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairment of a Loan", interest rate fluctuations
do not impact the recognition of income, as income is only recognized to the
extent of cash flow. Therefore, market risk factors do not impact the
Partnership's results of operations as it relates to the Loan. See "Item 8 -
Financial Statements and Supplementary Data - Note D" for further information.
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 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 December 31, 2000, a 100 basis point 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 December
31, 2000. The interest rates represent the weighted-average rates. The fair
value of the debt obligations approximates the carrying value as of December 31,
2000.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 6.80%
(in thousands)
2001 $ 304
2002 346
2003 371
2004 393
2005 4,320
Thereafter 21,028
Total $26,762
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Operations for the Years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Changes in Partners' (Deficit) Capital for the
Years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Institutional Properties
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Institutional Properties as of December 31, 2000 and 1999, and the
related consolidated statements of operations, changes in partners' (deficit)
capital, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Institutional Properties at December 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 2, 2001
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
December 31,
2000 1999
Assets
Cash and cash equivalents $ 2,036 $ 11,175
Receivables and deposits 886 1,078
Restricted escrows 453 600
Other assets 1,616 1,641
Investment in Master Loan 34,231 67,865
Less allowance for impairment loss (3,176) (17,417)
31,055 50,448
Investment properties (Notes E and H):
Land 3,564 3,564
Buildings and related personal property 38,762 37,115
42,326 40,679
Less accumulated depreciation (12,989) (9,953)
29,337 30,726
$ 65,383 $ 95,668
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 189 $ 108
Tenant security deposit liabilities 675 574
Other liabilities 741 627
Mortgage notes payable (Note E) 26,762 27,074
28,367 28,383
Partners' (Deficit) Capital
General partner 118 (58)
Limited partners (199,045.2 units issued and
outstanding) 36,898 67,343
37,016 67,285
$ 65,383 $ 95,668
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
2000 1999 1998
Revenues:
Rental income $ 10,826 $ 9,877 $ 9,191
Interest income on investment in Master
Loan to affiliate (Note D) 2,000 2,744 4,138
Reduction of provision for impairment
loss (Note D) 14,241 -- 23,269
Interest income 397 318 410
Other income 760 606 655
Property tax refund 210 -- --
Total revenues 28,434 13,545 37,663
Expenses:
Operating 4,570 4,150 4,856
General and administrative 711 531 556
Depreciation 3,036 2,655 2,292
Interest 1,909 1,926 751
Property taxes 597 511 632
Total expenses 10,823 9,773 9,087
Net income (Note C) $ 17,611 $ 3,772 $ 28,576
Net income allocated to general partner (1%) $ 176 $ 38 $ 286
Net income allocated to limited partners (99%) 17,435 3,734 28,290
$ 17,611 $ 3,772 $ 28,576
Net income per limited partnership unit $ 87.59 $ 18.76 $ 142.12
Distribution per limited partnership unit $ 240.55 $ 113.65 $ 143.58
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342.0 $ 1 $200,342 $200,343
Partners' (deficit) capital at
December 31, 1997 199,052.0 $ (364) $ 86,520 $ 86,156
Distributions -- (18) (28,580) (28,598)
Abandonment of partnership units
(Note K) (6.8) -- -- --
Net income for the year
ended December 31, 1998 -- 286 28,290 28,576
Partners' (deficit) capital
at December 31, 1998 199,045.2 (96) 86,230 86,134
Distributions -- -- (22,621) (22,621)
Net income for the year ended
December 31, 1999 -- 38 3,734 3,772
Partners' (deficit) capital at
December 31, 1999 199,045.2 (58) 67,343 67,285
Distributions -- -- (47,880) (47,880)
Net income for the year ended
December 31, 2000 -- 176 17,435 17,611
Partners' capital at
December 31, 2000 199,045.2 $ 118 $ 36,898 $ 37,016
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income $ 17,611 $ 3,772 $ 28,576
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,169 2,778 2,360
Casualty loss -- -- 14
Gain on sale of land -- -- (19)
Reduction of provision for impairment loss (14,241) -- (23,269)
Change in accounts:
Receivables and deposits 192 (93) (1)
Other assets (22) (513) (209)
Interest receivable on Master Loan -- -- 604
Accounts payable 81 (323) 267
Tenant security deposit liabilities 101 70 148
Accrued property taxes -- (62) 62
Other liabilities 114 (64) 187
Net cash provided by operating activities 7,005 5,565 8,720
Cash flows from investing activities:
Property improvements and replacements (1,647) (2,183) (3,239)
Lease commissions paid (74) -- (279)
Proceeds from sale of land -- -- 75
Net receipts from (deposits to) restricted
escrows 147 1,312 (1,846)
Principal receipts on Master Loan 33,634 20,713 2,687
Net cash provided by (used in) investing activities 32,060 19,842 (2,602)
Cash flows from financing activities:
Loan costs (12) (8) (440)
Distributions to partners (47,880) (22,621) (28,598)
Proceeds from mortgage note payable -- -- 23,000
Payments on mortgage notes payable (312) (286) (88)
Net cash used in financing activities (48,204) (22,915) (6,126)
Net (decrease) increase in cash and cash
equivalents (9,139) 2,492 (8)
Cash and cash equivalents at beginning of year 11,175 8,683 8,691
Cash and cash equivalents at end of year $ 2,036 $ 11,175 $ 8,683
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,861 $ 1,869 $ 597
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
Note A - Organization and Significant Accounting Policies
Organization: Consolidated Capital Institutional Properties (the "Partnership"
or "Registrant"), a California Limited Partnership, was formed on April 28,
1981, to lend funds through nonrecourse notes with participation interests (the
"Master Loan"). The loans were made to, and the real properties that secure the
Master Loan were purchased and owned by, Consolidated Capital Equity Partners,
("EP"), a California general partnership in which certain of the partners were
former shareholders and former management of Consolidated Capital Equities
Corporation ("CCEC"), the former Corporate General Partner. Through December 31,
2000, the Partnership had advanced a total of approximately $180,500,000 to EP
and its successor under the Master Loan. The Partnership Agreement provides that
the Partnership is to terminate on December 31, 2011 unless terminated prior to
such date.
Upon the Partnership's formation in 1981, CCEC, a Colorado corporation, was the
Corporate General Partner. In December 1988, CCEC filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's
reorganization plan, ConCap Equities, Inc., a Delaware corporation (the "General
Partner" or "CEI"), acquired CCEC's General Partner interests in the Partnership
and in 15 other affiliated public Limited Partnerships (the "Affiliated
Partnerships") and replaced CCEC as Managing General Partner in all 16
partnerships.
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the Bankruptcy Court approved EP's consensual
plan of reorganization (the "Plan"). In November 1990, EP and the Partnership
consummated a closing under the Plan pursuant to which, among other things, the
Partnership and EP executed an amended and restated loan agreement (the "New
Master Loan Agreement"). EP was converted from a California General Partnership
to a California Limited Partnership, Consolidated Capital Equity Partners, L.P.
("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure
the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole general partner of CCEP and an affiliate of the Partnership.
The General Partners of EP became Limited Partners in CCEP. CHI has full
discretion with respect to conducting CCEP's business, including managing CCEP's
properties and initiating and approving capital expenditures and asset
dispositions and refinancings. All of CEI's outstanding stock was owned by
Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT was merged
into Apartment Investment and Management Company ("AIMCO"). Hence, CEI is now a
wholly-owned subsidiary of AIMCO.
The Partnership owns and operates one apartment property and one multiple-use
complex in North Carolina and Pennsylvania, respectively. Also, the Partnership
is the holder of the Master Loan which is collateralized by apartment properties
located throughout the United States.
Principles of Consolidation: The Partnership's consolidated financial statements
include the accounts of Kennedy Boulevard Associates, I, L.P., a Pennsylvania
Limited Partnership ("KBA-I, L.P."), Kennedy Boulevard Associates II, L.P.,
Kennedy Boulevard Associates III, L.P., Kennedy Boulevard Associates IV, L.P.,
and Kennedy Boulevard GP I ("KBGP-I"), a Pennsylvania Partnership. Each of the
entities above except KBGP-I are Pennsylvania limited partnerships, and the
general partners of each of these affiliated limited and general partnerships
are limited liability corporations of which the Partnership is the sole member.
Therefore, the Partnership controls these affiliated limited and general
partnerships, and consolidation is appropriate. KBA-I, L.P. holds title to The
Sterling Apartment Home and Commerce Center ("the Sterling"). All
interpartnership transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Allocation of Profits, Gains, and Losses: The Agreement provides for net income
and net losses for both financial and tax reporting purposes to be allocated 99%
to the Limited Partners and 1% to the General Partner.
Net Income (Loss) Per Limited Partnership Unit: Net income (loss) per Limited
Partnership Unit ("Unit") is computed by dividing net income (loss) allocated to
the Limited Partners by the number of Units outstanding at the beginning of the
year. Per Unit information has been computed based on 199,045.2 Units
outstanding in 2000 and 1999 and 199,052 Units outstanding in 1998.
Cash and Cash Equivalents: Includes cash on hand, in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits. Cash balances include approximately $1,861,000 at
December 31, 2000 that are maintained by an affiliated management company on
behalf of affiliated entities in cash concentration accounts. There were no
amounts in cash concentration accounts at December 31, 1999.
Restricted Escrows:
Replacement Reserve Account - At the time of the December 15, 1995,
refinancing of The Loft, approximately $60,000 of the proceeds were
designated for a Replacement Reserve Fund for certain capital replacements
at the property. At December 31, 2000 and 1999, the balances are
approximately $121,000 and $96,000, respectively.
In conjunction with the financing of the Sterling in September 1998, the
Partnership is required to make monthly deposits of approximately $17,000
with the mortgage company to establish and maintain a Replacement Reserve
Fund designated for repairs and replacements at the property. As of
December 31, 2000 and 1999, the balances are approximately $332,000 and
$245,000, respectively.
Repair Escrow Fund - In addition to the Replacement Reserve Fund, a Repair
Escrow Fund was established with a portion of the proceeds of the new
Sterling note to pay for certain costs of repairs to the property to be
completed within the next two years. As of December 31, 1999, the balance
in this Fund totaled approximately $245,000 and is included in restricted
escrows.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment and commercial properties and related personal
property. For Federal income tax purposes, the accelerated cost recovery method
is used (1) for real property over 15 years for additions prior to March 16,
1984, 18 years for additions after March 15, 1984 and before May 9, 1985, and 19
years for additions after May 8, 1985, and before January 1, 1987, and (2) for
personal property over 5 years for additions prior to January 1, 1987. As a
result of the Tax Reform Act of 1986, for additions after December 31, 1986, the
modified accelerated cost recovery method is used for depreciation of (1) real
property additions over 27 1/2 years and (2) personal property additions over 5
years.
Loan Costs: As of December 31, 2000 and 1999, loan costs of approximately
$584,000 and $572,000, respectively, less accumulated amortization of
approximately $160,000 and $103,000 respectively, are included in other assets.
These costs are amortized on a straight-line basis over the life of the loans.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits totaling approximately
$676,000 and $572,000 as of December 31, 2000 and 1999, respectively, are
included in receivables and deposits. Deposits are refunded when the tenant
vacates, provided the tenant has not damaged its space and is current on rental
payments.
Investment Properties: Investment properties consist of one apartment complex
and one multiple-use building consisting of apartment units and commercial space
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
Costs of properties that have been permanently impaired have been written down
to appraised value. No adjustments for impairment of value were recorded in the
years ended December 31, 2000, 1999 or 1998.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amounts of its
financial instruments (except for long term debt) approximate their fair values
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Investment in Master Loan: In accordance with SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan", the allowance for credit losses related to
loans that are identified for evaluation in accordance with the Statement is
based on discounted cash flows using the loan's initial effective interest rate
or the fair value of the collateral for certain collateral dependent loans.
Leases: The Partnership leases certain commercial space to tenants under various
lease terms. The leases are accounted for as operating leases in accordance with
SFAS No. 13, "Accounting for Leases". Some of the leases contain stated rental
increases during their term. For leases with fixed rental increases, rents are
recognized on a straight-line basis over the terms of the leases. For all other
leases, minimum rents are recognized over the terms of the leases.
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on its leases. In addition, the
General Partner's policy is to offer rental concessions during particularly slow
months or in response to heavy competition from other similar complexes in the
area. Concessions are charged against rental income as incurred.
Lease Commissions: Lease commissions are capitalized and included in other
assets and are being amortized using the straight-line method over the life of
the applicable lease. At December 31, 2000 and 1999, lease commissions totaled
approximately $543,000 and $469,000, respectively, with accumulated amortization
of approximately $207,000 and $131,000, respectively.
Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. (See "Note L" for detailed disclosure of the Partnership's segments).
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $71,000, $90,000 and $138,000 for the years
ended December 31, 2000, 1999 and 1998, respectively, were charged to operating
expense.
Reclassifications: Certain reclassifications have been made to the 1999 and
1998 information 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 IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation. 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 - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable
income (in thousands, except per unit data):
2000 1999 1998
Net income as reported $17,611 $ 3,772 $ 28,576
Add (deduct):
Deferred revenue and other liabilities 195 (915) 155
Depreciation differences 499 471 459
Accrued expenses 21 28 3
Interest income (2,000) (2,744) (4,138)
Differences in valuation allowances (14,241) -- (23,269)
Other loss on disposition 14 -- --
Federal taxable income $ 2,099 $ 612 $ 1,786
Federal taxable income per
limited partnership unit $ 10.44 $ 3.04 $ 8.88
The following is reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
December 31,
2000 1999
Net assets as reported $37,016 $ 67,285
Land and buildings 931 908
Accumulated depreciation 2,905 2,414
Allowance for impairment loss 3,176 17,417
Interest receivable 3,324 5,324
Syndication fees 22,500 22,500
Other (205) (420)
Net assets - Federal tax basis $69,647 $115,428
Note D - Net Investment in Master Loan
The Partnership was formed for the benefit of its Limited Partners to lend funds
to CCEP subject to a nonrecourse note with a participation interest (the "Master
Loan"). At December 31, 2000 and 1999, the recorded investment in the Master
Loan was considered to be impaired under SFAS No. 114. The Partnership measures
the impairment of the loan based upon the fair value of the collateral due to
the fact that repayment of the loan is expected to be provided solely by the
collateral. For the years ended December 31, 2000 and 1998, the Partnership
recorded approximately $14,241,000 and $23,269,000, respectively, in income
based upon an increase in the fair value of the collateral. No change in
impairment was recorded for the year ended December 31, 1999.
For the years ended December 31, 2000, 1999, and 1998, the Partnership recorded
approximately $2,000,000, $2,744,000 and $4,138,000, respectively, of interest
income based upon "Excess Cash Flow" (as defined in the terms of the New Master
Loan Agreement) generated and paid to the Partnership.
The fair value of the collateral properties was determined using the net
operating income of the collateral properties capitalized at a rate deemed
reasonable for the type of property adjusted for market conditions, the physical
condition of the property and other factors or by obtaining an appraisal by an
independent third party. This methodology has not changed from that used in
prior calculations performed by the General Partner in determining the fair
value of the collateral properties. The approximate $14,241,000 and $23,269,000
reduction in the provision for impairment loss recognized during the years ended
December 31, 2000 and 1998, respectively, is attributed to an increase in the
net realizable value of the collateral properties. The General Partner evaluates
the net realizable value on a semi-annual basis. The General Partner has seen a
consistent increase in the net realizable value of the collateral properties,
taken as a whole, over the past few years. The increase is deemed to be
attributable to major capital improvement projects and the concerted effort to
complete deferred maintenance items that have been ongoing over the past few
years at the various properties. This has enabled the properties to increase
their respective occupancy levels or, in some cases, to maintain the properties'
high occupancy levels. The vast majority of this work was funded by cash flow
from the collateral properties as no amounts have been borrowed on the Master
Loan or from other sources in the past few years.
Interest, calculated on the accrual basis, due to the Partnership pursuant to
the terms of the Master Loan Agreement, but not recognized in the income
statements due to the impairment of the loan, totaled approximately $39,401,000,
$36,865,000 and $32,195,000 for the years ended December 31, 2000, 1999 and
1998, respectively. Interest income is recognized on the cash basis as required
by SFAS 114. At December 31, 2000 and 1999, such cumulative unrecognized
interest totaling approximately $306,262,000 and $266,861,000 was not included
in the balance of the investment in Master Loan. In addition, six of the
properties are collateralized by first mortgages totaling approximately
$56,060,000 as of December 31, 2000, which are senior to the Master Loan.
Accordingly, this fact has been taken into consideration in determining the fair
value of the Master Loan.
During the years ended December 31, 2000, 1999 and 1998, the Partnership made no
advances to CCEP on Master Loan.
During the years ended December 31, 2000, 1999 and 1998, the Partnership
received approximately $33,634,000, $20,713,000, and $2,687,000, respectively,
as principal payments on the Master Loan from CCEP. For 2000, approximately
$238,000 was received on certain investments by CCEP, which are required to be
transferred to the Partnership per the Master Loan Agreement. Approximately
$4,526,000 was received representing net proceeds from the sale of Shirewood and
approximately $28,870,000 was received representing net proceeds received for
the refinancing of the mortgages encumbering nine of the investment properties.
For 1999, approximately $163,000 was received on certain investments by CCEP.
Approximately $20,550,000 was received representing the net proceeds from the
sale of 444 DeHaro. For 1998, approximately $581,000 was received on certain
investments by CCEP and approximately $2,106,000 was part of the net proceeds
from the sale of Northlake Quadrangle.
Terms of the Master Loan Agreement
Under the terms of the Master Loan, interest accrues at a fluctuating rate per
annum adjusted annually on July 15 by the percentage change in the U.S.
Department of Commerce Implicit Price Deflator for the Gross National Product
subject to an interest rate ceiling of 12.5%. The interest rates for each of the
years ended December 31, 2000, 1999 and 1998 was 12.5%. Payments are currently
payable quarterly in an amount equal to "Excess Cash Flow", generally defined in
the Master Loan as net cash flow from operations after third-party debt service
and capital expenditures. Any unpaid interest is added to principal, compounded
annually, and is payable at the loan's maturity. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to CCIP under the terms of
the Master Loan Agreement. The Master Loan Agreement matured in November 2000.
The Partnership is currently evaluating its options as to the Master Loan
currently being in default. Those options include foreclosing on the properties
which collateralize the Master Loan or extending the terms of the loan.
The investment in the Master Loan consists of the following:
As of December 31,
2000 1999
(in thousands)
Master Loan funds advanced
at beginning of year $ 67,865 $ 88,578
Principal receipts on Master Loan (33,634) (20,713)
Master Loan funds advanced
at end of year $ 34,231 $ 67,865
The allowance for impairment loss on Master Loan to affiliates consists of the
following:
As of December 31,
2000 1999 1998
(in thousands)
Allowance for impairment loss on Master
Loan to affiliates, beginning of year $ 17,417 $ 17,417 $ 40,686
Reduction of impairment loss (14,241) -- (23,269)
Allowance for impairment loss on Master
Loan to affiliates, end of year $ 3,176 $ 17,417 $ 17,417
Note E - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Balance
December 31, (including Interest Maturity Due At
Property 2000 1999 interest) Rate Date Maturity
(in thousands) (in thousands) (in thousands)
The Loft Apartments
1st mortgage $ 4,276 $ 4,338 $ 30 6.95% 12/01/05 $ 3,903
The Sterling
Apartment
Homes and Commerce
Center
1st mortgage 22,486 22,736 149 6.77% 10/01/08 19,975
$ 26,762 $ 27,074 $179 $ 23,878
The mortgage notes payable are non-recourse and are secured by pledge of the
respective properties and by pledge of revenues from the respective properties.
The notes require prepayment penalties if repaid prior to maturity. Further, the
properties may not be sold subject to existing indebtedness.
Scheduled principal payments of the mortgage notes payable subsequent to
December 31, 2000, are as follows (in thousands):
2001 $ 304
2002 346
2003 371
2004 393
2005 4,320
Thereafter 21,028
$26,762
Note F - Related Party Transactions
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 (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and its affiliates during the years ended December 31, 2000, 1999, and
1998:
2000 1999 1998
(in thousands)
Property management fees (included in
operating expense) $580 $525 $485
Reimbursement for services of affiliates
(included in operating, general
and administrative expense, other
assets and investment properties) 510 259 543
During the years ended December 31, 2000, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $580,000, $525,000 and $485,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $510,000, $259,000 and
$543,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Included in "Reimbursement for services of affiliates" for the years ended 2000,
1999 and 1998 is approximately $29,000, $38,000 and $33,000, respectively, in
reimbursements for construction oversight costs. In addition, approximately
$66,000 and $171,000 of lease commissions and in loan financing costs,
respectively, are included for the year ended December 31, 1998.
For the period January 1, 1997 to August 31, 1998, the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an insurer unaffiliated with the General Partner. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the master policy. The agent assumed the financial obligations
to the affiliate of the General Partner which receives payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the General Partner by virtue of the
agent's obligations was not significant.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 125,866 limited partnership
units in the Partnership representing 63.23% 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 63.23% 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 its affiliation with
the General Partner.
Note G - Commitments
Until October 17, 2000, the Partnership was required by the Partnership
Agreement to maintain working capital reserves for contingencies of not less
than 5% of Net Invested Capital, as defined in the Partnership Agreement. In the
event expenditures were made from this reserve, operating revenues were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. 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 at least 5% of the limited partner's
capital contributions less distributions to limited partners 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 140,565.90 units had voted of which 136,767.20 units had voted
in favor of the amendment, 2,805.70 voted against the amendment and 993.00 units
abstained.
Note H - Real Estate and Accumulated Depreciation
Investment Properties Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
The Loft Apartments $ 4,276 $ 1,053 $ 4,147 $ 1,943
The Sterling Apt Homes
and Commerce Center 22,486 2,567 12,341 20,275
$26,762 $ 3,620 $16,488 $ 22,218
Gross Amount At Which
Carried
At December 31, 2000
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
(in thousands)
The Loft $ 997 $ 6,146 $ 7,143 $ 3,544 11/19/90 5-20
The Sterling 2,567 32,616 35,183 9,445 12/01/95 5-25
Totals $3,564 $38,762 $42,326 $12,989
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
2000 1999 1998
(in thousands)
Real Estate
Balance, real estate at beginning of year $40,679 $38,496 $35,335
Property improvements and
replacements 1,647 2,183 3,239
Property sold/written off -- -- (78)
Balance, real estate at end of year $42,326 $40,679 $38,496
Accumulated Depreciation
Balance at beginning of year $ 9,953 $ 7,298 $ 5,014
Additions charged to expense 3,036 2,655 2,292
Disposals due to write-offs -- -- (8)
Balance at end of year $12,989 $ 9,953 $ 7,298
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 2000 and 1999, is approximately $43,257,000 and $41,587,000,
respectively. Accumulated depreciation for Federal income tax purposes at
December 31, 2000 and 1999 is approximately $10,084,000, and $7,539,000,
respectively.
Note I - Revenues
Rental income on the commercial property leases is recognized on the
straight-line basis over the life of the applicable leases. Minimum future
rental income for the commercial properties subject to noncancellable operating
leases is as follows (in thousands):
Year Ending
December 31,
2001 $ 1,394
2002 1,336
2003 1,128
2004 957
2005 834
Thereafter 1,276
$ 6,925
There is no assurance that this rental income will continue at the same level
when the current leases expire.
Note J - Sale of Land
In July 1998, the Partnership sold approximately 1.26 acres of land (5.33% of
the total land) at The Loft Apartments. The land was situated to the side of the
property. This resulted in a net gain of approximately $19,000 on the sale.
Note K - Abandonment of Limited Partnership Units
In 1998, the number of Limited Partnership Units decreased by 6.8 units due to
Limited Partners abandoning their units. In abandoning his or her Limited
Partnership Units, a Limited Partner relinquishes all right, title, and interest
in the Partnership as of the date of abandonment. However, during the year of
abandonment, the Limited Partner is still allocated his or her share of net
income or loss for that year. The income or loss per Limited Partnership Unit in
the accompanying Statements of Operations is calculated based on the number of
units outstanding at the beginning of the year.
Note L - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has two reportable segments:
residential properties and commercial properties. The Partnership's property
segments consist of one apartment complex in North Carolina and one multiple use
facility consisting of apartment units and commercial space in Pennsylvania. The
Partnership rents apartment units to tenants for terms that are typically less
than twelve months. The commercial property leases space to various medical
offices, career services facilities, and a credit union at terms ranging from
two months to fifteen years.
Measurement of segment profit and loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those described in the summary of
significant accounting policies.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segments are business units (investment properties)
that offer different products and services. The reportable segments are each
managed separately because they provide distinct services with different types
of products and customers.
Segment information for the years 2000, 1999 and 1998 is shown in the tables
below (in thousands). The "Other" Column includes partnership administration
related items and income and expense not allocated to reportable segments.
2000 Residential Commercial Other Totals
Rental income $ 9,298 $ 1,528 $ -- $10,826
Interest income 98 24 275 397
Other income 520 239 1 760
Interest expense 1,673 236 -- 1,909
Depreciation 2,952 84 -- 3,036
General and administrative expense -- -- 711 711
Interest Income on Investment in
Master Loan -- -- 2,000 2,000
Reduction for provision of
impairment loss -- -- 14,241 14,241
Segment profit 1,424 381 15,806 17,611
Total assets 32,276 1,853 31,254 65,383
Capital expenditures for investment
properties 1,596 51 -- 1,647
1999 Residential Commercial Other Totals
Rental income $ 8,452 $ 1,425 $ -- $ 9,877
Interest income 33 5 280 318
Other income 447 159 -- 606
Interest expense 1,691 235 -- 1,926
Depreciation 2,578 77 -- 2,655
General and administrative expense -- -- 531 531
Interest Income on Investment
in Master Loan -- -- 2,744 2,744
Segment profit 772 507 2,493 3,772
Total assets 33,654 2,067 59,947 95,668
Capital expenditures for investment
properties 2,132 51 -- 2,183
1998 Residential Commercial Other Totals
Rental income $ 7,853 $ 1,338 $ -- $ 9,191
Interest income 27 6 377 410
Other income 470 155 30 655
Interest expense 751 -- -- 751
Depreciation 2,240 52 -- 2,292
General and administrative expense -- -- 556 556
Interest income on investment
in Master Loan -- -- 4,138 4,138
Reduction of provision of impairment
loss -- -- 23,269 23,269
Segment profit 822 496 27,258 28,576
Total assets 35,283 1,281 78,618 115,182
Capital expenditures for investment
properties 2,902 337 -- 3,239
Note M - 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, among other things, 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; management of
the 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 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 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 and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. 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.
Note N - Selected Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations for
the partnership (in thousands, except unit data):
1st 2nd 3rd 4th
2000 Quarter Quarter Quarter Quarter Total
Revenues:
Rental, interest and
other income $ 2,846 $ 2,963 $ 3,066 $ 3,108 $ 11,983
Interest income on
investment in Master Loan -- 1,000 1,000 -- 2,000
Reduction of provision for
impairment loss -- -- 14,241 -- 14,241
Property tax refund -- -- 210 -- 210
Total revenues 2,846 3,963 18,517 3,108 28,434
Total expenses 2,621 2,736 2,816 2,650 10,823
Net income $ 225 $ 1,227 $ 15,701 $ 458 $ 17,611
Net income allocated
to General Partner (1%) $ 2 $ 12 $ 157 $ 5 $ 176
Net income allocated
to Limited Partners (99%) 223 1,215 15,544 453 17,435
$ 225 $ 1,227 $ 15,701 $ 458 $ 17,611
Net income per limited
partnership unit $ 1.12 $ 6.10 $ 78.09 $ 2.28 $ 87.59
Distributions per limited
partnership unit $ 27.54 $ 5.97 $ 31.17 $ 175.87 $ 240.55
1st 2nd 3rd 4th
1999 Quarter Quarter Quarter Quarter Total
Revenues:
Rental, interest and
other income $ 2,661 $ 2,709 $ 2,669 $ 2,762 $ 10,801
Interest income on
investment in Master Loan 800 252 1,692 -- 2,744
Total revenues 3,461 2,961 4,361 2,762 13,545
Total expenses 2,462 2,492 2,394 2,425 9,773
Net income $ 999 $ 469 $ 1,967 $ 337 $ 3,772
Net income allocated
to General Partner (1%) $ 10 $ 5 $ 20 $ 3 $ 38
Net income allocated
to Limited Partners (99%) 989 464 1,947 334 3,734
$ 999 $ 469 $ 1,967 $ 337 $ 3,772
Net income per limited
partnership unit $ 4.97 $ 2.33 $ 9.78 $ 1.68 $ 18.76
Distributions per limited
partnership unit $ 9.29 $ -- $ 104.36 $ -- $ 113.65
Note O - Distributions
Distributions from surplus cash of approximately $47,880,000 were paid to the
limited partners ($240.55 per limited partnership unit) during the year ended
December 31, 2000 of which approximately $28,770,000 was from the receipt of net
financing and refinancing proceeds from CCEP. Distributions from surplus cash of
approximately $22,621,000 were paid to limited partners ($113.65 per limited
partnership unit) during the year ended December 31, 1999. During the year ended
December 31, 1998, the Partnership paid approximately $1,798,000 in
distributions from operations (approximately $1,780,000 to limited partners or
$8.94 per limited partnership unit). Also, during the year ended December 31,
1998, the Partnership paid approximately $26,800,000 in distributions from
surplus funds to limited partners ($134.64 per limited partnership unit).
Subsequent to December 31, 2000 the Partnership distributed approximately
$7,767,000 of surplus cash to the limited partners ($39.02 per limited
partnership unit).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors, Executive Officers of the General Partner of the
Partnership
The names and ages of, as well as the positions and offices held by, the present
executive officers and directors of ConCap Equities, Inc. ("CEI") the
Partnership's General Partner as of December 31, 2000, their ages and the nature
of all positions with CEI presently held by them are as follows:
Name Age Position
Patrick J. Foye 43 Executive Vice President and Director
Martha L. Long 41 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989
to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D.
from Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Managing
General Partner since October 1998 as a result of the acquisition of Insignia
Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of
the service business for AIMCO. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited partnerships which
either have a class of securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section 15(d) of such Act. Further, one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general partner of AIMCO Properties, L.P., entities that have a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting requirements of Section 15 (d) of such
Act.
The executive officers and director of the General Partner fulfill the
obligations of the Audit Committee and oversee the Partnership's financial
reporting process on behalf of the General Partner. Management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. In fulfilling its oversight responsibilities,
the executive officers and director of the General Partner reviewed the audited
financial statements with management including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements.
The executive officers and director of the General Partner reviewed with the
independent auditors, who are responsible for expressing an opinion on the
conformity of those audited financial statements with generally accepted
accounting principles, their judgments as to the quality, not just the
acceptability, of the Partnership's accounting principles and such other matters
as are required to be discussed with the Audit Committee or its equivalent under
generally accepted auditing standards. In addition, the Partnership has
discussed with the independent auditors the auditors' independence from
management and the Partnership including the matters in the written disclosures
required by the Independence Standards Board and considered the compatibility of
non-audit services with the auditors' independence.
The executive officers and director of the General Partner discussed with the
Partnership's independent auditors the overall scope and plans for their audit.
In reliance on the reviews and discussions referred to above, the executive
officers and director of the General Partner has approved the inclusion of the
audited financial statements in the Form 10-K for the year ended December 31,
2000 for filing with the Securities and Exchange Commission.
The General Partner has reappointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Partnership for the current fiscal year.
Fees for the last fiscal year were annual audit services of approximately
$38,000 and non-audit services (principally tax-related) of approximately
$21,000.
Item 11. Executive Compensation
No remuneration was paid to the General Partner nor any of its directors and
officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Except as noted below, no persons or entity is known by the General Partner to
own beneficially more than 5% of the outstanding Units of the Partnership:
Name and Address Number of Units Percentage
Insignia Properties, L.P.
(an affiliate of AIMCO) 50,572.4 25.41%
Reedy River Properties, L.L.C.
(an affiliate of AIMCO) 28,832.5 14.48%
Cooper River Properties, L.L.C.
(an affiliate of AIMCO) 11,365.6 5.71%
AIMCO Properties, L.P.
(an affiliate of AIMCO) 35,095.5 17.63%
Reedy River Properties, Cooper River Properties LLC and Insignia Properties LP
are indirectly ultimately owned by AIMCO. Their business addresses are 55
Beattie Place, Greenville, SC 20602.
AIMCO Properties, LP is ultimately controlled by AIMCO. Its business address
is 2000 South Colorado Blvd., Denver, Colorado 80222.
(b) Beneficial Owners of Management
Except as described in Item 12(a) above, neither CEI nor any of the directors,
officers or associates of CEI own any Units of the Partnership of record or
beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of December 31, 2000, the following entity was known to CEI to be the
beneficial owner of more than 5% of its common stock:
NUMBER OF PERCENT
NAME AND ADDRESS UNITS OF TOTAL
Insignia Properties Trust
55 Beattie Place
P.O. Box 1089
Greenville, SC 29602 100,000 100%
Effective February 26, 1999, Insignia Properties Trust merged into AIMCO with
AIMCO being the surviving corporation. As a result, AIMCO ultimately acquired a
100% interest in Insignia Properties Trust.
Item 13. Certain Relationships and Related Transactions
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 (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and its affiliates during the years ended December 31, 2000, 1999, and
1998:
2000 1999 1998
(in thousands)
Property management fees $580 $525 $485
Reimbursement for services of affiliates 510 259 543
During the years ended December 31, 2000, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $580,000, $525,000 and $485,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $510,000, $259,000 and
$543,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Included in "Reimbursement for services of affiliates" for the years ended 2000,
1999 and 1998 is approximately $29,000, $38,000 and $33,000, respectively, in
reimbursements for construction oversight costs. In addition, approximately
$66,000 and $171,000 of lease commissions and loan financing costs,
respectively, are included for the year ended December 31, 1998.
For the period January 1, 1997 to August 31, 1998, the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an insurer unaffiliated with the General Partner. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the master policy. The agent assumed the financial obligations
to the affiliate of the General Partner which receives payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the General Partner by virtue of the
agent's obligations was not significant.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 125,866 limited partnership
units in the Partnership representing 63.23% 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 63.23% 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 its affiliation with
the General Partner.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements Consolidated Capital Equity Partners,
L.P.
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Changes in Partners' Deficit for
the Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. Schedules
All schedules are omitted because they are not required, are
not applicable or the financial information is included in the
financial statements or notes thereto.
3. Exhibits
(a) See Exhibit index
(b) Reports on Form 8-K filed during the fourth quarter of 2000:
None.
EXHIBIT INDEX
S-K Reference Document Description
3 Certificates of Limited Partnership, as amended to date.
(Incorporated by reference to the Annual Report on Form
19-K for the year ended December 31, 1991 ("1991 Annual
Report")).
10.1 Amended Loan Agreement dated November 15, 1990 (the "Effective
Date"), by and between the Partnership and EP (Incorporated by
reference to the Annual Report of Form 10-K for the year ended
December 31, 1990 ("1990 Annual Report")).
10.2 Assumption Agreement as of the Effective Date, by and between
EP and CCEP (Incorporated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective Date, by and between
the Partnership and EP (Incorporated by reference to the 1990
Annual Report).
10.4 Assignment of Partnership Interests in Western Can, Ltd.,
by and between EP and CCEP (Incorporated by reference to
the 1990 Annual Report).
10.5 Bill of Sale and Assignment dated October 23, 1990, by and
between CCEP and ConCap Services Company (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990).
10.6 Assignment and Assumption Agreement dated October 23, 1990, by
and between CCMLP and Metro ConCap, Inc. (300 series of
Property Management contracts), (Incorporated by reference to
the 1990 Annual Report).
10.7 Construction Management Cost Reimbursement Agreement dated
January 1, 1991, by and between the Partnership and Metro
ConCap, Inc. (Incorporated by reference to the 1991 Annual
Report).
10.8 Investor Services Agreement dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990).
10.9 Assignment and Assumption Agreement (Investor Services
Agreement) dated October 23, 1990 by and between CCEC and
ConCap Services Company (Incorporated by reference to the 1990
Annual Report).
10.10 Letter of Notice dated December 20, 1991, from Partnership
Services, Inc. ("PSI") to the Partnership regarding the change
in ownership and dissolution of ConCap Services Company
whereby PSI assumed the Investor Services Agreement.
(Incorporated by reference to the 1991 Annual Report).
10.11 Financial Services Agreement dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990).
10.12 Assignment and Assumption Agreement (Financial Services
Agreement) dated October 23, 1990 by and between CCEC and
ConCap Capital Company (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September
30, 1990).
10.13 Letter of Notice dated December 20, 1991, from PSI to the
Partnership regarding the change in ownership and dissolution
of ConCap Capital Company whereby PSI assumed the Financial
Services Agreement. (Incorporated by reference to the 1991
Annual Report).
10.14 Property Management Agreement No. 503 dated February 16,
1993, by and between the Partnership, New Carlton House
Partners, Ltd. and Coventry Properties, Inc. (Incorporated
by reference to the Annual Report on Form 10-K for the year
ended December 31, 1992).
10.15 Property Management Agreement No. 508 dated June 1, 1993,
by and between the Partnership and Coventry Properties,
Inc.
10.16 Assignment and Assumption Agreement as to Certain Property
Management Services dated November 17, 1993, by and between
Coventry Properties, Inc. and Partnership Services, Inc.
10.17 Multifamily Note dated November 30, 1995 between
Consolidated Capital Institutional Properties, a California
limited partnership, and Lehman Brothers Holdings, Inc.
d/b/a Lehman Capital, A Division of Lehman Brothers
Holding, Inc.
10.18 Contract of Sale for Northlake Quadrangle, Tucker, Georgia,
Consolidated Capital Equity Partners, L.P, and SPIVLL
Management and Investment Company dated December 17, 1997,
filed in Form 10-Q for the quarter ended September 30, 1998.
10.19 First Amendment to Contract of Sale for Northlake Quadrangle,
Tucker, Georgia, between Consolidated Capital Equity Partners,
L.P., and SPIVLL Management and Investment Company dated April
16, 1998, filed in Form 10-Q for the quarter ended September
30, 1998.
10.20 Mortgage and Security Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.21 Repair Escrow Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.22 Replacement Reserve and Security Agreement between Kennedy
Boulevard Associates I, L.P., and Lehman Brothers Holdings,
Inc., dated August 25, 1998, securing The Sterling
Apartment Home and Commerce Center filed in Form 10-Q for
the quarter ended September 30, 1998.
11 Statement regarding computation of Net Income per Limited
Partnership Unit (Incorporated by reference to Note A of
Item 8 - Financial Statements of this Form 10-K)
16 Letter, dated August 12, 1992, from Ernst & Young to the
Securities and Exchange Commission regarding change in
certifying accountant. (Incorporated by reference to Form 8-K
dated August 6, 1992).
28.1 Fee Owner's Limited Partnership Agreement dated November 14,
1990 (Incorporated by reference to the 1990 Annual Report).
99.1 Audited Financial Statements of Consolidated Capital Equity
Partners, L.P. for the years ended December 31, 2000 and
1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 INSTITUTIONAL
PROPERTIES
By: ConCap Equities, Inc.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Senior Vice President and
Controller
Date: April 2, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities on the date indicated.
/s/Patrick J. Foye Date: April 2, 2001
Patrick J. Foye
Executive Vice President and Director
/s/Martha L. Long Date: April 2, 2001
Martha L. Long
Senior Vice President and Controller
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND 1999
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
TABLE OF CONTENTS
December 31, 2000
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Operations for the Years Ended December 31,
2000, 1999 and 1998
Consolidated Statements of Changes in Partners' Deficit for the Years
Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Equity Partners, L.P.
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Equity Partners, L.P. as of December 31, 2000 and 1999, and the related
consolidated statements of operations, changes in partners' deficit, and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Equity Partners, L.P. at December 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note A to
the consolidated financial statements, the Partnership has incurred operating
losses, suffers from inadequate liquidity, has an accumulated deficit and is
unable to repay the Master Loan balance, which matured in 2000. These conditions
raise substantial doubt about the Partnership's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note A. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 2, 2001
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
2000 1999
Assets
Cash and cash equivalents $ 5,894 $ 2,865
Receivables and deposits 928 1,359
Restricted escrows 767 718
Other assets 1,634 761
Investment properties (Notes F and H):
Land 7,796 8,290
Buildings and related personal property 83,558 85,969
91,354 94,259
Less accumulated depreciation (70,793) (71,592)
20,561 22,667
$ 29,784 $ 28,370
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 410 $ 493
Tenant security deposit liabilities 485 466
Accrued property taxes 218 435
Other liabilities 586 555
Mortgage notes payable (Note F) 56,060 22,556
Master loan and interest payable 340,493 334,840
398,252 359,345
Partners' Deficit
General partner (3,685) (3,310)
Limited partners (364,783) (327,665)
(368,468) (330,975)
$ 29,784 $ 28,370
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
2000 1999 1998
(Restated) (Restated)
Revenues:
Rental income $ 17,825 $ 17,832 $ 17,432
Other income 1,801 1,430 1,490
Gain on sale of investment property (Note J) 3,121 -- --
Total revenues 22,747 19,262 18,922
Expenses:
Operating 8,441 8,275 8,627
General and administrative 746 654 680
Depreciation 4,821 4,812 4,592
Interest 43,653 41,263 38,009
Property taxes 1,169 1,244 1,133
Total expenses 58,830 56,248 53,041
Loss from continuing operations (36,083) (36,986) (34,119)
Income from discontinued operations -- 178 428
Gain on sale of discontinued operations -- 16,630 425
Loss before extraordinary item (36,083) (20,178) (33,266)
Extraordinary loss on early extinguishment
of debt (Note I) (1,410) -- --
Net loss $(37,493) $(20,178) $(33,266)
Net loss allocated to general partner (1%) $ (375) $ (202) $ (333)
Net loss allocated to limited partners (99%) (37,118) (19,976) (32,933)
$(37,493) $(20,178) $(33,266)
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(in thousands)
General Limited
Partners Partners Total
Partners' deficit at December 31, 1997 $ (2,775) $ (274,719) $ (277,494)
Distributions -- (27) (27)
Net loss for the year ended December 31, 1998 (333) (32,933) (33,266)
Partners' deficit at December 31, 1998 (3,108) (307,679) (310,787)
Distributions -- (10) (10)
Net loss for the year ended December 31, 1999 (202) (19,976) (20,178)
Partners' deficit at December 31, 1999 (3,310) (327,665) (330,975)
Net loss for the year ended December 31, 2000 (375) (37,118) (37,493)
Partners' deficit at December 31, 2000 $ (3,685) $(364,783) $(368,468)
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net loss $(37,493) $(20,178) $(33,266)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Loss on disposal of property -- -- 28
Depreciation and amortization 4,920 5,381 5,500
Gain on sale of discontinued operations -- (16,630) (425)
Extraordinary loss on early extinguishment of debt 1,410 -- --
Gain on sale of investment property (3,121) -- --
Change in accounts:
Receivables and deposits 431 (77) (41)
Other assets 124 (199) 27
Accounts payable (83) 140 (73)
Tenant security deposit liabilities 19 (107) (16)
Accrued property taxes (217) 190 139
Other liabilities 121 (35) 7
Accrued interest on Master Loan 39,287 36,865 31,592
Net cash provided by operating activities 5,398 5,350 3,472
Cash flows from investing activities:
Property improvements and replacements (4,210) (3,902) (2,015)
Lease commissions paid -- (144) (57)
Proceeds from sale of investment property 4,526 20,550 2,106
Net (deposits to) withdrawals from restricted escrows (49) 41 39
Net cash provided by investing activities 267 16,545 73
Cash flows from financing activities:
Principal payments on Master Loan (33,634) (20,713) (2,687)
Principal payments on mortgage notes payable (385) (299) (278)
Proceeds from financing/refinancing 56,200 -- --
Repayment of mortgage notes payable (22,311) -- --
Debt extinguishment costs (1,007) -- --
Loan costs paid (1,499) -- --
Distributions to partners -- (10) (27)
Net cash used in financing activities (2,636) (21,022) (2,992)
Net increase in cash and cash equivalents 3,029 873 553
Cash and cash equivalents at beginning of year 2,865 1,992 1,439
Cash and cash equivalents at end of year $ 5,894 $ 2,865 $ 1,992
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,032 $ 4,348 $ 6,341
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
Note A - Going Concern
The Partnership's financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership continues to incur
operating losses, suffers from inadequate liquidity, has an accumulated deficit
and is unable to repay the Master Loan balance, which matured in November 2000.
The Partnership realized a net loss of approximately $37,493,000 for the year
ended December 31, 2000. This was due primarily to a loss from continuing
operations of approximately $36,083,000 including the recognition of a gain on
the sale of Shirewood Townhomes of approximately $3,121,000. The Partnership
also recognized an extraordinary loss on early extinguishment of debt of
approximately $1,410,000. The General Partner expects the Partnership to
continue to incur losses from operations.
The Partnership's indebtedness to CCIP under the Master Loan of approximately
$340,493,000, including accrued interest, matured in November 2000. The holder
of the note has two options, which include foreclosing on the properties that
collateralize the Master Loan or extending the term of the note. If CCIP were to
foreclose on the properties securing the New Master Loan title in the properties
owned by CCEP would be vested in the Partnership, subject to existing liens on
such properties including the first mortgage loans. As a result, CCIP would
become responsible for the operations of such properties. Currently, the
Partnership does not have the means with which to satisfy this obligation. No
other sources of additional financing have been identified by the Partnership,
nor does the General Partner have any other plans to remedy the liquidity
problems the Partnership is currently experiencing. At December 31, 2000,
partners' deficit was approximately $368,468,000.
The general partner expects revenues from the nine remaining investment
properties will be sufficient over the next twelve months to meet all property
operating expenses, mortgage debt service requirements and capital expenditure
requirements. However, these cash flows will be insufficient to repay to CCIP
the Master Loan balance, including accrued interest, in the event it is not
renegotiated.
As a result, there is substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from these uncertainties.
Note B - Organization and Summary of Significant Accounting Policies
Organization: Consolidated Capital Equity Partners ("EP"), a California general
partnership, was formed on June 24, 1981, to engage in the business of
acquiring, operating and holding equity investments in income-producing real
estate properties. The operations of EP were financed substantially through
nonrecourse notes (the "Master Loan") from Consolidated Capital Institutional
Properties ("CCIP"), a California limited partnership. These notes are secured
by the real estate properties owned by EP. The General Partner of CCIP is ConCap
Equities, Inc. ("CEI"), a Delaware corporation. In November 1990, EP's general
partners executed a new partnership agreement (the "New Partnership Agreement")
in conjunction with the bankruptcy settlement discussed below whereby EP
converted from a general partnership to a California limited partnership,
Consolidated Capital Equity Partners, L.P. ("CCEP" or the "Partnership").
Pursuant to the New Partnership Agreement, ConCap Holding, Inc. ("CHI"), a Texas
corporation, a wholly-owned subsidiary of CEI, became the General Partner of
CCEP, and the former General Partners of EP became Limited Partners of CCEP. CHI
has full discretion with respect to conducting CCEP's business, including
managing CCEP's properties and initiating and approving capital expenditures and
asset dispositions and refinancings. All of CEI's outstanding stock was owned by
Insignia Properties Trust ("IPT"). Effective February 26, 1999, IPT was merged
into Apartment Investment and Management Company ("AIMCO"). Hence, CEI is now a
wholly-owned subsidiary of AIMCO (See "Note C" - Transfer of Control). The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2011 unless terminated prior to such date.
Principles of Consolidation: As of December 31, 1998, CCEP owned a 75% interest
in a limited partnership ("Western Can, Ltd.") which owned 444 De Haro, an
office building in San Francisco, California. No minority interest liability was
reflected, as of December 31, 1998, for the 25% minority interest because
Western Can, Ltd. had a net capital deficit, and no minority liability existed
with respect to CCEP. In May 1999, a limited partner in Western Can, Ltd.
withdrew in connection with a settlement with CCEP pursuant to which the partner
was paid $1,350,000 by CCEP. This settlement effectively terminated Western Can
Ltd. as CCEP became the sole limited partner. In September 1999, 444 DeHaro was
sold (see "Note D - Discontinued Segment").
Allocation of Profits, Gains, and Losses: Pursuant to the New Partnership
Agreement, net income and net losses for both financial and tax reporting
purposes are allocated 99% to the Limited Partners and 1% to the General
Partner.
Cash and Cash Equivalents: Includes cash on hand, in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits. Cash balances included approximately $4,381,000
and $337,000 at December 31, 2000 and 1999, respectively, that are maintained by
an affiliated management company on behalf of affiliated entities in cash
concentration accounts.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on rental payments.
Replacement Reserve Account - At the time of the December 15, 1995 refinancing
of several of the properties, approximately $375,000 of the proceeds were
designated for a Replacement Reserve Fund for certain capital replacements (as
defined in the Replacement Reserve Agreement) at Plantation Gardens, Palm Lake,
Society Park East, The Knolls, Indian Creek Village and Tates Creek Village. At
December 31, 1999, the balance in the Replacement Reserve Fund was approximately
$718,000.
During 2000, each of these mortgages was refinanced. Approximately $767,000 of
the proceeds was designated for a replacement reserve fund for certain capital
replacements at The Knolls, Palm Lake and Tates Creek Village. At December 31,
2000, the balance in the replacement reserve fund was approximately $767,000.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984 and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of the
Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 5 years.
Loan Costs: Loan costs totaled approximately $1,402,000 and $779,000 at December
31, 2000 and 1999, respectively. Related accumulated amortization totaled
approximately $40,000 and $316,000, respectively. These balances are included in
other assets and are being amortized on a straight-line basis over the life of
the loans.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs were approximately $385,000, $408,000 and $382,000 for the
years ended December 31, 2000, 1999 and 1998, respectively, and are included in
operating expense.
Investment Properties: Investment properties consist of ten (10) apartment
complexes at December 31, 2000 and are stated at cost. During 1999 the
Partnership's only commercial building was sold and during 2000, one of the
apartment complexes was sold (see Notes D and J, respectively). Subsequent to
December 31, 2000, another apartment complex was sold (see Note K). Acquisition
fees are capitalized as a cost of real estate. In accordance with Financial
Accounting Standards Board Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Partnership
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. Costs of properties that have been
permanently impaired have been written down to appraised value. No adjustments
for impairment of value were recorded during any of the years ended December 31,
2000, 1999 or 1998.
Leases: CCEP leased certain commercial space to tenants under various lease
terms. The leases were accounted for as operating leases in accordance with SFAS
No. 13 "Accounting for Leases". Some of the leases contain stated rental
increases during their term. For leases with fixed rental increases, rents were
recognized on a straight-line basis over the terms of the leases. For all other
leases, minimum rents are recognized over the terms of the leases. The
Partnership's only remaining commercial property was sold in September 1999 (see
Note D).
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on its leases. In addition, the
General Partner's policy is to offer rental concessions during particularly slow
months or in response to heavy competition from other similar complexes in the
area. Concessions are charged against rental income as incurred.
Income Taxes: No provision has been made in the financial statements for Federal
income taxes because, under current law, no Federal income taxes are paid
directly by CCEP. The Partners are responsible for their respective shares of
CCEP's net income or loss. CCEP reports certain transactions differently for tax
than for financial statement purposes.
The tax basis of CCEP's assets and liabilities is approximately $311,877,000 and
$268,278,000 greater than the assets and liabilities as reported in the
financial statements at December 31, 2000 and 1999, respectively.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amounts of its
financial instruments (except for long term debt) approximate their fair values
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Note C - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into 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 D - Discontinued Segment
In September 1999, 444 DeHaro, located in San Francisco, California was sold to
an unaffiliated third party for approximately $23,250,000. In conjunction with
the sale, a fee of approximately $698,000 was paid to the General Partner in
accordance with the Partnership Agreement. After payment of closing expenses and
the fee to the General Partner, the net proceeds received by the Partnership
were approximately $20,550,000. The sale of the property resulted in a gain on
sale of discontinued operations of approximately $16,630,000 after writing off
the undepreciated value of the property and CCEP's investment in Western Can,
Ltd. (See "Note B. Principles of Consolidation). As required by the terms of the
Master Loan Agreement (see "Note E"), the Partnership remitted the net sale
proceeds to CCIP representing principal payments on the Master Loan.
In April 1998, CCEP sold Northlake Quadrangle to an unrelated third party for a
contract price of $2,325,000. The Partnership received net proceeds of
approximately $2,106,000 after payment of closing costs. The proceeds were
remitted to CCIP to pay down the Master Loan, as required by the Master Loan
Agreement.
444 DeHaro was the only remaining property in the commercial segment of the
Partnership. Due to the sale of this property, the results of operations of the
property have been classified as "Income from Discontinued Operations" for the
years ended December 31, 1999 and 1998 and the gain on sale of the property is
reported as "Gain from sale of discontinued operations". Revenues from
discontinued operations were approximately $1,472,000 and $2,345,000 for the
years ended December 31, 1999 and 1998, respectively. No revenues from 444
DeHaro were recorded for the year ended December 31, 2000.
Note E - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at December 31,
2000 and December 31, 1999, are approximately $340,493,000 and $334,840,000
respectively.
Under the terms of the Master Loan, interest accrues at a fluctuating rate per
annum, adjusted annually on July 15 by the percentage change in the U.S.
Department of Commerce Implicit Price Deflator for the Gross National Product,
subject to an interest rate ceiling of 12.5%. Payments are currently payable
quarterly in an amount equal to "Excess Cash Flow", generally defined in the
Master Loan as net cash flow from operations after third-party debt service and
capital expenditures. Any unpaid interest is added to principal, compounded
annually, and was payable at the loan's maturity. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to CCIP under the terms of
the Master Loan Agreement. The Master Loan Agreement matured in November 2000.
The holder of the note has two options which include foreclosing on the
properties that collateralize the Master Loan or extending the terms of the
note. If CCIP were to foreclose on its collateral, CCEP would no longer hold
title to its properties and would be dissolved.
During the years ended December 31, 2000, 1999 and 1998, CCEP paid approximately
$33,634,000, $20,713,000 and $2,687,000, respectively, as principal payments on
the Master Loan. For 2000, approximately $238,000 was from cash received on
certain investments by CCEP, which are required to be transferred to the
Partnership per the Master Loan Agreement. Approximately $4,526,000 of the net
proceeds from the sale of Shirewood Townhomes and approximately $28,870,000 of
the net proceeds received from the financing or refinancing of the mortgages of
nine of the investment properties was paid to CCIP (See Note I). For 1999,
approximately $163,000 was cash received on certain investments by CCEP. The
remaining $20,550,000 represents the net proceeds from the sale of 444 DeHaro.
For 1998, approximately $581,000 was cash received on certain investments by
CCEP. Approximately $2,106,000 represents the net proceeds from the sale of
Northlake Quadrangle. There were no advances on the Master Loan for the years
ended December 31, 2000, 1999, and 1998. See Notes D, I and J for details
concerning the sales of 444 DeHaro and Northlake Quadrangle, the refinancings
and the sale of Shirewood Townhomes, respectively.
Note F - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
Principal Principal Monthly Principal
Balance At Balance at Payment Stated Balance
December 31, December 31, Including Interest Maturity Due At
Property 2000 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
Indian Creek Village
1st Mortgage $ 8,735 $ 4,486 $ 72 7.83% 01/01/10 $ 6,351
The Knolls
1st Mortgage 9,883 5,177 81 7.78% 03/01/10 7,105
Palm Lake
1st Mortgage 2,990 1,670 25 7.86% 02/01/10 2,158
Plantation Gardens
1st Mortgage 9,683 6,776 80 7.83% 03/01/10 6,972
Regency Oaks
1st Mortgage 7,623 -- 63 7.80% 02/01/10 5,494
Silverado
1st Mortgage 3,519 -- 29 7.87% 11/01/10 2,434
Society Park
1st Mortgage 5,311 1,966 44 7.80% 02/01/10 3,828
The Dunes
1st Mortgage 4,106 -- 34 7.81% 02/01/10 2,960
Tates Creek Village
1st Mortgage 4,210 2,481 35 7.78% 04/01/10 3,017
Total $ 56,060 $22,556 $40,319
The mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. The mortgage notes are superior to the Master Loan.
Prepayment penalties are required if repaid prior to maturity. Further, the
properties may not be sold subject to existing indebtedness.
During 2000, the Partnership refinanced each of the existing mortgages and
financed each of the unencumbered investment properties except for Magnolia
Trace which was subsequently sold. See Note I for further details concerning
these refinancings and financings.
Principal payments on mortgage notes payable are due as follows (in thousands):
Years Ending December 31,
2001 $ 1,218
2002 1,325
2003 1,432
2004 1,548
2005 1,673
Thereafter 48,864
$56,060
Note G - Related Party Transactions
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 New Partnership Agreement provides for (i) certain payments to affiliates
for services and (ii) reimbursement of certain expenses incurred by affiliates
for services. The following payments were made or accrued to the General Partner
and its affiliates during the years ended December 31, 2000, 1999, and 1998:
2000 1999 1998
(in thousands)
Property management fees (included in
operating expense) $ 985 $ 968 $ 1,042
Investment advisory fees (included in
general and administrative expense) 179 179 174
Reimbursement for services of affiliates
(included in operating, general
and administrative expense and
investment properties) 548 373 346
During the years ended December 31, 2000, 1999 and 1998 affiliates of the
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's residential properties for providing property management services.
The Partnership paid to such affiliates approximately $985,000, $968,000 and
$945,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Until September 30, 1998, affiliates of the General Partner were entitled to
receive varying percentages of gross receipts from the Partnership's commercial
properties for providing property management services. The Partnership paid to
such affiliates approximately $97,000 for the year ended December 31, 1998.
Effective October 1, 1998 (the effective date of the Insignia Merger), these
services for the commercial properties were provided by an unrelated party.
The Partnership is also subject to an Investment Advisory Agreement between the
Partnership and an affiliate of the General Partner. This agreement provides for
an annual fee, payable in monthly installments, to an affiliate of the General
Partner for advising and consulting services for CCEP's properties. The
Partnership paid to such affiliates approximately $179,000, $179,000 and
$174,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $548,000, $373,000 and
$346,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Included in the expense for the years ended December 31, 2000, 1999 and 1998 is
approximately $112,000, $33,000 and $28,000 in reimbursements for construction
oversight costs and approximately $16,000 of lease commissions for the year
ended December 31, 1998.
In connection with the sale of Shirewood Townhomes in 2000, 444 DeHaro in 1999
and Northlake Quadrangle in 1998 the General Partner was entitled to a fee of
$133,000, $698,000 and $102,000, respectively, in compensation for its role in
the sale.
In connection with the refinancing of each of its mortgages and the financing of
its unencumbered investment properties during 2000, the Partnership paid to the
General Partner fees totaling $560,000 for its role in the transactions. These
fees were capitalized as loan costs and are included in other assets in the
accompanying consolidated balance sheets.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from CCIP. Such interest
payments totaled approximately $2,000,000, $2,744,000 and $4,138,000 for the
years ended December 31, 2000, 1999 and 1998, respectively. There were no
advances during 2000, 1999 or 1998. Principal payments totaling $33,634,000,
$20,713,000 and $2,687,000 were made during the years ended December 31, 2000,
1999 and 1998, respectively.
For the period January 1, 1997 to August 31, 1998, the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an insurer unaffiliated with the General Partner. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the master policy. The agent assumed the financial obligations
to the affiliate of the General Partner which receives payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the General Partner by virtue of the
agent's obligations was not significant.
Note H - Real Estate and Accumulated Depreciation
The investment properties owned by the Partnership consist of the following
(dollar amounts in thousands):
Building
December 31, 2000 & Related
Personal Accumulated Depreciable
Description Land Property Total Depreciation Life-Years
Indian Creek Village $ 1,041 $ 9,281 $10,322 $ 7,827 5-18
The Knolls 647 8,339 8,986 6,513 5-18
Palm Lake 272 5,152 5,424 4,280 5-18
Plantation Gardens 1,958 14,205 16,163 12,759 5-18
Regency Oaks 521 11,820 12,341 9,763 5-18
Magnolia Trace 892 6,340 7,232 5,578 5-18
Silverado 628 5,460 6,088 4,577 5-18
Society Park 966 9,167 10,133 8,211 5-18
The Dunes 489 5,951 6,440 4,681 5-18
Tates Creek Village 382 7,843 8,225 6,604 5-18
Total $ 7,796 $83,558 $91,354 $70,793
Building
December 31, 1999 & Related
Personal Accumulated Depreciable
Description Land Property Total Depreciation Life-Years
Indian Creek Village $ 1,041 $ 9,133 $10,174 $ 7,315 5-18
The Knolls 647 7,771 8,418 6,127 5-18
Palm Lake 272 4,857 5,129 3,963 5-18
Plantation Gardens 1,958 13,733 15,691 11,947 5-18
Regency Oaks 521 10,639 11,160 9,052 5-18
Magnolia Trace 892 6,199 7,091 5,206 5-18
Shirewood Townhomes 494 6,479 6,973 5,393 5-18
Silverado 628 4,924 5,552 4,378 5-18
Society Park 966 8,890 9,856 7,684 5-18
The Dunes 489 5,709 6,198 4,288 5-18
Tates Creek Village 382 7,635 8,017 6,239 5-18
Total $ 8,290 $85,969 $94,259 $71,592
Note I - Refinancings/Financings and Extraordinary Loss
On September 29, 2000, the Partnership refinanced the mortgage encumbering The
Dunes Apartments. The refinancing replaced indebtedness of approximately
$1,945,000 with a new mortgage in the amount of $4,120,000. The new mortgage
carries a stated interest rate of 7.81%. Interest on the old mortgage was 6.95%.
Principal and interest payments on the mortgage loan of approximately $34,000
are due monthly until the loan matures on February 1, 2010 at which time a
balloon payment of approximately $2,960,000 is due. Total capitalized loan costs
were approximately $116,000. The Partnership recognized an extraordinary loss on
the early extinguishment of debt of approximately $134,000 due to the write-off
of unamortized loan costs and a prepayment penalty.
On September 29, 2000, the Partnership refinanced the mortgage encumbering Palm
Lake Apartments. The refinancing replaced indebtedness of approximately
$1,653,000 with a new mortgage in the amount of $3,000,000. The new mortgage
carries a stated interest rate of 7.86%. Interest on the old mortgage was 6.95%.
Principal and interest payments on the mortgage loan of approximately $25,000
are due monthly until the loan matures on February 1, 2010 at which time a
balloon payment of approximately $2,158,000 is due. Total capitalized loan costs
were approximately $94,000. The Partnership recognized an extraordinary loss on
the early extinguishment of debt of approximately $118,000 due to the write-off
of unamortized loan costs and a prepayment penalty.
On September 29, 2000, the Partnership refinanced the mortgage encumbering Tates
Creek Village Apartments. The refinancing replaced indebtedness of approximately
$2,455,000 with a new mortgage in the amount of $4,225,000. The new mortgage
carries a stated interest rate of 7.78%. Interest on the old mortgage was 6.95%.
Principal and interest payments on the mortgage loan of approximately $35,000
are due monthly until the loan matures on April 1, 2010 at which time a balloon
payment of approximately $3,017,000 is due. Total capitalized loan costs were
approximately $106,000. The Partnership recognized an extraordinary loss on the
early extinguishment of debt of approximately $155,000 due to the write-off of
unamortized loan costs and a prepayment penalty.
On September 29, 2000, the Partnership financed a mortgage encumbering Society
Park Apartments. The mortgage debt totaled $5,330,000. The mortgage carries a
stated interest rate of 7.80%. Principal and interest payments on the mortgage
loan of approximately $44,000 are due monthly until the loan matures on February
1, 2010 at which time a balloon payment of approximately $3,828,000 is due.
Total capitalized loan costs were approximately $159,000.
On September 29, 2000, the Partnership financed a mortgage encumbering Regency
Oaks Apartments. The mortgage debt totaled $7,650,000. The mortgage carries a
stated interest rate of 7.80%. Principal and interest payments on the mortgage
loan of approximately $63,000 are due monthly until the loan matures on February
1, 2010 at which time a balloon payment of approximately $5,494,000 is due.
Total capitalized loan costs were approximately $217,000.
On October 3, 2000, the Partnership refinanced the mortgage encumbering
Plantation Gardens Apartments. The refinancing replaced indebtedness of
approximately $6,704,000 with a new mortgage in the amount of $9,700,000. The
new mortgage carries a stated interest rate of 7.83%. Interest on the old
mortgage was 6.95%. Principal and interest payments on the mortgage loan of
approximately $80,000 are due monthly until the loan matures on March 1, 2010 at
which time a balloon payment of approximately $6,972,000 is due. Total
capitalized loan costs were approximately $229,000. The Partnership recognized
an extraordinary loss on the early extinguishment of debt of approximately
$428,000 due to the write-off of unamortized loan costs and a prepayment
penalty.
On October 3, 2000, the Partnership refinanced the mortgage encumbering Indian
Creek Apartments. The refinancing replaced indebtedness of approximately
$4,438,000 with a new mortgage in the amount of $8,750,000. The new mortgage
carries a stated interest rate of 7.83%. Interest on the old mortgage was 6.95%.
Principal and interest payments on the mortgage loan of approximately $72,000
are due monthly until the loan matures on January 1, 2010 at which time a
balloon payment of $6,351,000 is due. Total capitalized loan costs were
approximately $198,000. The Partnership recognized an extraordinary loss on the
early extinguishment of debt of approximately $260,000 due to the write-off of
unamortized loan costs and a prepayment penalty.
On October 3, 2000, the Partnership financed a mortgage encumbering Silverado
Apartments. The new mortgage is in the amount of $3,525,000. The new mortgage
carries a stated interest rate of 7.87%. Principal and interest payments on the
mortgage loan of approximately $29,000 are due monthly until the loan matures on
November 1, 2010 at which time a balloon payment of approximately $2,434,000 is
due. Total capitalized loan costs were approximately $110,000.
On October 11, 2000, the Partnership refinanced the mortgage encumbering The
Knolls Apartments. The refinancing replaced indebtedness of approximately
$5,116,000 with a new mortgage in the amount of $9,900,000. The new mortgage
carries a stated interest rate of 7.78%. Interest on the old mortgage was 6.95%.
Principal and interest payments on the mortgage loan of approximately $81,000
are due monthly until the loan matures on March 1, 2010 at which time a balloon
payment of approximately $7,105,000 is due. Total capitalized loan costs were
approximately $270,000. The Partnership recognized an extraordinary loss on the
early extinguishment of debt of approximately $315,000 due to the write-off of
unamortized loan costs and a prepayment penalty.
Included in the loan costs capitalized associated with the above transactions
was a 1% fee of approximately $560,000 paid to the General Partner in accordance
with the terms of the Partnership Agreement.
Note J - Sale of Property
On July 21, 2000 the Partnership sold Shirewood Townhomes, located in
Shreveport, Louisiana, to an unaffiliated third party for net sales proceeds of
approximately $4,526,000, after payment of closing costs. The Partnership used
all of the proceeds from the sale of the property to pay down the Master Loan
principal as required by the Master Loan Agreement. The sale resulted in a gain
on sale of investment property of approximately $3,121,000. In conjunction with
the sale, a fee of approximately $133,000 was paid to the General Partner in
accordance with the Partnership Agreement.
Note K - Subsequent Event
On January 19, 2001, the Partnership sold Magnolia Trace Apartments, located in
Baton Rouge, Louisiana, to an unaffiliated third party for net sales proceeds of
approximately $5,967,000, after payment of closing costs. The Partnership used
all of the proceeds for the sale of the property to pay down the Master Loan
principal as required by the Master Loan agreement. The sale resulted in a gain
on sale of investment property of approximately $4,325,000.
Note L - Selected Quarterly Financial Data (unaudited)
The following is a summary of the unaudited quarterly results of operations for
the Partnership (in thousands):
Year Ended December 31, 2000
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
Revenues $ 4,936 $ 5,072 $ 7,827 $ 4,912 $ 22,747
Expenses 14,818 14,984 14,583 14,445 58,830
Loss before extraordinary item (9,882) (9,912) (6,756) (9,533) (36,083)
Extraordinary loss on early
extinguishment of debt -- -- (407) (1,003) (1,410)
Net loss $ (9,882) $ (9,912) $ (7,163) $(10,536) $(37,493)
Year Ended December 31, 1999
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
Revenues $ 4,836 $ 4,743 $ 4,750 $ 4,933 $ 19,262
Expenses 14,124 14,209 14,215 13,700 56,248
Loss from continuing
operations (9,288) (9,466) (9,465) (8,767) (36,986)
Income (loss) from discontinued
operations 68 117 (172) 165 178
Gain (loss) on sale of
discontinued operations -- -- 16,690 (60) 16,630
Net (loss) income $ (9,220) $ (9,349) $ 7,053 $ (8,662) $(20,178)