FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact name of small business issuer as specified in its charter)
California 94-2653686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 383
Receivables and deposits 96
Restricted escrows 35
Other assets 218
Investment properties:
Land $ 507
Buildings and related personal property 11,082
11,589
Less accumulated depreciation (8,102) 3,487
$ 4,219
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 83
Tenant security deposit liabilities 96
Accrued property taxes 44
Other liabilities 186
Mortgage notes payable 5,319
Partners' (Deficit) Capital
General partners $(1,850)
Limited partners (158,582 units issued and
outstanding) 341 (1,509)
$ 4,219
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 739 $ 733
Other income 53 50
Total revenues 792 783
Expenses:
Operating 358 370
General and administrative 113 65
Depreciation 145 137
Interest 107 115
Property taxes 48 51
Total expenses 771 738
Net income $ 21 $ 45
Net income allocated to general partners (4%) $ 1 $ 2
Net income allocated to limited partners (96%) 20 43
$ 21 $ 45
Net income per limited partnership unit $ 0.13 $ 0.27
Distribution per limited partnership unit $ 2.01 $ 4.10
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 158,945 $ 1 $ 79,473 $ 79,474
Partners' (deficit) capital
at December 31, 2000 158,582 $(1,838) $ 639 $ (1,199)
Distributions to partners -- (13) (318) (331)
Net income for the three months
ended March 31, 2001 -- 1 20 21
Partners' (deficit) capital
at March 31, 2001 158,582 $(1,850) $ 341 $ (1,509)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 21 $ 45
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 145 137
Amortization of loan costs 8 8
Change in accounts:
Receivables and deposits (24) 13
Other assets (26) (3)
Accounts payable -- (48)
Tenant security deposit liabilities (3) 1
Accrued property taxes 44 41
Other liabilities 14 (75)
Net cash provided by operating activities 179 119
Cash flows from investing activities:
Property improvements and replacements (114) (193)
Net withdrawals from (deposits to) restricted escrows 110 (19)
Net cash used in investing activities (4) (212)
Cash flows from financing activities:
Payment of loan costs -- (10)
Payments on mortgage note payable (6) (6)
Distributions to partners (331) (650)
Net cash used in financing activities (337) (666)
Net decrease in cash and cash equivalents (162) (759)
Cash and cash equivalents at beginning of period 545 1,460
Cash and cash equivalents at end of period $ 383 $ 701
Supplemental disclosure of cash flow information:
Cash paid for interest $ 99 $ 99
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner") which is wholly-owned by Apartment Investment and Management Company
("AIMCO"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2001, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2001. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2000.
Consolidation
The Partnership's financial statements include the accounts of ConCap Village
Green Associates, Ltd. The Partnership owns a 99% interest in this partnership,
and it has the ability to control the major operating and financial policies of
this partnership. All inter-partnership transactions have been eliminated.
Segment Reporting: Statement of Financial Accounting Standards ("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. As defined in SFAS
No. 131, the Partnership has only one reportable segment. The Managing General
Partner believes that segment-based disclosures will not result in a more
meaningful presentation than the financial statements as currently presented.
Note B - Transactions with Affiliated Parties
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 Limited Partnership Agreement ("Partnership Agreement") provides for
payments to affiliates of the General Partner for property management services
based on a percentage of revenue; for a partnership management fee equal to 9%
of the total distributions made to limited partners from cash flow from
operations; and for reimbursements of certain expenses incurred by affiliates of
the General Partner on behalf of the Partnership.
The following amounts were paid or accrued to the General Partner or affiliates
during the three month periods ended March 31, 2001 and 2000, respectively:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 40 $ 39
Reimbursement for services of affiliates (included in
investment properties and general and
administrative expenses) 105 29
Partnership management fees (included in general and
administrative expenses) 31 --
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from all of the Registrant's residential properties as compensation for
providing property management services. The Registrant paid to such affiliates
approximately $40,000 and $39,000 for the three months ended March 31, 2001 and
2000, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $105,000 and $29,000 for the
three months ended March 31, 2001 and 2000, respectively. Included are
approximately $50,000 and $10,000 of construction oversight charges during the
three months ended March 31, 2001 and 2000, respectively. At March 31, 2001, the
Partnership has accrued approximately $11,000 of these reimbursements which is
included in other liabilities.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow from
operations to be paid to the General Partner for executive and administrative
management services. During the three months ended March 31, 2001, a fee of
approximately $31,000 was paid to the General Partner. No management fee was
paid to the General Partner during the corresponding period in 2000.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates currently own 78,319 limited partnership
units ("Units") in the Partnership representing 49.39% 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 49.39% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner favorable to the interest of the General Partner because of its
affiliation with the General Partner.
Note C - Distributions
During the three months ended March 31, 2001, distributions of approximately
$331,000 (approximately $318,000 to the limited partners or $2.01 per limited
partnership unit) were declared and paid from operations. During the three
months ended March 31, 2000, a distribution of approximately $650,000 ($4.10 per
limited partnership unit) was paid to the limited partners from financing
proceeds from West Chase Apartments in December 1999. Subsequent to March 31,
2001 a distribution of approximately $153,000 (approximately $147,000 to the
limited partners or $0.93 per limited partnership unit) was paid from
operations.
Note D - 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 demurrer is scheduled to be heard on May 14, 2001. The
Court has also scheduled a hearing on a motion for class certification for
August 27, 2001. Plaintiffs must file their motion for class certification no
later than June 15, 2001. 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 E - Casualty
On January 31, 2001, a fire occurred at West Chase Apartments resulting in
damage to two units. Negotiations concerning this casualty are ongoing with the
insurance carrier. No insurance proceeds have been received as of March 31,
2001, and thus the financial statement impact cannot be practicably determined
at this time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-QSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussions 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 operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the three month periods ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Ventura Landing Apartments 93% 93%
Orlando, Florida
Village Green Apartments 94% 95%
Altamonte Springs, Florida
West Chase Apartments 89% 92%
Lexington, Kentucky
The General Partner attributes the decrease in occupancy at West Chase
Apartments to a fire which resulted in twelve units being unleaseable and
also to increased evictions.
Results of Operations
The Partnership's net income for the three months ended March 31, 2001 was
approximately $21,000 as compared to approximately $45,000 for the three months
ended March 31, 2000. The decrease in net income is primarily attributable to an
increase in total expenses which was partially offset by a slight increase in
total income.
Total expenses increased primarily due to an increase in general and
administrative expenses. General and administrative expenses increased primarily
due to the asset management fee charged as a result of the distribution from
operations and to an increase in the costs of services provided by the General
Partner which is reimbursable pursuant to 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.
Total revenues increased primarily due to an increase in rental income. Rental
income increased primarily due to increased average rental rates at all of the
Partnership's residential properties which was partially offset by a decrease in
occupancy at Village Green and West Chase.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
As of March 31, 2001, the Partnership held cash and cash equivalents of
approximately $383,000 compared to approximately $701,000 at March 31, 2000.
Cash and cash equivalents decreased approximately $162,000 from December 31,
2000, the Partnership's year end. This decrease is due to approximately $4,000
of cash used in investing activities and approximately $337,000 of cash used in
financing activities partially offset by approximately $179,000 of cash provided
by operating activities. Cash used in investing activities consisted of property
improvements and replacements offset by net withdrawals from escrow accounts
maintained by the mortgage lenders. Cash used in financing activities consisted
of distributions to the partners, and, to a lesser extent, payments on the
mortgage note payable encumbering West Chase Apartments. 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 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. Capital improvements planned
for each of the Registrant's properties are detailed below.
Village Green
During the three months ended March 31, 2001, the Partnership completed
approximately $22,000 of capital improvements at Village Green Apartments
consisting primarily of carpet and vinyl replacements, plumbing enhancements and
appliance replacements. These improvements were funded from cash provided by
operations and replacement reserves. The Partnership had budgeted but is not
limited to approximately $45,000 for the year ended December 31, 2001,
consisting primarily of office equipment and carpet and cabinet replacements.
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.
West Chase
During the three months ended March 31, 2001, the Partnership completed
approximately $61,000 of capital improvements at West Chase Apartments
consisting primarily of carpet and vinyl replacement, structural improvements,
and appliance replacements. These improvements were funded from cash provided by
operations and replacement reserves. The Partnership has budgeted but is not
limited to approximately $33,000 for the year ending December 31, 2001,
consisting primarily of interior and exterior building improvements. 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 property has spent more than its budget during the first
quarter primarily due to repairs related to a fire in January 2001 (see Note E
to the financial statements).
Ventura Landing
During the three months ended March 31, 2001, the Partnership completed
approximately $31,000 of capital improvements at Ventura Landing Apartments
consisting primarily of flooring replacements. These improvements were funded
from cash provided by operations and replacement reserves. The Partnership has
budgeted but is not limited to approximately $51,000 for the year ending
December 31, 2001, consisting primarily of interior and exterior building
improvements. 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 capital expenditures will be incurred only if cash is available from
operations or from Partnership reserves. To the extent that such budgeted
capital improvements are required, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
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 at Village Green and Ventura Landing Apartments of $4,200,000
requires interest only payments with the principal balance due in November 2003.
The mortgage indebtedness at West Chase Apartments of approximately $1,119,000
requires principal and interest payments due on the first day of each month
until the loan matures on December 1, 2019. The General Partner will attempt to
refinance the indebtedness at Village Green and Ventura Landing indebtedness
and/or sell the properties prior to their maturity date. If the properties
cannot be refinanced or sold for a sufficient amount, the Registrant may risk
losing such properties through foreclosure.
During the three months ended March 31, 2001, distributions of approximately
$331,000 (approximately $318,000 to the limited partners or $2.01 per limited
partnership unit) was declared and paid from operations. During the three months
ended March 31, 2000, a distribution of approximately $650,000 ($4.10 per
limited partnership unit) was paid to the limited partners from financing
proceeds from West Chase Apartments in December 1999. Subsequent to March 31,
2001, a distribution of approximately $153,000 (approximately $147,000 to the
limited partners or $0.93 per limited partnership unit) was paid from
operations. 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, property sales, and/or refinancings. The Partnership's
distribution policy is reviewed on a quarterly basis. There can be no assurance
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit any additional distributions to its
partners during the remainder of 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates currently own 78,319 limited partnership
units ("Units") in the Partnership representing 49.39% 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 49.39% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner favorable to the interest of the General Partner because of its
affiliation with the General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, 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 demurrer is scheduled to be heard on May 14, 2001. The
Court has also scheduled a hearing on a motion for class certification for
August 27, 2001. Plaintiffs must file their motion for class certification no
later than June 15, 2001. The General Partner does not anticipate that costs
associated with this case will be material to the Partnership's overall
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES III
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: May 7, 2001