FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant as specified in its charter)
California 94-2768742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
June 30, December 31,
2001 2000
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 2,933 $ 6,377
Receivables and deposits 1,188 1,854
Restricted escrows 629 900
Other assets 1,530 1,497
Investment properties:
Land 10,907 10,907
Buildings and related personal property 122,009 120,607
132,916 131,514
Less accumulated depreciation (105,243) (103,272)
27,673 28,242
$ 33,953 $ 38,870
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 474 $ 1,021
Tenant security deposit liabilities 530 488
Accrued property taxes 1,063 1,311
Other liabilities 1,461 1,510
Distribution payable 506 402
Mortgage notes payable 71,526 71,791
75,560 76,523
Partners' Deficit
General partners (7,006) (6,798)
Limited partners (342,773 units issued and
outstanding) (34,601) (30,855)
(41,607) (37,653)
$ 33,953 $ 38,870
Note: The balance sheet at December 31, 2000, has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements as accepted in the United States.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 6,564 $ 6,905 $13,144 $13,784
Other income 515 643 1,060 1,163
Casualty gain 145 -- 145 --
Total revenues 7,224 7,548 14,349 14,947
Expenses:
Operating 2,876 2,857 5,589 5,615
General and administrative 707 347 1,106 803
Depreciation 1,040 1,052 2,060 2,081
Interest 1,391 1,444 2,795 2,885
Property taxes 453 475 891 971
Total expenses 6,467 6,175 12,441 12,355
Income before extraordinary item 757 1,373 1,908 2,592
Extraordinary loss on early extinguishment
of debt -- (5) -- (64)
Net income $ 757 $ 1,368 $ 1,908 $ 2,528
Net income allocated to general partner (4%) $ 30 $ 55 $ 76 $ 101
Net income allocated to limited partners (96%) 727 1,313 1,832 2,427
$ 757 $ 1,368 $ 1,908 $ 2,528
Per limited partnership unit:
Income before extraordinary item $ 2.12 $ 3.84 $ 5.34 $ 7.26
Extraordinary loss on early extinguishment
of debt -- (0.01) -- (0.18)
Net income $ 2.12 $ 3.83 $ 5.34 $ 7.08
Distributions per limited partnership unit $ 5.63 $ 5.12 $ 16.27 $ 16.67
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partners Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 1999 342,773 $ (6,634) $(28,254) $(34,888)
Distributions to partners -- (250) (5,713) (5,963)
Net income for the six months
ended June 30, 2000 -- 101 2,427 2,528
Partners' deficit at
June 30, 2000 342,773 $ (6,783) $(31,540) $(38,323)
Partners' deficit at
December 31, 2000 342,773 $ (6,798) $(30,855) $(37,653)
Distributions to partners -- (284) (5,578) (5,862)
Net income for the six months
ended June 30, 2001 -- 76 1,832 1,908
Partners' deficit at
June 30, 2001 342,773 $ (7,006) $(34,601) $(41,607)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net income $ 1,908 $ 2,528
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,060 2,081
Amortization of loan costs 116 123
Casualty gain (145) --
Extraordinary loss on early extinguishment of debt -- 64
Change in accounts:
Receivables and deposits 666 300
Other assets (149) (82)
Accounts payable (547) (306)
Tenant security deposit liabilities 42 22
Accrued property taxes (248) (171)
Other liabilities (49) (312)
Net cash provided by operating activities 3,654 4,247
Cash flows from investing activities:
Property improvements and replacements (1,554) (1,378)
Net withdrawals from (deposits to) restricted escrows 271 (287)
Insurance proceeds from casualties 208 213
Net cash used in investing activities (1,075) (1,452)
Cash flows from financing activities:
Payments on mortgage notes payable (265) (227)
Repayment of mortgage notes payable -- (10,329)
Proceeds from mortgage notes payable -- 14,035
Prepayment penalties paid -- (30)
Loan costs paid -- (434)
Distributions to partners (5,758) (9,938)
Net cash used in financing activities (6,023) (6,923)
Net decrease in cash and cash equivalents (3,444) (4,128)
Cash and cash equivalents at beginning of period 6,377 8,921
Cash and cash equivalents at end of period $ 2,933 $ 4,793
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $2,682,000 and $2,708,000 for the six
months ended June 30, 2001 and 2000, respectively.
Distribution payable and distributions to partners were each adjusted by
approximately $104,000 and $343,000 for non-cash activity for the six months
ended June 30, 2001 and 2000, respectively.
Distributions to partners of approximately $4,318,000 were declared at December
31, 1999 and approximately $4,113,000 of this balance was paid during the six
months ended June 30, 2000. The remaining balance is deferred per the
Partnership Agreement.
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of ConCap Equities, Inc. ("CEI" or the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 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-K for
the fiscal year ended December 31, 2000. The General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"), a publicly traded real
estate investment trust.
Consolidation
The consolidated financial statements include the Partnership's majority
interest in a joint venture which owns South Port Apartments. The Partnership
has the ability to control the major operating and financial policies of the
joint venture. No minority interest has been reflected for the joint venture
because minority interests are limited to the extent of their equity capital,
and losses in excess of the minority interest equity capital are charged against
the Partnership's interest. Should the losses reverse, the Partnership would be
credited with the amount of minority interest losses previously absorbed.
The Partnership's consolidated financial statements also include the accounts of
the Partnership, its wholly-owned partnerships and its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
ConCap Rivers Edge Associates, Ltd., Foothill Chimney Associates, L.P., and
ConCap Stratford Associates, Ltd. The Partnership may remove the general partner
of its 99% owned partnerships; therefore, the partnerships are deemed controlled
and therefore consolidated by the Partnership. All significant interpartnership
balances have been eliminated.
Note B - Transactions with Affiliated Partners
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership. The following transactions with the General Partner
and/or its affiliates were incurred during the six months ended June 30, 2001
and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $731 $751
Reimbursement for services of affiliates (included in
investment properties and general and administrative
and operating expenses) 567 326
Partnership management fee (included in general and
administrative expenses) 276 279
Loan costs (included in other assets) -- 140
During the six months ended June 30, 2001 and 2000, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all the Partnership's
properties as compensation for providing property management services. The
Partnership paid to such affiliates approximately $731,000 and $751,000 for the
six months ended June 30, 2001 and 2000, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $567,000 and $326,000 for the
six months ended June 30, 2001 and 2000, respectively.
The Limited Partnership Agreement ("Partnership Agreement") provides for a
special management fee equal to 9% of the total distributions made to the
limited partners from cash flow provided by operations to be paid to the General
Partner for executive and administrative management services. The Partnership
paid approximately $276,000 and $279,000 under this provision of the Partnership
Agreement to the General Partner during the six months ended June 30, 2001 and
2000, respectively.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $140,000 for loan costs related
to the refinancing of three of the Partnership's properties during the six
months ended June 30, 2000. These costs were capitalized and are included in
other assets on the consolidated balance sheet.
For acting as real estate broker in connection with the sale of Stratford Place
Apartments, the General Partner was paid a real estate commission of
approximately $228,000 during the six months ended June 30, 2001. For acting as
real estate broker in connection with the sale of Overlook Apartments in
December 1999, the General Partner was paid a real estate commission of
approximately $40,000 during the fourth quarter ended December 31, 2000. When
the Partnership terminates, the General Partner will have to return these
commissions if the limited partners do not receive their original invested
capital plus a 6% per annum cumulative return.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 186,162.50 limited partnership units
in the Partnership representing 54.31% of the outstanding units at June 30,
2001. 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 either through private purchases or tender offers. 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 54.31% 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 C - Distributions
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $3,201,000 (approximately $3,072,000 to the
limited partners or $8.96 per limited partnership unit) from operations and
approximately $2,610,000 (approximately $2,506,000 to the limited partners or
$7.31 per limited partnership unit) from sales proceeds of Stratford Place
Apartments, which sold in December of 2000. Approximately $104,000 of the sales
proceeds of Stratford Place Apartments is payable to the General Partner and
special limited partners as this portion is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus cash. In conjunction with the transfer of
funds from their certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $51,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
During the six months ended June 30, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared and paid distributions of approximately
$5,951,000 (approximately $5,713,000 to the limited partners of $16.67 per
limited partnership unit) during the six months ended June 30, 2000 consisting
of approximately $2,724,000 (approximately $2,615,000 to the limited partners or
$7.63 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, and Stratford Place Apartments and sale proceeds from
Overlook Apartments which sold in December of 1999, and approximately $3,227,000
(approximately $3,098,000 to the limited partners or $9.04 per limited
partnership unit) from operations. Approximately $343,000 of the distribution
from operations was payable at June 30, 2000 to the General Partner and special
limited partners. Approximately $31,000 of this balance was paid subsequent to
June 30, 2000. The remaining balance is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus funds. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $15,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
Note D - Casualty Gains
In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment
units. Insurance proceeds of approximately $26,000 were received during the six
months ended June 30, 2001. The Partnership recognized a casualty gain of
approximately $17,000 for the six months ended June 30, 2001 which represents
the excess of the proceeds received as of June 30, 2001 over the write-off of
the undepreciated damaged assets.
In March 2000, South Port Apartments had hail and wind damage, which affected
all 240 units and damaged 100% of the roof, which was replaced. Insurance
proceeds of approximately $182,000 were received during the six months ended
June 30, 2001. The Partnership recognized a casualty gain of approximately
$128,000 for the six months ended June 30, 2001 which represents the excess of
the proceeds received as of June 30, 2001 over the write-off of the
undepreciated damaged assets.
In January 2000, Stratford Place Apartments had a fire which damaged 12
apartment units and 30% of the roof. Insurance proceeds of approximately
$213,000 were received during the six months ended June 30, 2000. The General
Partner successfully completed the repairs prior to the sale of the property on
December 20, 2000. The Partnership recognized a casualty gain of approximately
$154,000 during the second half of 2000.
Note E - Extraordinary Loss on Early Extinguishment of Debt
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place. The refinancing replaced mortgage indebtedness of approximately
$2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a
rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $124,000
at June 30, 2000. The Partnership wrote off approximately $4,000 in unamortized
loan costs and paid prepayment penalties of approximately $1,000 resulting in an
extraordinary loss on early extinguishment of debt of approximately $5,000. On
December 20, 2000, the Partnership sold Stratford Place Apartments to an
unaffiliated third party whom assumed the mortgage encumbering the property. The
Partnership wrote off the unamortized loan costs resulting in an additional
extraordinary loss on early extinguishment of debt of approximately $143,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $141,000 at June 30, 2000. The Partnership wrote off approximately
$19,000 in unamortized loan costs and paid prepayment penalties of approximately
$7,000 resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $153,000
at June 30, 2000. The Partnership wrote off approximately $11,000 in unamortized
loan costs and paid prepayment penalties of approximately $22,000 resulting in
an extraordinary loss on early extinguishment of debt of approximately $33,000.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the six months ended June
30, 2000.
Note F - 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 established 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 General Partner believes that
segment-based disclosures will not result in a more meaningful presentation than
the consolidated financial statements as currently presented.
Note G - 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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement costs, associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Partnership's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Partnership's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of fifteen apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
The Apartments 90% 94%
Omaha, NE
Arbours of Hermitage Apartments 92% 95%
Nashville, TN
Briar Bay Racquet Club Apartments 95% 97%
Miami, FL
Chimney Hill Apartments 94% 94%
Marietta, GA
Citadel Apartments 89% 91%
El Paso, TX
Citadel Village Apartments 94% 96%
Colorado Springs, CO
Foothill Place Apartments 96% 95%
Salt Lake City, UT
Knollwood Apartments 91% 93%
Nashville, TN
Lake Forest Apartments 87% 92%
Omaha, NE
Nob Hill Villa Apartments 90% 97%
Nashville, TN
Point West Apartments 96% 98%
Charleston, SC
Post Ridge Apartments 90% 93%
Nashville, TN
Rivers Edge Apartments 97% 98%
Auburn, WA
South Port Apartments 94% 97%
Tulsa, OK
Village East Apartments 94% 97%
Cimarron Hills, CO
The decrease in occupancy at The Apartments, Arbours of Hermitage Apartments,
Lake Forest Apartments, Nob Hill Villa Apartments, Post Ridge Apartments, South
Port Apartments, and Village East Apartments is due to increased competition and
changing economic conditions in their respective local markets.
Results of Operations
The Partnership's net income for the six months ended June 30, 2001, totaled
approximately $1,908,000 as compared to a net income of approximately $2,528,000
for the corresponding period of 2000. The Partnership's net income for the
three-month period ended June 30, 2001 was approximately $757,000 as compared to
a net income of approximately $1,368,000 for the corresponding period of 2000.
The decrease in net income for the six months ended June 30, 2001, is due to a
decrease in total revenues and a slight increase in total expenses. The decrease
in net income for the three months ended June 30, 2001 is due to a decrease in
total revenues and an increase in total expenses. Excluding the results of
operations of Stratford Place Apartments, which sold in December 2000, total
revenues increased for the Partnership's remaining properties offset by an
increase in total expenses for the three and six months ended June 30, 2001.
Total revenues for the Partnership's remaining properties increased due to an
increase in rental income and the recognition of a casualty gain partially
offset by a decrease in other income for the three and six months ended June 20,
2001. During the three and six months ended June 30, 2001, a gain on casualty
events was recognized as discussed below. Rental income increased due to
increased average rental rates at fourteen of the Partnership's fifteen
properties partially offset by a decrease in average occupancy at thirteen of
the Partnership's fifteen properties. Other income decreased primarily due to a
decrease in interest income partially offset by increased utility
reimbursements. Interest income decreased due to less cash being held in
interest bearing accounts due to the increased frequency of distributions.
Total expenses on the remaining properties increased due to an increase in
operating, general and administrative expense, depreciation, and interest
expenses, partially offset by decreases in extraordinary losses on early
extinguishment of debt (see discussion of 2000 refinancings below). Operating
expenses increased due to increased utility bills due to the sharp increase in
fuel prices, insurance expenses and payroll expenses at many of the
Partnership's properties partially offset by a decrease in sewer and water
expense due to water conserving measures being taken at many of the properties
during the three and six months ended June 30, 2001. General and administrative
expenses increased primarily due to increases in the cost of services included
in management reimbursements to the General Partner as allowed under the
Partnership Agreement and increases in taxes due to a new tax imposed by the
State of Tennessee on the Partnership's properties. Depreciation expense on the
remaining properties increased due to capital improvements completed during the
past twelve months. The increase in interest expense is primarily due to the new
financing at River's Edge Apartments in August 2000 for an increased debt
balance.
In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment
units. Insurance proceeds of approximately $26,000 were received during the six
months ended June 30, 2001. The Partnership recognized a casualty gain of
approximately $17,000 for the six months ended June 30, 2001 which represents
the excess of the proceeds received as of June 30, 2001 over the write-off of
the undepreciated damaged assets.
In March 2000, South Port Apartments had hail and wind damage, which affected
all 240 units and damaged 100% of the roof, which was replaced. Insurance
proceeds of approximately $182,000 were received during the six months ended
June 30, 2001. The Partnership recognized a casualty gain of approximately
$128,000 for the six months ended June 30, 2001 which represents the excess of
the proceeds received as of June 30, 2001 over the write-off of the
undepreciated damaged assets.
In January 2000, Stratford Place Apartments had a fire which damaged 12
apartment units and 30% of the roof. Insurance proceeds of approximately
$213,000 were received during the six months ended June 30, 2000. The General
Partner successfully completed the repairs prior to the sale of the property on
December 20, 2000. The Partnership recognized a casualty gain of approximately
$154,000 during the second half of 2000.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 2001, the Partnership held cash and cash equivalents of
approximately $2,933,000, compared to approximately $4,793,000 at June 30, 2000.
Cash and cash equivalents decreased approximately $3,444,000 for the six months
ended June 30, 2001 from the Partnership's year ended December 31, 2000. This
net decrease was comprised of approximately $6,023,000 of net cash used in
financing activities and approximately $1,075,000 of cash used in investing
activities, partially offset by net cash provided by operating activities of
approximately $3,654,000. Cash used in financing activities consisted of the
distributions to the partners and payments of principal made on the mortgages
encumbering the Partnership's properties. Cash used in investing activities
consisted primarily of property improvements and replacements, partially offset
by net insurance proceeds received and net withdrawals from restricted escrows.
The Partnership 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 Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
The Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $68,000 of budgeted capital improvements at the property,
consisting primarily of HVAC replacements, perimeter fencing upgrades, and floor
covering replacements. These improvements were funded from operating cash flow.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $152,000 for 2001 at this property which consist primarily of
floor covering replacements and appliance replacements.
Arbours of Hermitage Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $238,000 of budgeted capital improvements at the property,
consisting primarily of a vinyl siding project, perimeter fencing enhancements,
floor covering replacements, plumbing and lighting upgrades. These improvements
were funded from Partnership reserves and operating cash flow. The Partnership
has budgeted, but is not limited to, capital improvements of approximately
$607,000 for 2001 at this property which consist primarily of floor covering
replacements and structural enhancements.
Briar Bay Racquet Club Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $108,000 of budgeted capital improvements at the property,
consisting primarily of plumbing upgrades, floor covering and appliance
replacements, plumbing enhancements, and elevator upgrades. These improvements
were funded from operating cash flow and Partnership reserves. The Partnership
has budgeted, but is not limited to, capital improvements of approximately
$126,000 for 2001 at this property which consist primarily of plumbing
enhancements, structural enhancements, swimming pool upgrades and floor covering
replacements.
Chimney Hill Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $85,000 of budgeted capital improvements at the property,
consisting primarily of floor covering and appliance replacements, cabinet and
countertop replacements, roof replacements and wall covering replacements. These
improvements were funded from operating cash flow and Partnership reserves. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $126,000 for 2001 at this property which consist primarily of
floor covering and appliance replacements and interior building improvements.
Citadel Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $37,000 of budgeted capital improvements at the property,
consisting primarily of floor covering and appliance replacements, replacement
of pool decking and major landscaping. These improvements were funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $77,000 for 2001 at this property which
consist primarily of floor covering replacements and other building
improvements.
Citadel Village Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $28,000 of budgeted capital improvements at the property,
consisting primarily of floor covering replacements, lighting upgrades and
structural improvements. These improvements were funded from Partnership
reserves and operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $34,000 for 2001 at this
property which consist primarily of floor covering and appliance replacements.
Foothill Place Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $336,000 of budgeted and non-budgeted capital improvements at the
property, consisting primarily of interior decorating, floor covering and
appliance replacements, structural enhancements, cabinets and countertop
replacements and water heater replacements. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has budgeted, but
is not limited to, capital improvements of approximately $208,000 for 2001 at
this property which consist primarily of interior decoration and floor covering
replacements.
Knollwood Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $108,000 of budgeted capital improvements at the property,
consisting primarily of appliance replacements, floor covering replacements, and
roof replacements. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $276,000 for 2001 at this property which
consist primarily of floor covering, appliance and countertop replacements.
Lake Forest Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $75,000 of budgeted capital improvements at the property,
consisting primarily of floor covering and appliance replacements and water
heater upgrades. These improvements were primarily funded from operating cash
flow and Partnership reserves. The Partnership has budgeted, but is not limited
to, capital improvements of approximately $86,000 for 2001 at this property
which consist primarily of floor covering replacements and water heater
replacements.
Nob Hill Villa Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $171,000 of budgeted capital improvements at the property,
consisting primarily of floor covering replacements, building upgrades, roof
replacements, water heater replacements, major landscaping and appliance
replacements. These improvements were funded from Partnership reserves,
insurance proceeds and operating cash flow. The Partnership has budgeted, but is
not limited to, capital improvements of approximately $875,000 for 2001 at this
property which consist primarily of floor covering replacements, appliance
replacements, clubhouse renovations, roof replacements, interior decoration and
structural improvements.
Point West Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $20,000 of budgeted capital improvements at the property,
consisting primarily of floor covering replacements and HVAC upgrades. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $33,000 for 2001 at
this property which consist primarily of floor covering replacements and
appliance replacements.
Post Ridge Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $80,000 of budgeted and non-budgeted capital improvements at the
property, consisting primarily of appliance and floor covering replacements,
structural improvements, major landscaping, electrical and lighting upgrades,
swimming pool improvements and parking area enhancements. These improvements
were funded from operating cash flow and Partnership reserves. The Partnership
has budgeted, but is not limited to, capital improvements of approximately
$57,000 for 2001 at this property which consist primarily of carpet replacements
and appliance replacements.
Rivers Edge Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $34,000 of budgeted capital improvements at the property,
consisting primarily of floor covering replacements, plumbing upgrades, swimming
pool improvements and appliance replacements. These improvements were funded
from operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $55,000 for 2001 at this property which
consist primarily of floor covering replacements and appliance replacements.
South Port Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $133,000 of budgeted capital improvements at the property,
consisting primarily of building upgrades, plumbing fixtures, appliance and
floor covering replacements. These improvements were funded from Partnership
reserves, insurance proceeds and operating cash flow. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $138,000
for 2001 at this property which consist primarily of floor covering replacements
and appliance replacements.
Village East Apartments
During the six months ended June 30, 2001, the Partnership completed
approximately $33,000 of budgeted capital improvements at the property,
consisting primarily of floor covering replacements, major landscaping and
plumbing upgrades. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $38,000 for 2001 at this property which
consists of floor covering replacements and appliance replacements.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. The
mortgage indebtedness of approximately $71,526,000 matures at various dates
between 2003 and 2020. The General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford
Place. The refinancing replaced mortgage indebtedness of approximately
$2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a
rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $124,000
at June 30, 2000. The Partnership wrote off approximately $4,000 in unamortized
loan costs and paid prepayment penalties of approximately $1,000 resulting in an
extraordinary loss on early extinguishment of debt of approximately $5,000. On
December 20, 2000, the Partnership sold Stratford Place Apartments to an
unaffiliated third party whom assumed the mortgage encumbering the property. The
Partnership wrote off the unamortized loan costs resulting in an additional
extraordinary loss on early extinguishment of debt of approximately $143,000.
On February 28, 2000, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $141,000 at June 30, 2000. The Partnership wrote off approximately
$19,000 in unamortized loan costs and paid prepayment penalties of approximately
$7,000 resulting in an extraordinary loss on early extinguishment of debt of
approximately $26,000.
On February 2, 2000, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $153,000
at June 30, 2000. The Partnership wrote off approximately $11,000 in unamortized
loan costs and paid prepayment penalties of approximately $22,000 resulting in
an extraordinary loss on early extinguishment of debt of approximately $33,000.
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999. An
additional $16,000 of loan costs were incurred during the six months ended June
30, 2000.
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $3,201,000 (approximately $3,072,000 to the
limited partners or $8.96 per limited partnership unit) from operations and
approximately $2,610,000 (approximately $2,506,000 to the limited partners or
$7.31 per limited partnership unit) from sales proceeds of Stratford Place
Apartments, which sold in December of 2000. Approximately $104,000 of the sales
proceeds of Stratford Place Apartments is payable to the General Partner and
special limited partners as this portion is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus cash. In conjunction with the transfer of
funds from their certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $51,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
During the six months ended June 30, 2000, the Partnership paid a cash
distribution from operations of approximately $1,871,000, of which approximately
$1,679,000 ($4.90 per limited partnership unit) was paid to the limited
partners, and a distribution of financing proceeds representing funds from the
financing of Point West Apartments of approximately $2,242,000 ($6.54 per
limited partnership unit), all of which was paid to the limited partners. These
distributions were declared and accrued at December 31, 1999.
In addition, the Partnership declared and paid distributions of approximately
$5,951,000 (approximately $5,713,000 to the limited partners of $16.67 per
limited partnership unit) during the six months ended June 30, 2000 consisting
of approximately $2,724,000 (approximately $2,615,000 to the limited partners or
$7.63 per limited partnership unit) of refinance proceeds from The Apartments,
Citadel Apartments, and Stratford Place Apartments and sale proceeds from
Overlook Apartments which sold in December of 1999, and approximately $3,227,000
(approximately $3,098,000 to the limited partners or $9.04 per limited
partnership unit) from operations. Approximately $343,000 of the distribution
from operations was payable at June 30, 2000 to the General Partner and special
limited partners. Approximately $31,000 of this balance was paid subsequent to
June 30, 2000. The remaining balance is subordinated and deferred per the
Partnership Agreement until the limited partners receive 100% of their original
capital contributions from surplus funds. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $15,000 was distributed to the general partner of the
majority owned sub-tier limited partnerships.
The Partnership's distribution policy is reviewed on a monthly basis. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations,
after planned capital improvement expenditures, to permit further distributions
to its partners in 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 186,162.50 limited partnership units
in the Partnership representing 54.31% of the outstanding units at June 30,
2001. 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 either through private purchases or tender offers. 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 54.31% 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 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. Based on interest rates at June 30, 2001, 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 June 30,
2001. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of June 30, 2001.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2001 $ 277 8.12%
2002 588 8.12%
2003 9,389 7.92%
2004 4,808 8.12%
2005 42,812 7.51%
Thereafter 13,652 8.07%
Total $71,526
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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement 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 June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED CAPITAL PROPERTIES IV
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: