FORM 10-Q--QUARTERLY 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-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 0-11723
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
(Exact name of registrant as specified in its charter)
California 94-2883067
(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 Partnership 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 INSTITUTIONAL PROPERTIES/2
BALANCE SHEETS
(in thousands, except unit data)
September 30, December 31,
2001 2000
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 532 $ 2,143
Other assets 11 11
Investment in Master Loan to affiliate 39,443 39,779
Less: allowance for impairment loss (28,129) (29,129)
11,314 10,650
$ 11,857 $ 12,804
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ -- $ 1
Other liabilities 71 45
Distributions payable 141 141
212 187
Partners' (Deficit) Capital
General partner (406) (421)
Limited partners (909,123.60 units outstanding) 12,051 13,038
11,645 12,617
$ 11,857 $ 12,804
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 in the United States for complete financial statements.
See Accompanying Notes to Financial Statements
b)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Interest income on investment
in Master Loan to affiliate $ -- $ -- $ 904 $ 1,198
Reduction of provision for impairment
loss 1,000 -- 1,000 --
Interest income on investments 2 82 27 242
Total revenues 1,002 82 1,931 1,440
Expenses:
General and administrative 132 242 475 508
Total expenses 132 242 475 508
Net income (loss) $ 870 $ (160) $ 1,456 $ 932
Net income (loss) allocated
to general partner (1%) $ 9 $ (2) $ 15 $ 9
Net income (loss) allocated
to limited partners (99%) 861 (158) 1,441 923
$ 870 $ (160) $ 1,456 $ 932
Net income (loss) per limited
partnership unit $ .95 $ (.17) $ 1.59 $ 1.02
Distribution per limited partnership unit $ -- $ .64 $ 2.67 $ 2.82
See Accompanying Notes to Financial Statements
c)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 912,182 $ 1 $228,046 $228,047
Partners' (deficit) capital
at December 31, 1999 909,124 $ (410) $ 25,534 $ 25,124
Net income for the nine months
ended September 30, 2000 -- 9 923 932
Distributions to partners -- (20) (2,565) (2,585)
Partners' (deficit) capital
at September 30, 2000 909,124 $ (421) $ 23,892 $ 23,471
Partners' (deficit) capital
at December 31, 2000 909,124 $ (421) $ 13,038 $ 12,617
Net income for the nine months
ended September 30, 2001 -- 15 1,441 1,456
Distributions to partners -- -- (2,428) (2,428)
Partners' (deficit) capital at
September 30, 2001 909,124 $ (406) $ 12,051 $ 11,645
See Accompanying Notes to Financial Statements
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 1,456 $ 932
Adjustments to reconcile net income to net cash
provided by operating activities:
Reduction of provision for impairment loss (1,000) --
Change in accounts:
Interest receivable on Master Loan -- 92
Accounts payable (1) --
Other liabilities 26 (5)
Net cash provided by operating activities 481 1,019
Cash flows provided by investing activities:
Principal receipts on Master Loan 336 78
Cash flows used in financing activities:
Distributions to partners (2,428) (2,585)
Net decrease in cash and cash equivalents (1,611) (1,488)
Cash and cash equivalents at beginning of period 2,143 6,846
Cash and cash equivalents at end of period $ 532 $ 5,358
See Accompanying Notes to Financial Statements
e)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital
Institutional Properties/2 (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. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 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 financial statements
and footnotes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2000. The General Partner is an affiliate of
Apartment Investment and Management Company ("AIMCO"), a publicly traded real
estate investment trust.
Segment Reporting
Statement of Financial Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information" ("Statement 131") 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. Moreover, due to the very
nature of the Partnership's operations, the General Partner believes that
segment-based disclosures will not result in a more meaningful presentation than
the financial statements as presently presented.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - 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 (the "Agreement") provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with the
administration of partnership activities. The following payments were made to
the General Partner and its affiliates during the nine months ended September
30, 2001 and 2000:
2001 2000
(in thousands)
Reimbursements for services of affiliates (included in
general and administrative expenses) $ 351 $ 345
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $351,000 and $345,000 for the
nine months ended September 30, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 429,667.20 limited partnership units
in the Partnership representing 47.26% of the outstanding units at September 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
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 voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 47.26% of the outstanding units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note D - Net Investment in Master Loan
The Partnership was formed to lend funds pursuant to a non-recourse note with a
participation interest (the "Master Loan") which is secured by deeds of trust on
all real property purchased with such funds. The Master Loan was to, and the
real properties that secure the Master Loan were purchased and are owned by,
Consolidated Capital Equity Partners/Two, L.P. ("CCEP/2").
At September 30, 2001, the recorded investment in the Master Loan is considered
to be impaired under "Statement of Financial Accounting Standards No. 114 ("SFAS
114"), "Accounting by Creditors for Impairment of a Loan". 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 nine month period ended September 30, 2001, the
Partnership recorded $1,000,000 in income based upon an increase in the fair
market value of the collateral securing the Master Loan. No such income was
recorded for the nine months ended September 30, 2000 as the recorded value of
the Master Loan approximated the fair value of the collateral at that time.
The fair value of all of the collateral properties, which on a combined basis
secure the Master Loan, was determined by obtaining an appraisal by an
independent third party or by using the net operating income of all of the
collateral properties capitalized at a rate deemed reasonable for the type of
property adjusted for market conditions, physical condition of each respective
property, and other factors, less the value of the first mortgage loans held on
each property which are superior to the Master Loan. In addition, certain
investments held by CCEP/2 also serve as collateral on the Master Loan. These
investments, which consist of general partner interests in three affiliated
partnerships have been valued based upon the fair value of the affiliated
partnerships derived by using the same methodology used to value the collateral
properties noted above.
The principal balance of the Master Loan due to the Partnership totaled
approximately $39,443,000 at September 30, 2001. 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 $19,096,000 and $17,604,000 for the nine months
ended September 30, 2001 and 2000, respectively. Interest income is recognized
on the cash basis in accordance with SFAS 114. At September 30, 2001 and
December 31, 2000, such cumulative unrecognized interest totaled approximately
$243,068,000 and $223,972,000 and was not included in the balance of the
investment in Master Loan. The allowance for possible losses totaled
approximately $28,129,000 and $29,129,000 at September 30, 2001 and December 31,
2000, respectively.
During the first nine months of 2001, no advances were made to CCEP/2. Principal
payments received from CCEP/2 on the Master Loan were $336,000 and $78,000 for
the nine months ended September 30, 2001 and 2000, respectively. Such payments
were from certain investments of CCEP/2, which are required to be transferred to
the Partnership per the Master Loan Agreement as principal payments.
Approximately $904,000 and $1,198,000 was recorded as interest income on
investment in Master Loan to an affiliate for the nine months ended September
30, 2001 and 2000, respectively. Of the $1,198,000 received during 2000,
$853,000 was received from Village Brooke as a result of its receipt of a
portion of the insurance proceeds related to lost rents due to the destruction
of the property (see the Financial Statements of CCEP/2 Note C - Casualty Event,
included in these financial statements). The balance of $345,000 for 2000 was
received from CCEP/2 as an excess cash payment, as defined in the Master Loan
Agreement. Excess cash payments of $904,000 were received from CCEP/2 during the
first quarter of 2001.
The Master Loan matured in November 2000. The Partnership is currently
evaluating its options and is in negotiations with CCEP/2. The options include
foreclosing on the remaining properties that collateralize the Master Loan and
assigning all other collateral to the Partnership or extending the terms of the
loan. If the Partnership forecloses on the properties securing the Master Loan,
title in the properties owned by CCEP/2 would be vested in the Partnership,
subject to the existing liens on such properties. As a result, the Partnership
would become responsible for the operations of such properties.
Note E - Distribution
The Partnership distributed approximately $1,299,000 (approximately $1.43 per
limited partnership unit) to the limited partners from the refinancing proceeds
of one of the CCEP/2 properties during the nine months ended September 30, 2001.
The Partnership also distributed approximately $1,129,000 ($1.24 per limited
partnership unit) from surplus cash due to receipt of interest income on the
Master Loan which was distributed 100% to the limited partners during the nine
months ended September 30, 2001.
The Partnership distributed approximately $2,000,000 from operations
(approximately $1,980,000 to the limited partners, or approximately $2.18 per
limited partnership unit) and $585,000 to the limited partners from surplus cash
(approximately $0.64 per limited partnership unit) during the nine months ended
September 30, 2000.
Note F - 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. (the "Nuanes action") 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. On July 20, 2001, plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which, together with a demurrer filed by other defendants, is
currently scheduled to be heard on November 15, 2001. The Court has set the
matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. The matters are currently scheduled to be heard on
November 15, 2001.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases 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.
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
September 30, 2001 AND 2000
See Accompanying Notes to Consolidated Financial Statements
13
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
September 30, December 31,
2001 2000
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 2,002 $ 2,972
Receivables and deposits (net of allowance of $5
and $259 at September 30, 2001 and December 31,
2000, respectively) 191 433
Restricted escrows 103 406
Other assets 460 426
Investment properties:
Land 2,731 2,731
Buildings and related personal property 19,531 18,296
22,262 21,027
Less accumulated depreciation (13,315) (12,434)
8,947 8,593
$ 11,703 $ 12,830
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 158 $ 143
Accrued property taxes 400 533
Tenant security deposit liabilities 114 115
Other liabilities 208 250
Mortgage notes payable 16,188 16,452
Master loan and interest payable 282,511 263,751
299,579 281,244
Partners' Deficit
General partner (2,865) (2,670)
Limited partners (285,011) (265,744)
(287,876) (268,414)
$ 11,703 $ 12,830
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 in the United States for complete financial statements.
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 1,162 $ 1,091 $ 3,419 $ 3,705
Other income 539 173 856 867
Casualty gain -- 2 -- 806
Total revenues 1,701 1,266 4,275 5,378
Expenses:
Operating 444 480 1,356 1,508
General and administrative 108 104 219 314
Depreciation 291 272 881 832
Interest 6,970 6,422 20,954 19,511
Property taxes 103 153 327 424
Total expenses 7,916 7,431 23,737 22,589
Loss before extraordinary
item (6,215) (6,165) (19,462) (17,211)
Extraordinary loss on early
extinguishment of debt -- -- -- (35)
Net loss $(6,215) $(6,165) $(19,462) $(17,246)
Net loss allocated
to general partner (1%) $ (62) $ (62) $ (195) $ (172)
Net loss allocated
to limited partners (99%) (6,153) (6,103) (19,267) (17,074)
$(6,215) $(6,165) $(19,462) $(17,246)
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
(in thousands)
General Limited
Partner Partners Total
Partners' deficit at
December 31, 1999 $ (2,424) $(241,370) $ (243,794)
Net loss for the nine months
ended September 30, 2000 (172) (17,074) (17,246)
Partners' deficit
at September 30, 2000 $ (2,596) $(258,444) $ (261,040)
Partners' deficit
at December 31, 2000 $ (2,670) $(265,744) $ (268,414)
Net loss for the nine months
ended September 30, 2001 (195) (19,267) (19,462)
Partners' deficit at
September 30, 2001 $ (2,865) $(285,011) $ (287,876)
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net loss $(19,462) $(17,246)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 881 832
Amortization of loan costs 24 40
Extraordinary loss on early extinguishment of debt -- 35
Casualty gain -- (806)
Change in accounts:
Restricted cash -- 7,750
Receivables and deposits 70 (333)
Other assets (29) (32)
Accounts payable 15 (252)
Accrued property taxes (133) (123)
Tenant security deposit liabilities (1) (84)
Other liabilities (42) (646)
Interest payable on Master Loan 19,096 17,604
Net cash provided by operating activities 419 6,739
Cash flows from investing activities:
Insurance proceeds received 172 1,298
Net withdrawals from restricted escrows 303 56
Property improvements and replacements (1,235) (721)
Net cash (used in) provided by investing activities (760) 633
Cash flows from financing activities:
Repayment of mortgage notes payable -- (6,517)
Loan costs paid (29) --
Principal payments on mortgage notes payable (264) (40)
Principal payments on Master Loan (336) (78)
Net cash used in financing activities (629) (6,635)
Net (decrease) increase in cash and cash equivalents (970) 737
Cash and cash equivalents at beginning of period 2,972 3,747
Cash and cash equivalents at end of period $ 2,002 $ 4,484
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,817 $ 1,911
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Equity Partners/Two, L.P. ("CCEP/2" or the "Partnership") have been
prepared in accordance with generally accepted accounting principles for interim
financial information. 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 Holdings, Inc., (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 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 of the Partnership included in the annual
report on Form 10-K for Consolidated Capital Institutional Properties/2 L.P.
("CCIP/2") for the year ended December 31, 2000.
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 2000. The
Partnership realized net losses of approximately $6,215,000 and $19,462,000 for
the three and nine months ended September 30, 2001, respectively. The General
Partner expects the Partnership to continue to incur such losses from
operations.
The Partnership's indebtedness to CCIP/2 under the Master Loan of approximately
$282,511,000, including accrued interest, matured in November 2000. The General
Partner is currently in negotiations with CCIP/2 with respect to its options
which include CCIP/2 foreclosing on the properties in CCEP/2 which collateralize
the Master Loan or extending the terms of the Master Loan. 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 September 30, 2001, partners' deficit
was approximately $287,876,000.
The General Partner expects that revenues from the four 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/2
the Master Loan balance, including accrued interest, in the event it is not
renegotiated.
As a result of the above, 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 - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - Casualty Event
In April 1999, one of the Partnership's residential properties, Village Brooke,
was completely destroyed by a tornado. It is estimated that the property
sustained approximately $16,000,000 in damages. As of September 30, 2001,
$11,302,000 in insurance proceeds have been received, with additional insurance
proceeds expected in the near future. All of the property's fixed assets and
related accumulated depreciation were written off as a result of this casualty.
Lost rents of approximately $750,000 were recorded as of September 30, 2000. A
casualty gain of approximately $806,000 was recognized during the nine months
ended September 30, 2000 as a result of receiving additional insurance proceeds
which were previously not recognized net of approximately $58,000 of additional
clean up costs incurred. The General Partner is currently excavating the land to
begin reconstruction of the property during the fall of 2001. The Partnership is
negotiating with several insurance companies as to the final settlement amount.
The Partnership expects to receive additional funds; however, the final
settlement amount cannot be reasonably estimated.
Note D - Related Party Transactions
CCEP/2 has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
Affiliates of the General Partner provide property management and asset
management services to the Partnership. CCEP/2 paid property management fees
based upon collected gross rental revenues for property management services for
the nine months ended September 30, 2001 and 2000. The Partnership Agreement
(the "Agreement") also provides for reimbursement to the General Partner and its
affiliates for costs incurred in connection with the administration of CCEP/2's
activities.
Also, CCEP/2 is subject to an Investment Advisory Agreement between CCEP/2 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/2's properties. The General Partner
and its affiliates received reimbursements and fees for the nine months ended
September 30, 2001 and 2000 as follows:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 187 $ 205
Investment advisory fees (included in general
and administrative expense) 51 134
Reimbursement for services of affiliates (included in
operating, general and administrative expenses,
and investment properties) 401 63
Real estate brokerage commission -- 447
During the nine months ended September 30, 2001 and 2000, affiliates of the
General Partner were entitled to receive 5% of gross receipts from the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $187,000 and $205,000 for
the nine months ended September 30, 2001 and 2000, respectively.
An affiliate of the General Partner received investment advisory fees amounting
to approximately $51,000 and $134,000 for the nine months ended September 30,
2001 and 2000, respectively. In addition, the Partnership received a refund of
prior investment advisory fees paid of approximately $119,000 during the nine
months ended September 30, 2001. The refund was a result of recalculating the
amount of fees owed to affiliates for the period January 1, 2000 through March
31, 2001 during the first quarter of 2001. The amount of fees have been properly
adjusted for the remainder of 2001.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $401,000 and $63,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
expenses for the nine months ended September 30, 2001 and 2000 is approximately
$276,000 and $2,000 respectively, of reimbursements for construction oversight
costs.
For acting as real estate broker in connection with the sale of Richmond Plaza,
a commission of $447,000 was accrued at December 31, 1999. This commission was
paid during the nine months ended September 30, 2000.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from CCIP/2 pursuant to the
Master Loan Agreement. Such interest payments totaled approximately $904,000 and
$1,198,000 for the nine months ended September 30, 2001 and 2000, respectively.
These payments were based upon the results of operations for the Partnership's
properties. CCEP/2 made principal payments on the Master Loan of $336,000 and
$78,000 during the nine months ended September 30, 2001 and 2000, respectively.
These funds were received from distributions from three affiliated partnerships.
Note E - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at September 30,
2001 and December 31, 2000, are approximately $282,511,000 and approximately
$263,751,000, respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan, interest accrues at 10% per annum and
payments are due quarterly in an amount equal to Excess Cash Flow, generally
defined in the Master Loan Agreement as net cash flow from operations after
capital improvements and third-party debt service. 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
currently payable 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/2's properties are paid to CCIP/2, as principal payments on the Master Loan
as per the terms of the Master Loan Agreement.
The Master Loan matured in November 2000. The General Partner is currently in
negotiations with CCIP/2 with respect to its options which include CCIP/2
foreclosing on the properties in CCEP/2 which collateralize the Master Loan and
assigning all other collateral to CCIP/2 or extending the terms of the Master
Loan. If CCIP/2 were to foreclose on its collateral, CCEP/2 would no longer hold
title to its properties and would be dissolved.
Effective January 1, 1993, CCEP/2 and CCIP/2 amended the 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 CCIP/2 to CCEP/2. This amendment and change in the definition of
Excess Cash Flow will have the effect of reducing Master Loan payments to CCIP/2
by the amount of CCEP/2's capital expenditures since such amounts were
previously excluded from Excess Cash Flow. The amendment will have no effect on
the computation of interest expense on the Master Loan.
Note F - 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. (the "Nuanes action") 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. On July 20, 2001, plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which, together with a demurrer filed by other defendants, is
currently scheduled to be heard on November 15, 2001. The Court has set the
matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. The matters are currently scheduled to be heard on
November 15, 2001.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases 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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 Partnership 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.
Results of Operations
The Partnership's net income for the nine months ended September 30, 2001 and
2000 was approximately $1,456,000 and $932,000, respectively. The Partnership's
net income for the three months ended September 30, 2001 was approximately
$870,000 as compared to a net loss of approximately $160,000 for the three
months ended September 30, 2000. The increase in net income for the nine months
ended September 30, 2001 is due primarily to an increase in total revenues
partially offset by a decrease in total expenses. The increase in total revenues
for the nine months ended September 30, 2001 is primarily the result of the
reduction of provision for impairment loss partially offset by a decrease in
interest income on the investment in the Master Loan and, to a lesser extent, a
decrease in interest income on investments. Interest income on the investment in
the Master Loan decreased as a result of a decrease in excess cash flow payments
received from CCEP/2. The increase in net income for the three months ended
September 30, 2001 is primarily due to the reduction of provision for impairment
loss and a decrease in total expenses, which was partially offset by a decrease
in interest income on investments. The decrease in interest income on
investments for the three and nine months ended September 30, 2001 is primarily
due to a decrease in the cash balance in interest bearing cash accounts as a
result of distributions to partners. The reduction of provision for impairment
loss recognized during the three and nine months ended September 30, 2001 is due
to reducing the allowance for impairment loss on the investment in Master Loan.
The allowance was reduced because the fair value of the collateral securing the
Master Loan has increased over the past nine months. The decrease in total
expenses for the three months ended September 30, 2001 is due to the timing of
the receipt of billings related to general and administrative expenses of the
Partnership.
General and administrative expenses decreased for the nine months ended
September 30, 2001, primarily due to a decrease in costs of communications with
investors, a decrease in reimbursements to the General Partner and a decrease in
costs of professional services necessary to operate the Partnership.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $532,000 as compared to approximately $5,358,000 at September 30,
2000. The decrease in cash and cash equivalents of approximately $1,611,000 for
the nine months ended September 30, 2001, from the Partnership's calendar year
end is due to approximately $2,428,000 of cash used in financing activities,
which was partially offset by approximately $481,000 of cash provided by
operating activities and approximately $336,000 of cash provided by investing
activities. Cash provided by investing activities consisted of principal
receipts on the Master Loan. Cash used in financing activities consisted of
distributions to partners. 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 expenditures
required to meet the ongoing operating needs of the Partnership and to comply
with Federal, state, local, legal and regulatory requirements. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
See "CCEP/2 Property Operations" below for discussion on CCEP/2's ability to
provide future cash flow as Master Loan debt service.
The Partnership distributed approximately $1,299,000 (approximately $1.43 per
limited partnership unit) to the limited partners from the refinancing proceeds
of one of the CCEP/2 properties during the nine months ended September 30, 2001.
The Partnership also distributed approximately $1,129,000 ($1.24 per limited
partnership unit) from surplus cash due to receipt of interest income on the
Master Loan which was distributed 100% to the limited partners during the nine
months ended September 30, 2001. The Partnership distributed approximately
$2,000,000 from operations (approximately $1,980,000 to the limited partners, or
approximately $2.18 per limited partnership unit) and $585,000 to the limited
partners from surplus cash (approximately $0.64 per limited partnership unit)
during the nine months ended September 30, 2000. Future cash distributions will
depend on CCEP/2's ability to make payments on the account of the Master Loan
and the availability of cash reserves. The Partnership's distribution policy is
reviewed on a monthly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations to permit any
additional distributions to its partners during the remainder of 2001 or
subsequent periods.
During the nine months ended September 30, 2001 and 2000, the Partnership
received approximately $336,000 and $78,000, respectively, as principal payments
on the Master Loan consisting of funds received by CCEP/2 from certain
investments. These funds are required to be transferred to the Partnership under
the terms of the Master Loan.
CCEP/2 Property Operations
CCEP/2 had a net loss of approximately $19,462,000 and $17,246,000 for the nine
months ended September 30, 2001 and 2000, respectively. CCEP/2 had a net loss of
approximately $6,215,000 and $6,165,000 for the three months ended September 30,
2001 and 2000, respectively. The increase in net loss for the nine months ended
September 30, 2001 was primarily due to an increase in total expenses and a
decrease in total revenues. The increase in net loss for the three months ended
September 30, 2001 was primarily due to an increase in total expenses partially
offset by an increase in total revenues. Included in other revenues for the
three and nine months ended September 30, 2001 is approximately $172,000 of
insurance proceeds received during the third quarter of 2001 relating to an
electrical fire that occurred in April 1999 at Town Center. The insurance
proceeds were originally recorded and reserved with the sale of the property
during September 1999.
CCEP/2 recognizes interest expense on the New 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 nine
months ended September 30, 2001, CCEP/2's consolidated statement of operations
includes total interest expense attributable to the Master Loan of approximately
$20,000,000, of which $19,096,000 represents interest accrued in excess of
required payments. CCEP/2 is expected to continue to generate operating losses
as a result of such interest accruals and noncash charges for depreciation.
In April 1999, one of the Partnership's residential properties, Village Brooke,
was completely destroyed by a tornado. It is estimated that the property
sustained approximately $16,000,000 in damages. As of September 30, 2001,
$11,302,000 in insurance proceeds have been received, with additional insurance
proceeds expected in the near future. All of the property's fixed assets and
related accumulated depreciation were written off as a result of this casualty.
Lost rents of approximately $750,000 were recorded as of September 30, 2000. A
casualty gain of approximately $806,000 was recognized during the nine months
ended September 30, 2000 as a result of receiving additional insurance proceeds
which were previously not recognized net of approximately $58,000 of additional
clean up costs incurred. The General Partner is currently excavating the land to
begin reconstruction of the property during the fall of 2001. The Partnership is
negotiating with several insurance companies as to the final settlement amount.
The Partnership expects to receive additional funds; however, the final
settlement amount cannot be reasonably estimated.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 429,667.20 limited partnership units
in the Partnership representing 47.26% of the outstanding units at September 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
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 voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 47.26% of the outstanding units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Item 3. Quantitative and Qualitative Disclosures about 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 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 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 in which they operate. In this
regard, the General Partner of the Partnership closely monitors the performance
of the properties collateralizing the Loan.
Based upon the fact that the Loan is considered impaired under Statement of
Financial Accounting Standards No. 114, "Accounting by Creditor for Impairment
of a Loan", interest rate fluctuations do not affect the recognition of income,
as income is only recognized to the extent of cash flow. Therefore, market risk
factors do not affect the Partnership's results of operations as it relates to
the Loan.
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. (the "Nuanes action") 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. On July 20, 2001, plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which, together with a demurrer filed by other defendants, is
currently scheduled to be heard on November 15, 2001. The Court has set the
matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. The matters are currently scheduled to be heard on
November 15, 2001.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases 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 September 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 INSTITUTIONAL PROPERTIES/2
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: November 9, 2001