FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 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 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact name of small business issuer as specified in its charter)
California 94-2653686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 359
Receivables and deposits 203
Restricted escrows 178
Other assets 466
Investment properties:
Land $ 507
Buildings and related personal property 11,586
12,093
Less accumulated depreciation (8,398) 3,695
$ 4,901
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 79
Tenant security deposit liabilities 93
Accrued property taxes 140
Other liabilities 250
Mortgage notes payable 8,884
Partners' Deficit
General partners $(1,874)
Limited partners (158,582 units issued and
outstanding) (2,671) (4,545)
$ 4,901
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 755 $ 742 $ 2,255 $ 2,204
Other income 68 64 170 179
Total revenues 823 806 2,425 2,383
Expenses:
Operating 452 373 1,192 1,086
General and administrative 69 111 272 284
Depreciation 146 140 441 417
Interest 172 108 389 330
Property taxes 51 48 150 142
Total expenses 890 780 2,444 2,259
(Loss) income before extraordinary
loss (67) 26 (19) 124
Extraordinary loss on early
extinguishment of debt (34) -- (70) --
Net (loss) income $ (101) $ 26 $ (89) $ 124
Net (loss) income allocated to
general partners (4%) $ (4) $ 1 $ (3) $ 5
Net (loss) income allocated to
limited partners (96%) (97) 25 (86) 119
$ (101) $ 26 $ (89) $ 124
Per limited partnership unit:
(Loss) income before extraordinary
loss $ (.41) $ 0.16 $ (.12) $0.75
Extraordinary loss (.20) -- (.42) --
Net (loss) income $ (.61) $ 0.16 $ (.54) $0.75
Distributions per limited
partnership unit $ 17.40 $ -- $20.33 $6.74
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 158,945 $ 1 $ 79,473 $ 79,474
Partners' (deficit) capital
at December 31, 2000 158,582 $(1,838) $ 639 $ (1,199)
Distributions to partners -- (33) (3,224) (3,257)
Net loss for the nine months
ended September 30, 2001 -- (3) (86) (89)
Partners' deficit
at September 30, 2001 158,582 $(1,874) $ (2,671) $ (4,545)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (89) $ 124
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 441 417
Amortization of loan costs 23 24
Extraordinary loss on early extinguishment of debt 70 --
Change in accounts:
Receivables and deposits (131) (188)
Other assets (21) (2)
Accounts payable (4) (90)
Tenant security deposit liabilities (6) 2
Accrued property taxes 140 132
Other liabilities 78 (19)
Net cash provided by operating activities 501 400
Cash flows from investing activities:
Property improvements and replacements (618) (444)
Net (deposits to) withdrawals from restricted escrows (33) 10
Net cash used in investing activities (651) (434)
Cash flows from financing activities:
Loan costs paid (338) (10)
Proceeds from refinancings 7,800 --
Repayment of mortgage notes payable (4,200) --
Payments on mortgage notes payable (41) (18)
Distributions to partners (3,257) (1,086)
Advance from affiliate 150 --
Payments on advance from affiliate (150) --
Net cash used in financing activities (36) (1,114)
Net decrease in cash and cash equivalents (186) (1,148)
Cash and cash equivalents at beginning of period 545 1,460
Cash and cash equivalents at end of period $ 359 $ 312
Supplemental disclosure of cash flow information:
Cash paid for interest $ 343 $ 298
At December 31, 1999, property improvements and replacements and accounts
payable were adjusted by approximately $167,000 for non-cash activity.
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), 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 included in the Partnership's Annual Report on
Form 10-KSB for the fiscal 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.
Principles of Consolidation
The Partnership's financial statements include the accounts of ConCap Village
Green Associates, Ltd. The Partnership owns a 99% interest in this partnership,
and it has the ability to control the major operating and financial policies of
this partnership. All inter-partnership transactions have been eliminated.
Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also 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 Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the financial statements as currently presented.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Limited Partnership Agreement ("Partnership Agreement") provides for
payments to affiliates of the General Partner for property management services
based on a percentage of revenue; for a partnership management fee equal to 9%
of the total distributions made to limited partners from cash flow from
operations; and for reimbursements of certain expenses incurred by affiliates of
the General Partner on behalf of the Partnership.
The following amounts were paid or accrued to the General Partner or affiliates
during the nine month periods ended September 30, 2001 and 2000, respectively:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $122 $117
Reimbursement for services of affiliates (included in
investment properties and general and
administrative expenses) 358 136
Partnership management fees (included in general and
administrative expenses) 46 41
Refinance fee (included in other assets) 78 --
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from all of the Registrant's properties as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$122,000 and $117,000 for the nine months ended September 30, 2001 and 2000,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $358,000 and $136,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
amounts are approximately $215,000 and $1,000 of construction oversight charges
during the nine months ended September 30, 2001 and 2000, respectively.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow from
operations to be paid to the General Partner for executive and administrative
management services. During the nine months ended September 30, 2001 and 2000,
fees of approximately $46,000 and $41,000, respectively, were paid to the
General Partner.
During the nine months ended September 30, 2001, an affiliate of the General
Partner advanced the Registrant $150,000 to fund repairs related to a fire at
West Chase Apartments in January 2001. This advance bore interest at the prime
rate plus 2%. The Partnership repaid this advance in July 2001 with a portion of
the refinancing proceeds from Ventura Landing Apartments.
Pursuant to the Partnership Agreement, the General Partner is entitled to
receive a commission equal to 3% of the aggregate disposition price of sold
properties. The Partnership paid a commission of $108,000 to the General Partner
related to the sale of Professional Plaza in 1999. This amount is subordinate to
the limited partners receiving their original capital contributions plus a
cumulative preferred return of 6% per annum of their adjusted capital
investment, as defined in the Partnership Agreement. If the limited partners
have not received these returns when the Partnership terminates, the General
Partner will return this amount to the Partnership.
For services provided in connection with the refinancing of two of the
Partnership's investment properties, the General Partner was paid approximately
$78,000 during the nine months ended September 30, 2001. These costs were
capitalized and are included in other assets on the consolidated balance sheet.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 78,548 limited partnership units
("Units") in the Partnership representing 49.53% 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 make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters which would include voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 49.53% of the outstanding Units, AIMCO is in a position to
influence all such 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 nine months ended September 30, 2001, the Partnership distributed
approximately $3,257,000 (approximately $3,224,000 to the limited partners or
$20.33 per limited partnership unit), of which approximately $497,000
(approximately $464,000 to the limited partners or $2.93 per limited partnership
unit) was paid from operations. Approximately $2,760,000 ($17.40 per limited
partnership unit) was paid to the limited partners from the refinancing proceeds
from Ventura Landing Apartments and Village Green Apartments. During the nine
months ended September 30, 2000, the Partnership distributed approximately
$1,086,000 (approximately $1,069,000 to the limited partners or $6.74 per
limited partnership unit), of which approximately $436,000 (approximately
$419,000 to the limited partners or $2.64 per limited partnership unit) was
attributable to cash flow from operations. Approximately $650,000 ($4.10 per
limited partnership unit) represented 1999 financing proceeds on West Chase
Apartments which was distributed entirely to the limited partners.
Note D - Casualty
On January 31, 2001, a fire occurred at West Chase Apartments. Negotiations
concerning this casualty are ongoing with the insurance carrier. No insurance
proceeds have been received as of September 30, 2001, and thus the financial
statement impact cannot be practicably determined at this time. The Partnership
does not expect to realize a loss from this event.
Note E - Refinancing and Extraordinary Loss
On June 28, 2001, the Partnership refinanced the mortgage encumbering Ventura
Landing Apartments. The refinancing replaced indebtedness of approximately
$2,200,000 with a new mortgage in the amount of $4,225,000. Approximately
$60,000 of the proceeds were placed into a restricted escrow account maintained
by the lender. The new mortgage carries a stated interest rate of 7.54%. The
interest rate on the old mortgage was 7.33%. Principal and interest payments on
the mortgage loan of approximately $34,000 are due monthly until the loan
matures in July 2021 at which time the mortgage will be fully amortized. Total
capitalized loan costs were approximately $180,000. The Partnership recognized
an extraordinary loss on the early extinguishment of debt of approximately
$36,000 due to the write-off of unamortized loan costs.
On July 24, 2001, the Partnership refinanced the mortgage encumbering Village
Green Apartments. The refinancing replaced indebtedness of approximately
$2,000,000 with a new mortgage in the amount of $3,575,000. Approximately
$117,000 of the proceeds was placed into a restricted escrow account maintained
by the lender. The new mortgage carries a stated interest rate of 7.54%. The
interest rate on the old mortgage was 7.33%. Principal and interest payments on
the mortgage loan of approximately $29,000 are due monthly until the loan
matures in September 2021 at which time the mortgage will be fully amortized.
Total capitalized loan costs were approximately $158,000. The Partnership
recognized an extraordinary loss on the early extinguishment of debt of
approximately $34,000 due to the write-off of unamortized loan costs.
Note F - Legal Proceedings
In March 1998, several putative unitholders 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 OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-QSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussions of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the nine month periods ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Ventura Landing Apartments 94% 94%
Orlando, Florida
Village Green Apartments 94% 94%
Altamonte Springs, Florida
West Chase Apartments 90% 91%
Lexington, Kentucky
Results of Operations
The Partnership's net loss for the nine months ended September 30, 2001 was
approximately $89,000 compared to net income of approximately $124,000 for the
nine months ended September 30, 2000. The Partnership's net loss for the three
months ended September 30, 2001, was approximately $101,000 compared to net
income of approximately $26,000 for the three months ended September 30, 2000.
The decrease in income for the three and nine month periods ended September 30,
2001 is due to an increase in total expenses and the extraordinary loss on early
extinguishment of debt recognized in connection with the refinancing of Ventura
Landing and Village Green Apartments (see Liquidity and Capital Resources)
slightly offset by an increase in total revenues. Total expenses increased for
the three and nine months ended September 30, 2001 due to increases in
operating, depreciation and interest expenses, partially offset by a decrease in
general and administrative expenses. Operating expenses increased primarily due
to increases in hazard insurance at Ventura Landing and Village Green
Apartments. Depreciation expense increased at all three investment properties
due to property improvements and replacements placed into service during the
past twelve months which are now being depreciated. Interest expense increased
due to the refinancing of the mortgages at Ventura Landing and Village Green
Apartments which resulted in larger debt balances.
General and administrative expenses decreased for the three and nine months
ended September 30, 2001 as a result of a decrease in legal fees, offset by an
increase in the costs of services included in the management reimbursements to
the General Partner allowed under the Partnership Agreement. In addition to
these reimbursements, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included in general and
administrative expenses.
Total revenues increased due to an increase in rental income. Rental income
increased due to increases in average rental rates at all three investment
properties, offset by a slight decrease in occupancy at West Chase Apartments.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
As of September 30, 2001, the Partnership held cash and cash equivalents of
approximately $359,000 compared to approximately $312,000 at September 30, 2000.
Cash and cash equivalents decreased approximately $186,000 since December 31,
2000 due to approximately $651,000 and $36,000 of cash used in investing and
financing activities, respectively, partially offset by approximately $501,000
of cash provided by operating activities. Cash used in investing activities
consisted of property improvements and replacements and, to a lesser extent, net
deposits to escrow accounts maintained by the mortgage lenders. Cash used in
financing activities consisted of repayment of mortgage notes payables of
Ventura Landing Apartments and Village Green Apartments, distributions to
partners, principal payments made on the mortgages encumbering the investment
properties, loan costs paid and payments on an advance from an affiliate offset
by proceeds received from the refinancing of Ventura Landing Apartments and
Village Green Apartments and an advance from an affiliate. The Registrant
invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Village Green
During the nine months ended September 30, 2001, the Partnership completed
approximately $175,000 of budgeted capital improvements at Village Green
Apartments consisting primarily of floor covering and appliance replacements,
air conditioning and lighting improvements, plumbing enhancements, and
structural improvements. These improvements were funded from cash provided by
operations and replacement reserves. The Partnership budgeted approximately
$219,000 for the year ended December 31, 2001, consisting primarily of floor
covering, appliance and cabinet replacements and air conditioning improvements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
West Chase
During the nine months ended September 30, 2001, the Partnership completed
approximately $276,000 of budgeted capital improvements at West Chase Apartments
consisting primarily of floor covering replacement, exterior painting,
structural improvements, and appliance and air conditioning replacements.
Approximately $170,000 of these capital improvements relate to damage caused by
a fire in January 2001. These improvements were funded from cash provided by
operations and advances from an affiliate of the General Partner. The
Partnership budgeted approximately $117,000 for the year ending December 31,
2001, consisting primarily of floor covering and appliance replacements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Ventura Landing
During the nine months ended September 30, 2001, the Partnership completed
approximately $167,000 of budgeted capital improvements at Ventura Landing
Apartments consisting primarily of floor covering, air conditioning unit and
appliance replacements and structural improvements. These improvements were
funded from cash provided by operations and replacement reserves. The
Partnership budgeted approximately $192,000 for the year ending December 31,
2001, consisting primarily of air conditioning and carpet and vinyl replacements
and structural improvements. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
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 required, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
On June 28, 2001, the Partnership refinanced the mortgage encumbering Ventura
Landing Apartments. The refinancing replaced indebtedness of approximately
$2,200,000 with a new mortgage in the amount of $4,225,000. Approximately
$60,000 of the proceeds were placed into a restricted escrow account maintained
by the lender. The new mortgage carries a stated interest rate of 7.54%. The
interest rate on the old mortgage was 7.33%. Principal and interest payments on
the mortgage loan of approximately $34,000 are due monthly until the loan
matures in July 2021 at which time the mortgage will be fully amortized. Total
capitalized loan costs were approximately $180,000. The Partnership recognized
an extraordinary loss on the early extinguishment of debt of approximately
$36,000 due to the write-off of unamortized loan costs.
On July 24, 2001, the Partnership refinanced the mortgage encumbering Village
Green Apartments. The refinancing replaced indebtedness of approximately
$2,000,000 with a new mortgage in the amount of $3,575,000. Approximately
$117,000 of the proceeds was placed into a restricted escrow account maintained
by the lender. The new mortgage carries a stated interest rate of 7.54%. The
interest rate on the old mortgage was 7.33%. Principal and interest payments on
the mortgage loan of approximately $29,000 are due monthly until the loan
matures in September 2021 at which time the mortgage will be fully amortized.
Total capitalized loan costs were approximately $158,000. The Partnership
recognized an extraordinary loss on the early extinguishment of debt of
approximately $34,000 due to the write-off of unamortized loan costs.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of $8,884,000 requires monthly payments of principal and interest
until the loans mature in December 2019, July 2021 and September 2021 at which
time the loans will be fully amortized.
During the nine months ended September 30, 2001, the Partnership distributed
approximately $3,257,000 (approximately $3,224,000 to the limited partners or
$20.33 per limited partnership unit), of which approximately $497,000
(approximately $464,000 to the limited partners or $2.93 per limited partnership
unit) was paid from operations. Approximately $2,760,000 ($17.40 per limited
partnership unit) was paid to the limited partners from the refinancing proceeds
from Ventura Landing Apartments and Village Green Apartments. During the nine
months ended September 30, 2000, the Partnership distributed approximately
$1,086,000 (approximately $1,069,000 to the limited partners or $6.74 per
limited partnership unit), of which approximately $436,000 (approximately
$419,000 to the limited partners or $2.64 per limited partnership unit) was
attributable to cash flow from operations. Approximately $650,000 ($4.10 per
limited partnership unit) represented 1999 financing proceeds on West Chase
Apartments which was distributed entirely to the Limited Partners. Future cash
distributions will depend on the levels of net cash generated from operations,
the availability of cash reserves, and the timing of debt maturities, property
sales, and/or refinancings. The Partnership's distribution policy is reviewed on
a monthly basis. There can be no assurance that the Partnership will generate
sufficient funds from operations after required capital expenditures to permit
any additional distributions to its partners during the remainder of 2001 or
subsequent periods.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 78,548 limited partnership units
("Units") in the Partnership representing 49.53% 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 make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters which would include voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 49.53% of the outstanding Units, AIMCO is in a position to
influence all such voting decisions with respect to the Registrant. When voting
on matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of its affiliation with
the General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unitholders 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 filed during the quarter ended September
30, 2001:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES III
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: November 13, 2001