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 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(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 preceding 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)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 95
Receivables and deposits 119
Restricted escrows 28
Other assets 154
Investment property:
Land $ 213
Buildings and related personal property 4,754
4,967
Less accumulated depreciation (3,384) 1,583
$ 1,979
Liabilities and Partners' Deficit
Accounts payable $ 11
Tenant security deposit liabilities 40
Accrued property taxes 50
Other liabilities 94
Mortgage note payable 3,861
Partners' Deficit
General partner $ (267)
Corporate limited partner on behalf of the
Unitholders - (128,810 units issued and
outstanding) (1,810) (2,077)
$ 1,979
See Accompanying Notes to Financial Statements
b)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 278 $ 274 $ 826 $ 819
Other income 25 52 84 184
Total revenues 303 326 910 1,003
Expenses:
Operating 121 112 330 344
General and administrative 38 25 133 166
Depreciation 64 57 191 169
Interest 76 47 171 139
Property taxes 14 18 50 51
Total expenses 313 259 875 869
(Loss) income from continuing
operations (10) 67 35 134
Loss on sale of discontinued
operations -- -- -- (71)
(Loss) income before extraordinary
item (10) 67 35 63
Extraordinary loss on early
extinguishment of debt -- -- (35) --
Net (loss) income $ (10) $ 67 $ -- $ 63
Net income allocated to
general partner (1%) $ -- $ 1 $ -- $ 1
Net (loss) income allocated to
limited partners (99%) (10) 66 -- 62
$ (10) $ 67 $ -- $ 63
Per unit of depositary receipt:
(Loss) income from continuing
operations $ (.08) $.51 $.27 $1.03
Loss on sale of discontinued
operations -- -- -- (.55)
Extraordinary loss on early
extinguishment of debt -- -- (.27) --
Net (loss) income per unit of
depositary receipt $ (.08) $ .51 $ -- $ .48
Distributions per unit of
depositary receipt $ 10.34 $ -- $13.38 $ 71.82
See Accompanying Notes to Financial Statements
c)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Unitholder
Units of
Units of Depositary
Depositary General Receipt
Receipt Partner (Note A) Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' deficit at
December 31, 2000 128,810 $ (250) $ (87) $ (337)
Distributions to partners -- (17) (1,723) (1,740)
Net income for the nine months
ended September 30, 2001 -- -- -- --
Partners' deficit at
September 30, 2001 128,810 $ (267) $(1,810) $(2,077)
See Accompanying Notes to Financial Statements
d)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ -- $ 63
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 191 169
Amortization of loan costs 10 11
Loss on sale of discontinued operations -- 71
Extraordinary loss on early extinguishment of debt 35 --
Change in accounts:
Receivables and deposits (6) 7
Other assets 15 10
Accounts payable (24) (102)
Tenant security deposit liabilities 1 4
Accrued property taxes 50 (16)
Other liabilities 21 (25)
Net cash provided by operating activities 293 192
Cash flows from investing activities:
Property improvements and replacements (171) (63)
Net receipts from restricted escrows 153 60
Net cash used in investing activities (18) (3)
Cash flows from financing activities:
Payments on mortgage note payable (27) --
Loan costs paid (141) --
Proceeds from mortgage note payable 3,875 --
Repayment of mortgage note payable (2,312) --
Distributions to partners (1,740) (9,344)
Net cash used in financing activities (345) (9,344)
Net decrease in cash and cash equivalents (70) (9,155)
Cash and cash equivalents at beginning of period 165 10,579
Cash and cash equivalents at end of period $ 95 $ 1,424
Supplemental disclosure of cash flow information:
Cash paid for interest $ 151 $ 128
See Accompanying Notes to Financial Statements
e)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of the Johnstown/Consolidated
Income Partners (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. The Partnership's general partner is ConCap Equities, Inc.
(the "General Partner"). In the opinion of 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-KSB for the fiscal year ended
December 31, 2000. ConCap Equities, Inc. is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Units of Depositary Receipt
Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"),
an affiliate of the General Partner, serves as a depositary of certain units of
depositary receipt ("Units"). The Units represent economic rights attributable
to the limited partnership interests in the Partnership and entitle the
unitholders thereof ("Unitholders") to certain economic benefits, allocations
and distributions of the Partnership. For this reason, partners' deficit is
herein represented as an interest of the Unitholders.
Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also established standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The General Partner believes that
segment-based disclosures will not result in a more meaningful presentation than
the financial statements as currently presented.
Note B - 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,
as provided for in the Partnership Agreement. The Partnership Agreement provides
for (i) certain payments to affiliates for services and (ii) reimbursement of
certain expenses incurred by affiliates on behalf of the Partnership.
The following expenses were paid or accrued to an affiliate of the General
Partner during the nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Asset management fees (included in general and
administrative expenses) $ 31 $ 29
Property management fees (included in operating expenses) 44 44
Reimbursement for services of affiliates (included in
general and administrative expenses and investment
property) 154 40
Loan costs (included in other assets) 39 --
The Partnership Agreement provides that the Partnership shall pay in monthly
installments to the General Partner, or an affiliate, a yearly asset management
fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans
outstanding at the end of the month preceding the installment payment; (ii) 1/8
of 1% of the market value of guaranteed mortgage-backed securities as of the end
of the Partnership quarter immediately preceding the installment payment; and
(iii) 5/8 of 1% of the purchase price of the properties plus improvements for
managing the Partnership's assets. In the event the property was not owned at
the beginning or end of the year, such fee shall be pro-rated for the short-year
period of ownership. Under this provision, fees of approximately $31,000 and
$29,000 were paid to the General Partner and its affiliates for the nine months
ended September 30, 2001 and 2000, respectively.
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
Partnership's investment property for providing property management services.
The Partnership paid to such affiliates approximately $44,000 for both the nine
month periods ended September 30, 2001 and 2000.
An affiliate of the General Partner received reimbursement of accountable
administrative expense amounting to approximately $154,000 and $40,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
charges at September 30, 2001 is approximately $110,000 in reimbursements for
construction oversight costs. There were no construction oversight costs for the
nine months ended September 30, 2000.
For services provided in connection with the refinancing of Cedar Brooke
Apartments, the General Partner was paid approximately $39,000 during the nine
months ended September 30, 2001. These costs were capitalized and are included
in other assets on the balance sheet.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 68,316 units of depositary receipt
in the Partnership representing 53.04% 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 units of depositary receipt
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 53.04% of the outstanding units, AIMCO is in a
position to control all such voting decisions with respect to the Registrant.
When voting on matters, AIMCO and its affiliates 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 General Partner declared
and paid distributions of approximately $1,740,000 (approximately $1,723,000 to
the limited partners or $13.38 per unit of depositary receipt) consisting of
approximately $395,000 (approximately $391,000 to the limited partners or $3.04
per unit of depositary receipt) from operations and approximately $1,345,000
(approximately $1,332,000 to the limited partners or $10.34 per unit of
depositary receipt) from proceeds from the refinancing of the mortgage at Cedar
Brooke Apartments. During the nine months ended September 30, 2000, the General
Partner declared and paid distributions of approximately $9,344,000
(approximately $9,251,000 to the limited partners or $71.82 per unit of
depositary receipt). These distributions consisted of sale proceeds from the
1999 sale of Phoenix Business Center and Florida #11 Mini Warehouse of
approximately $7,738,000 (approximately $7,661,000 to the limited partners or
$59.48 per unit of depositary receipt) and approximately $1,606,000
(approximately $1,590,000 to the limited partners or $12.34 per unit of
depositary receipt) from operations.
Note D - Refinancing and Extraordinary Loss
On June 28, 2001, the Partnership refinanced the mortgage encumbering Cedar
Brooke Apartments. The refinancing replaced indebtedness of approximately
$2,312,000 with a new mortgage in the amount of $3,875,000. The new mortgage
carries a stated interest rate of 7.44% as compared to 7.33% on the previous
loan. Payments of principal and interest on the new mortgage loan are due
monthly until the loan matures on July 1, 2021 at which time it will be fully
amortized. The Partnership recognized an extraordinary loss on the early
extinguishment of debt of approximately $35,000 due to the write-off of
unamortized loan costs. Total capitalized loan costs for the new mortgage were
approximately $141,000 at September 30, 2001.
Note E - Sale of Discontinued Operations
The Partnership's two commercial properties, Florida #11 Mini Warehouse and
Phoenix Business Campus were sold during November and December of 1999,
respectively. These were the only commercial properties owned by the Partnership
and represented one segment of the Partnership's operations. Due to the sale of
these properties, the results of the commercial segment have been shown as loss
on sale of discontinued operations. The loss on sale of discontinued operations
during the nine months ended September 30, 2000 was due to additional legal fees
and other costs relating to the property sales.
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 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
disclosures contained in this Form 10-QSB 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 operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
nine month periods ended September 30, 2001 and 2000.
Average Occupancy
Property 2001 2000
Cedar Brooke Apartments 96% 98%
Independence, Missouri
Results of Operations
The Partnership's net income for the nine months ended September 30, 2001 was
approximately zero compared to approximately $63,000 for the nine months ended
September 30, 2000. The net loss for the three months ended September 30, 2001
was approximately $10,000 as compared to net income of approximately $67,000 for
the three months ended September 30, 2000. The decrease in net income for the
three and nine months ended September 30, 2001 is due to reduced total revenues
and increased total expenses. In addition, for the nine months ended September
30, 2000 net income was partially offset by the loss on sale of discontinued
operations. The Partnership's two commercial properties, Florida #11 Mini
Warehouse and Phoenix Business Campus, were sold during 1999. These were the
only commercial properties owned by the Partnership and represented one segment
of the Partnership's operations. Due to the sale of these properties, the
results of the commercial segment have been shown as loss on sale of
discontinued operations. The loss on sale of discontinued operations for the
nine months ended September 30, 2000 was due to additional legal fees and other
costs relating to the sales. For the nine months ended September 30, 2001 net
income was partially offset by the recognition of an extraordinary loss on early
extinguishment of debt due to the refinancing of Cedar Brooke Apartments in June
2001 (as discussed in Liquidity and Capital Resources).
The Partnership's (loss) income from the continuing operations was approximately
($10,000) and $35,000 for the three and nine months ended September 30, 2001, as
compared to approximately $67,000 and $134,000 for the three and nine months
ended September 30, 2000. The decrease in income from continuing operations for
the three and nine months ended September 30, 2001 is due to a decrease in total
revenues and an increase in total expenses. The decrease in total revenues is
due to a decrease in other income. The decrease in other income is primarily due
to a decrease in interest income, which decreased as a result of lower average
cash balances in interest bearing accounts. Rental income remained relatively
constant for the comparable periods as the decrease in occupancy was offset by
an increase in the average rental rate at the Partnership's investment property.
The increase in total expenses for the three months ended September 30, 2001 is
due to increases in interest, depreciation, and general and administrative
expenses. The increase in total expenses for the nine months ended September 30,
2001 is due to increases in interest and depreciation expenses, partially offset
by a decrease in general and administrative expenses. The increase in interest
expense for both the three and nine months ended September 30, 2001 is a result
of a larger loan balance due to the refinancing of the Partnership's investment
property. The increase in depreciation expense for both the three and nine
months ended September 30, 2001 is due to recent capital improvements completed
at the Partnership's investment property. Operating and property tax expenses
remained relatively constant for the comparable periods.
General and administrative expenses increased for the three months ended
September 30, 2001, primarily due to an increase in asset management fees paid
to the General Partner as allowed under the Partnership Agreement. General and
administrative expenses decreased for the nine months ended September 30, 2001
primarily due to a decrease in professional fees associated with the management
of the Partnership and a decrease in audit fees. Also included in general and
administrative expense at both September 30, 2001 and 2000 are management
reimbursements to the General Partner allowed under the Partnership Agreement,
costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $95,000 compared to approximately $1,424,000 at September 30,
2000. The decrease in cash and cash equivalents of approximately $70,000 for the
nine months ended September 30, 2001, from the Partnership's calendar year end,
is due to approximately $345,000 of cash used in financing activities and
approximately $18,000 of cash used in investing activities, which was partially
offset by approximately $293,000 of cash provided by operating activities. Cash
used in financing activities consisted of the repayment of the existing mortgage
at Cedar Brooke Apartments, distributions to partners, and to a lesser extent,
loan costs paid related to the refinancing of the mortgage encumbering Cedar
Brooke Apartments and payments of principal made on the mortgage encumbering the
Partnership's property, partially offset by proceeds received as a result of the
refinancing of the mortgage of Cedar Brooke Apartments. Cash used in investing
activities consisted of property improvements and replacements which was
partially offset by net receipts from escrow accounts maintained by the mortgage
lender. 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 investment property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and local legal and regulatory requirements. Capital
improvements planned for the Partnership's property are discussed below.
The Partnership budgeted approximately $211,000 for capital improvements at
Cedar Brooke Apartments for the year 2001 consisting primarily of roof
replacement, parking lot repairs, and appliance and floor covering replacements.
During the nine months ended September 30, 2001, the Partnership completed
approximately $171,000 of capital improvements at Cedar Brooke Apartments,
consisting primarily of swimming pool upgrades and appliance and floor covering
replacement. These improvements were funded from replacement reserves and
operations.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. On June
28, 2001, the Partnership refinanced the mortgage encumbering Cedar Brooke
Apartments. The refinancing replaced indebtedness of approximately $2,312,000
with a new mortgage in the amount of $3,875,000. The new mortgage carries a
stated interest rate of 7.44% as compared to 7.33% on the previous loan.
Payments of principal and interest on the new mortgage loan are due monthly
until the loan matures on July 1, 2021. The Partnership recognized an
extraordinary loss on the early extinguishment of debt of approximately $35,000
due to the write-off of unamortized loan costs. Total capitalized loan costs for
the new mortgage were approximately $141,000 at September 30, 2001. The mortgage
indebtedness on Cedar Brooke Apartments of approximately $3,861,000 matures in
2021, at which time it will be fully amortized.
During the nine months ended September 30, 2001, the General Partner declared
and paid distributions of approximately $1,740,000 (approximately $1,723,000 to
the limited partners or $13.38 per unit of depositary receipt) consisting of
approximately $395,000 (approximately $391,000 to the limited partners or $3.04
per unit of depositary receipt) from operations and approximately $1,345,000
(approximately $1,332,000 to the limited partners or $10.34 per unit of
depositary receipt) from proceeds from the refinancing of the mortgage at Cedar
Brooke Apartments. During the nine months ended September 30, 2000, the General
Partner declared and paid distributions of approximately $9,344,000
(approximately $9,251,000 to the limited partners or $71.82 per unit of
depositary receipt). These distributions consisted of sale proceeds from the
1999 sale of Phoenix Business Center and Florida #11 Mini Warehouse of
approximately $7,738,000 (approximately $7,661,000 to the limited partners or
$59.48 per unit of depositary receipt) and approximately $1,606,000
(approximately $1,590,000 to the limited partners or $12.34 per unit of
depositary receipt) from operations. Future cash distributions will depend on
the levels of net cash generated from operations, the availability of working
capital reserves, and the timing of the debt maturity, refinancing and/or
property sale. 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, after required capital expenditures, to permit
further distributions to its partners during the remainder of 2001 or subsequent
periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 68,316 units of depositary receipt
in the Partnership representing 53.04% 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 units of depositary receipt
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 53.04% of the outstanding units, AIMCO is in a position to control all such
voting decisions with respect to the Registrant. When voting on matters, AIMCO
and its affiliates would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of its
affiliation with the General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (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
In accordance with the requirements of the Exchange Act, the Partnership caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
Its 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