FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact name of small business issuer as specified in its charter)
California 94-2653686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2002
Assets
Cash and cash equivalents $ 375
Receivables and deposits 240
Restricted escrows 178
Other assets 493
Investment properties:
Land $ 507
Buildings and related personal property 11,673
12,180
Less accumulated depreciation (8,610) 3,570
$ 4,856
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 93
Tenant security deposit liabilities 81
Accrued property taxes 40
Other liabilities 264
Mortgage notes payable 8,783
Partners' Deficit
General partners $(1,869)
Limited partners (158,582 units issued and
outstanding) (2,536) (4,405)
$ 4,856
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $ 726 $ 739
Other income 67 53
Total revenues 793 792
Expenses:
Operating 346 358
General and administrative 68 113
Depreciation 156 145
Interest 173 107
Property taxes 49 48
Total expenses 792 771
Net income $ 1 $ 21
Net income allocated to general partners (4%) $ -- $ 1
Net income allocated to limited partners (96%) 1 20
$ 1 $ 21
Net income per limited partnership unit $ 0.01 $ 0.13
Distributions per limited partnership unit $ -- $ 2.01
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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
at December 31, 2001 158,582 $(1,869) $ (2,537) $ (4,406)
Net income for the three months
ended March 31, 2002 -- -- 1 1
Partners' deficit
at March 31, 2002 158,582 $(1,869) $ (2,536) $ (4,405)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net income $ 1 $ 21
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 156 145
Amortization of loan costs 6 8
Change in accounts:
Receivables and deposits (5) (24)
Other assets (71) (26)
Accounts payable (14) --
Tenant security deposit liabilities 1 (3)
Accrued property taxes 40 44
Other liabilities 48 14
Net cash provided by operating activities 162 179
Cash flows from investing activities:
Property improvements and replacements (72) (114)
Net withdrawals from restricted escrows -- 110
Net cash used in investing activities (72) (4)
Cash flows from financing activities:
Payments on mortgage notes payable (51) (6)
Distributions to partners -- (331)
Net cash used in financing activities (51) (337)
Net increase (decrease) in cash and cash equivalents 39 (162)
Cash and cash equivalents at beginning of period 336 545
Cash and cash equivalents at end of period $ 375 $ 383
Supplemental disclosure of cash flow information:
Cash paid for interest $ 167 $ 99
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the general partner of the Partnership,
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 month period ended March 31, 2002
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2002. 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, 2001. The General Partner is wholly-owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
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 Partnership Agreement ("Partnership Agreement") provides for (i) payments to
affiliates for services and (ii) reimbursements of certain expenses incurred by
affiliates of the General Partner on behalf of the Partnership.
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
$40,000 for both the three months ended March 31, 2002 and 2001, which are
included in operating expenses.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $44,000 and $105,000 for the
three months ended March 31, 2002 and 2001, respectively. Included in these
amounts are fees related to construction management services provided by an
affiliate of the General Partner of approximately $50,000 for the three months
ended March 31, 2001. No such fees were incurred for the three months ended
March 31, 2002. The construction management service fees are calculated based on
a percentage of additions to investment properties. These reimbursements of
accountable administrative expenses are included in investment properties and
general and administrative expenses.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow from
operations to be paid to the General Partner for executive and administrative
management services. During the three months ended March 31, 2001, a fee of
approximately $31,000 was paid to the General Partner, which is included in
general and administrative expenses. During the three months ended March 31,
2002, no special management fee was paid as no distributions from cash flow from
operations were made.
Beginning in 2001, the Partnership began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the three months ended March 31,
2002 and 2001, the Partnership was charged by AIMCO and its affiliates
approximately $37,000 and $63,000, respectively, for insurance coverage and fees
associated with policy claims administration.
Note C - Casualty Event
In January 2001, a fire occurred at West Chase Apartments, which resulted in
damage to twelve apartment units. The property incurred damages of approximately
$178,000. Insurance proceeds of approximately $173,000 were received in 2001 to
cover these damages. These proceeds are held on deposit with the mortgage
lender.
Note D - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (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 was heard on December 11, 2001. On February 2, 2002, the Court
served its order granting in part the demurrer. The Court has dismissed without
leave to amend certain of the plaintiffs' claims. On February 11, 2002,
plaintiffs filed a motion seeking to certify a putative class comprised of all
non-affiliated persons who own or have owned units in the partnerships. The
General Partner and affiliated defendants oppose the motion. On April 29, 2002,
the Court heard argument on the motion and ordered further briefing after which
time the matter will be taken under submission. 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. On December 11, 2001, the court heard argument on the
motions and took the matters under submission. On February 4, 2002, the Court
served notice of its order granting defendants' motion to strike the Heller
complaint as a violation of its July 10, 2001 order in the Nuanes action. On
March 27, 2002, the plaintiffs filed a notice appealing the order striking the
complaint.
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 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
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 properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the three month periods ended March 31, 2002 and 2001:
Average Occupancy
Property 2002 2001
Ventura Landing Apartments 92% 93%
Orlando, Florida
Village Green Apartments 91% 94%
Altamonte Springs, Florida
West Chase Apartments 91% 89%
Lexington, Kentucky
The General Partner attributes the decrease in occupancy at Village Green
Apartments to increased market competition as a result of the slowdown in the
economy in the Altamonte Springs area.
Results of Operations
The Partnership's net income for the three months ended March 31, 2002 was
approximately $1,000, compared to net income of approximately $21,000 for the
three months ended March 31, 2001. The decrease in net income is due to an
increase in total expenses. Total expenses increased due to increases in
depreciation and interest expenses, partially offset by decreases in operating
and general and administrative expenses. Property tax expense remained
relatively constant for the comparable periods. Depreciation expense increased
at all three investment properties due to property improvements and replacements
placed into service during the past twelve months. Interest expense increased
due to the refinancing of the mortgages at Ventura Landing Apartments and
Village Green Apartments in 2001 which resulted in larger loan balances.
Operating expense decreased primarily due to a decrease in maintenance expense
at Ventura Landing Apartments and West Chase Apartments, partially offset by an
increase in insurance expense as a result of an increase in insurance premiums
at all three investment properties. General and administrative expenses
decreased for the three months ended March 31, 2002 primarily due to the
partnership management fee charged during the three months ended March 31, 2001,
as a result of the distribution from operations, and, to a lesser extent, a
decrease in management reimbursements to the General Partner allowed under the
Partnership Agreement. Also included in general and administrative expenses for
the three months ended March 31, 2002 and 2001 are costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement.
Total revenues remained relatively constant for the comparable periods, as an
increase in other income was offset by a decrease in rental income. Other income
increased primarily due to increases in laundry income at West Chase Apartments
and lease cancellation fees at Ventura Landing Apartments and West Chase
Apartments, partially offset by a decrease in interest income. Rental income
decreased primarily due to the decreases in occupancy at Village Green
Apartments and Ventura Landing Apartments and increased concessions at all three
investment properties, partially offset by an increase in the average rental
rate at all three properties and the increase 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
At March 31, 2002, the Partnership had cash and cash equivalents of
approximately $375,000, compared to approximately $383,000 at March 31, 2001.
Cash and cash equivalents increased approximately $39,000, from the
Partnership's year ended December 31, 2001, due to approximately $162,000 of
cash provided by operating activities, partially offset by approximately $72,000
of cash used in investing activities and approximately $51,000 of cash used in
financing activities. Cash used in investing activities consisted of property
improvements and replacements. Cash used in financing activities consisted of
payments of principal on the mortgages encumbering the Partnership's properties.
The Partnership invests its working capital reserves in interest bearing
accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the 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 Apartments
For 2002, the Partnership has budgeted approximately $73,000 for capital
improvements, consisting primarily of gutter replacement, structural
improvements, and air conditioning unit and floor covering replacements. The
Partnership completed approximately $31,000 of capital improvements at Village
Green Apartments as of March 31, 2002, consisting primarily of gutter
replacement and structural improvements. These improvements were funded from
operations. 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 Apartments
For 2002, the Partnership has budgeted approximately $43,000 for capital
improvements, consisting primarily of parking area upgrades, fencing
improvements, and floor covering replacement. The Partnership completed
approximately $21,000 of capital improvements at West Chase Apartments as of
March 31, 2002, consisting primarily of construction related to the damage
caused by a January 2001 fire (as
discussed in "Note C" to the financial statements) and floor covering
replacement. These improvements were funded from operations. 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 Apartments
For 2002, the Partnership has budgeted approximately $70,000 for capital
improvements consisting primarily of parking area upgrades, structural
improvements, and air conditioning unit and floor covering replacements. The
Partnership completed approximately $20,000 of capital improvements at Ventura
Landing Apartments as of March 31, 2002, consisting primarily of parking area
upgrades and floor covering replacement. These improvements were funded from
operations. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The 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 Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. 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.
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 August 2021 at which time the mortgage will be fully amortized.
The mortgage indebtedness on West Chase Apartments of approximately $1,092,000
requires monthly payments of principal and interest until the loan matures in
December 2019, at which time the loan will be fully amortized.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2010. Accordingly, prior to such date the Partnership
will need to either sell its investment properties or extend the term of the
Partnership.
The Partnership distributed the following amounts during the three months ended
March 31, 2002 and 2001 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2002 Unit March 31, 2001 Unit
Operations $ -- $ -- $ 331 $ 2.01
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 cash
available for distribution 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 2002 or subsequent periods.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 78,727 limited partnership units
("Units") in the Partnership representing 49.64% of the outstanding units at
March 31, 2002. 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 49.64% 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 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 was heard on December 11, 2001. On February 2, 2002, the Court
served its order granting in part the demurrer. The Court has dismissed without
leave to amend certain of the plaintiffs' claims. On February 11, 2002,
plaintiffs filed a motion seeking to certify a putative class comprised of all
non-affiliated persons who own or have owned units in the partnerships. The
General Partner and affiliated defendants oppose the motion. On April 29, 2002,
the Court heard argument on the motion and ordered further briefing after which
time the matter will be taken under submission. 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. On December 11, 2001, the court heard argument on the
motions and took the matters under submission. On February 4, 2002, the Court
served notice of its order granting defendants' motion to strike the Heller
complaint as a violation of its July 10, 2001 order in the Nuanes action. On
March 27, 2002, the plaintiffs filed a notice appealing the order striking the
complaint.
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 March 31, 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES III
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: May 14, 2002