FORM 10-Q---QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 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 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. 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 INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
2002 2001
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 879 $ 922
Receivables and deposits 298 488
Restricted escrows 390 392
Other assets 1,262 604
Investment in Master Loan 26,430 26,430
Investment properties:
Land 3,564 3,564
Building and related personal property 39,763 39,658
43,327 43,222
Less: Accumulated depreciation (16,688) (15,969)
26,639 27,253
$ 55,898 $ 56,089
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 163 $ 126
Tenant security deposit liabilities 538 566
Accrued property taxes 23 --
Other liabilities 783 603
Mortgage notes payable 26,368 26,457
27,875 27,752
Partners' Capital
General partner 119 123
Limited partners (199,045.2 units issued and
outstanding) 27,904 28,214
28,023 28,337
$ 55,898 $ 56,089
Note: The balance sheet at December 31, 2001 has been derived from the audited
consolidated financial statements at that date, but does not include all
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $ 2,708 $ 2,805
Interest income on investment in
Master Loan to affiliate -- 1,900
Reduction of provision for impairment loss (Note C) -- 3,176
Other income 221 270
Total revenues 2,929 8,151
Expenses:
Operating 1,245 1,304
General and administrative 152 171
Depreciation 719 775
Interest 463 485
Property taxes 208 210
Total expenses 2,787 2,945
Net income $ 142 $ 5,206
Net income allocated to general partner (1%) $ 1 $ 52
Net income allocated to limited partners (99%) 141 5,154
$ 142 $ 5,206
Net income per limited partnership unit $ 0.71 $ 25.89
Distributions per limited partnership unit $ 2.27 $ 39.02
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342.0 $ 1 $200,342 $200,343
Partners' capital
at December 31, 2000 199,045.2 $ 118 $ 36,898 $ 37,016
Distributions to partners -- -- (7,767) (7,767)
Net income for the three months
ended March 31, 2001 -- 52 5,154 5,206
Partners' capital
at March 31, 2001 199,045.2 $ 170 $ 34,285 $ 34,455
Partners' capital at
December 31, 2001 199,045.2 $ 123 $ 28,214 $ 28,337
Distributions to partners -- (5) (451) (456)
Net income for the three months
ended March 31, 2002 -- 1 141 142
Partners' capital at
March 31, 2002 199,045.2 $ 119 $ 27,904 $ 28,023
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net income $ 142 $ 5,206
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 738 806
Reduction of provision for impairment loss -- (3,176)
Change in accounts:
Receivables and deposits 190 109
Other assets (677) (566)
Accounts payable 37 (61)
Tenant security deposit liabilities (28) (1)
Accrued property taxes 23 24
Other liabilities 180 143
Net cash provided by operating activities 605 2,484
Cash flows from investing activities:
Net withdrawals from restricted escrows 2 95
Property improvements and replacements (105) (52)
Principal receipts on Master Loan -- 6,785
Net cash (used in) provided by investing activities (103) 6,828
Cash flows from financing activities:
Distributions to partners (456) (7,767)
Payments on mortgage notes payable (89) (66)
Net cash used in financing activities (545) (7,833)
Net (decrease) increase in cash and cash equivalents (43) 1,479
Cash and cash equivalents at beginning of period 922 2,036
Cash and cash equivalents at end of period $ 879 $ 3,515
Supplemental disclosure of cash flow information:
Cash paid for interest $ 449 $ 455
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Institutional Properties (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), which is ultimately owned by Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, 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-K for the fiscal
year ended December 31, 2001.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") 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. (See "Note
D" for detailed disclosure of the Partnership's segments).
Reclassifications: Certain reclassifications have been made to the 2001
information to conform to the 2002 presentation. These reclassifications had no
impact on net income or partners' capital as previously reported.
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.
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.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $143,000 and $153,000 for the
three months ended March 31, 2002 and 2001, respectively, which is included in
operating expenses.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $112,000 and $139,000 for the
three months ended March 31, 2002 and 2001, respectively.
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 $98,000 and $60,000, respectively, for insurance coverage and fees
associated with policy claims administration.
Note C - Net Investment in Master Loan
The Partnership was formed for the benefit of its limited partners to lend funds
to Consolidated Capital Equity Partners ("CCEP"), a California general
partnership. The general partner of CCEP is an affiliate of the General Partner.
The Partnership loaned funds to CCEP subject to a nonrecourse note with a
participation interest (the "Master Loan"). At March 31, 2002, the recorded
investment in the Master Loan was considered to be impaired under SFAS 114
"Accounting by Creditors for Impairment of a Loan". The Partnership measures the
impairment of the loan based upon the fair value of the collateral, as repayment
of the loan is expected to be provided solely by the collateral. For the three
months ended March 31, 2001, the Partnership recorded approximately $1,900,000,
of interest income based upon "Excess Cash Flow" generated (as defined in the
terms of the New Master Loan Agreement). There was no interest income recorded
for the three months ended March 31, 2002.
The fair value of the collateral properties which on a combined basis secure the
Master Loan was determined using the net operating income of the collateral
properties capitalized at a rate deemed reasonable for the type of property
adjusted for market conditions, the physical condition of the property and other
factors, or by obtaining an appraisal by an independent third party. This
methodology has not changed from that used in prior calculations performed by
the General Partner in determining the fair value of the collateral properties.
The approximate $3,176,000 reduction in the provision for impairment loss
recognized during the three months ended March 31, 2001 is attributed to an
increase in the net realizable value of the collateral properties and to the
payment of principal of the Master Loan from the sales proceeds of Magnolia
Trace in January 2001. There was no change in the provision for impairment loss
during the three months ended March 31, 2002. The General Partner evaluates the
net realizable value on a semi-annual basis or as circumstance dictate that it
should be analyzed.
Interest, calculated on the accrual basis, due to the Partnership pursuant to
the terms of the Master Loan Agreement, but not recognized in the consolidated
statements of operations due to the impairment of the loan, totaled
approximately $11,769,000 and $10,640,000 for the three months ended March 31,
2002 and 2001, respectively. Interest income is recognized on the cash basis as
required by SFAS 114. At March 31, 2002 and December 31, 2001, such cumulative
unrecognized interest totaling approximately $356,793,000 and $345,024,000 was
not included in the balance of the investment in Master Loan. In addition, all
of the collateral properties are encumbered by first mortgages totaling
approximately $54,511,000 which are senior to the Master Loan. Accordingly, this
fact has been taken into consideration in determining the fair value of the
Master Loan.
During the three months ended March 31, 2002, the Partnership did not receive
any payments on the Master Loan. During the three months ended March 31, 2001,
the Partnership received approximately $6,785,000, in principal payments on the
Master Loan. During the three months ended March 31, 2001, approximately
$5,987,000 was received representing net proceeds from the sale of Magnolia
Trace and approximately $789,000 was received representing additional proceeds
from the refinancing of the mortgages encumbering nine of investment properties
in 2000. Approximately $9,000 was received during the three months ended March
31, 2001 representing cash received on certain investments held by CCEP, which
are required to be transferred to the Partnership per the Master Loan Agreement.
Terms of the Master Loan Agreement
The Master Loan matured in November 2000. The General Partner had been
negotiating with CCEP with respect to its options which included foreclosing on
the properties which collateralize the Master Loan or extending the terms of the
loan. The General Partner has decided to foreclose on the properties that
collateralize the Master Loan. The General Partner will begin the process of
foreclosure or executing deeds in lieu of foreclosure during the second quarter
of 2002 on all the properties in CCEP. As the deeds are executed, title in the
properties owned by CCEP will be transferred to the Partnership, subject to the
existing liens on such properties, including the first mortgage loans. As a
result, the Partnership will become responsible for the operations of such
properties.
Note D - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has two reportable segments: residential properties and
commercial properties. The Partnership's residential property segment consist of
one apartment complex located in North Carolina and one multiple-use facility
consisting of apartment units and commercial space located in Pennsylvania. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less. The commercial property leases space to various medical offices,
various career services facilities and a credit union at terms ranging from two
months to fifteen years.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit before
depreciation. The accounting policies of the reportable segments are the same as
those described in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2001.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segments are investment properties that offer
different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.
Segment information for the three months ended March 31, 2002 and 2001 is shown
in the tables below (in thousands). The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segments.
2002 Residential Commercial Other Totals
Rental income $ 2,445 $ 263 $ -- $ 2,708
Other income 191 29 1 221
Interest expense 406 57 -- 463
Depreciation 698 21 -- 719
General and administrative
expenses -- -- 152 152
Segment profit (loss) 373 (80) (151) 142
Total assets 27,722 1,302 26,874 55,898
Capital expenditures for
investment properties 97 8 -- 105
2001 Residential Commercial Other Totals
Rental income $ 2,407 $ 398 $ -- $ 2,805
Other income 190 79 1 270
Interest income on investment
in Master Loan -- -- 1,900 1,900
Reduction of provision for
impairment loss -- -- 3,176 3,176
Interest expense 410 75 -- 485
Depreciation 752 23 -- 775
General and administrative
expenses -- -- 171 171
Segment profit 238 62 4,906 5,206
Total assets 33,110 2,014 27,737 62,861
Capital expenditures for
investment properties 31 21 -- 52
Note E - 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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion 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 two properties, The Loft
Apartments and The Sterling Apartment Homes and Commerce Center ("The
Sterling"). The Sterling is a multiple-use facility which consists of an
apartment complex and commercial space. The following table sets forth the
average occupancy of the properties for the three months ended March 31, 2002
and 2001:
Average Occupancy
Property 2002 2001
The Loft Apartments 94% 90%
Raleigh, North Carolina
The Sterling Apartment Homes 93% 95%
The Sterling Commerce Center 54% 90%
Philadelphia, Pennsylvania
The increase in occupancy at The Loft Apartments is due to increased marketing
efforts at the property. The decrease in occupancy at The Sterling Commerce
Center is due to the loss of a major tenant in late December 2001. The
Partnership is actively seeking a tenant to lease the space formerly occupied by
this major tenant.
Results of Operations
The Partnership's net income for the three months ended March 31, 2002 was
approximately $142,000 compared to net income of approximately $5,206,000 for
the corresponding period in 2001. The decrease in net income for the three
months ended March 31, 2002 was primarily due to the $3,176,000 reduction of the
provision for impairment loss on the investment in the Master Loan and
approximately $1,900,000 of interest payments received on the Master Loan and
therefore recognized as income. No such payments were received in 2002. Interest
income is only recognized to the extent that actual cash is received. The
receipt of cash is dependent on the corresponding cash flow of the properties
which secure the Master Loan. The reduction of the provision for impairment loss
on the Master Loan was recognized due to an increase in the net realizable value
of the collateral properties and payment of principal on the Master Loan from
the sales proceeds of Magnolia Trace during the three months ended March 31,
2001. The General Partner evaluates the net realizable value on a semi-annual
basis or when circumstances dictate that it should be analyzed.
Excluding the reduction of provision for impairment loss and the interest income
on the Master Loan, the Partnership's net income for the three months ended
March 31, 2002 and 2001 was approximately $142,000 and $130,000, respectively.
The increase for the three months ended March 31, 2002 was due to a decrease in
total expenses which was largely offset by a decrease in total revenues. The
decrease in total revenues is due to decreases in rental and other income. The
decrease in rental revenue is due to a decrease in occupancy at The Sterling
Commerce Center and The Sterling Apartment Homes and a decrease in average
rental rates at The Loft Apartments. This was partially offset by an increase in
occupancy at The Loft Apartments and an increase in average rental rates at The
Sterling Commerce Center and The Sterling Apartment Homes. The decrease in other
income is due to a decrease in interest income. Interest income decreased due to
lower average cash balances in interest bearing accounts.
Total expenses decreased due to decreases in operating, depreciation, interest
and general and administrative expenses. Operating expenses decreased due to a
decrease in utility and maintenance expenses at The Sterling. Depreciation
expense decreased due to capital improvements and replacements becoming fully
amortized during the past year at The Sterling. Interest expense decreased as a
result of scheduled principal payments on the mortgages encumbering the
investment properties.
General and administrative expenses decreased for the three months ended March
31, 2002 due to a decrease 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.
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 $879,000 compared to approximately $3,515,000 at March 31, 2001.
Cash and cash equivalents decreased approximately $43,000 since December 31,
2001 due to approximately $545,000 and $103,000 of net cash used in financing
and investing activities, respectively, partially offset by approximately
$605,000 of cash provided by operating activities. Cash used in investing
activities consisted of property improvements and replacement slightly offset by
net withdrawals from escrow accounts maintained by the mortgage lenders. Cash
used in financing activities consisted of distributions to partners and
principal payments made on the mortgages encumbering the Registrant's
properties. 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 Partnership 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.
The Loft
The Partnership budgeted approximately $111,000 for capital improvements during
2002 consisting of floor covering replacements, water submetering and swimming
pool improvements. During the three months ended March 31, 2002, the Partnership
completed approximately $52,000 of capital improvements, consisting primarily of
floor covering replacements, water submetering and swimming pool improvements.
These improvements were funded from operating cash flow and replacement
reserves. 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 Sterling
The Partnership budgeted approximately $1,684,000 for capital improvements
during 2002 consisting primarily of window replacement and, to a lesser extent,
appliance and floor covering replacements. During the three months ended March
31, 2002, the Partnership completed approximately $53,000 of capital
improvements consisting primarily of parking area resurfacing, floor covering
replacements and office computers. These improvements were funded primarily from
operating cash flow. 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 improvements at the Partnership's properties will be made
only to the extent of cash available from operations and 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. The mortgage
indebtedness of approximately $26,368,000 requires monthly payments of principal
and interest and balloon payments of approximately $3,903,000 and $19,975,000 on
December 1, 2005 and October 1, 2008, respectively. The General Partner will
attempt to refinance such indebtedness and/or sell the properties prior to such
maturity date. If the properties cannot be refinanced or sold for a sufficient
amount, the Registrant may risk losing such properties through foreclosure.
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 $ 456 $ 2.27 $ -- $ --
Sale (1) -- -- 5,987 30.08
Refinancing (2) -- -- 789 3.96
Surplus (3) -- -- 991 4.98
$ 456 $ 2.27 $7,767 $39.02
(1) From the sale of Magnolia Trace Apartments owned by CCEP and received as a
principal payment on the Master Loan.
(2) From refinancings of all CCEP properties and received as a principal
payment on the Master Loan.
(3) Consists of receipt of principal and interest payments on the Master Loan
from operations of the collateral properties.
The Registrant's cash available for distribution is reviewed on a monthly basis.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance that
the Partnership will generate sufficient funds from operations, after planned
capital improvement expenditures, to permit further distributions to its
partners during the remainder of 2002 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 126,615 limited partnership units
(the "Units") in the Partnership representing 63.61% 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 63.61% of the outstanding Units, AIMCO is in a position to
control all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of its affiliation with
the General Partner.
CCEP Property Operations
CCIP has decided to foreclose on the properties that collaterize the Master
Loan. During the three months ended March 31, 2002, CCIP will begin the process
of foreclosure or executing deeds in lieu of foreclosure. As the deeds are
executed, title in the properties currently owned by CCEP will be vested in
CCIP, subject to the existing liens on the properties including the first
mortgage loans. When CCEP no longer has title to the properties, it will be
dissolved.
As a result of the decision to liquidate, CCEP changed its basis of accounting
for its financial statements at March 31, 2002, to the liquidation basis of
accounting. Consequently, assets have been valued at estimated net realizable
value and liabilities are presented at their estimated settlement amounts. The
valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are substantial uncertainties in carrying out the
liquidation. The actual realization of assets and settlement of liabilities
could be higher or lower than amounts indicated and is based upon estimates of
the General Partner of CCEP as of the date of the consolidated financial
statements.
For the three months ended March 31, 2002, CCEP's net loss totaled approximately
$11,442,000 on total revenues of approximately $4,371,000. CCEP recognizes
interest expense on the Master Loan Agreement obligation according to the note
terms, although payments to the Partnership are required only to the extent of
Excess Cash Flow, as defined therein. During the three months ended March 31,
2002 and 2001, CCEP's statement of operations includes total interest expense
attributable to the Master Loan of approximately $11,769,000 and $10,640,000,
respectively, which represents interest accrued in excess of required payments.
CCEP is expected to continue to generate operating losses as a result of such
interest accruals and noncash charges for depreciation.
During the three months ended March 31, 2001, CCEP paid approximately $6,785,000
in principal payments on the Master Loan. These amounts were paid from the sales
proceeds of one of CCEP's investment properties and on certain investments by
CCEP, which are required to be transferred to the Partnership per the Master
Loan Agreement. No payments were made during the three months ended March 31,
2002.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks associated with its Master Loan.
Receipts (interest income) on the Loan are based upon the operations and cash
flow of the underlying investment properties that collateralize the Master Loan.
Both the income and expenses of operating the investment properties are subject
to factors outside the Partnership's control, such as an oversupply of similar
properties resulting from overbuilding, increases in unemployment or population
shifts, reduced availability of permanent mortgage financing, changes in zoning
laws or changes in the patterns or needs of users. The investment properties are
also susceptible to the impact of economic and other conditions outside of the
control of the Partnership as well as being affected by current trends in the
market area in which they operate. In this regard, the General Partner of the
Partnership closely monitors the performance of the properties collateralizing
the loans. Because the Master Loan is considered impaired under Statement of
Financial Accounting Standard No. 114, "Accounting by Creditors for Impairment
of a Loan", interest rate fluctuations do not affect the recognition of income,
as income is only recognized to the extent of cash flow. Therefore, market risk
factors do not affect the Partnership's results of operations as it relates to
the Master Loan.
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for its
borrowing activities used to maintain liquidity and fund business operations. To
mitigate the impact of fluctuations in U.S. interest rates, the Partnership
maintains its debt as fixed rate in nature by borrowing on a long-term basis.
Based on interest rates at March 31, 2002, a 100 basis point increase or
decrease in market interest rates would not have a material impact on the
Partnership.
The following table summarizes the Partnership's debt obligations at March 31,
2002. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of March 31, 2002.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 6.80%
(in thousands)
2002 $ 257
2003 371
2004 393
2005 4,320
2006 362
Thereafter 20,665
Total $ 26,368
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 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:
S-K Reference
Number Description
99.1 Consolidated Capital Equity Partners, L.P., unaudited
financial statements for the three months ended March 31,
2002 and 2001.
b) Reports on Form 8-K during the quarter ended March 31, 2002:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
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 15, 2002
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
March 31, 2002 and 2001
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
March 31, 2002
Assets
Cash and cash equivalents $ 1,205
Receivables and deposits 224
Restricted escrow 625
Other assets 342
Investment in affiliated partnerships (Note F) 1,371
Investment properties 94,660
98,427
Liabilities
Accounts payable 314
Tenant security deposit liabilities 440
Accrued property taxes 370
Other liabilities 727
Mortgage notes payable 54,511
Master Loan and interest payable 42,065
98,427
Net liabilities in liquidation $ --
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
b)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31,
2001
(Note)
Assets
Cash and cash equivalents $ 1,321
Receivables and deposits 280
Restricted escrows 615
Other assets 1,514
Investment properties:
Land 6,904
Building and related personal property 80,399
87,303
Less accumulated depreciation (68,315)
18,988
$ 22,718
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 527
Tenant security deposit liabilities 440
Accrued property taxes 256
Other liabilities 564
Mortgage notes 54,834
Master loan and interest payable (Note D) 371,455
428,076
Partners' Deficit
General partner (4,054)
Limited partners (401,304)
(405,358)
$ 22,718
Note: The balance sheet at December 31, 2001 has been derived from the audited
consolidated financial statements at that date, but does not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
c)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
(restated)
Revenues:
Rental income $ 3,877 $ 4,123
Other income 494 422
Total revenues 4,371 4,545
Expenses:
Operating 1,839 1,840
General and administrative 228 184
Depreciation 564 1,020
Property taxes 307 294
Interest 12,875 11,777
Total expenses 15,813 15,115
Loss from continuing operations (11,442) (10,570)
Loss from discontinued operations -- (35)
Gain on sale of discontinued operations (Note D) -- 4,377
Net loss $(11,442) $ (6,228)
Net loss allocated to general partner (1%) $ (114) $ (62)
Net loss allocated to limited partners (99%) (11,328) (6,166)
$(11,442) $ (6,228)
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
d)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands)
General Limited
Partners Partners Total
Partners' deficit at
December 31, 2000 $ (3,685) $(364,783) $(368,468)
Net loss for the three months
ended March 31, 2001 (62) (6,166) (6,228)
Partners' deficit
at March 31, 2001 $ (3,747) $(370,949) $(374,696)
Partners' deficit
at December 31, 2001 $ (4,054) $(401,304) $(405,358)
Net loss for the three months
ended March 31, 2002 (114) (11,328) (11,442)
Partners' deficit at
March 31, 2002 $ (4,168) $(412,632) $(416,800)
Adjustment to liquidation basis
(Note E) 416,800
Net liabilities in liquidation
of March 31, 2002 $ --
See Accompanying Notes to Consolidated Financial Statements
EXHIBIT 99.1 (Continued)
e)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net loss $(11,442) $ (6,228)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 604 1,095
Gain on sale of discontinued operations -- (4,377)
Change in accounts:
Receivables and deposits 56 318
Other assets (430) (143)
Accounts payable 36 (246)
Tenant security deposit liabilities -- 20
Accrued property taxes 114 150
Other liabilities 163 (63)
Accrued interest on Master Loan 11,769 8,740
Net cash provided by (used in) operating activities 870 (734)
Cash flows from investing activities:
Property improvements and replacements (617) (676)
Proceeds from sale of investment property -- 6,019
Net deposits to restricted escrows (10) (111)
Net cash (used in) provided by investing activities (627) 5,232
Cash flows from financing activities:
Principal payments on Master Loan -- (6,785)
Principal payments on notes payable (323) (298)
Loan costs paid (36) (39)
Net cash used in financing activities (359) (7,122)
Net decrease in cash and cash equivalents (116) (2,624)
Cash and cash equivalents at beginning of period 1,321 5,894
Cash and cash equivalents at end of period $ 1,205 $ 3,270
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,068 $ 2,993
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
On March 31, 2002, Consolidated Capital Equity Partners, L.P. ("the Partnership"
or "CCEP") adopted the liquidation basis of accounting due to the Partnership
receiving notification from Consolidated Capital Investment Partners, L.P.
("CCIP"), the holder of the nonrecourse note ("Master Loan") and a related
party, of its intention to exercise its remedy under the Master Loan agreement
and to foreclose or to execute a deed in lieu of foreclosure on the investment
properties held by the Partnership. The Master Loan matured in November 2000.
The Partnership does not have the means to satisfy its obligation under the
Master Loan. No other sources of additional financing have been identified by
the Partnership, nor does ConCap Holdings, Inc. (the "General Partner") have any
other plans to remedy the liquidity problems the Partnership is experiencing.
Upon completion of the foreclosures or execution of the deeds in lieu of
foreclosure, the Partnership will cease to exist as a going concern, and it will
be terminated.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for consolidated financial statements at March
31, 2002, to the liquidation basis of accounting. Consequently, assets have been
valued at estimated net realizable value and liabilities are presented at their
estimated settlement amounts, including estimated costs associated with
completing the liquidation and estimated operations of the investment
properties. The valuation of assets and liabilities requires many estimates and
assumptions. There are substantial uncertainties in completing the liquidation.
The actual realization of assets and settlement of liabilities could be higher
or lower than amounts indicated.
The General Partner is ultimately owned by Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust.
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.
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.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Partnership's properties for providing property management services.
The Partnership paid to such affiliates approximately $231,000 and $230,000 for
the three months ended March 31, 2002 and 2001, respectively, which is included
in operating expenses and loss from discontinued operations.
The Partnership is also subject to an Investment Advisory Agreement between the
Partnership and an affiliate of the General Partner. This agreement provides for
an annual fee, payable in monthly installments, to an affiliate of the General
Partner for advising and consulting services for CCEP's properties. The
Partnership paid to such affiliates approximately $66,000 and $63,000 for the
three months ended March 31, 2002 and 2001, respectively, which is included in
general and administrative expenses.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $148,000 and $94,000 for the
three months ended March 31, 2002 and 2001, respectively, which is included in
general and administrative expenses and investment properties. Included in these
amounts are fees related to construction management services provided by an
affiliate of the General Partner of approximately $39,000 and $18,000 for the
three months ended March 31, 2002 and 2001, respectively. The construction
management service fees are calculated based on a percentage of current year
additions to investment properties.
In connection with the sale of Magnolia Trace in January 2001, the Partnership
paid a fee of $206,000 in compensation for its role in the sale. This
Partnership fee is included in gain on sale of discontinued operations.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from CCIP pursuant to the
Master Loan which is described more fully in the 2001 annual report. There were
no interest payments made during the three months ended March 31, 2002. Such
interest payments totaled approximately $1,900,000 for the three months ended
March 31, 2001.
There were no advances on the Master Loan during the three months ended March
31, 2002 or 2001. During the three months ended March 31, 2001 CCEP paid
approximately $6,785,000 to CCIP as principal payments on the Master Loan. There
were no principal payments made on the Master Loan during the three months ended
March 31, 2002.
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 $224,000 and $259,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Note C - Master Loan and Accrued Interest Payable
The Master Loan principal and accrued interest payable balances at March 31,
2002 and December 31, 2001, are approximately $383,224,000 and $371,455,000,
respectively.
Until foreclosure is complete, interest will accrue on the Master Loan at a
fluctuating rate per annum, adjusted annually on July 15 by the percentage
change in the U.S. Department of Commerce Implicit Price Deflator for the Gross
National Product, subject to an interest rate ceiling of 12.5%. Payments are
currently payable quarterly in an amount equal to "Excess Cash Flow", generally
defined in the Master Loan as net cash flow from operations after third-party
debt service and capital expenditures. Any unpaid interest is added to
principal, and compounded annually. Any net proceeds from the sale or
refinancing of any of CCEP's properties are paid to CCIP under the terms of the
Master Loan Agreement.
During the three months ended March 31, 2002, CCEP did not make any principal
payments on the Master Loan to CCIP. During the three months ended March 31,
2001, CCEP paid approximately $6,785,000 to CCIP as principal payments on the
Master Loan. There were no advances on the Master Loan for the three months
ended March 31, 2002 or 2001.
Note D - Sale of Property
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which established standards for the way that public business
enterprises report information about long-lived assets that are either being
held for sale or have already been disposed of by sale or other means. The
standard requires that results of operations for a long-lived asset that is
being held for sale or has already been disposed of be reported as a
discontinued operation on the statement of operations. As a result, the
accompanying consolidated statements of operations have been restated as of
January 1, 2001 to reflect the operations of Magnolia Trace as loss from
discontinued operations. The Partnership recognized a loss from discontinued
operations for the three months ended March 31, 2001 of approximately $35,000 on
revenues of approximately $39,000.
On January 19, 2001, the Partnership sold Magnolia Trace, located in Baton
Rouge, Louisiana, to an unaffiliated third party for net sales proceeds of
approximately $6,019,000, after payment of closing costs. The Partnership used
all of the proceeds from the sale of the property as a payment on the Master
Loan principal as required by the Master Loan Agreement. The sale resulted in a
gain on sale of discontinued operations of approximately $4,377,000. In
conjunction with the sale, a fee of approximately $206,000 was paid to the
General Partner in accordance with the Partnership Agreement.
Note E - Adjustment to Liquidation Basis of Accounting
At March 31, 2002, in accordance with the liquidation basis of accounting,
assets were adjusted to their estimated net realizable value and liabilities
were adjusted to their estimated settlement amount. The net adjustment required
to convert to the liquidation basis of accounting was a decrease in net
liabilities of approximately $416,800,000 which is included in the Statement of
Changes in Partners' Deficit/Net Liabilities In Liquidation. The adjustments are
summarized as follows:
Increase in
Net Assets
(in thousands)
Adjustment of book value of property and
improvements to estimated net realizable value $ 75,868
Adjustment for estimated net realizable value of
investment in affiliated partnerships 1,371
Adjustment of master loan and accrued interest to
estimated settlement amount 341,159
Adjustment of other assets and liabilities, net (1,598)
Decrease in net liabilities $416,800
Note F - Investment in Affiliated Partnerships
The Partnership has investments in the following affiliated partnerships:
Estimated
Ownership Net Realizable
Partnership Type of Ownership Percentage Value
Consolidated Capital Non-controlling
Growth Fund General Partner 0.40% $ 47
Consolidated Capital Non-controlling
Properties III General Partner 1.85% 27
Consolidated Capital Non-controlling
Properties IV General Partner 1.85% 1,297
$1,371
Prior to the adoption of the liquidation basis of accounting, the Partnership
did not recognize an investment in these affiliated partnerships in its
consolidated financial statements as these investment balances had been reduced
to zero as a result of the receipt of distributions from the affiliated
partnerships in prior periods exceeding the investment balance of the
Partnership. However, due to the adoption of the liquidation basis of
accounting, the investments in these affiliated partnerships have been valued at
their estimated fair value and included in the Consolidated Statement of Net
Liabilities in Liquidation as of March 31, 2002.