UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 2002
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _________to _________
Commission file number 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of small business issuer as specified in its charter)
California 94-2382571
(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)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2002
Assets
Cash and cash equivalents $ 467
Receivables and deposits 524
Restricted escrows 58
Other assets 785
Investment properties:
Land $ 4,610
Buildings and related personal property 44,097
48,707
Less accumulated depreciation (32,543) 16,164
$ 17,998
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 129
Tenant security deposit liabilities 306
Accrued property taxes 366
Other liabilities 650
Mortgage notes payable 35,260
Partners' Deficit
General partner $ (5,441)
Limited partners (49,196 units issued and
outstanding) (13,272) (18,713)
$ 17,998
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Revenues: (Restated) (Restated)
Rental income $ 2,590 $ 2,887 $ 5,259 $ 5,663
Other income 140 140 317 312
Casualty gain (Note C) -- -- -- 57
Total revenues 2,730 3,027 5,576 6,032
Expenses:
Operating 1,155 1,231 2,194 2,461
General and administrative 246 167 356 332
Depreciation 589 577 1,174 1,147
Interest 645 566 1,292 1,124
Property taxes 189 212 377 392
Loss on early extinguishment of debt
(Note D) -- 64 -- 64
Total expenses 2,824 2,817 5,393 5,520
Net (loss) income $ (94) $ 210 $ 183 $ 512
Net (loss) income allocated to general
partner (1%) $ (1) $ 2 $ 2 $ 5
Net (loss) income allocated to limited
partners (99%) (93) 208 181 507
$ (94) $ 210 $ 183 $ 512
Net (loss) income per limited partnership
unit $ (1.89) $ 4.23 $ 3.68 $ 10.31
Distribution per limited partnership unit $ 30.59 $ 10.40 $ 30.59 $ 22.07
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $ 49,196 $ 49,197
Partners' deficit at
December 31, 2001 49,196 $(5,428) $(11,948) $(17,376)
Distribution to partners -- (15) (1,505) (1,520)
Net income for the six months
ended June 30, 2002 -- 2 181 183
Partners' deficit at
June 30, 2002 49,196 $(5,441) $(13,272) $(18,713)
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2002 2001
Cash flows from operating activities:
Net income $ 183 $ 512
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,174 1,147
Amortization of loan costs 34 39
Bad debt expense, net -- 85
Casualty gain -- (57)
Loss on early extinguishment of debt -- 64
Change in accounts:
Receivables and deposits (225) (774)
Other assets (161) (95)
Accounts payable (17) (181)
Tenant security deposit liabilities 29 42
Accrued property taxes 366 327
Other liabilities 219 (111)
Net cash provided by operating activities 1,602 998
Cash flows from investing activities:
Property improvements and replacements (372) (802)
Net withdrawals from restricted escrows 235 96
Insurance proceeds received -- 76
Net cash used in investing activities (137) (630)
Cash flows from financing activities:
Principal payments on mortgage notes payable (122) --
Distributions to partners (1,520) (1,097)
Proceeds from refinancing -- 10,790
Repayment of mortgage note payable -- (6,000)
Loan costs paid -- (356)
Net cash (used in) provided by financing
activities (1,642) 3,337
Net (decrease) increase in cash and cash equivalents (177) 3,705
Cash and cash equivalents at beginning of period 644 1,340
Cash and cash equivalents at end of period $ 467 $ 5,045
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,259 $ 1,121
At December 31, 2000, accounts payable included approximately $83,000 for
property improvements and replacements which are included in property
improvements and replacements for the six months ended June 30, 2001.
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital Growth
Fund (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 Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 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 financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
2001. The General Partner is a wholly owned subsidiary of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Effective April 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4,44
and 64". SFAS No. 4 "Reporting Gains and Losses from Extinguishment of Debt,"
required that all gains and losses from extinguishment of debt be aggregated
and, if material, classified as an extraordinary item. SFAS No. 145 rescinds
SFAS No. 4, and accordingly, gains and losses from extinguishment of debt should
only be classified as extraordinary if they are unusual in nature and occur
infrequently. Neither of these criteria applies to the Partnership. As a result,
the accompanying statements of operations have been restated to reflect the loss
on early extinguishment of debt at Doral Springs Apartments (see "Note D") in
operations rather than as an extraordinary item.
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 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 all of the Registrant's properties for providing property management
services. The Registrant paid to such affiliates approximately $285,000 and
$304,000 for the six months ended June 30, 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 $174,000 and $192,000 for the
six months ended June 30, 2002 and 2001, respectively, which is included in
general and administrative expenses.
The Partnership Agreement provides for a fee equal to 9% of the total
distributions made to the limited partners from "cash available for
distribution" (as defined in the Agreement) to be paid to the General Partner
for executive and administrative management services. During the six months
ended June 30, 2002 and 2001, affiliates of the General Partner received
approximately $135,000 and $98,000, respectively, for providing these services,
which is included in general and administrative expenses.
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 six months ended June 30, 2002
and 2001, the Partnership was charged by AIMCO and its affiliates approximately
$135,000 and $187,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note C - Casualty Event
During the six months ended June 30, 2001, a net casualty gain of approximately
$57,000 was recorded at Doral Springs Apartments. The casualty gain related to a
flood that occurred in October 2000. The gain was a result of the receipt of
insurance proceeds of approximately $76,000 and the write-off of the net book
value of the destroyed assets totaling approximately $19,000.
Note D - Refinancing and Mortgage Note Payable
On June 28, 2001, the Partnership refinanced the mortgage encumbering Doral
Springs Apartments. The refinancing replaced indebtedness of approximately
$6,000,000 with a new mortgage in the amount of $10,790,000. The new mortgage
carries a stated interest rate of 7.53%. Interest on the old mortgage was 7.33%.
Principal and interest payments on the mortgage loan of approximately $87,000
are due monthly until the loan matures in July 2021 at which time the loan will
be fully amortized. Total capitalized loan costs were approximately $356,000 at
June 30, 2001. The Partnership recognized a loss on the early extinguishment of
debt of approximately $64,000 due to the write-off of unamortized loan costs.
Note E - Legal Proceedings
The Partnership is a party to a certain legal action resulting from its
operating activities. This action is a routine litigation and administrative
proceeding arising in the ordinary course of business and is not expected to
have a material adverse effect on the financial condition or results of
operations of the Partnership.
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
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 four apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 2002 and 2001:
Average Occupancy
Property 2002 2001
Breckinridge Square 84% 90%
Louisville, Kentucky
Churchill Park 75% 90%
Louisville, Kentucky
The Lakes 84% 91%
Raleigh, North Carolina
Doral Springs 95% 97%
Miami, Florida
The General Partner attributes the decrease in occupancy at all of the
investment properties to a slower economy and recent job layoffs.
Results of Operations
The Partnership's net loss for the three months ended June 30, 2002 was
approximately $94,000 and net income for the six months ended June 30, 2002 was
approximately $183,000 as compared to net income of approximately $210,000 and
$512,000 for the three and six months ended June 30, 2001.
The decrease in net income for the three months ended June 30, 2002 is due to a
decrease in total revenues and an increase in total expenses. The decrease in
net income for the six months ended June 30, 2002 is due to a decrease in total
revenues offset by a decrease in total expenses.
Total revenues decreased for the three and six months ended June 30, 2002
primarily due to a decrease in rental income and the recognition of a casualty
gain in 2001 (see "Item 1. Financial Statements - Note C"). Rental income
decreased due to a decrease in average occupancy at all four of the investment
properties and due to a decrease in average rental rates at Breckenridge Square
Apartments, Churchill Park Apartments, and The Lakes Apartments.
Total expenses for the three months ended June 30, 2002 increased due to
increases in interest and general and administrative expenses offset by a
decrease in operating expenses and the recognition of a loss on early
extinguishment of debt as a result of the refinancing of the mortgage
encumbering Doral Springs in June 2001 see "Item 1. Financial Statements - Note
D"). Total expenses decreased for the six months ended June 30, 2002 due to a
decrease in operating expenses and the recognition of a loss on early
extinguishment of debt partially offset by an increase in interest expense.
Operating expense decreased due to decreases in utility expense and salary
expense at all four investment properties. Interest expense increased due to the
refinancing of the mortgage encumbering Doral Springs Apartments in June of 2001
which resulted in a larger loan balance.
General and administrative expenses increased due to an increase in partnership
management fees which is the result of more cash from operations being
distributed to the partners during the three and six months ended June 30, 2002.
Included in general and administrative expenses for the three and six months
ended June 30, 2002 and 2001 are management reimbursements to the Corporate
General Partner as allowed under the Partnership Agreement. In addition, costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included in general and administrative expenses.
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 expense. 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 June 30, 2002, the Partnership had cash and cash equivalents of approximately
$467,000 compared to approximately $5,045,000 at June 30, 2001. Cash and cash
equivalents decreased approximately $177,000 from December 31, 2001 due to
approximately $1,642,000 of cash used in financing and approximately $137,000 of
cash used in investing activities partially offset by approximately $1,602,000
of cash provided by operating activities. Cash used by investing activities
consisted of property improvements and replacements partially offset by net
withdrawals from restricted escrows maintained by the mortgage lender. Cash used
in financing activities consisted of principal payments on the mortgage
encumbering Doral Springs Apartments and distributions to partners. The
Partnership invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Breckinridge Square Apartments: For 2002, the Partnership has budgeted
approximately $147,000 for capital improvements for HVAC, appliance, water meter
and floor covering replacements. The Partnership completed approximately
$108,000 in capital expenditures at Breckinridge Square Apartments during the
six months ended June 30, 2002, consisting primarily of plumbing fixtures,
heating upgrades, water heaters, and appliance and floor covering replacements.
These improvements were funded from operations. Additional improvements may be
considered and will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
Churchill Park Apartments: For 2002, the Partnership has budgeted approximately
$208,000 for capital improvements for interior painting of common areas, water
conservation enhancement, and door, air conditioning and floor covering
replacements. The Partnership completed approximately $86,000 in capital
expenditures at Churchill Park Apartments as of June 30, 2002, consisting
primarily of air conditioning and plumbing upgrades, floor covering, water/sewer
upgrades, and appliance replacements. These improvements were funded from
operations. Additional improvements may be considered and will depend on the
physical condition of the property as well as anticipated cash flow generated by
the property.
The Lakes Apartments: For 2002, the Partnership has budgeted approximately
$205,000 for capital improvements, consisting primarily of floor covering,
appliance, and water heater replacements. The Partnership completed
approximately $134,000 in capital expenditures at The Lakes Apartments as of
June 30, 2002, consisting primarily of structural improvements and floor
covering and water heater replacements. These improvements were funded from
operations and replacement reserves. Additional improvements may be considered
and will depend on the physical condition of the property as well as anticipated
cash flow generated by the property and replacement reserves.
Doral Springs Apartments: For 2002, the Partnership has budgeted approximately
$108,000 for capital improvements, consisting primarily of floor covering, air
conditioning and appliance replacements. The Partnership completed approximately
$44,000 in capital expenditures at Doral Springs Apartments as of June 30, 2002,
consisting primarily of office computers, roofing, lighting, and floor covering
and appliance replacements. These improvements were funded from operations.
Additional improvements may be considered and will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Additional capital expenditures will be incurred only if cash is 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 Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness is approximately $35,260,000 of which approximately $24,690,000
requires monthly interest only payments. These notes require balloon payments on
December 1, 2005. The remaining indebtedness, approximately $10,570,000,
requires monthly principal and interest payments of approximately $54,000. This
note will be fully amortized when it matures on July 1, 2021. The General
Partner may attempt to refinance such indebtedness and/or sell the properties
prior to such maturity dates. If the properties cannot be refinanced or sold for
a sufficient amount, the Registrant will risk losing such properties through
foreclosure.
The Partnership distributed the following amounts during the six months ended
June 30, 2002 and 2001 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2002 Unit June 30, 2001 Unit
Operations $1,520 $30.59 $1,097 $ 22.07
The Partnership'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 required
capital expenditures, to permit further distributions to its partners during the
remainder of 2002 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 31,439.25 limited partnership units
(the "Units") in the Partnership representing 63.91% of the outstanding Units at
June 30, 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 acquire additional units of limited partnership interest in the Partnership
in exchange for cash or a combination of cash and units in the operating
partnership of AIMCO either through private purchases or tender offers. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters which would include
voting on certain amendments to the Partnership Agreement and voting to remove
the General Partner. As a result of its ownership of 63.91% of the outstanding
Units, AIMCO is in a position to control all such voting decisions with respect
to the Registrant. Although the General Partner owes fiduciary duties to the
limited partners of the Partnership, the General Partner also owes fiduciary
duties to AIMCO as its sole stockholder. As a result, the duties of the General
Partner, as general partner, to the Partnerships and its limited partners may
come into conflict with the duties of the General Partner to AIMCO, as its sole
stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include changes in the
national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area.
Concessions are charged to income as incurred.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership is a party to a certain legal action resulting from its
operating activities. This action is a routine litigation and administrative
proceeding arising in the ordinary course of business and is not expected to
have a material adverse effect on the financial condition or results of
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3.1, Certificate of Limited Partnership (incorporated by reference to
Registration Statement of Registrant (File No. 2-57960) filed March 30, 1978, as
amended to date).
Exhibit 3.2, Agreement of Limited Partnership (Exhibit A to the Prospectus of
Registrant dated February 25, 1977 is incorporated herein by reference).
Exhibit 99, Certification of Chief Executive Officer and Chief Financial
Officer.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 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 GROWTH FUND
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President
and Chief Accounting Officer
Date: August 14, 2002
Exhibit 99
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Consolidated Capital
Growth Fund (the "Partnership"), for the quarterly period ended June 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Patrick J. Foye, as the equivalent of the Chief Executive Officer of
the Partnership, and Paul J. McAuliffe, as the equivalent of the Chief Financial
Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/ Patrick J. Foye
Name: Patrick J. Foye
Date: August 14, 2002
/s/ Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: August 14, 2002
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.