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 0-14099
CONSOLIDATED CAPITAL PROPERTIES VI
(Exact name of small business issuer as specified in its charter)
California 94-2940204
(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 PROPERTIES VI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2002
Assets
Cash and cash equivalents $ 93
Receivables and deposits 42
Other assets 135
Investment property:
Land $ 916
Buildings and related personal property 10,186
11,102
Less accumulated depreciation (5,425) 5,677
$ 5,947
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 14
Tenant security deposit liabilities 71
Accrued property taxes 59
Other liabilities 130
Due to affiliates 77
Mortgage note payable 5,266
Partners' (Deficit) Capital
General partner $ (2)
Special limited partners (76)
Limited partners (181,300 units issued and
outstanding) 408 330
$ 5,947
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
Revenues:
Rental income $ 443 $ 381 $ 867 $ 772
Other income 62 40 107 90
Casualty gain 18 -- 18 --
Total revenues 523 421 992 862
Expenses:
Operating 197 200 371 388
General and administrative 37 47 80 142
Depreciation 114 110 225 218
Interest 107 99 214 207
Property taxes 38 28 68 55
Total expenses 493 484 958 1,010
Net income (loss) $ 30 $ (63) $ 34 $ (148)
Net income (loss) allocated to
general partner (0.2%) $ -- $ -- $ -- $ --
Net income (loss) allocated to
limited partners (99.8%) 30 (63) 34 (148)
$ 30 $ (63) $ 34 $ (148)
Net income (loss) per limited
partnership unit $ 0.17 $ (0.35) $ 0.19 $ (0.82)
Distribution per limited
partnership unit $ -- $ -- $ -- $ 2.83
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453
Partners' (deficit) capital
at December 31, 2001 181,300 $ (2) $ (81) $ 379 $ 296
Amortization of timing
difference -- -- 5 (5) --
Net income for the six
months ended June 30, 2002 -- -- -- 34 34
Partners' (deficit) capital
at June 30, 2002 181,300 $ (2) $ (76) $ 408 $ 330
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2002 2001
Cash flows from operating activities:
Net income (loss) $ 34 $ (148)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 225 218
Amortization of loan costs 3 3
Casualty gain (18) --
Change in accounts:
Receivables and deposits 13 10
Other assets (18) (17)
Accounts payable (75) 3
Tenant security deposit liabilities 8 (8)
Accrued property taxes (63) (72)
Other liabilities 59 48
Due to affiliates 23 --
Net cash provided by operating activities 191 37
Cash flows from investing activities:
Property improvements and replacements (201) (95)
Insurance proceeds received 19 --
Net cash used in investing activities (182) (95)
Cash flows from financing activities:
Payments on mortgage note payable (70) (73)
Advances from affiliates 98 --
Payments on advances from affiliates (184) --
Distributions paid to partners -- (534)
Net cash used in financing activities (156) (607)
Net decrease in cash and cash equivalents (147) (665)
Cash and cash equivalents at beginning of period 240 810
Cash and cash equivalents at end of period $ 93 $ 145
Supplemental disclosure of cash flow information:
Cash paid for interest $ 211 $ 169
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties VI (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. ("CEI" or 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 months 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 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
an affiliate of 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 payments to affiliates for services and
the 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 property as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$58,000 and $46,000 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 $63,000 and $54,000 for the
six months ended June 30, 2002 and 2001, respectively, which is included in
investment property and general and administrative expenses. Included in the
amount for the six months ended June 30, 2002, are fees related to construction
management services provided by an affiliate of the General Partner of
approximately $15,000. The construction management service fees are calculated
based on a percentage of current year additions to the investment property.
There were no such fees paid during the six months ended June 30, 2001. As of
June 30, 2002, the Partnership owed approximately $24,000 to an affiliate of the
General Partner for reimbursement of accountable administrative expenses which
is included in Due to affiliates on the accompanying consolidated balance sheet.
The Partnership Agreement also provides for a special management fee equal to 9%
of the total distributions made from operations to the Limited Partners to be
paid to the General Partner for executive and administrative management
services. No such fee was earned in 2002. The General Partner received
approximately $46,000 in March 2001, resulting from a distribution declared and
paid during the six months ended June 30,2001. The fee is included in general
and administrative expenses.
The Partnership had advances from an affiliate of the General Partner of
approximately $139,000 as of December 31, 2001. During the six months ended June
30, 2002, the Partnership received additional advances from an affiliate of the
General Partner of approximately $98,000 and repaid approximately $188,000 of
these advances including approximately $4,000 in accrued interest. At June 30,
2002, the Partnership owed an affiliate of the General Partner approximately
$53,000 which is included in Due to an affiliates on the accompanying
consolidated balance sheet. Interest is being charged at the prime rate plus 2%
and amounted to approximately $3,000 for the six months ended June 30, 2002.
There were no loans from the General Partner or associated interest expense
during the six months ended June 30, 2001.
Beginning in 2001, the Partnership began insuring its property 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 property 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
$17,000 and $19,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note C - Change in Status of Non-Corporate General Partner
During the year ended December 31, 1991, the Partnership Agreement was amended
to convert the general partner interests held by the non-corporate general
partner, Consolidated Capital Group II ("CCG"), to that of special limited
partners ("Special Limited Partners"). The Special Limited Partners do not have
a vote and do not have any of the other rights of a Limited Partner except the
right to inspect the Partnership's books and records; however, the Special
Limited Partners retained the economic interest in the Partnership which they
previously owned as general partner.
ConCap Equities, Inc. ("CEI") became the sole general partner of the Partnership
effective December 31, 1991. In connection with CCG's conversion, a special
allocation of gross income was made to the Special Limited Partners in order to
eliminate its tax basis negative capital account.
After the conversion, the various Special Limited Partners transferred portions
of their interests to CEI so that CEI now holds a .2% interest in all allocable
items of income, loss and distribution. The differences between the Special
Limited Partners' capital accounts for financial statement and tax reporting
purposes are being amortized to the Limited Partners' capital accounts as the
components of the timing differences which created the balance reverse.
Note D - Casualty Gain
The casualty gain is related to a fire at the property in August 2001. A gain of
approximately $43,000 was recognized during the year ended December 31, 2001. An
additional gain of approximately $18,000 was recognized during the six months
ended June 30, 2002 due to the receipt of additional insurance proceeds of
approximately $19,000, net of the write off of additional undepreciated property
improvements and replacements of approximately $1,000.
Note E - 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 held a hearing on plaintiffs' motion for class certification and took
the matter under submission after further briefing, as ordered by the court, was
submitted by the parties. On July 10, 2002, the Court entered an order vacating
the current trial date of January 13, 2003 (as well as the pre-trial and
discovery cut-off dates) and stayed the case in its entirety through November 7,
2002 so that the parties can have an opportunity to discuss settlement.
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 parties are currently in the midst of briefing that appeal.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment property consists of one apartment complex, Colony
of Springdale Apartments, located in Springdale, Ohio. The average occupancy for
the six month periods ended June 30, 2002 and 2001, was 95% and 89%,
respectively. The increase in occupancy at The Colony of Springdale Apartments
is due to a more aggressive marketing campaign.
Results of Operations
The Partnership's net income for the six months ended June 30, 2002 totaled
approximately $34,000 compared to a net loss of approximately $148,000 for the
corresponding period of 2001. The Partnership realized net income for the three
months ended June 30, 2002 of approximately $30,000 compared to a net loss of
approximately $63,000 for the three months ended June 30, 2001. The increase in
net income for the three months ended June 30, 2002 is attributable to an
increase in total revenues partially offset by an increase in total expenses.
The increase in net income for the six months ended June 30, 2002 is due to an
increase in total revenues and a decrease in total expenses. The increase in
total revenues for both the three and six months ended June 30, 2002 is
attributable to an increase in rental income and, to a lesser extent, an
increase in other income. The increase in rental income is due to an increase in
occupancy and a decrease in concessions offered to tenants at Colony of
Springdale Apartments. The increase in other income is primarily due to an
increase in utility reimbursements, partially offset by a decrease in interest
income due to lower average cash balances in interest bearing accounts.
The increase in total expenses for the three months ended June 30, 2002 is due
to an increase in property tax expense partially offset by a decrease in general
and administrative expenses. The decrease in total expenses for the six months
ended June 30, 2002 is the result of a decrease in operating and general and
administrative expenses partially offset by an increase in property tax expense.
Operating expenses decreased for the six months ended June 30, 2002 primarily
due to a decrease in maintenance expenses partially offset by an increase in
property management fees. The decrease in maintenance expenses is primarily due
to a decrease in contract services at the investment property. The increase in
property management fees is primarily due to the increase in rental revenues at
the investment property. The increase in property tax expense for both the three
and six months ended June 30, 2002 is due to the timing of the receipt of the
tax bills, which affected the recording of the associated accrual at both June
30, 2002 and 2001.
The decrease in general and administrative expenses is due to the special
management fee of 9% on distributions from operations earned during the six
months ended June 30, 2001. No such fee was earned during the six months ended
June 30, 2002. General and administrative expenses also decreased due to a
decrease in the cost of services included in the management reimbursements to
the General Partner as allowed under the Partnership Agreement. Also included in
general and administrative expenses at both June 30, 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.
The casualty gain is related to a fire at the property in August 2001. A gain of
approximately $43,000 was recognized during the year ended December 31, 2001. An
additional gain of approximately $18,000 was recognized during the six months
ended June 30, 2002 due to the receipt of additional insurance proceeds of
approximately $19,000, net of the write off of additional undepreciated property
improvements and replacements of approximately $1,000.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 2002, the Partnership had cash and cash equivalents of approximately
$93,000 compared to approximately $145,000 at June 30, 2001. Cash and cash
equivalents decreased by approximately $147,000 since December 31, 2001 due to
approximately $156,000 and $182,000 of cash used in financing and investing
activities, respectively, partially offset by approximately $191,000 of cash
provided by operating activities. Cash used in financing activities consisted of
payments on advances from affiliates and principal payments made on the mortgage
encumbering the Partnership's property partially offset by advances from
affiliates. Cash used in investing activities consisted of property improvements
and replacements partially offset by insurance proceeds received. 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 property 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
the Partnership's property are discussed below.
During the six months ended June 30, 2002, the Partnership completed
approximately $201,000 in budgeted and unbudgeted capital improvements at the
property. Approximately $97,000 of these expenditures were repairs completed as
a result of a casualty during 2001. These repairs were funded from insurance
proceeds received in 2001 and 2002. The improvements consisted primarily of
floor covering and roof replacements and structural improvements. These
improvements were funded from operating cash flow. Approximately $166,000 has
been budgeted for capital improvements at Colony of Springdale for the year 2002
consisting primarily of floor covering, roof, appliance, heating and air
conditioning unit replacements and structural improvements. 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 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 Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $5,266,000 matures December 1, 2019 at which time
the mortgage is scheduled to be fully amortized.
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 $ -- $ -- $ 534 $ 2.83
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of the debt
maturity, refinancing and/or property sale. The Registrant'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 distributions to its partners during the
remainder of 2002 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 91,675 limited partnership units
(the "Units") in the Partnership representing 50.57% 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. In this
regard, on June 25, 2002, a tender offer by AIMCO Properties, L.P., to acquire
any and all of the units not owned by affiliates of AIMCO for a purchase price
of $2.00 per unit expired. Pursuant to this offer, AIMCO acquired 2,877 units
during the quarter ended June 30, 2002. 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 50.57% of the outstanding Units, AIMCO is in a
position to control all 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 owed 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 it 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
The investment property is 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 property. 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
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 held a hearing on plaintiffs' motion for class certification and took
the matter under submission after further briefing, as ordered by the court, was
submitted by the parties. On July 10, 2002, the Court entered an order vacating
the current trial date of January 13, 2003 (as well as the pre-trial and
discovery cut-off dates) and stayed the case in its entirety through November 7,
2002 so that the parties can have an opportunity to discuss settlement.
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 parties are currently in the midst of briefing that appeal.
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:
3.1 Certificate of Limited Partnership, incorporated by
reference to the Registration Statement of Registrant
filed October 22, 1984, as amended to date.
3.2 Agreement of Limited Partnership, incorporated by
reference to the Registration Statement of Registrant
filed October 22, 1984, as amended to date.
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 PROPERTIES VI
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
Properties VI (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.