UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact Name of Registrant as Specified in Its Charter)
California 94-2653686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2003
Assets
Cash and cash equivalents $ 658
Receivables and deposits 71
Other assets 361
Investment properties:
Land $ 407
Buildings and related personal property 9,424
9,831
Less accumulated depreciation (7,582) 2,249
$ 3,339
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 57
Tenant security deposit liabilities 61
Accrued property taxes 132
Other liabilities 338
Due to affiliates (Note B) 145
Mortgage notes payable 7,413
Partners' Deficit
General partners $(1,873)
Limited partners (158,582 units issued and
outstanding) (2,934) (4,807)
$ 3,339
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(Restated) (Restated)
Revenues:
Rental income $ 582 $ 538 $ 1,675 $ 1,647
Other income 54 64 160 165
Total revenues 636 602 1,835 1,812
Expenses:
Operating 360 365 903 848
General and administrative 50 66 172 199
Depreciation 111 107 342 326
Interest 147 155 446 455
Property taxes 38 45 132 133
Total expenses 706 738 1,995 1,961
Loss from continuing operations (70) (136) (160) (149)
(Loss) income from discontinued
operations (402) (6) (488) 1
Gain from sale of discontinued operations 988 -- 988 --
Net income (loss) $ 516 $ (142) $ 340 $ (148)
Net income (loss) allocated to general
partners (4%) $ 21 $ (6) $ 14 $ (6)
Net income (loss) allocated to limited
partners (96%) 495 (136) 326 (142)
$ 516 $ (142) $ 340 $ (148)
Per limited partnership unit:
Loss from continuing operations $ (0.42) $ (0.82) $ (0.97) $ (0.91)
(Loss) income from discontinued operations (2.44) (0.04) (2.95) 0.01
Gain from sale of discontinued operations 5.98 -- 5.98 --
Net income (loss) $ 3.12 $ (0.86) $ 2.06 $ (0.90)
Distributions per limited partnership unit $ -- $ -- $ -- $ 1.91
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 158,945 $ 1 $ 79,473 $ 79,474
Partners' deficit
at December 31, 2002 158,582 $(1,887) $ (3,260) $ (5,147)
Net income for the nine months
ended September 30, 2003 -- 14 326 340
Partners' deficit
at September 30, 2003 158,582 $(1,873) $ (2,934) $ (4,807)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities:
Net income (loss) $ 340 $ (148)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain from sale of discontinued operations (988) --
Depreciation 478 465
Loss on early extinguishment of debt 332 --
Amortization of loan costs 21 23
Bad debt expense 115 172
Change in accounts:
Due to affiliates 99 --
Receivables and deposits (67) (179)
Other assets (49) (18)
Accounts payable (65) (33)
Tenant security deposit liabilities (8) (6)
Accrued property taxes 132 137
Other liabilities 25 116
Net cash provided by operating activities 365 529
Cash flows from investing activities:
Proceeds from sale of discontinued operations 1,651 --
Property improvements and replacements (245) (198)
Insurance proceeds received -- 173
Net withdrawals from restricted escrows -- 178
Net cash provided by investing activities 1,406 153
Cash flows from financing activities:
Repayment of mortgage note payable (1,047) --
Payments on mortgage notes payable (166) (154)
Distributions to partners -- (303)
Advance from affiliate 70 --
Payments on advances from affiliate (58) --
Net cash used in financing activities (1,201) (457)
Net increase in cash and cash equivalents 570 225
Cash and cash equivalents at beginning of period 88 336
Cash and cash equivalents at end of period $ 658 $ 561
Supplemental disclosure of cash flow information:
Cash paid for interest $ 496 $ 498
At December 31, 2001, receivables and deposits and cash flow from investing
activities were adjusted by approximately $173,000 for non-cash activity related
to insurance proceeds which were held on deposit with the mortgage lender and
received during the nine months ended September 30, 2002.
At September 30, 2003, proceeds from sale of discontinued operations has been
adjusted by approximately $299,000 in connection with prepayment penalties paid
by the buyer of West Chase Apartments.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the general partner of the Partnership,
ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 2003 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2003. 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, 2002. The General Partner is wholly-owned by Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") 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
discontinued operations on the statement of operations. As a result, the
accompanying statements of operations have been restated as of January 1, 2002
to reflect the operations of West Chase Apartments as (loss) income from
discontinued operations. West Chase Apartments was sold to an unrelated third
party on September 29, 2003.
Certain reclassifications have been made to the 2002 balances to conform to the
2003 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The partnership agreement ("Partnership Agreement") provides for (i) payments to
affiliates for services and (ii) reimbursements of certain expenses incurred by
affiliates of the General Partner on behalf of the Partnership.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from all of the Partnership's properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$118,000 for each of the nine months ended September 30, 2003 and 2002,
respectively, which are included in operating expenses and (loss) income from
discontinued operations.
Affiliates of the General Partner are entitled to receive reimbursement of
accountable administrative expenses which amounted to approximately $129,000 and
$135,000 for the nine months ended September 30, 2003 and 2002, respectively.
Included in these amounts are fees related to construction management services
provided by an affiliate of the General Partner of approximately $18,000 and
$3,000 for the nine months ended September 30, 2003 and 2002, respectively. The
construction management service fees are calculated based on additions to
investment properties. These reimbursements of accountable administrative
expenses, which include approximately $98,000 payable to affiliates of the
General Partner at September 30, 2003, are included in investment properties,
general and administrative expenses, due to affiliates and (loss) income from
discontinued operations. Subsequent to September 30, 2003, the reimbursements
included in due to affiliates were paid to affiliates of the General Partner
from proceeds from the sale of West Chase Apartments.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow from
operations to be paid to the General Partner for executive and administrative
management services. During the nine months ended September 30, 2003 and 2002,
no special management fees were paid as no distributions from cash flow from
operations were made.
During the nine months ended September 30, 2003, an affiliate of the General
Partner advanced the Partnership approximately $70,000 to fund operations at
Ventura Landing Apartments. During the nine months ended September 30, 2003, the
Partnership made payments on advances of approximately $58,000. Interest on the
advances is accrued at the prime rate plus 2% (6.00% at September 30, 2003).
Interest expense for the nine months ended September 30, 2003 was approximately
$3,000. At September 30, 2003, the total amount of advances and accrued interest
was approximately $47,000, which includes advances made from an affiliate of the
General Partner to the Partnership during the fourth quarter of 2002. These
advances and related accrued interest are included in due to affiliates.
Subsequent to September 30, 2003, these advances were repaid from proceeds from
the sale of West Chase Apartments. There were no advances from affiliates of the
General Partner to the Partnership during the nine months ended September 30,
2002.
The Partnership insures 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 nine months ended September 30, 2003 and 2002, the
Partnership was charged by AIMCO and its affiliates approximately $39,000 and
$48,000, respectively, for insurance coverage and fees associated with policy
claims administration.
Note C - Disposition of Investment Property
On September 29, 2003, the Partnership sold West Chase Apartments to an
unrelated third party for a gross sale price of approximately $2,124,000. The
net proceeds realized by the Partnership were approximately $1,651,000 after
payment of closing costs of approximately $174,000 and a prepayment penalty of
approximately $299,000 owed by the Partnership and paid by the buyer. The
Partnership used approximately $1,047,000 of the net proceeds to repay the
mortgage encumbering the property. As a result of the sale, the Partnership
realized a gain of approximately $988,000 for the three and nine months ended
September 30, 2003, and this amount is included in gain from sale of
discontinued operations on the accompanying consolidated statements of
operations. The property's operations, loss of approximately $402,000 and
$488,000 for the three and nine months ended September 30, 2003, respectively,
and (loss) income of approximately ($6,000) and $1,000 for the three and nine
months ended September 30, 2002, respectively, are shown as (loss) income from
discontinued operations. Included in (loss) income from discontinued operations
are revenues of approximately $139,000 and $477,000, respectively, for the three
and nine months ended September 30, 2003 and approximately $185,000 and $551,000
for the three and nine months ended September 30, 2002, respectively. In
addition, the Partnership recorded a loss on early extinguishment of debt of
approximately $332,000 for the three and nine months ended September 30, 2003
due to the write off of unamortized loan costs and a prepayment penalty, which
is also included in loss from discontinued operations on the accompanying
consolidated statements of operations.
Note D - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that 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 that 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 sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, 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 Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The General Partner intends to file a
respondent's brief in support of the order approving settlement and entering
judgment thereto.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the General Partner the claims will
not result in any material liability to the Partnership.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
Note E - Subsequent Event
Subsequent to September 30, 2003, the Partnership distributed approximately
$303,000 to its partners from the West Chase Apartments sales proceeds.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine month periods ended September 30, 2003 and 2002:
Average Occupancy
Property 2003 2002
Ventura Landing Apartments 95% 91%
Orlando, Florida (1)
Village Green Apartments 95% 93%
Altamonte Springs, Florida
(1) The General Partner attributes the increase in occupancy at Ventura
Landing Apartments to resident retention efforts and an aggressive
marketing campaign at the property.
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
2003 was approximately $516,000 and $340,000, respectively, as compared to net
loss of approximately $142,000 and $148,000, respectively, for the three and
nine months ended September 30, 2002. The increase in net income for both the
three and nine months ended September 30, 2003 is due to an increase in gain
from sale of discontinued operations. On September 29, 2003, the Partnership
sold West Chase Apartments to an unrelated third party for a gross sale price of
approximately $2,124,000. The net proceeds realized by the Partnership were
approximately $1,651,000 after payment of closing costs of approximately
$174,000 and a prepayment penalty of approximately $299,000 owed by the
Partnership and paid by the buyer. The Partnership used approximately $1,047,000
of the net proceeds to repay the mortgage encumbering the property. As a result
of the sale, the Partnership realized a gain of approximately $988,000 for the
three and nine months ended September 30, 2003, and this amount is included in
gain from sale of discontinued operations on the accompanying consolidated
statements of operations. The property's operations, loss of approximately
$402,000 and $488,000 for the three and nine months ended September 30, 2003,
respectively, and (loss) income of approximately ($6,000) and $1,000 for the
three and nine months ended September 30, 2002, respectively, are shown as
(loss) income from discontinued operations. Included in (loss) income from
discontinued operations are revenues of approximately $139,000 and $477,000,
respectively, for the three and nine months ended September 30, 2003 and
approximately $185,000 and $551,000 for the three and nine months ended
September 30, 2002, respectively. In addition, the Partnership recorded a loss
on early extinguishment of debt of approximately $332,000 for the three and nine
months ended September 30, 2003 due to the write off of unamortized loan costs
and a prepayment penalty, which is also included in loss from discontinued
operations on the accompanying consolidated statements of operations.
The Partnership's loss from continuing operations for the three and nine months
ended September 30, 2003 was approximately $70,000 and $160,000, respectively,
compared to loss from continuing operations of approximately $136,000 and
$149,000, respectively, for the three and nine months ended September 30, 2002.
The decrease in loss from continuing operations for the three months ended
September 30, 2003 is due to an increase in total revenues and a decrease in
total expenses. The increase in loss from continuing operations for the nine
months ended September 30, 2003 is due to an increase in total expenses,
partially offset by an increase in total revenues. The increase in total
revenues for both the three and nine months ended September 30, 2003 is due to
an increase in rental income, partially offset by a decrease in other income.
The increase in rental income is primarily due to the increase in occupancy at
both of the Partnership's investment properties, and a decrease in bad debt
expense at Ventura Landing Apartments, partially offset by a decrease in the
average rental rates at both properties and an increase in concessions at
Village Green Apartments. Other income decreased primarily due to decreases in
late charges and lease cancellation fees at Ventura Landing Apartments.
The decrease in total expenses for the three months ended September 30, 2003 is
due to decreases in general and administrative, interest, and property tax
expenses. Both operating and depreciation expense remained relatively constant
for the three months ended September 30, 2003. The increase in total expenses
for the nine months ended September 30, 2003 is due to increases in both
operating and depreciation expense, partially offset by decreases in both
general and administrative and interest expense. Property tax expense remained
relatively constant for the nine months ended September 30, 2003. The increase
in operating expenses for the nine months ended September 30, 2003 is primarily
due to increases in floor covering repair, contract maintenance expense,
advertising expense, and payroll related expenses at Ventura Landing Apartments.
The increase in depreciation expense for the nine months ended September 30,
2003 is due to property improvements and replacements placed into service during
the past twelve months. The decrease in interest expense for both the three and
nine months ended September 30, 2003 is a result of scheduled principal payments
which reduced the carrying balance of the mortgages encumbering the
Partnership's properties. The decrease in property tax expense for the three
months ended September 30, 2003 is primarily due to the timing and receipt of
the tax bill, which affected the accrual at Ventura Landing Apartments.
General and administrative expenses decreased for both the three and nine months
ended September 30, 2003 primarily due to a decrease in management
reimbursements to the General Partner as allowed under the Partnership
Agreement. Also included in general and administrative expense for the three and
nine months ended September 30, 2003 and 2002 are costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of 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, the General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions, accordingly, there is no guarantee that the General Partner will be
able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2003, the Partnership had cash and cash equivalents of
approximately $658,000, compared to approximately $561,000 at September 30,
2002. The increase in cash and cash equivalents of approximately $570,000 for
the nine months ended September 30, 2003, from December 31, 2002, is due to
approximately $1,406,000 of cash provided by investing activities and
approximately $365,000 of cash provided by operating activities, partially
offset by approximately $1,201,000 of cash used in financing activities. Cash
provided by investing activities consisted of net proceeds received from the
sale of West Chase Apartments, partially offset by property improvements and
replacements. Cash used in financing activities consisted of repayment of the
mortgage encumbering West Chase Apartments, payments of principal made on the
mortgages encumbering the Partnership's properties, and payments on advances
from the General Partner, partially offset by an advance received from the
General Partner. The Partnership invests its working capital reserves in
interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance and is studying new
federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act
of 2002 mandates or suggests additional compliance measures with regard to
governance, disclosure, audit and other areas. In light of these changes, the
Partnership expects that it will incur higher expenses related to compliance,
including increased legal and audit fees. Capital improvements planned for each
of the Partnership's properties are detailed below.
Village Green Apartments
During the nine months ended September 30, 2003, the Partnership completed
approximately $70,000 of capital improvements at Village Green Apartments,
consisting primarily of structural improvements, swimming pool upgrades, air
conditioning unit upgrades, and floor covering replacement. These improvements
were funded from operations. The Partnership evaluates the capital improvement
needs of the property during the year and expects that only necessary
improvements will be made during the remainder of 2003 in order to maintain
occupancy at the property. Additional capital improvements may be considered and
will depend on the physical condition of the property as well as the anticipated
cash flow generated by the property.
West Chase Apartments
During the nine months ended September 30, 2003, the Partnership completed
approximately $73,000 of capital improvements at West Chase Apartments,
consisting primarily of air conditioning unit upgrades, roof replacement, and
floor covering replacement. These improvements were funded from operations. The
Partnership sold West Chase Apartments on September 29, 2003 to an unrelated
third party.
Ventura Landing Apartments
During the nine months ended September 30, 2003, the Partnership completed
approximately $102,000 of capital improvements at Ventura Landing Apartments,
consisting primarily of parking area upgrades, air conditioning unit upgrades,
interior improvements, and floor covering replacement. These improvements were
funded from operations. The Partnership evaluates the capital improvement needs
of the property during the year and expects that only necessary improvements
will be made during the remainder of 2003 in order to maintain occupancy at the
property. Additional capital improvements may be considered and will depend on
the physical condition of the property as well as the anticipated cash flow
generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such capital
improvements are completed, the Partnership's distributable cash flow, if any,
may be adversely affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the Partnership's investment properties of
approximately $7,413,000 requires monthly payments of principal and interest
until the loans mature between July and August 2021, at which time the loans are
scheduled to be fully amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2003 and 2002 (in thousands, except per unit data):
Nine Months Ended Per Limited Nine Months Ended Per Limited
September 30, Partnership September 30, Partnership
2003 Unit 2002 Unit
Refinancing
Proceeds (1) $ -- $ -- $ 303 $ 1.91
(1) From previously undistributed proceeds from the 2001 refinancing of the
mortgage encumbering Village Green Apartments.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of property sales
and/or refinancings. The Partnership's cash available for distribution is
reviewed on a monthly basis. There can be no assurance that the Partnership will
generate sufficient funds from operations after required capital expenditures to
permit any distributions to its partners during the remainder of 2003 or
subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 81,579.50 limited partnership units
(the "Units") in the Partnership representing 51.44% of the outstanding Units at
September 30, 2003. 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 in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 51.44% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
voting decisions with respect to the Partnership. 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
Partnership 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, but are not limited
to, 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 impairment of 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 and
the Partnership fully reserves all balances outstanding over thirty days. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
Item 3. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that 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 that 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 sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, 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 Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The General Partner intends to file a
respondent's brief in support of the order approving settlement and entering
judgment thereto.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the General Partner the claims will
not result in any material liability to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Certificate of Limited Partnership, as amended to date
(Exhibit 3 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991, is
incorporated herein by reference).
3.2 Partnership Agreement dated May 22, 1980 is incorporated
herein by reference to Exhibit A to the Prospectus of
the Registrant dated August 17, 1981 as filed with the
Commission pursuant to Rule 424(b) under the Act.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K:
None filed during the quarter ended September 30, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES III
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President
and Chief Financial Officer
Date: November 12, 2003
Exhibit 31.1
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Consolidated
Capital Properties III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 12, 2003
/s/Patrick J. Foye
Patrick J. Foye
Executive Vice President of ConCap Equities,
Inc., equivalent of the chief executive officer
of the Partnership
Exhibit 31.2
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Consolidated
Capital Properties III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 12, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of ConCap Equities, Inc., equivalent of
the chief financial officer of the Partnership
Exhibit 32.1
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 III (the "Partnership"), for the quarterly period ended September 30,
2003 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: November 12, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: November 12, 2003
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.