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 0-14570
MCCOMBS REALTY PARTNERS
(Exact Name of Registrant as Specified in Its Charter)
California 33-0068732
(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
MCCOMBS REALTY PARTNERS
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2003
Assets
Cash and cash equivalents $ 108
Receivables and deposits 45
Restricted escrow 108
Other assets 77
Investment property:
Land $ 499
Buildings and related personal property 6,158
6,657
Less accumulated depreciation (4,730) 1,927
$ 2,265
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 57
Tenant security deposit liabilities 31
Accrued property taxes 76
Other liabilities 87
Mortgage note payable 5,318
Due to affiliates (Note C) 39
Partners' Deficit
General partner $ (1)
Limited partners (17,172.43 units
issued and outstanding) (3,342) (3,343)
$ 2,265
See Accompanying Notes to Consolidated Financial Statements
MCCOMBS REALTY PARTNERS
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
Revenues:
Rental income $ 314 $ 336 $ 917 $ 990
Other income 42 28 125 87
Casualty gain (Note D) -- -- 15 --
Total revenues 356 364 1,057 1,077
Expenses:
Operating 188 157 481 463
General and administrative 26 33 85 98
Depreciation 67 65 203 201
Interest 113 115 340 345
Property taxes 26 26 76 78
Total expenses 420 396 1,185 1,185
Net loss $ (64) $ (32) $ (128) $ (108)
Net loss allocated to
general partner $ -- $ -- $ -- $ --
Net loss allocated to
limited partners (64) (32) (128) (108)
$ (64) $ (32) $ (128) $ (108)
Net loss per limited
partnership unit $ (3.73) $ (1.86) $ (7.45) $ (6.28)
Distribution per limited
partnership unit $ -- $ -- $ -- $ 32.62
See Accompanying Notes to Consolidated Financial Statements
MCCOMBS REALTY PARTNERS
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Partners' deficit at
December 31, 2002 17,172.43 $ (1) $ (3,214) $ (3,215)
Net loss for the nine months
ended September 30, 2003 -- -- (128) (128)
Partners' deficit
at September 30, 2003 17,172.43 $ (1) $ (3,342) $ (3,343)
See Accompanying Notes to Consolidated Financial Statements
MCCOMBS REALTY PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities:
Net loss $ (128) $ (108)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 203 201
Amortization of loan costs 14 14
Bad debt expense 53 52
Casualty gain (15) --
Change in accounts:
Receivables and deposits (59) (54)
Other assets (27) (7)
Accounts payable 41 (12)
Tenant security deposit liabilities 13 6
Accrued property taxes 76 (23)
Due to affiliates 39 --
Other liabilities 26 (9)
Net cash provided by operating activities 236 60
Cash flows from investing activities:
Insurance proceeds received 26 --
Property improvements and replacements (144) (107)
Net deposits to restricted escrows (27) (27)
Net cash used in investing activities (145) (134)
Cash flows from financing activities:
Payments on mortgage note payable (65) (59)
Distribution to partners -- (562)
Net cash used in financing activities (65) (621)
Net increase (decrease) in cash and cash equivalents 26 (695)
Cash and cash equivalents at beginning of period 82 895
Cash and cash equivalents at end of period $ 108 $ 200
Supplemental disclosure of cash flow information:
Cash paid for interest $ 325 $ 331
See Accompanying Notes to Consolidated Financial Statements
MCCOMBS REALTY PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of McCombs Realty
Partners (the "Partnership" or "Registrant"), a California limited partnership,
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. The Partnership's general partner is CRPTEX,
Inc. (the "General Partner"). In the opinion of 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 a subsidiary of
Apartment Investment and Management Company ("AIMCO"), a publicly traded real
estate investment trust.
Note B - Plan of Reorganization
On March 9, 1987, the original general partners of the Partnership, on behalf of
the Partnership, filed a voluntary petition under Chapter 11 of the Federal
Bankruptcy Code in U.S. Bankruptcy Court, Central District of California
("Court"). The Partnership continued as Debtor-In-Possession to operate its
business in the ordinary course until the Court confirmed the Partnership's Plan
of Reorganization (the "Plan") effective October 25, 1988. The Plan was approved
by all required classes of creditors.
The Plan required that the Partnership make certain payments to its secured
creditors and others on or before October 20, 1995. These payments were made on
or about June 25, 1995, when the Partnership refinanced the outstanding
mortgages encumbering the property. The Plan also required that the Partnership
make the following distributions on October 20, 1998, from available cash:
1) First, Limited Partners, both original and substitute, who made
additional capital contributions under the plan would receive a
repayment of the additional contributions totaling approximately
$730,000; if sufficient funds were unavailable to fully satisfy this
amount then a pro-rata portion would be paid based upon available
funds;
2) Second,Class 12 unsecured creditors ($23,100) would be paid on their
claims;
3) Third, Limited Partners who made additional capital contributions
and were original Limited Partners would receive a repayment of
their original capital contributions totaling approximately
$9,818,000; if sufficient funds were unavailable to fully satisfy
this amount then a pro-rata portion of available cash less a
pro-rata portion reserved for one third of the existing capital
contributions of non-contributing Limited Partners would be paid
based upon available funds;
4) Fourth, Limited Partners who did not make additional capital
contributions would receive a repayment of one-third of their
original capital contributions (i.e., one-third of $1,200,000); if
sufficient funds were unavailable to fully satisfy this amount then
a pro-rata portion would be paid based upon available funds.
Additionally, the Plan required CRPTEX, Inc. to make a capital contribution of
$14,500 and loan an additional $117,500 on behalf of the Partnership. The
Partnership received the $14,500 capital contribution but did not receive or
require the additional $117,500 to be loaned.
The payments required by number 2 above were timely made. With respect to the
amounts due to the Limited Partners under numbers 1, 3 and 4 above, there were
not sufficient funds available to completely satisfy these obligations at
October 20, 1998.
It was not anticipated that at October 20, 1998, there would be available funds
to fully satisfy the unsecured claims of the Limited Partners, as indicated
under the Plan. The limited partners were approached in August 1998 and asked to
either approve a sale of the Partnership's sole investment property or for the
General Partner to petition the Bankruptcy Court for an extension of the
settlement date. The required fifty-one percent response was not received. As a
result, the Partnership did not make any payments to the Limited Partners on
October 20, 1998, as required by the Plan from available funds. There is no
requirement, however, that the Partnership sell or again refinance the property
in order to pay in part or in whole, the payments to the Limited Partners
referred to above. The General Partner has determined that although all of the
required payments due under the Plan to the Limited Partners were not made, that
the Partnership is not in any material financial default in connection with its
prior bankruptcy. In addition, the General Partner believes that it is proper
for the Partnership to continue operating under the terms of its Partnership
Agreement as modified by the Plan.
Since the expiration of the Plan on October 20, 1998, the General Partner had
reserved all excess cash to ensure that the Partnership would be able to meet
its operating and capital improvement needs rather than making pro-rata payments
to the limited partners in accordance with numbers 1, 3, and 4 above. During the
fourth quarter of 2001, the General Partner determined that the Partnership had
accumulated approximately $562,000 in excess funds. Approximately $530,000,
which had been reserved since 1998 to ensure that the property was fully able to
meet its operating and capital improvement needs with existing operating funds,
was distributed during the nine months ended September 30, 2002 in accordance
with number 1 above. In addition, approximately $32,000 was distributed from
operations during the nine months ended September 30, 2002. Any additional funds
will be distributed in accordance with the terms of the Partnership Agreement as
modified by the Plan.
Note C - 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 certain payments to affiliates for
services and for 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
$51,000 and $56,000 for the nine months ended September 30, 2003 and 2002,
respectively, which is included in operating expenses.
Affiliates of the General Partner were entitled to receive reimbursement of
accountable administrative expenses amounting to approximately $45,000 and
$54,000 for the nine months ended September 30, 2003 and 2002, respectively,
which are included in general and administrative expenses. Approximately $39,000
in reimbursement of accountable administrative expenses was accrued at September
30, 2003 and is included in due to affiliates on the accompanying consolidated
balance sheet.
The Partnership insures 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 nine months ended September 30, 2003 and 2002, the
Partnership was charged by AIMCO and its affiliates approximately $23,000 and
$28,000, respectively, for insurance coverage and fees associated with policy
claims administration.
Note D - Casualty Event
In October 2002, a fire occurred at Lakewood at Pelham, which resulted in damage
to the laundry area. The property incurred damages of approximately $41,000.
Insurance proceeds of approximately $26,000 were received during the nine months
ended September 30, 2003 to cover the damages. After writing off the
undepreciated cost of the damaged asset of approximately $11,000, the
Partnership recognized a casualty gain of approximately $15,000 from this event
during the nine months ended September 30, 2003.
Note E - Legal Proceedings
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 property that are 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 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 property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2003 and 2002:
Average Occupancy
Property 2003 2002
Lakewood at Pelham 89% 89%
Greenville, South Carolina
Results of Operations
The Partnership's net loss for the three and nine months ended September 30,
2003 was approximately $64,000 and $128,000, respectively, as compared to a net
loss of approximately $32,000 and $108,000 for the three and nine months ended
September 30, 2002. The increase in net loss for the three months ended
September 30, 2003 is due to an increase in total expenses and a decrease in
total revenues. The increase in net loss for the nine months ended September 30,
2003 is due to a decrease in total revenues. Total expenses increased for the
three months ended September 30, 2003 due to an increase in operating expenses,
partially offset by a decrease in general and administrative expenses. Total
expenses remained relatively constant for the nine months ended September 30,
2003, as an increase in operating expenses was offset by a decrease in general
and administrative expenses. Depreciation, interest, and property tax expenses
remained relatively constant for the comparable periods. The increase in
operating expenses is primarily due to an increase in contract maintenance
expense. General and administrative expenses decreased primarily due to a
decrease in management reimbursements to the General Partner allowed under the
Partnership Agreement. Also included in general and administrative expenses 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.
The decrease in total revenues for the nine months ended September 30, 2003 is
due to a decrease in rental income, partially offset by an increase in other
income and the recognition of a casualty gain. The decrease in total revenues
for the three months ended September 30, 2003 is due to a decrease in rental
income, partially offset by an increase in other income. The decrease in rental
income is primarily due to a decrease in average rental rates charged at
Lakewood at Pelham, partially offset by reduced concessions. Other income
increased due to increases in late charges and utility reimbursements. The
casualty gain recognized during the nine months ended September 30, 2003 is the
result of an October 2002 fire which occurred at Lakewood at Pelham. The
property incurred damages of approximately $41,000. Insurance proceeds of
approximately $26,000 were received during the nine months ended September 30,
2003 to cover the damages. After writing off the undepreciated cost of the
damaged asset of approximately $11,000, the Partnership recognized a casualty
gain of approximately $15,000 from this event during the nine months ended
September 30, 2003.
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, the General Partner may use rental rate
concessions and rental 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 $108,000 as compared to approximately $200,000 at September 30,
2002. The increase in cash and cash equivalents of approximately $26,000, from
December 31, 2002, is due to approximately $236,000 of cash provided by
operating activities, partially offset by approximately $145,000 of cash used in
investing activities and approximately $65,000 of cash used in financing
activities. Cash used in investing activities consisted of property improvements
and replacements and, to a lesser extent, net deposits to escrow accounts
maintained by the mortgage lender, partially offset by insurance proceeds
received. Cash used in financing activities consisted of payments of principal
made on the mortgage encumbering the Partnership's investment property. 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 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 at the
Partnership's investment property are detailed below.
During the nine months ended September 30, 2003, the Partnership completed
approximately $144,000 of capital improvements at Lakewood at Pelham, consisting
primarily of construction related to the fire which occurred at the property, as
discussed in "Results of Operations", and floor covering replacement. These
improvements were funded from operations, replacement reserves and insurance
proceeds. The Partnership evaluates the capital improvement needs of the
property during the year and currently expects to complete an additional $11,000
in capital improvements during the remainder of 2003. The additional capital
improvements will consist primarily of countertops and floor covering
replacement. 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 and replacement reserves.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The mortgage indebtedness encumbering Lakewood at Pelham of approximately
$5,318,000 is being amortized over 30 years with a balloon payment of
approximately $5,151,000 due July 2005. The General Partner will attempt to
refinance such indebtedness and/or sell the property prior to such maturity
date. If the property cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such property through foreclosure.
On March 9, 1987, the original general partners of the Partnership, on behalf of
the Partnership, filed a voluntary petition under Chapter 11 of the Federal
Bankruptcy Code in U.S. Bankruptcy Court, Central District of California
("Court"). The Partnership continued as Debtor-In-Possession to operate its
business in the ordinary course until the Court confirmed the Partnership's Plan
of Reorganization (The "Plan") effective October 25, 1988. The Plan was approved
by all required classes of creditors.
The Plan required that the Partnership make certain payments to its secured
creditors and others on or before October 20, 1995. These payments were made on
or about June 25, 1995, when the Partnership refinanced the outstanding
mortgages encumbering the property. The Plan also required that the Partnership
make the following distributions on October 20, 1998, from available cash:
1) First, Limited Partners, both original and substitute, who made
additional capital contributions under the plan would receive a
repayment of the additional contributions totaling approximately
$730,000; if sufficient funds were unavailable to fully satisfy this
amount then a pro-rata portion would be paid based upon available
funds;
2) Second,Class 12 unsecured creditors ($23,100) would be paid on their
claims;
3) Third, Limited Partners who made additional capital contributions
and were original Limited Partners would receive a repayment of
their original capital contributions totaling approximately
$9,818,000; if sufficient funds were unavailable to fully satisfy
this amount then a pro-rata portion of available cash less a
pro-rata portion reserved for one third of the existing capital
contributions of non-contributing Limited Partners would be paid
based upon available funds;
4) Fourth, Limited Partners who did not make additional capital
contributions would receive a repayment of one-third of their
original capital contributions (i.e., one-third of $1,200,000); if
sufficient funds were unavailable to fully satisfy this amount then
a pro-rata portion would be paid based upon available funds.
Additionally, the Plan required CRPTEX, Inc. to make a capital contribution of
$14,500 and loan an additional $117,500 on behalf of the Partnership. The
Partnership received the $14,500 capital contribution but did not receive or
require the additional $117,500 to be loaned.
The payments required by number 2 above were timely made. With respect to the
amounts due to the Limited Partners under numbers 1, 3 and 4 above, there were
not sufficient funds available to completely satisfy these obligations at
October 20, 1998.
It was not anticipated that at October 20, 1998, there would be available funds
to fully satisfy the unsecured claims of the Limited Partners, as indicated
under the Plan. The limited partners were approached in August 1998 and asked to
either approve a sale of the Partnership's sole investment property or for the
General Partner to petition the Bankruptcy Court for an extension of the
settlement date. The required fifty-one percent response was not received. As a
result, the Partnership did not make any payments to the Limited Partners on
October 20, 1998, as required by the Plan from available funds. There is no
requirement, however, that the Partnership sell or again refinance the property
in order to pay in part or in whole, the payments to the Limited Partners
referred to above. The General Partner has determined that although all of the
required payments due under the Plan to the Limited Partners were not made, that
the Partnership is not in any material financial default in connection with its
prior bankruptcy. In addition, the General Partner believes that it is proper
for the Partnership to continue operating under the terms of its Partnership
Agreement as modified by the Plan.
Since the expiration of the Plan on October 20, 1998, the General Partner had
reserved all excess cash to ensure that the Partnership would be able to meet
its operating and capital improvement needs rather than making pro-rata payments
to the limited partners in accordance with numbers 1, 3, and 4 above. During the
fourth quarter of 2001, the General Partner determined that the Partnership had
accumulated approximately $562,000 in excess funds. Approximately $530,000,
which had been reserved since 1998 to ensure that the property was fully able to
meet its operating and capital improvement needs with existing operating funds,
was distributed during the nine months ended September 30, 2002 in accordance
with number 1 above. In addition, approximately $32,000 was distributed from
operations during the nine months ended September 30, 2002. Any additional funds
will be distributed in accordance with the terms of the Partnership Agreement as
modified by the Plan.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 3,686.5 limited partnership units
(the "Units") in the Partnership representing 21.47% 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. 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 property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the 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, 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
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:
Exhibit 3.1, Amended and Restated Certificate and Agreement of
Limited Partners of McCombs Realty Partners, a California
Limited Partnership, incorporated by reference to the exhibits
to the Registrant's Annual Report filed on Form 10-K, filed on
April 13, 1990.
Exhibit 3.2, Certificate of Limited Partnership of the
Partnership, incorporated by reference to the exhibits to the
Registrant's Annual Report filed on Form 10-K, filed on April
13, 1990.
Exhibit 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.
Exhibit 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.
Exhibit 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.
MCCOMBS REALTY PARTNERS
By: CRPTEX, 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 McCombs Realty
Partners;
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 CRPTEX, 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 McCombs Realty
Partners;
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 CRPTEX, 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 McCombs Realty
Partners (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.