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 March 31, 2004
[ ] 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 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact Name of Registrant as Specified in Its Charter)
California 94-3004963
(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
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2004
Assets
Cash and cash equivalents $ 52
Receivables and deposits 11
Other assets 191
Investment property:
Land $ 213
Buildings and related personal property 5,019
5,232
Less accumulated depreciation (4,042) 1,190
$ 1,444
Liabilities and Partners' Deficit
Accounts payable $ 8
Tenant security deposit liabilities 38
Due to affiliate 72
Accrued property taxes 20
Other liabilities 122
Mortgage note payable 3,626
Partners' Deficit
General partner $ (272)
Corporate limited partner on behalf of the
Unitholders (128,810 units issued and
outstanding) (2,170) (2,442)
$ 1,444
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
Revenues:
Rental income $ 257 $ 274
Other income 25 36
Total revenues 282 310
Expenses:
Operating 126 126
General and administrative 39 42
Depreciation 70 69
Interest 69 73
Property taxes 19 18
Total expenses 323 328
Net loss $ (41) $ (18)
Net loss allocated to general partner (1%) $ -- $ --
Net loss allocated to limited partners (99%) (41) (18)
$ (41) $ (18)
Net loss per Unit of Depositary Receipt $(0.32) $(0.14)
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Unitholders
Units of
Units of Depositary
Depositary General Receipt
Receipt Partner (Note A) Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' deficit at
December 31, 2003 128,810 $ (272) $(2,129) $(2,401)
Net loss for the three months
ended March 31, 2004 -- -- (41) (41)
Partners' deficit at
March 31, 2004 128,810 $ (272) $(2,170) $(2,442)
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net loss $ (41) $ (18)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 70 69
Amortization of loan costs 2 3
Change in accounts:
Receivables and deposits -- 8
Other assets (35) 6
Accounts payable (34) (41)
Due to affiliates 65 38
Tenant security deposit liabilities (3) 1
Accrued property taxes 20 18
Other liabilities (40) 29
Net cash provided by operating activities 4 113
Cash flows used in investing activities:
Property improvements and replacements (12) (11)
Cash flows from financing activities:
Payments on mortgage note payable (26) (24)
Advance from affiliate 7 18
Payments on advance from affiliate -- (18)
Net cash used in financing activities (19) (24)
Net (decrease) increase in cash and cash equivalents (27) 78
Cash and cash equivalents at beginning of period 79 35
Cash and cash equivalents at end of period $ 52 $ 113
Supplemental disclosure of cash flow information:
Cash paid for interest $ 68 $ 70
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Johnstown/Consolidated Income
Partners (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.
The Partnership's general partner is ConCap Equities, 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 month period ended March 31, 2004
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2004. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2003. The General
Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
Units of Depositary Receipt
Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"),
an affiliate of the General Partner, serves as a depositary of certain units of
depositary receipt ("Units"). The Units represent economic rights attributable
to the limited partnership interests in the Partnership and entitle the
unitholders thereof ("Unitholders") to certain economic benefits, allocations
and distributions of the Partnership. For this reason, partners' deficit is
herein represented as an interest of the Unitholders.
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,
as provided for in the Partnership Agreement. The Partnership Agreement provides
for certain payments to affiliates for services and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The Partnership Agreement provides that the Partnership shall pay in monthly
installments to the General Partner, or an affiliate, a yearly asset management
fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans
outstanding at the end of the month preceding the installment payment; (ii) 1/8
of 1% of the market value of guaranteed mortgage-backed securities as of the end
of the Partnership quarter immediately preceding the installment payment; and
(iii) 5/8 of 1% of the purchase price of the properties plus improvements for
managing the Partnership's assets. In the event the property was not owned at
the beginning or end of the year, such fee shall be pro-rated for the short-year
period of ownership. Under this provision, fees of approximately $12,000 and
$8,000 were incurred to the General Partner and its affiliates for the three
months ended March 31, 2004 and 2003, respectively, which are included in
general and administrative expenses. Approximately $35,000 in asset management
fees were owed to the General Partner at March 31, 2004 and are included in due
to affiliate.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Partnership's investment property for providing property management
services. The Partnership paid to such affiliates as compensation approximately
$14,000 and $16,000 for the three months ended March 31, 2004 and 2003,
respectively. These amounts are included in operating expenses.
Affiliates of the General Partner were eligible to receive reimbursement of
accountable administrative expenses amounting to approximately $16,000 and
$23,000 for the three months ended March 31, 2004 and 2003, respectively.
Included in these amounts are fees related to construction management services
provided by an affiliate of the General Partner of approximately $1,000 for the
three months ended March 31, 2003. The construction management service fees are
calculated based on a percentage of current additions to investment property.
There were no such construction management service fees incurred during the
three months ended March 31, 2004. These reimbursements of accountable
administrative expenses are included in general and administrative expenses and
investment property. At March 31, 2004, approximately $30,000 are owed to
affiliates of the General Partner and are included in due to affiliate.
In accordance with the Partnership Agreement, during the three months ended
March 31, 2004, the General Partner loaned the Partnership approximately $7,000
to fund a Partnership audit invoice. Interest accrued at the prime rate plus 2%
(6.00% at March 31, 2004). Interest expense was less than $1,000 for the three
months ended March 31, 2004. During the three months ended March 31, 2003, the
General Partner loaned the Partnership approximately $18,000 to fund a real
estate tax bill at Cedar Brooke Apartments. Interest accrued at the prime rate
plus 2%. Interest expense was less than $1,000 for the three months ended March
31, 2003. During the three months ended March 31, 2003, the Partnership repaid
the loan plus the related accrued interest with cash from operations.
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 2004, the Partnership anticipates its cost for insurance
coverage and fees associated with policy claims administration provided by AIMCO
and its affiliates will be approximately $9,000. The Partnership was charged
approximately $14,000 for 2003.
Note C - Casualty Event
On February 26, 2004, a fire occurred at Cedar Brooke Apartments that damaged 4
apartment units. As of March 31, 2004, the Partnership estimates the damage to
be approximately $136,000. Reconstruction of the damaged units is underway.
However, neither the ultimate cost of reconstruction nor the total insurance
proceeds to be received is presently determinable. The General Partner
anticipates that when determined, the insurance proceeds received will cover the
cost of the damaged units.
Note D - Contingencies
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Managing General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
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. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. 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 Defendants have filed
an answer to the Amended Complaint denying the substantive allegations.
Discovery is currently underway.
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.
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.
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's financial condition or results of operations taken
as a whole.
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 each of the
three month periods ended March 31, 2004 and 2003.
Average Occupancy
Property 2004 2003
Cedar Brooke Apartments 89% 97%
Independence, Missouri
The General Partner attributes the decrease at Cedar Brooke Apartments to the
combination of increase in home purchases in the Independence market and the
fire that damaged four units during February 2004 (see Note C).
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
property, interest rates on mortgage loans, costs incurred to operate the
investment property, general economic conditions and weather. 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 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.
Further, a number of factors which are outside the control of the Partnership
such as the local economic climate and weather can adversely or positively
impact the Partnership's financial results.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2004 was
approximately $41,000, as compared to a net loss of approximately $18,000 for
the three months ended March 31, 2003. The increase in net loss is due to a
decrease in total revenues, partially offset by a decrease in total expenses.
Total revenues decreased due to decreases in rental income and other income.
Rental income decreased due to a decrease in occupancy and the average rental
rate at Cedar Brooke Apartments. Other income decreased due to decreases in late
charges and lease cancellation fees at the Partnership's investment property.
The decrease in total expense is due to decreases in interest and general and
administrative expenses. Operating, depreciation and property tax expenses
remained constant for the comparable periods. Interest expense decreased due to
scheduled principal payments which reduced the carrying balance of the mortgage
loan encumbering Cedar Brooke Apartments. General and administrative expenses
decreased primarily due to a decrease in reimbursements paid to the General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative expenses for the three months ended March 31, 2004 and 2003 are
costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $52,000, compared to approximately $113,000 at March 31, 2003. The
decrease in cash and cash equivalents of approximately $27,000 from December 31,
2003 is due to approximately $19,000 of cash used in financing activities and
approximately $12,000 of cash used in investing activities, partially offset by
approximately $4,000 of cash provided by operating activities. Cash used in
financing activities consisted of scheduled principal payments on the mortgage
encumbering Cedar Brooke Apartments, partially offset by an advance from an
affiliate of the General Partner. Cash used in investing activities consisted of
property improvement and replacements. The Partnership invests its working
capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment 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 for the Partnership's property are discussed below.
During the three months ended March 31, 2004, the Partnership completed
approximately $12,000 of capital improvements at Cedar Brooke Apartments,
consisting primarily of floor covering replacements. These improvements were
funded from operations. The Partnership evaluates the capital improvement needs
of the property during the year and currently expects to complete an additional
$75,000 in capital improvements during the remainder of 2004. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as anticipated cash flow generated by the property.
The 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 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 Cedar Brooke Apartments of approximately $3,626,000, which carries a
stated interest rate of 7.44%, requires monthly payments of principal and
interest until the loan matures on July 1, 2021, at which time the loan is
scheduled to be fully amortized.
There were no distributions to the partners during the three months ended March
31, 2004 and 2003. Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, refinancing
and/or property sale. The Partnership's cash available for distribution is
reviewed on a monthly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after required
capital expenditures, to permit any distributions to its partners during 2004 or
subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 72,417 limited partnership units in
the Partnership representing 56.22% of the outstanding Units at March 31, 2004.
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 56.22% 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 financial statements are prepared in accordance with accounting principles
generally accepted in the United States which require the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
The Partnership's 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
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Managing General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
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. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. 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 Defendants have filed
an answer to the Amended Complaint denying the substantive allegations.
Discovery is currently underway.
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
3.1 Certificate of Limited Partnership, as amended to date,
incorporated herein by reference to the Partnership's
Annual Report on Form 10-KSB for the year ended December
31, 1991.
3.2 Amended and Restated Partnership Agreement dated July
16, 1986 is incorporated by reference to Exhibit A to
the Prospectus of the Registrant dated June 20, 1986 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 March 31, 2004.
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.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2004
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Johnstown/Consolidated Income 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: May 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap
Equities, Inc., equivalent of
the chief executive officer of
the Partnership
Exhibit 31.2
CERTIFICATION
I, Thomas M. Herzog, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Johnstown/Consolidated Income 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: May 13, 2004
/s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and
Chief Accounting 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 Johnstown/Consolidated
Income Partners (the "Partnership"), for the quarterly period ended March 31,
2004 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Thomas M. Herzog, 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/Martha L. Long
Name: Martha L. Long
Date: May 13, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 13, 2004
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.