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 0-10273
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)
March 31, 2004
Assets
Cash and cash equivalents $ 60
Receivables and deposits 36
Other assets 398
Investment properties:
Land $ 407
Buildings and related personal property 9,471
9,878
Less accumulated depreciation (7,807) 2,071
$ 2,565
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 115
Tenant security deposit liabilities 60
Accrued property taxes 44
Other liabilities 209
Due to affiliates (Note B) 149
Mortgage notes payable 7,313
Partners' Deficit
General partners $(1,882)
Limited partners (158,582 units issued and
outstanding) (3,443) (5,325)
$ 2,565
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
March 31,
2004 2003
(Restated)
Revenues:
Rental income $ 535 $ 541
Other income 58 43
Total revenues 593 584
Expenses:
Operating 329 281
General and administrative 51 66
Depreciation 113 113
Interest 145 149
Property taxes 44 47
Total expenses 682 656
Loss from continuing operations (89) (72)
Loss from discontinued operations -- (23)
Net loss $ (89) $ (95)
Net loss allocated to general partners (4%) $ (4) $ (4)
Net loss allocated to limited partners (96%) (85) (91)
$ (89) $ (95)
Per limited partnership unit:
Loss from continuing operations $ (0.54) $ (0.43)
Loss from discontinued operations -- (0.14)
Net loss $ (0.54) $ (0.57)
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, 2003 158,582 $(1,878) $ (3,358) $ (5,236)
Net loss for the three months
ended March 31, 2004 -- (4) (85) (89)
Partners' deficit
at March 31, 2004 158,582 $(1,882) $ (3,443) $ (5,325)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net loss $ (89) $ (95)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 113 159
Amortization of loan costs 6 7
Change in accounts:
Receivables and deposits 13 59
Other assets (60) 7
Due to affiliates 27 44
Accounts payable (34) (105)
Tenant security deposit liabilities (1) 4
Accrued property taxes 44 53
Other liabilities 22 66
Net cash provided by operating activities 41 199
Cash flows used in investing activities:
Property improvements and replacements (34) (106)
Cash flows from financing activities:
Payments on mortgage notes payable (50) (54)
Advances from affiliates 51 70
Payments on advances from affiliates -- (27)
Net cash provided by (used in) financing activities 1 (11)
Net increase in cash and cash equivalents 8 82
Cash and cash equivalents at beginning of period 52 88
Cash and cash equivalents at end of period $ 60 $ 170
Supplemental disclosure of cash flow information:
Cash paid for interest $ 139 $ 163
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 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
consolidated 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 wholly-owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
The accompanying statement of operations for the three months ended March 31,
2003 has been restated as of January 1, 2003 to reflect the operations of West
Chase Apartments as loss from discontinued operations in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". West Chase Apartments was sold
to an unrelated third party on September 29, 2003.
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) reimbursement 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 Registrant's properties as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$29,000 and $38,000 for the three months ended March 31, 2004 and 2003,
respectively, which are included in operating expenses and loss from
discontinued operations.
Affiliates of the General Partner are entitled to receive reimbursement of
accountable administrative expenses amounting to approximately $39,000 and
$46,000 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 $2,000 for the
three months ended March 31, 2003. No such fees were incurred for the three
months ended March 31, 2004. The construction management service fees are
calculated based on a percentage of current additions to investment properties.
These reimbursements of accountable administrative expenses are included in
general and administrative expenses and investment properties. At March 31,
2004, approximately $98,000 of such fees were owed and are included in due to
affiliates.
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 three months ended March 31, 2004 and 2003, no
special management fees were paid as no distributions from cash flow from
operations were made.
During the three months ended March 31, 2004, an affiliate of the General
Partner advanced the Partnership approximately $51,000 to fund the payment of
certain 2003 liabilities. Interest is 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, an affiliate
of the General Partner advanced the Partnership approximately $70,000 to fund
operations at Ventura Landing Apartments. During the three months ended March
31, 2003, the Partnership made payments on advances of approximately $27,000.
Interest was accrued at the prime rate plus 2%. Interest expense was less than
$1,000 for the three months ended March 31, 2003. At March 31, 2004, the total
amount of advances and accrued interest was approximately $51,000 and is
included in due to affiliates.
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 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 $19,000. The Partnership was charged
approximately $29,000 for 2003.
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. The property's operations, loss of
approximately $23,000, including revenues of approximately $166,000, are
included in loss from discontinued operations for the three months ended March
31, 2003.
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 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 properties 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 consolidated 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 properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the three month periods ended March 31, 2004 and 2003:
Average Occupancy
Property 2004 2003
Ventura Landing Apartments 94% 93%
Orlando, Florida
Village Green Apartments 91% 95%
Altamonte Springs, Florida
The General Partner attributes the decrease in occupancy at Village Green
Apartments to increased competition in the Altamonte Springs area.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, 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 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.
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 $89,000, as compared to a net loss of approximately $95,000 for
the three months ended March 31, 2003. The decrease in net loss is primarily due
to a decrease in loss from 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.
The property's operations, loss of approximately $23,000, including revenues of
approximately $166,000, are included in loss from discontinued operations for
the three months ended March 31, 2003.
The Partnership's loss from continuing operations for the three months ended
March 31, 2004 was approximately $89,000 compared to a loss from continuing
operations of approximately $72,000 for the three months ended March 31, 2003.
The increase in loss from continuing operations is due to an increase in total
expenses, partially offset by an increase in total revenues. The increase in
total expenses is due to an increase in operating expenses, partially 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 increases in utility,
advertising, contract maintenance, and payroll related expenses at Ventura
Landing Apartments. General and administrative expenses decreased primarily due
to a decrease in management reimbursements to the General Partner as allowed
under the Partnership Agreement and professional expenses associated with the
administration of the Partnership. 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.
The increase in total revenues is due to an increase in other income, partially
offset by a decrease in rental income. The increase in other income is primarily
due to an increase in late charges at Ventura Landing Apartments. The decrease
in rental income is due to decreases in occupancy and the average rental rate at
Village Green Apartments, partially offset by increases in occupancy and the
average rental rate at Ventura Landing Apartments.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $60,000, compared to approximately $170,000 at March 31, 2003. The
increase in cash and cash equivalents of approximately $8,000 from December 31,
2003 is due to approximately $41,000 of cash provided by operating activities
and approximately $1,000 of cash provided by financing activities, partially
offset by approximately $34,000 of cash used in investing activities. Cash
provided by financing activities consisted of an advance received from an
affiliate of the General Partner, partially offset by payments of principal made
on the mortgages encumbering the Partnership's investment properties. Cash used
in investing activities consisted of property improvements 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 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 three months ended March 31, 2004, the Partnership completed
approximately $29,000 of capital improvements at Village Green Apartments,
consisting primarily of structural 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 currently expects
to complete an additional $65,000 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 the anticipated cash flow
generated by the property.
Ventura Landing Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $5,000 of capital improvements at Ventura Landing Apartments,
consisting primarily of floor covering replacement. 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
$98,000 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 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 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 the Partnership's investment properties of
approximately $7,313,000 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.
There were no distributions made 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, 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 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 83,719.5 limited partnership units
(the "Units") in the Partnership representing 52.79% 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 52.79% of the
outstanding Units, AIMCO is 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
The Partnership's 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. 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 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
(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
by reference to Exhibit A to the Prospectus of the
Registration 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 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.
CONSOLIDATED CAPITAL PROPERTIES III
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 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: 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 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: 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 Consolidated Capital
Properties III (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.