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 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of registrant as specified in its charter)
California 94-2382571
(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 GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2004
Assets
Cash and cash equivalents $ 403
Receivables and deposits 417
Restricted escrows 218
Other assets 191
Investment property:
Land $ 946
Buildings and related personal property 16,193
17,139
Less accumulated depreciation (12,733) 4,406
$ 5,635
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 207
Tenant security deposit liabilities 79
Accrued property taxes 63
Due to affiliates (Note B) 501
Other liabilities 338
Mortgage note payable 12,240
Partners' Deficit
General partner $ (3,142)
Limited partners (49,196 units issued and
outstanding) (4,651) (7,793)
$ 5,635
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
(Restated)
Revenues:
Rental income $ 655 $ 750
Other income 54 62
Casualty gain (Note D) 25 --
Total revenues 734 812
Expenses:
Operating 308 331
General and administrative 53 135
Depreciation 228 227
Interest 220 218
Property taxes 64 63
Total expenses 873 974
Loss from continuing operations (139) (162)
Loss from discontinued operations -- (632)
Gain on sale of discontinued operations -- 8,803
Net (loss) income $ (139) $ 8,009
Net (loss) income allocated to general partner $ (1) $ 1,224
Net (loss) income allocated to limited partners (138) 6,785
$ (139) $ 8,009
Per limited partnership unit:
Loss from continuing operations $ (2.80) $ (3.26)
Loss from discontinued operations -- (12.72)
Gain on sale of discontinued operations -- 153.90
$ (2.80) $137.92
Distribution per limited partnership unit $ -- $ 81.82
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $49,196 $49,197
Partners' deficit at
December 31, 2003 49,196 $(3,141) $(4,513) $(7,654)
Net loss for the three months
ended March 31, 2004 -- (1) (138) (139)
Partners' deficit at
March 31, 2004 49,196 $(3,142) $(4,651) $(7,793)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
(Restated)
Cash flows from operating activities:
Net (loss) income $ (139) $ 8,009
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation 228 523
Amortization of loan costs 5 15
Bad debt expense 26 122
Casualty gain (25) --
Loss on early extinguishment of debt -- 689
Gain on sale of discontinued operations -- (8,803)
Change in accounts:
Receivables and deposits (57) (42)
Other assets (82) (48)
Accounts payable (260) (119)
Tenant security deposit liabilities -- (44)
Accrued property taxes 63 221
Due to affiliates 1 --
Other liabilities (18) 24
Net cash (used in) provided by operating activities (258) 547
Cash flows from investing activities:
Property improvements and replacements (53) (230)
Net (deposits to) withdrawals from restricted escrows (180) 108
Insurance proceeds received 30 --
Net proceeds from sale of investment property -- 10,991
Net cash (used in) provided by investing activities (203) 10,869
Cash flows from financing activities:
Advances from affiliates 500 --
Principal payments on mortgage notes payable -- (65)
Distributions to partners -- (4,632)
Loan costs paid -- (5)
Debt extinguishment cost -- (650)
Repayment of mortgage note payable -- (6,000)
Net cash provided by (used in) financing activities 500 (11,352)
Net increase in cash and cash equivalents 39 64
Cash and cash equivalents at beginning of period 364 559
Cash and cash equivalents at end of period $ 403 $ 623
Supplemental disclosure of cash flow information:
Cash paid for interest $ 214 $ 538
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital Growth
Fund (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 Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of ConCap Equities, Inc. (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/A No. 1 for the year ended December
31, 2003. The General Partner is a wholly owned subsidiary of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying consolidated statement of operations for the three months ended
March 31, 2003 reflect the operations of Breckenridge Square as loss from
discontinued operations due to its sale in January 2003. In addition, the same
period has been restated to reflect the operations of Churchill Park and Doral
Springs Apartments as loss from discontinued operations due to the sale of these
properties in July and September 2003, respectively.
Reclassification
Certain 2003 amounts have been reclassified to conform to the 2004 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) 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 properties for providing property management services.
The Partnership paid to such affiliates approximately $37,000 and $120,000 for
the three months ended March 31, 2004 and 2003, respectively, which is included
in operating expenses and (loss) income from discontinued operations.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $29,000 and $90,000 for the
three months ended March 31, 2004 and 2003, respectively, which is included in
general and administrative expenses and investment properties.
The Partnership Agreement provides for a fee equal to 9% of the total
distributions made to the limited partners from "cash available for
distribution" (as defined in the Partnership Agreement) to be paid to the
General Partner for executive and administrative management services. During the
three months ended March 31, 2003, affiliates of the General Partner received
approximately $28,000 for providing these services, which is included in general
and administrative expenses. No fees were earned or paid for the three months
ended March 31, 2004.
During the three months ended March 31, 2004, an affiliate of the General
Partner advanced the Partnership approximately $500,000 to assist in paying city
taxes related to the sales of two investment properties and to fund replacement
reserves at The Lakes Apartments. Interest was charged at the prime rate plus 2%
and was approximately $1,000 for the three months ended March 31, 2004.
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 $40,000. The Partnership was charged
approximately $127,000 for 2003.
Note C- Sale of Investment Property
On January 16, 2003, the Partnership sold Breckinridge Square to an unrelated
third party for net proceeds of approximately $10,991,000 after payment of
closing costs. The Partnership realized a gain of approximately $8,803,000 as a
result of the sale. The Partnership used approximately $6,000,000 of net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$689,000 as result of unamortized loan costs being written off and prepayment
penalties. In accordance with SFAS No. 144, the accompanying consolidated
statement of operations for the three months ended March 31, 2003 reflects the
operations of Breckinridge Square as (loss) income from discontinued operations.
Included in (loss) income from discontinued operations for the three months
ended March 31, 2003 is approximately $88,000 of revenue generated by the
property.
Note D - Casualty
In October 2003, the Partnership's investment property, The Lakes Apartments,
incurred damage to four apartment units as a result of a fire. During the three
months ended March 31, 2004, the Partnership recognized a casualty gain of
approximately $25,000 which is the result of insurance proceeds received of
approximately $30,000 offset by the net book value of the assets written off.
Note E - 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. On May 13, 2004, Objector filed a reply to both briefs in support of
the settlement and judgment entered thereto. No hearing has been scheduled in
the matter.
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 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 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 remaining investment property consists of one apartment
complex. The following table sets forth the average occupancy of the property
for the three months ended March 31, 2004 and 2003:
Average Occupancy
Property 2004 2003
The Lakes 74% 84%
Raleigh, North Carolina
The General Partner attributes the decrease in occupancy at The Lakes Apartments
to increased credit standards for tenants.
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 $139,000 compared to net income of approximately $8,009,000 for
the same period in 2003. Net income decreased due to the recognition of a gain
on the sale of Breckinridge Square in January 2003 partially offset by a
decrease in loss from discontinued operations.
In accordance with Statement of Financial Accounting Standards No. 144, the
accompanying consolidated statements of operations for the three months ended
March 31, 2003 reflect the operations of Breckinridge Square as (loss) income
from discontinued operations due to its sale in January 2003. In addition, the
same period has been restated to reflect the operations of Churchill Park and
Doral Springs Apartments as (loss) income from discontinued operations due to
the sale of these properties in July and September 2003, respectively.
On January 16, 2003, the Partnership sold Breckinridge Square to an unrelated
third party for net proceeds of approximately $10,991,000 after payment of
closing costs. The Partnership realized a gain of approximately $8,803,000 as a
result of the sale. The Partnership used approximately $6,000,000 of net
proceeds to repay the mortgage encumbering the property. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$689,000 as result of unamortized loan costs being written off and prepayment
penalties. Included in (loss) income from discontinued operations for the three
months ended March 31, 2003 is approximately $88,000 of revenue generated by the
property.
Excluding the impact of the gain on sale and the loss from discontinued
operations, the Partnership realized a loss from continuing operations of
approximately $139,000 for the three months ended March 31, 2004 compared to a
loss from continuing operations of approximately $162,000 for the corresponding
period in 2003. The decrease in loss from continuing operations is due to a
decrease in total expenses partially offset by a decrease in total revenues.
Total revenue decreased due to a decrease in rental income which was caused by
decreases in occupancy and average rental rates at The Lakes Apartments. This
decrease was partially offset by a casualty gain recognized in 2004.
In October 2003, the Partnership's investment property, The Lakes Apartments,
incurred damage to four apartment units as a result of a fire. During the three
months ended March 31, 2004, the Partnership recognized a casualty gain of
approximately $25,000 which is the result of insurance proceeds received of
approximately $30,000 offset by the net book value of the assets written off.
Total expenses decreased due to decreases in operating and general and
administrative expenses. Operating expenses decreased due to decreases in
advertising and maintenance expenses partially offset by an increase in property
expense. Advertising expense decreased due to decreases in newspaper and
periodical advertising and resident relations. Maintenance expense decreased due
to a decrease in contract labor at The Lakes Apartments. Property expense
increased due to an increase in salaries and related benefits.
General and administrative expenses decreased due to decreases in management
reimbursements paid to the General Partner, as allowed under the Partnership
Agreement and in Partnership management fees due to no cash from operations
being distributed in 2004. For 2004 and 2003, costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included in
general and administrative expenses.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $403,000 compared to approximately $623,000 at March 31, 2003.
Cash and cash equivalents increased approximately $39,000 from December 31, 2003
due to approximately $500,000 of cash provided by financing activities,
partially offset by approximately $258,000 and $203,000 of cash used in
operating and investing activities, respectively. Cash provided by financing
activities consisted of advances from an affiliate of the General Partner. Cash
used in investing activities consisted of property improvements and replacements
and net deposits to restricted escrows maintained by the mortgage lender
partially offset by insurance proceeds received. The Partnership invests its
working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, 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 detailed below.
The Lakes Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $53,000 of capital improvements at The Lakes Apartments,
consisting primarily of major landscaping, floor covering replacements and
casualty repairs. These improvements were funded from operating cash flow and
insurance proceeds. The Partnership evaluates the capital improvement needs of
the property during the year and currently expects to complete an additional
$276,000 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 replacement reserves and anticipated cash flow
generated by the property.
Additional capital expenditures will be incurred only if cash is available from
operations and 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 investment property of approximately $12,240,000
requires monthly interest only payments until December 1, 2005 at which time a
balloon payment is due. 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 the property through foreclosure.
The Partnership distributed the following amounts during the three months ended
March 31, 2004 and 2003 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2004 Unit March 31, 2003 Unit
Operations $ -- $ -- $ 317 $ 6.38
Sale proceeds from
Breckinridge Square -- -- 4,315 75.44
$ -- $ -- $4,632 $81.82
The Partnership's cash available for distribution is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. 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 interest in the
Partnership, AIMCO and its affiliates owned 31,142.75 limited partnership units
(the "Units") in the Partnership representing 63.30% 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, unit holders 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 63.30% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
such 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
Investment property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of a property may be impaired, the Partnership will make an assessment of
its recoverability by estimating the undiscounted future cash flows, excluding
interest charges, of the property. If the carrying amount exceeds the aggregate
future cash flows, the Partnership would recognize an impairment loss to the
extent the carrying amount exceeds the fair value of the property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, 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 needed to be
improved and were improved during the second quarter of 2004 to provide that
expenses related to sold properties are more accurately estimated and are
reported in the proper period. In particular, the Partnership has implemented a
system to improve the coordination and communication between those departments
responsible for property and tax accounting and the group responsible for the
preparation and reporting of financial information.
(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. On May 13, 2004, Objector filed a reply to both briefs in support of
the settlement and judgment entered thereto. No hearing has been scheduled in
the matter.
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:
Exhibit 3.1, Certificate of Limited Partnership (incorporated
by reference to Registration Statement of Registrant (File No.
2-57960) filed March 30, 1978, as amended to date).
Exhibit 3.2, Agreement of Limited Partnership (Exhibit A to
the Prospectus of Registrant dated February 25, 1977 is
incorporated herein by reference).
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 filed during the quarter ended March 31,
2004:
None.
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 GROWTH FUND
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 24, 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 Growth Fund;
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 24, 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 Growth Fund;
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 24, 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
Growth Fund (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 24, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 24, 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.