UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2005
Assets
Cash and cash equivalents $ 107
Receivables and deposits 44
Restricted escrow 23
Other assets 225
Investment property:
Land $ 213
Buildings and related personal property 5,204
5,417
Less accumulated depreciation (4,171) 1,246
$ 1,645
Liabilities and Partners' Deficit
Accounts payable $ 47
Tenant security deposit liabilities 26
Accrued property taxes 20
Other liabilities 96
Due to affiliates (Note B) 98
Mortgage notes payable 5,402
Partners' Deficit
General partner $ (289)
Corporate limited partner on behalf of the
Unitholders (128,810 units issued and
outstanding) (3,755) (4,044)
$ 1,645
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2005 2004
Revenues:
Rental income $ 254 $ 257
Other income 28 25
Casualty gain (Note C) 99 --
Total revenues 381 282
Expenses:
Operating 139 126
General and administrative 39 39
Depreciation 66 70
Interest 99 69
Property taxes 19 19
Total expenses 362 323
Net income (loss) $ 19 $ (41)
Net income (loss) allocated to general partner (1%) $ -- $ --
Net income (loss) allocated to limited partners (99%) 19 (41)
$ 19 $ (41)
Net income (loss) per Unit of Depositary Receipt $ 0.15 $(0.32)
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Unitholders
Units of
Units of Depositary
Depositary General Receipt
Receipt Partner (Note A) Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' deficit at
December 31, 2004 128,810 $ (289) $(3,774) $(4,063)
Net income for the three months
ended March 31, 2005 -- -- 19 19
Partners' deficit at
March 31, 2005 128,810 $ (289) $(3,755) $(4,044)
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2005 2004
Cash flows from operating activities:
Net income (loss) $ 19 $ (41)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 66 70
Amortization of loan costs 8 2
Casualty gain (99) --
Change in accounts:
Receivables and deposits (17) --
Other assets (2) (35)
Accounts payable 31 (34)
Due to affiliates 29 65
Tenant security deposit liabilities (1) (3)
Accrued property taxes 20 20
Other liabilities 1 (40)
Net cash provided by operating activities 55 4
Cash flows from investing activities:
Property improvements and replacements (87) (12)
Insurance proceeds received 104 --
Net deposits to restricted escrow (13) --
Net cash provided by (used in) investing activities 4 (12)
Cash flows from financing activities:
Payments on mortgage note payable (5) (26)
Advance from affiliate -- 7
Net cash used in financing activities (5) (19)
Net increase (decrease) in cash and cash equivalents 54 (27)
Cash and cash equivalents at beginning of period 53 79
Cash and cash equivalents at end of period $ 107 $ 52
Supplemental disclosure of cash flow information:
Cash paid for interest $ 70 $ 68
At December 31, 2004, approximately $20,000 of property improvements and
replacements were included in accounts payable.
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Johnstown/Consolidated Income
Partners (the "Partnership" or "Registrant") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The Partnership's general partner is ConCap Equities, Inc. (the "General
Partner"). In the opinion of the General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2005
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2005. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2004. The General
Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
Units of Depositary Receipt
Johnstown/Consolidated Depositary Corporation (the "Corporate Limited Partner"),
an affiliate of the General Partner, serves as a depositary of certain units of
depositary receipt ("Units"). The Units represent economic rights attributable
to the limited partnership interests in the Partnership and entitle the
unitholders thereof ("Unitholders") to certain economic benefits, allocations
and distributions of the Partnership. For this reason, partners' deficit is
herein represented as an interest of the Unitholders.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the General Partner and its
affiliates for the management and administration of all Partnership activities,
as provided for in the Partnership Agreement. The Partnership Agreement provides
for certain payments to affiliates for services and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The Partnership Agreement provides that the Partnership shall pay in monthly
installments to the General Partner, or an affiliate, a yearly asset management
fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans
outstanding at the end of the month preceding the installment payment; (ii) 1/8
of 1% of the market value of guaranteed mortgage-backed securities as of the end
of the Partnership quarter immediately preceding the installment payment; and
(iii) 5/8 of 1% of the purchase price of the properties plus improvements for
managing the Partnership's assets. In the event the property was not owned at
the beginning or end of the year, such fee shall be pro-rated for the short-year
period of ownership. Under this provision, fees of approximately $14,000 and
$12,000 were incurred to the General Partner and its affiliates for the three
months ended March 31, 2005 and 2004, respectively, which are included in
general and administrative expenses. Approximately $29,000 in asset management
fees are owed to the General Partner at March 31, 2005 and are included in due
to affiliates.
Affiliates of the General Partner receive 5% of gross receipts from the
Partnership's investment property as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$14,000 for each of the three months ended March 31, 2005 and 2004. These
amounts are included in operating expenses.
Affiliates of the General Partner charged the Partnership for reimbursement of
accountable administrative expenses amounting to approximately $19,000 and
$16,000 for the three months ended March 31, 2005 and 2004, respectively, which
are included in general and administrative expenses and investment property. The
portion of these reimbursements included in investment property for the three
months ended March 31, 2005 are fees related to construction management services
provided by an affiliate of the General Partner of approximately $4,000. There
were no such construction management service fees incurred during the three
months ended March 31, 2004. The construction management service fees are
calculated based on a percentage of current additions to investment property.
Approximately $25,000 of unpaid reimbursements are owed to affiliates of the
General Partner at March 31, 2005, which are included in due to affiliates.
In accordance with the Partnership Agreement, during the three months ended
March 31, 2004, an affiliate of the General Partner advanced the Partnership
approximately $7,000 to fund a Partnership audit invoice. During the fourth
quarter of 2004, an affiliate of the General Partner advanced the Partnership
approximately $42,000 to fund operating expenses. Interest accrues at the prime
rate plus 2% (7.75% at March 31, 2005). Interest expense was approximately
$1,000 for the three months ended March 31, 2005 and less than $1,000 for the
three months ended March 31, 2004. At March 31, 2005, the total amount of
advances and related accrued interest due to an affiliate of the General Partner
was approximately $44,000 and is included in due to affiliates.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers' compensation, property casualty and vehicle
liability. The Partnership insures its property above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During the three months ended March 31, 2005, the Partnership was
charged by AIMCO and its affiliates approximately $10,000 for hazard insurance
coverage and fees associated with policy claims administration. Additional
charges will be incurred by the Partnership during 2005 as other insurance
policies renew later in the year. The Partnership was charged by AIMCO and its
affiliates approximately $15,000 for insurance coverage and fees associated with
policy claims administration during the year ended December 31, 2004.
Note C - Casualty Events
On January 7, 2005, a fire occurred at Cedar Brooke Apartments causing damage to
two apartment units. The property incurred damages of approximately $124,000.
During the three months ended March 31, 2005, insurance proceeds of
approximately $104,000 were received to cover the damages. After writing off the
undepreciated cost of the damaged asset of approximately $5,000, the Partnership
recognized a casualty gain of approximately $99,000 for the three months ended
March 31, 2005.
On February 25, 2004, a fire occurred at Cedar Brooke Apartments, causing damage
to four apartment units. The property incurred damages of approximately
$144,000. During the year ended December 31, 2004, insurance proceeds of
approximately $129,000 were received to cover the damages to the property and
approximately $5,000 was received to cover emergency repairs. After writing off
the undepreciated cost of the damaged asset, the Partnership recognized a
casualty gain of approximately $122,000 for the year ended December 31, 2004.
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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 28, 2002, the trial
court granted defendants motion to strike the complaint.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering judgment thereto. On May 4, 2004 the
Objector filed a second appeal challenging the court's use of a referee and its
order requiring Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. The General Partner and its affiliates are
currently scheduled to file an answer to Objector's petition on May 18, 2005.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company 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. Oral argument relating to the
certification of the collective action is scheduled for May 12, 2005. Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
financial condition or results of operations. Similarly, the General Partner
does not believe that the ultimate outcome will have a material adverse effect
on the Partnership's financial condition or results of operations.
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.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, the presence of hazardous
substances on a property could result in claims by private plaintiffs for
personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership and operation of its property, the Partnership
could potentially be liable for environmental liabilities or costs associated
with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
it s properties and the General Partner believes that these measures will
eliminate, or at least minimize, the effects that mold could have on residents.
To date, the Partnership has not incurred any material costs or liabilities
relating to claims of mold exposure or to abate mold conditions. Because the law
regarding mold is unsettled and subject to change the General Partner can make
no assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's financial condition
or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") is conducting a formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, 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,
capitalization of payroll and certain other costs, and tax credit transactions.
At the end of the first quarter of 2005, the SEC added certain tender offers for
limited partnership interests as an area of investigation. AIMCO is cooperating
fully. AIMCO is not able to predict when the investigation will be resolved.
AIMCO does not believe that the ultimate outcome will have a material adverse
effect on its consolidated financial condition or results of operations.
Similarly, the General Partner does not believe that the ultimate outcome will
have a material adverse effect on the Partnership's financial condition or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
three month periods ended March 31, 2005 and 2004.
Average Occupancy
Property 2005 2004
Cedar Brooke Apartments 90% 89%
Independence, Missouri
The Partnership's financial results depend 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 that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
Results of Operations
The Partnership's net income for the three months ended March 31, 2005 was
approximately $19,000, as compared to a net loss of approximately $41,000 for
the three months ended March 31, 2004. The increase in net income is due to an
increase in total revenues, partially offset by an increase in total expenses.
The increase in total revenues is due to the recognition of a casualty gain
during the three months ended March 31, 2005. Both rental and other income
remained relatively constant for the comparable periods. On January 7, 2005, a
fire occurred at Cedar Brooke Apartments causing damage to two apartment units.
The property incurred damages of approximately $124,000. During the three months
ended March 31, 2005, insurance proceeds of approximately $104,000 were received
to cover the damages. After writing off the undepreciated cost of the damaged
asset of approximately $5,000, the Partnership recognized a casualty gain of
approximately $99,000 for the three months ended March 31, 2005.
On February 25, 2004, a fire occurred at Cedar Brooke Apartments, causing damage
to four apartment units. The property incurred damages of approximately
$144,000. During the year ended December 31, 2004, insurance proceeds of
approximately $129,000 were received to cover the damages to the property and
approximately $5,000 was received to cover emergency repairs. After writing off
the undepreciated cost of the damaged asset, the Partnership recognized a
casualty gain of approximately $122,000 for the year ended December 31, 2004.
The increase in total expenses is due to increases in both operating and
interest expenses. Depreciation, property tax, and general and administrative
expenses remained relatively constant for the comparable periods. The increase
in operating expenses is primarily due to an increase in insurance expense as a
result of higher insurance premiums. The increase in interest expense is
primarily due to the second mortgage obtained on Cedar Brooke Apartments,
resulting in a higher debt balance, the modification of terms of the existing
mortgage encumbering the property at a higher interest rate (as discussed in
"Liquidity and Capital Resources"), and increased loan cost amortization
expense. Included in general and administrative expenses for the three months
ended March 31, 2005 and 2004 are the annual asset management fee and management
reimbursements to the General Partner as allowed under the Partnership
Agreement, costs associated with the quarterly and annual communications with
investors and regularly agencies, and the annual audit required by the
Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2005, the Partnership had cash and cash equivalents of
approximately $107,000, compared to approximately $52,000 at March 31, 2004. The
increase in cash and cash equivalents of approximately $54,000 from December 31,
2004 is due to approximately $55,000 of cash provided by operating activities
and approximately $4,000 of cash provided by investing activities, partially
offset by approximately $5,000 of cash used in financing activities. Cash
provided by investing activities consisted of insurance proceeds received
related to the January 2005 fire at Cedar Brooke Apartments, partially offset by
property improvements and replacements and net deposits to an escrow account
maintained by the mortgage lender. Cash used in financing activities consisted
of payments of principal made on the first mortgage encumbering Cedar Brooke
Apartments. The Partnership invests its working capital reserves in interest
bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state and local legal and regulatory requirements. The General Partner
monitors developments in the area of legal and regulatory compliance. For
example, 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. Capital improvements planned for the
Partnership's property are discussed below.
During the three months ended March 31, 2005, the Partnership completed
approximately $67,000 of capital improvements at Cedar Brooke Apartments,
consisting primarily of construction related to the fire that occurred at the
property in January 2005 (as discussed in "Results of Operations"). These
improvements were funded from operations and insurance proceeds. The Partnership
regularly evaluates the capital improvement needs of the property. While the
Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as replacement reserves and anticipated cash flow generated by the
property.
Capital improvements will be made only to the extent of cash available from
operations and Partnership reserves. To the extent that 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. On June 25, 2004, the
Partnership obtained a second mortgage, in the amount of $1,830,000, on Cedar
Brooke Apartments. The second mortgage requires monthly payments of interest
beginning on August 1, 2004 until the loan matures July 1, 2007, with interest
being equal to the one month LIBOR rate plus 300 basis points (5.86% at March
31, 2005).
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Cedar Brooke Apartments.
The modification terms consisted of an interest rate of 7.74%, monthly payments
of approximately $26,000, commencing August 1, 2004 through its maturity of July
1, 2014, with a balloon payment of approximately $3,121,000 due at maturity. The
previous terms consisted of monthly payments of approximately $31,000 with a
stated interest rate of 7.44% through its maturity of July 1, 2021, at which
time the loan was scheduled to be fully amortized.
There were no distributions to the partners during the three months ended March
31, 2005 or 2004. Future cash distributions will depend on the levels of net
cash generated from operations, the timing of debt maturities, refinancings
and/or property sale. The Partnership's cash available for distribution is
reviewed on a monthly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after planned
capital expenditures, to permit any distributions to its partners during 2005 or
subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 72,866 units of depositary receipt
(the "Units") in the Partnership representing 56.57% of the outstanding Units at
March 31, 2005. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 56.57% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
voting decisions with respect to the Partnership. Although the General Partner
owes fiduciary duties to the limited partners of the Partnership, the General
Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a
result, the duties of the General Partner, as general partner, to the
Partnership and its limited partners may come into conflict with the duties of
the General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States which require the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
The Partnership's investment property is recorded at cost, less accumulated
depreciation, unless considered impaired. If events or circumstances indicate
that the carrying amount of 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
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. 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.
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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 28, 2002, the trial
court granted defendants motion to strike the complaint.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering judgment thereto. On May 4, 2004 the
Objector filed a second appeal challenging the court's use of a referee and its
order requiring Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. The General Partner and its affiliates are
currently scheduled to file an answer to Objector's petition on May 18, 2005.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company 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. Oral argument relating to the
certification of the collective action is scheduled for May 12, 2005. Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
financial condition or results of operations. Similarly, the General Partner
does not believe that the ultimate outcome will have a material adverse effect
on the Partnership's financial condition or results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: May 11, 2005
JOHNSTOWN CONSOLIDATED INCOME PARTNERS
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION
3 Certificate of Limited Partnership, as amended to date,
incorporated herein by reference to the Partnership's
Annual Report on Form 10-KSB for the year ended December
31, 1991.
10.40 Multifamily Note dated June 27, 2001, by and between
Johnstown/Consolidated Income Partners, a California limited
partnership, and GMAC Commercial Mortgage Corporation relating
to Cedar Brooke Apartments. (Incorporated by reference to the
Quarterly Report on Form 10-QSB for the quarter ended June 30,
2001).
10.41 Allonge and Amendment to Multifamily Note dated June 25, 2004,
by and among Johnstown/Consolidated Income Partners, a
California limited partnership, GMAC Commercial Mortgage
Corporation, and Federal Home Loan Mortgage Corporation.
(Incorporated by reference to the Current Report on Form 8-K
dated June 25, 2004)
10.42 Multifamily Note dated June 25, 2004, by and between
Johnstown/Consolidated Income Partners, a California limited
partnership, and GMAC Commercial Mortgage Bank. (Incorporated
by reference to the Current Report on Form 8-K dated June 25,
2004)
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.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Johnstown/Consolidated Income Partners;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: May 11, 2005
/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, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Johnstown/Consolidated Income Partners;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: May 11, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of ConCap
Equities, Inc., equivalent of the
chief financial officer of the
Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Johnstown/Consolidated
Income Partners (the "Partnership"), for the quarterly period ended March 31,
2005 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 Stephen B. Waters, 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 11, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: May 11, 2005
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.