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 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of small business issuer 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)
Check whether the issuer (i) 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
CONSOLIDATED CAPITAL GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2005
Assets
Cash and cash equivalents $ 36
Receivables and deposits 379
Restricted escrows 227
Other assets 165
Investment property:
Land $ 946
Buildings and related personal property 16,880
17,826
Less accumulated depreciation (13,606) 4,220
$ 5,027
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 186
Tenant security deposit liabilities 91
Accrued property taxes 65
Other liabilities 252
Due to affiliates (Note B) 948
Mortgage note payable 12,240
Partners' Deficit
General partner $ (3,152)
Limited partners (49,196 units issued and
outstanding) (5,603) (8,755)
$ 5,027
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,
2005 2004
Revenues:
Rental income $ 782 $ 655
Other income 53 54
Casualty gain (Note C) -- 25
Total revenues 835 734
Expenses:
Operating 417 308
General and administrative 45 53
Depreciation 217 228
Interest 235 220
Property taxes 65 64
Total expenses 979 873
Net loss (144) (139)
Net loss allocated to general partner $ (1) $ (1)
Net loss allocated to limited partners (143) (138)
$ (144) $ (139)
Net loss per limited partnership unit $ (2.91) $ (2.80)
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, 2004 49,196 $(3,151) $(5,460) $(8,611)
Net loss for the three months
ended March 31, 2005 -- (1) (143) (144)
Partners' deficit at
March 31, 2005 49,196 $(3,152) $(5,603) $(8,755)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2005 2004
Cash flows from operating activities:
Net loss $ (144) $ (139)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 217 228
Amortization of loan costs 5 5
Bad debt expense 14 26
Casualty gain -- (25)
Change in accounts:
Receivables and deposits (77) (57)
Other assets (60) (82)
Accounts payable 54 (260)
Tenant security deposit liabilities 4 --
Accrued property taxes 65 63
Due to affiliates 49 1
Other liabilities (29) (18)
Net cash provided by (used in) operating activities 98 (258)
Cash flows from investing activities:
Property improvements and replacements (218) (53)
Net deposits to restricted escrows -- (180)
Insurance proceeds received -- 30
Net cash used in investing activities (218) (203)
Cash flows provided by financing activities:
Advances from affiliates -- 500
Net (decrease) increase in cash and cash equivalents (120) 39
Cash and cash equivalents at beginning of period 156 364
Cash and cash equivalents at end of period $ 36 $ 403
Supplemental disclosure of cash flow information:
Cash paid for interest $ 213 $ 214
Supplemental disclosure of non-cash flow information:
Property improvements and replacements in accounts
payable $ 29 $ --
Included in property improvements and replacements for the three months ended
March 31, 2005 is approximately $65,000 of improvements which were included in
accounts payable at December 31, 2004.
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 months 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 year ended December 31, 2004.
The General Partner is a wholly owned subsidiary of Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership suffers from a
lack of cash and has debt of approximately $12,240,000 maturing in December of
2005. Based upon current operations, the Partnership does not anticipate that
proceeds from the new financing will be sufficient to repay the existing debt.
If the Partnership defaults on its scheduled debt repayment, the Partnership
will risk losing its sole investment property through foreclosure. The General
Partner is currently evaluating its options with respect to obtaining financing
for the investment property. The General Partner is currently evaluating its
means to improve the operations of the property and increase occupancy levels to
improve the cash flows generated by the property.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
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.
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 receive 5% of gross receipts from the
Partnership's property for providing property management services. The
Partnership paid to such affiliates approximately $40,000 and $37,000 for the
three months ended March 31, 2005 and 2004, respectively, which is included in
operating expenses.
Affiliates of the General Partner charged the Partnership for reimbursement of
accountable administrative expenses amounting to approximately $46,000 and
$29,000 for the three months ended March 31, 2005 and 2004, respectively, which
is 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 $13,000. No
such fees were charged in the three months ended March 31, 2004. The
construction management service fees are calculated based on a percentage of
additions to the investment property. At March 31, 2005, approximately $74,000
in reimbursements was due to the General Partner and is included in due to
affiliates on the accompanying balance sheet.
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. No fees
were earned or paid for the three months ended March 31, 2005 and 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. There were no advances during the three months
ended March 31, 2005. Interest on advances is charged at the prime rate plus 2%
(7.75% at March 31, 2005). Interest expense was approximately $16,000 and $1,000
for the three months ended March 31, 2005 and 2004, respectively. At March 31,
2005, approximately $874,000 in principal and accrued interest is included in
due to affiliates. Subsequent to March 31, 2005, the General Partner advanced
approximately $90,000 to the Partnership to pay operating expenses at the
investment property.
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 $42,000 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 $62,000 for insurance coverage and fees associated with
policy claims administration during the year ended December 31, 2004.
Note C - 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 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.
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 took place on May 12, 2005 and the parties await a ruling from the Court.
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
its 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 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, 2005 and 2004:
Average Occupancy
Property 2005 2004
The Lakes 84% 74%
Raleigh, North Carolina
The General Partner attributes the increase in occupancy at The Lakes Apartments
to capital improvements made at the property that have improved the overall
appearance and helped to attract tenants.
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 loss for the three months ended March 31, 2005 was
approximately $144,000, compared to net loss of approximately $139,000 for the
three months ended March 31, 2004. Net loss remained relatively constant due to
an increase in total revenues offset by an increase in total expenses. Total
revenue increased due to an increase in rental income partially offset by a
casualty gain recognized in 2004. Rental income increased due to increases in
occupancy and the average rental rate and a decrease in bad debt expense at the
Partnership's investment property.
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 increased due to increases in operating and interest expenses,
partially offset by a decrease in depreciation expense. Operating expense
increased due to increases in property and maintenance expenses. Property
expense increased due to increases in payroll and related benefits, utilities
and corporate unit expense at the investment property. Maintenance expense
increased due to an increase in contract labor. Interest expense increased due
to interest charged on the advances outstanding to an affiliate of the General
Partner. Depreciation expense decreased due to assets at the investment property
becoming fully depreciated during 2004.
Included in general and administrative expense for the three months ended March
31, 2005 and 2004 are management reimbursements to the General Partner as
allowed under the Partnership Agreement. Also included in general and
administrative expenses are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2005, the Partnership had cash and cash equivalents of
approximately $36,000 compared to approximately $403,000 at March 31, 2004. The
decrease in cash and cash equivalents of approximately $120,000 since December
31, 2004 is due to approximately $218,000, of cash used in investing activities,
partially offset by approximately $98,000 of cash provided by operating
activities. Cash used in investing activities consisted of property improvements
and replacements. The Partnership invests its working capital reserves in
interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the 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. 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 detailed below.
The Lakes Apartments
During the three months ended March 31, 2005, the Partnership completed
approximately $182,000 of capital improvements at The Lakes Apartments,
consisting primarily of structural upgrades, interior lighting, building
upgrades, plumbing fixtures, floor covering replacements and casualty repairs.
These improvements were funded from operating cash flow. 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 expenditures will be incurred only if cash is available from operations
or from 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. 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 is currently evaluating its options
with respect to obtaining financing for the investment property. 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.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2006. Accordingly, prior to such date the Partnership
will need to either sell its investment property or extend the term of the
Partnership.
The Partnership made no distributions during the three months ended March 31,
2005 and 2004. Future cash distributions will depend on the levels of cash
generated from operations, and the timing of the debt maturity, property sale
and/or refinancing. The Partnership's cash available for distribution is
reviewed on a monthly basis. There can be no assurance that the Partnership will
generate sufficient funds from operations after required capital expenditures to
permit any distributions to its partners during 2005 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 32,142.75 limited partnership units
(the "Units") in the Partnership representing 65.34% 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, 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 65.34% 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.
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.
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 took place on May 12, 2005 and the parties await a ruling from the Court.
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.
CONSOLIDATED CAPITAL GROWTH FUND
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 13, 2005
EXHIBIT INDEX
Exhibit
3 Certificate of Limited Partnership, as amended to date.
10.30 Multifamily Note dated November 30, 1995 between
Consolidated Capital Growth Fund, a California limited
partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holdings, Inc.
(Incorporate by reference to the Annual Report on Form
10-KSB for the year ended December 31, 1995).
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 of the equivalent of the Chief Executive Officer
and Chief Financial Officer 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 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 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 13, 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 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 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 13, 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 Consolidated Capital
Growth Fund (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 13, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: May 13, 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.