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 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact name of small business issuer as specified in its charter)
California 94-2653686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2005
Assets
Cash and cash equivalents $ 58
Receivables and deposits 75
Other assets 358
Investment properties:
Land $ 407
Buildings and related personal property 10,209
10,616
Less accumulated depreciation (8,267) 2,349
$ 2,840
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 178
Tenant security deposit liabilities 57
Accrued property taxes 45
Other liabilities 184
Due to affiliates (Note B) 964
Mortgage notes payable 7,091
Partners' Deficit
General partners $(1,896)
Limited partners (158,582 units issued and
outstanding) (3,783) (5,679)
$ 2,840
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2005 2004
Revenues:
Rental income $ 626 $ 535
Other income 46 58
Total revenues 672 593
Expenses:
Operating 310 329
General and administrative 65 51
Depreciation 117 113
Interest 157 145
Property taxes 45 44
Total expenses 694 682
Net loss $ (22) $ (89)
Net loss allocated to general partners (4%) $ (1) $ (4)
Net loss allocated to limited partners (96%) (21) (85)
$ (22) $ (89)
Net loss per limited partnership unit $ (0.13) $ (0.54)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 158,945 $ 1 $ 79,473 $ 79,474
Partners' deficit
at December 31, 2004 158,582 $(1,895) $ (3,762) $ (5,657)
Net loss for the three months
ended March 31, 2005 -- (1) (21) (22)
Partners' deficit
at March 31, 2005 158,582 $(1,896) $ (3,783) $ (5,679)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2005 2004
Cash flows from operating activities:
Net loss $ (22) $ (89)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Casualty loss (5) --
Depreciation 117 113
Amortization of loan costs 6 6
Change in accounts:
Receivables and deposits 28 13
Other assets (44) (60)
Due to affiliates 61 27
Accounts payable (57) (34)
Tenant security deposit liabilities (8) (1)
Accrued property taxes 45 44
Other liabilities (50) 22
Net cash provided by operating activities 71 41
Cash flows used in investing activities:
Property improvements and replacements (144) (34)
Cash flows from financing activities:
Payments on mortgage notes payable (64) (50)
Advances from affiliate 112 51
Net cash provided by financing activities 48 1
Net (decrease) increase in cash and cash equivalents (25) 8
Cash and cash equivalents at beginning of period 83 52
Cash and cash equivalents at end of period $ 58 $ 60
Supplemental disclosure of cash flow information:
Cash paid for interest $ 159 $ 139
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 141 $ --
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties III (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the general partner of the Partnership,
ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 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
consolidated 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 wholly-owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
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 ("Partnership Agreement") provides for payments to
affiliates for services and reimbursement of certain expenses incurred by
affiliates of the General Partner on behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from both of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $33,000 and
$29,000 for the three months ended March 31, 2005 and 2004, respectively, which
are included in operating expenses.
Affiliates of the General Partner charged the Partnership for reimbursement of
accountable administrative expenses amounting to approximately $80,000 and
$39,000 for the three months ended March 31, 2005 and 2004, respectively. These
amounts are included in general and administrative expenses and investment
properties. The portion of these reimbursements included in investment
properties 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 $34,000. No such fees were incurred for the three months ended
March 31, 2004. The construction management service fees are calculated based on
a percentage of current additions to investment properties. At March 31, 2005,
approximately $278,000 of such fees were owed to affiliates of the General
Partner and are included in due to affiliates.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow from
operations to be paid to the General Partner for executive and administrative
management services. During the three months ended March 31, 2005 and 2004, no
special management fees were paid as no distributions from cash flow from
operations were made.
During the three months ended March 31, 2005 and 2004, an affiliate of the
General Partner advanced the Partnership approximately $112,000 and $51,000 to
fund operations and capital improvements at Ventura Landing Apartments and
certain audit related liabilities. Interest is accrued at the prime rate plus 2%
(7.75% at March 31, 2005). Interest expense was approximately $11,000 for the
three months ended March 31, 2005. Interest expense was less than $1,000 for the
three months ended March 31, 2004. At March 31, 2005, the total amount of
advances and accrued interest was approximately $686,000 and is included in due
to affiliates. Subsequent to March 31, 2005, an affiliate of the General Partner
advanced the Partnership approximately $70,000 to fund capital improvements at
Ventura Landing Apartments.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During the three months ended March 31, 2005, the Partnership was
charged by AIMCO and its affiliates approximately $21,000 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 $32,000 for insurance coverage and fees associated with
policy claims administration during the year ended December 31, 2004.
Note C - Casualty Events
In August 2004, Ventura Landing Apartments experienced damage from Hurricane
Charley. As of March 31, 2005, the Partnership estimates damage of approximately
$210,000. The Partnership does not expect a casualty loss to result from the
damage as the damaged assets were fully depreciated.
In September 2004, Ventura Landing Apartments experienced damage from Hurricane
Frances. As of March 31, 2005, the Partnership estimates damage of approximately
$37,000. The Partnership does not expect a casualty loss to result from the
damage as the damaged assets were fully depreciated.
In September 2004, Village Green Apartments experienced damage from Hurricane
Frances. During the three months ended March 31, 2005, the Partnership
recognized a casualty gain of approximately $5,000 due to a change in the
estimated building damages at the property, which is reflected in operating
expense.
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, the 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 relating 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 consolidated financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
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 properties, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its properties.
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 consolidated
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 consolidated 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 properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the three month periods ended March 31, 2005 and 2004:
Average Occupancy
Property 2005 2004
Ventura Landing Apartments 96% 94%
Orlando, Florida
Village Green Apartments 96% 91%
Altamonte Springs, Florida
The General Partner attributes the increase in occupancy at Village Green
Apartments to market growth in the Altamonte Springs area.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Partnership, the General Partner monitors the rental market
environment of its investment properties to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses. As part of this plan, the General Partner attempts
to protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, the General Partner may use rental concessions and rental rate
reductions to offset softening market conditions; accordingly, there is no
guarantee that the General Partner will be able to sustain such a plan. Further,
a number of factors 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 $22,000, as compared to a net loss of approximately $89,000 for
the three months ended March 31, 2004. The decrease in net loss is due to an
increase in total revenues, partially offset by an increase in total expenses.
The increase in total revenues is due to an increase in rental income, partially
offset by a decrease in other income. The increase in rental income is primarily
due to increases in occupancy and average rental rates and a decrease in bad
debt expense at both of the Partnership's investment properties. The decrease in
other income is primarily due to decreases in late charges and lease
cancellation fees at Ventura Landing Apartments.
The increase in total expenses is due to increases in both general and
administrative and interest expenses, partially offset by a decrease in
operating expenses. Both depreciation and property tax expense remained
relatively constant for the comparable periods. The increase in interest expense
is primarily due to an increase in interest on advances from an affiliate of the
General Partner. The decrease in operating expenses is primarily due to a
decrease in contract maintenance expense, partially offset by increases in
payroll related expenses at Village Green Apartments, utility expenses at
Ventura Landing Apartments, and clean up costs associated with the 2004
hurricane damage at Ventura Landing Apartments (as discussed below). General and
administrative expenses increased primarily due to an increase in management
reimbursements to the General Partner as allowed under the Partnership Agreement
and professional expenses associated with the administration of the Partnership.
Also included in general and administrative expenses for the three months ended
March 31, 2005 and 2004 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
In August 2004, Ventura Landing Apartments experienced damage from Hurricane
Charley. As of March 31, 2005, the Partnership estimates damage of approximately
$210,000. The Partnership does not expect a casualty loss to result from the
damage as the damaged assets were fully depreciated.
In September 2004, Ventura Landing Apartments experienced damage from Hurricane
Frances. As of March 31, 2005, the Partnership estimates damage of approximately
$37,000. The Partnership does not expect a casualty loss to result from the
damage as the damaged assets were fully depreciated.
In September 2004, Village Green Apartments experienced damage from Hurricane
Frances. During the three months ended March 31, 2005, the Partnership
recognized a casualty gain of approximately $5,000 due to a change in the
estimated building damages at the property, which is reflected in operating
expense.
Liquidity and Capital Resources
At March 31, 2005, the Partnership had cash and cash equivalents of
approximately $58,000, compared to approximately $60,000 at March 31, 2004. The
decrease in cash and cash equivalents of approximately $25,000, from December
31, 2004, is due to approximately $144,000 of cash used in investing activities,
partially offset by approximately $71,000 of cash provided by operating
activities and approximately $48,000 of cash provided by financing activities.
Cash used in investing activities consisted of property improvements and
replacements. Cash provided by financing activities consisted of advances
received from an affiliate of the General Partner, partially offset by payments
of principal made on the mortgages encumbering the Partnership's investment
properties. The Partnership invests its working capital reserves in interest
bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance. 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 each of the Partnership's
properties are detailed below.
Village Green Apartments
During the three months ended March 31, 2005, the Partnership completed
approximately $26,000 of capital improvements at Village Green Apartments,
consisting primarily of floor covering replacement. These improvements were
funded from operations. 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 anticipated cash flow
generated by the property.
Ventura Landing Apartments
During the three months ended March 31, 2005, the Partnership completed
approximately $259,000 of capital improvements at Ventura Landing Apartments,
consisting primarily of plumbing upgrades, and floor covering replacement and
construction related to the hurricane damage, as discussed in "Results of
Operations". These improvements were funded from operations and advances from an
affiliate of the General Partner. 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 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 Partnership's investment properties of
approximately $7,091,000 requires monthly payments of principal and interest
until the loans mature between July and August 2021, at which time the loans are
scheduled to be fully amortized.
There were no distributions made to the partners during the three months ended
March 31, 2005 or 2004. Future cash distributions will depend on the levels of
net cash generated from operations, property sales and/or refinancings. The
Partnership's cash available for distribution is reviewed on a monthly basis. In
light of the amounts accrued and payable to affiliates of the General Partner at
March 31, 2005, there can be no assurance that the Partnership will generate
sufficient funds from operations after 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 83,947.50 limited partnership units
(the "Units") in the Partnership representing 52.94% 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 52.94% of the
outstanding Units, AIMCO is in a position to control all voting decisions with
respect to the Partnership. Although the General Partner owes fiduciary duties
to the limited partners of the Partnership, the General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the General Partner, as general partner, to the Partnership and its limited
partners may come into conflict with the duties of the General Partner to AIMCO
as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
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, the 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 relating 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 consolidated 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 PROPERTIES III
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 16, 2005
CONSOLIDATED CAPITAL PARTNERS III
EXHIBIT INDEX
Exhibit Number
3.1 Certificate of Limited Partnership, as amended to date (Exhibit 3 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by reference).
3.2 Partnership Agreement dated May 22, 1980 is incorporated by
reference to Exhibit A to the Prospectus of the Registration dated
August 17, 1981 as filed with the Commission pursuant to Rule 424(b)
under the Act.
10.51 Multifamily Note dated June 27, 2001 between Consolidated Capital
Properties III, a California limited partnership, and GMAC
Commercial Mortgage Corporation. (Incorporated by reference to the
Quarterly Report on Form 10-QSB for the quarter ended June 30,
2001).
10.52 Multifamily Note dated July 23, 2001 between ConCap Village Green
Associates, Ltd., a Texas limited partnership, and GMAC
Commercial Mortgage Corporation. (Incorporated by reference to
the Quarterly Report on Form 10-QSB for the quarter ended June
30, 2001).
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 Properties III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the 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 16, 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 Properties III;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the 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 16, 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
Properties III (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 16, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: May 16, 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.