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 June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-14099
CONSOLIDATED CAPITAL PROPERTIES VI
(Exact name of small business issuer as specified in its charter)
California 94-2940204
(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 VI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2005
Assets
Cash and cash equivalents $ 4
Receivables and deposits 27
Other assets 150
Investment property:
Land $ 916
Buildings and related personal property 11,586
12,502
Less accumulated depreciation (6,782) 5,720
$ 5,901
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 215
Tenant security deposit liabilities 73
Accrued property taxes 64
Other liabilities 89
Due to affiliates (Note B) 814
Mortgage note payable 4,784
Partners' Deficit
General partner $ (2)
Special limited partners (79)
Limited partners (181,300 units issued and
outstanding) (57) (138)
$ 5,901
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Revenues:
Rental income $ 408 $ 403 $ 823 $ 830
Other income 63 63 107 114
Casualty gain (Note C) -- 4 20 9
Total revenues 471 470 950 953
Expenses:
Operating 250 215 460 388
General and administrative 43 46 77 100
Depreciation 125 117 244 234
Interest 108 99 213 198
Property taxes 32 29 64 59
Total expenses 558 506 1,058 979
Net loss $ (87) $ (36) $ (108) $ (26)
Net loss allocated to
general partner (0.2%) $ -- $ -- $ -- $ --
Net loss allocated to
limited partners (99.8%) (87) (36) (108) (26)
$ (87) $ (36) $ (108) $ (26)
Net loss per limited
partnership unit $ (0.48) $ (0.20) $ (0.60) $ (0.14)
Distributions per limited
partnership unit $ -- $ -- $ -- $ 0.57
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453
Partners' (deficiency) capital
at December 31, 2004 181,300 $ (2) $ (79) $ 51 $ (30)
Net loss for the six months
ended June 30, 2005 -- -- -- (108) (108)
Partners' deficit
at June 30, 2005 181,300 $ (2) $ (79) $ (57) $ (138)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2005 2004
Cash flows from operating activities:
Net loss $ (108) $ (26)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 244 234
Amortization of loan costs 3 3
Casualty gain (20) (9)
Change in accounts:
Receivables and deposits (1) (7)
Other assets (23) (45)
Accounts payable 68 (40)
Tenant security deposit liabilities (12) --
Accrued property taxes (62) (65)
Other liabilities (38) 58
Due to affiliates 70 (67)
Net cash provided by operating activities 121 36
Cash flows from investing activities:
Property improvements and replacements (439) (101)
Insurance proceeds received 21 16
Net cash used in investing activities (418) (85)
Cash flows from financing activities:
Payments on mortgage note payable (89) (69)
Advances from affiliates 330 --
Distributions paid to partners -- (107)
Net cash provided by (used in) financing activities 241 (176)
Net decrease in cash and cash equivalents (56) (225)
Cash and cash equivalents at beginning of period 60 243
Cash and cash equivalents at end of period $ 4 $ 18
Supplemental disclosure of cash flow information:
Cash paid for interest $ 188 $ 162
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 118 $ 59
Included in property improvements and replacements for the six months ended June
30, 2005 are approximately $11,000 of improvements which were included in
accounts payable at December 31, 2004.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties VI (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 ConCap Equities, Inc. ("CEI" or the
"General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 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
an affiliate of Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust.
Note B - Related Party Transactions
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 as compensation for providing property management
services. The Partnership paid to such affiliates approximately $45,000 and
$46,000 for the six months ended June 30, 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 $91,000 and
$63,000 for the six months ended June 30, 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 six
months ended June 30, 2005 and 2004 are fees related to construction management
services provided by an affiliate of the General Partner of approximately
$40,000 and $1,000, respectively. The construction management service fees are
calculated based on a percentage of additions to the investment property.
Approximately $109,000 of the accountable administrative expenses remained
unpaid as of June 30, 2005 and are included in due to affiliates.
The Partnership Agreement also provides for a special management fee equal to 9%
of the total distributions made from operations to the Limited Partners to be
paid to the General Partner for executive and administrative management
services. The General Partner earned approximately $9,000 during the six months
ended June 30, 2004 which is included in general and administrative expenses. No
such fee was earned for the six months ended June 30, 2005 as there were no
operating distributions.
During the six months ended June 30, 2005, the Partnership received advances
from an affiliate of the General Partner of approximately $330,000. Interest was
charged at the prime rate plus 2% (8.25% at June 30, 2005) and amounted to
approximately $19,000 for the six months ended June 30, 2005. At June 30, 2005,
the amount of outstanding loans and accrued interest was approximately $705,000
and is included in due to affiliates. There were no loans from the General
Partner or associated interest expense during the six months ended June 30,
2004.
Subsequent to June 30, 2005, the General Partner advanced the Partnership
approximately $162,000 for capital improvements and operating costs at Colony of
Springdale Apartments.
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, general
liability 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 six months ended June 30, 2005
and 2004, the Partnership was charged by AIMCO and its affiliates approximately
$24,000 for both periods for insurance coverage and fees associated with policy
claims administration.
Note C - Casualty Events
In January 2004 a pipe bomb explosion occurred at the property which damaged 16
electrical meters and exterior siding. No apartment units were damaged. A
casualty gain of approximately $9,000 was recognized during the six months ended
June 30, 2004 due to the receipt of approximately $16,000 in insurance proceeds,
net of the write off of undepreciated property and improvements of approximately
$7,000.
During the six months ended June 30, 2005, there was a casualty gain of
approximately $20,000 recorded at the property related to a fire that damaged
two apartment units in April 2004. This gain was the result of the receipt of
remaining insurance proceeds of approximately $21,000, less the write off of
additional undepreciated property and improvements of approximately $1,000.
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. Plaintiffs took an
appeal from this order.
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. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeal reversed the trial court's order striking the
first amended complaint.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. On June 23, 2005 the Court conditionally certified the collective
action on both the on-call and overtime issues. The Court ruling allows
plaintiffs to provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the present. Those employees
will have the opportunity to opt-in to the collective action. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. After the notice goes out, defendants will have
the opportunity to move to decertify the collective action. The Court further
denied plaintiffs' Motion for Certification of the state subclass. 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
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.
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, and potential fines or
penalties imposed by such agencies in connection therewith, 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, operation and management 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
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") continues its 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 have included 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, tax credit transactions and
tender offers for limited partnership interests. 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 Operations
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex, Colony
of Springdale Apartments, located in Springdale, Ohio. The average occupancy for
the six month periods ended June 30, 2005 and 2004, was 88% and 91%,
respectively. The General Partner attributes the decrease in occupancy at the
property to a more stringent tenant acceptance policy in order to create a more
stable customer base.
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 and six months ended June 30, 2005 was
approximately $87,000 and $108,000 compared to a net loss of approximately
$36,000 and $26,000 for the corresponding periods in 2004. The increase in net
loss for the three and six months ended June 30, 2005 was primarily due to an
increase in total expenses. The increase in net loss for the six months ended
June 30, 2005 was also due to a slight decrease in total revenues. Total
revenues remained relatively constant for the three months ended June 30, 2005.
Total expenses increased for the three and six months ended June 30, 2005 due to
an increase in operating, depreciation and interest expenses partially offset by
a decrease in general and administrative expenses. Operating expenses increased
primarily due to an increase in property and maintenance expenses partially
offset by a decrease in advertising expenses. The increase in property expenses
is primarily due to increased salaries and related benefits and utility expenses
at the Partnership's property. The increase in maintenance expenses is primarily
due to an increase in contract services and damage repairs at the Partnership's
property. The decrease in advertising expense is due to decreased newspaper and
periodical advertisements. The increase in depreciation expense was primarily
due to fixed asset additions being placed into service over the past twelve
months at the Partnership's property. The increase in interest expense is
primarily due to increases in interest incurred on advances from affiliates.
There were no advances during the six months ended June 30, 2004.
General and administrative expenses decreased due to a decrease in the special
management fees earned by the General Partner for executive and administration
management services. The fee is equal to 9% of the total distributions made from
operations to the Limited Partners and there were no operating distributions
during the six months ended June 30, 2005. The decrease in general and
administrative expenses is also due to a decrease in the cost of services
included in the 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. .
The decrease in total revenues for the six months ended June 30, 2005 is
primarily due to decreases in rental and other income, partially offset by an
increase in casualty gain (as discussed below). Rental income decreased
primarily due to a decrease in occupancy, partially offset by an increase in the
average rental rates and a decrease in bad debt expense at the property. Other
income decreased primarily due to a decrease in lease cancellation fees at the
property.
In January 2004 a pipe bomb explosion occurred at the property which damaged 16
electrical meters and exterior siding. No apartment units were damaged. A
casualty gain of approximately $9,000 was recognized during the six months ended
June 30, 2004 due to the receipt of approximately $16,000 in insurance proceeds,
net of the write off of undepreciated property and improvements of approximately
$7,000.
During the six months ended June 30, 2005, there was a casualty gain of
approximately $20,000 recorded at the property related to a fire that damaged
two apartment units in April 2004. This gain was the result of the receipt of
remaining insurance proceeds of approximately $21,000, less the write off of
additional undepreciated property and improvements of approximately $1,000.
Liquidity and Capital Resources
At June 30, 2005, the Partnership had cash and cash equivalents of approximately
$4,000 compared to approximately $18,000 at June 30, 2004. Cash and cash
equivalents decreased by approximately $56,000 since December 31, 2004 due to
approximately $418,000 of cash used in investing activities, partially offset by
approximately $241,000 and $121,000 of cash provided by financing and operating
activities, respectively. Cash used in investing activities consisted of
property improvements and replacements partially offset by insurance proceeds
received. Cash provided by financing activities consisted of advances from
affiliates partially offset by principal payments made on the mortgage
encumbering the Partnership's property. 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 property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal, state,
and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance. For example, the
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Partnership expects that it will incur higher expenses related to
compliance. Capital improvements planned for the Partnership's property are
discussed below.
During the six months ended June 30, 2005, the Partnership completed
approximately $546,000 of capital improvements at Colony of Springdale
Apartments, consisting primarily of vinyl siding, floor covering replacements,
balcony replacements, structural improvements and roof replacements. These
improvements were funded from operating cash flow, insurance proceeds and
advances from affiliates. 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.
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 property of approximately $4,784,000
matures in November 2019 at which time the mortgage is scheduled to be fully
amortized.
The Partnership distributed the following amounts during the six months ended
June 30, 2005 and 2004 (in thousands, except per unit data):
Six Months Per Six Months Per
Ended Limited Ended Limited
June 30, Partnership June 30, Partnership
2005 Unit 2004 Unit
Operations $ -- $ -- $ 107 $ 0.57
Future cash distributions will depend on the levels of cash generated from
operations, and the timing of the debt maturity, refinancing and/or sale of the
property. 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 in 2005 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 102,000 limited partnership units
(the "Units") in the Partnership representing 56.26% of the outstanding Units at
June 30, 2005. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 56.26% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
voting decisions with respect to the Partnership. Although the General Partner
owes fiduciary duties to the limited partners of the Partnership, the General
Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a
result, the duties of the General Partner, as general partner, to the
Partnership and its limited partners may come into conflict with the duties of
the General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
The investment property is recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
ITEM 3. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing 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 Managing 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. Plaintiffs took an
appeal from this order.
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. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeal reversed the trial court's order striking the
first amended complaint.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. The defendants have filed an answer to the amended complaint denying
the substantive allegations. On June 23, 2005 the Court conditionally certified
the collective action on both the on-call and overtime issues. The Court ruling
allows plaintiffs to provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the present. Those employees
will have the opportunity to opt-in to the collective action. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. After the notice goes out, defendants will have
the opportunity to move to decertify the collective action. The Court further
denied plaintiffs' Motion for Certification of the state subclass. 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
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 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index Attached.
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 VI
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: August 12, 2005
CONSOLIDATED CAPITAL PROPERTIES VI
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Certificate of Limited Partnership, incorporated by
reference to the Registration Statement of Registrant filed
October 22, 1984, as amended to date.
3.2 Agreement of Limited Partnership, incorporated by reference
to the Registration Statement of Registrant filed October
22, 1984, as amended to date.
10.22 Multi-family note between Colony of Springdale Associates,
Ltd. and GMAC Commercial Mortgage Corporation dated October
25, 1999. (Incorporated by reference to the Annual Report on
Form 10-K dated December 31, 1999.)
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 VI;
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: August 12, 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 VI;
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: August 12, 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 VI (the "Partnership"), for the quarterly period ended June 30, 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: August 12, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 12, 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.