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 0-8639
CONSOLIDATED CAPITAL GROWTH FUND
(Exact name of small business issuer as specified in its charter)
California 94-2382571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL GROWTH FUND
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2005
Assets
Cash and cash equivalents $ 42
Receivables and deposits 451
Restricted escrows 227
Other assets 154
Investment property:
Land $ 946
Buildings and related personal property 17,109
18,055
Less accumulated depreciation (13,825) 4,230
$ 5,104
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 208
Tenant security deposit liabilities 90
Accrued property taxes 130
Other liabilities 273
Due to affiliates (Note B) 1,095
Mortgage note payable 12,240
Partners' Deficit
General partner $ (3,154)
Limited partners (49,196 units issued and
outstanding) (5,778) (8,932)
$ 5,104
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Rental income $ 796 $ 656 $ 1,578 $ 1,311
Other income 68 61 121 115
Casualty gain (Note C) -- 9 -- 34
Total revenues 864 726 1,699 1,460
Expenses:
Operating 464 455 881 763
General and administrative 55 70 100 123
Depreciation 219 230 436 458
Interest 238 227 473 447
Property taxes 65 62 130 126
Total expenses 1,041 1,044 2,020 1,917
Net loss $ (177) $ (318) $ (321) $ (457)
Net loss allocated to general partner (1%) $ (2) $ (3) $ (3) $ (5)
Net loss allocated to limited partners (99%) (175) (315) (318) (452)
$ (177) $ (318) $ (321) $ (457)
Net loss per limited partnership unit $ (3.55) $ (6.40) $ (6.46) $ (9.19)
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 49,196 $ 1 $49,196 $49,197
Partners' deficit at
December 31, 2004 49,196 $(3,151) $(5,460) $(8,611)
Net loss for the six months
ended June 30, 2005 -- (3) (318) (321)
Partners' deficit at
June 30, 2005 49,196 $(3,154) $(5,778) $(8,932)
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2005 2004
Cash flows from operating activities:
Net loss $ (321) $ (457)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 436 458
Amortization of loan costs 11 11
Bad debt expense, net 40 60
Casualty gain -- (34)
Change in accounts:
Receivables and deposits (175) (141)
Other assets (55) (56)
Accounts payable 6 (251)
Tenant security deposit liabilities 3 10
Accrued property taxes 130 125
Due to affiliates 102 9
Other liabilities (8) (66)
Net cash provided by (used in) operating activities 169 (332)
Cash flows from investing activities:
Property improvements and replacements (377) (163)
Net deposits to restricted escrows -- (61)
Insurance proceeds received -- 40
Net cash used in investing activities (377) (184)
Cash flows provided by financing activities:
Advances from affiliate 94 500
Net decrease in cash and cash equivalents (114) (16)
Cash and cash equivalents at beginning of period 156 364
Cash and cash equivalents at end of period $ 42 $ 348
Supplemental disclosure of cash flow information:
Cash paid for interest $ 425 $ 427
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 99 $ --
At December 31, 2004, approximately $65,000 of property improvements and
replacements were included in accounts payable which are included in property
improvements and replacements during the six months ended June 30, 2005.
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital Growth
Fund (the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods 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 financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
2004. The General Partner is a wholly owned subsidiary of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
The accompanying unaudited financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership suffers from a
lack of cash and has debt of approximately $12,240,000 maturing in December of
2005. Based upon current operations, the Partnership does not anticipate that
proceeds from the new financing will be sufficient to repay the existing debt.
If the Partnership defaults on its scheduled debt repayment, the Partnership
will risk losing its sole investment property through foreclosure. The General
Partner is currently evaluating its options with respect to obtaining financing
for the investment property. The General Partner is also currently evaluating
its means to improve the operations of the property and increase occupancy
levels to improve the cash flows generated by the property.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from the
Partnership's property for providing property management services. The
Partnership paid to such affiliates approximately $81,000 and $71,000 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 $84,000 and
$62,000 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
$19,000 and $3,000, respectively. The construction management service fees are
calculated based on a percentage of additions to the investment property. At
June 30, 2005, approximately $108,000 in reimbursements was due to the General
Partner and is included in due to affiliates on the accompanying balance sheet.
The Partnership Agreement provides for a fee equal to 9% of the total
distributions made to the limited partners from "cash available for
distribution" (as defined in the Partnership Agreement) to be paid to the
General Partner for executive and administrative management services. No fees
were earned or paid for the six months ended June 30, 2005 and 2004.
During the six months ended June 30, 2005, an affiliate of the General Partner
advanced to the Partnership approximately $94,000 to fund property and
Partnership operations. During the six months ended June 30, 2004, an affiliate
of the General Partner advanced the Partnership approximately $500,000 to assist
in paying city taxes related to the sales of two investment properties and to
fund replacement reserves at The Lakes Apartments. Interest on advances is
charged at the prime rate plus 2% (8.25% at June 30, 2005). Interest expense was
approximately $34,000 and $9,000 for the six months ended June 30, 2005 and
2004, respectively. At June 30, 2005, approximately $987,000 in principal and
accrued interest is included in due to affiliates. Subsequent to June 30, 2005,
the General Partner advanced approximately $22,000 to the Partnership to fund
capital improvements at the investment property.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty, 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
$64,000 and $62,000 for insurance coverage and fees associated with policy
claims administration.
Note C - Casualty
In October 2003, the Partnership's investment property, The Lakes Apartments,
incurred damage to four apartment units as a result of a fire. As a result of
the damage, approximately $32,000 of property improvements and replacements and
$26,000 of accumulated depreciation were written off resulting in a net write
off of approximately $6,000. The property received approximately $40,000 in
insurance proceeds from the insurance company to repair the damaged units. For
financial statement purposes, a casualty gain of approximately $34,000 was
recognized during the six months ended June 30, 2004 as a result of the
difference between the proceeds received and the net book value of the assets
written off.
Note D - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. 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 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 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 financial condition or results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's remaining investment property consists of one apartment
complex. The following table sets forth the average occupancy of the property
for the six months ended June 30, 2005 and 2004:
Average Occupancy
Property 2005 2004
The Lakes Apartments 85% 75%
Raleigh, North Carolina
The General Partner attributes the increase in occupancy at The Lakes Apartments
to property management focusing on increasing occupancy through rental
concessions, the addition of an additional leasing agent and tenant retention.
In addition various capital improvements have been made at the property over the
last year which has improved the overall appearance and has helped to attract
new tenants.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage loans, costs incurred to operate the investment property,
general economic conditions and weather. As part of the ongoing business plan of
the Partnership, the General Partner monitors the rental market environment of
its investment property to assess the feasibility of increasing rents,
maintaining or increasing occupancy levels and protecting the Partnership from
increases in expenses. As part of this plan, the General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, the General Partner may use rental concessions and rental rate
reductions to offset softening market conditions, accordingly, there is no
guarantee that the General Partner will be able to sustain such a plan. Further,
a number of factors that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
Results of Operations
The Partnership recognized a net loss of approximately $177,000 and $321,000 for
the three and six months ended June 30, 2005 compared to a net loss of
approximately $318,000 and $457,000 for the three and six months ended June 30,
2004. The decrease in net loss for the six months ended June 30, 2005 is due to
an increase in total revenues partially offset by an increase in total expenses.
The decrease in net loss for the three months ended June 30, 2005 is due to an
increase in total revenues.
Total revenues increased for both the three and six months ended June 30, 2005
due to an increase in rental income slightly offset by a decrease in casualty
gain. Other income remained relatively constant for the comparable periods.
Rental income increased due to an increase in occupancy and the average rental
rate at the Partnership's sole investment property and a decrease in bad debt
expense.
In October 2003, the Partnership's investment property, The Lakes Apartments,
incurred damage to four apartment units as a result of a fire. As a result of
the damage, approximately $32,000 of property improvement and replacements and
$26,000 of accumulated depreciation were written off resulting in a net write
off of approximately $6,000. The property received approximately $40,000 in
insurance proceeds from the insurance company to repair the damaged units. For
financial statement purposes, a casualty gain of approximately $9,000 and
$34,000 was recognized during the three and six months ended June 30, 2004,
respectively, as a result of the difference between the proceeds received and
the net book value of the assets written off.
Total expenses decreased slightly for the three months ended June 30, 2005 due
to decreases in general and administrative and depreciation expenses partially
offset by increases in operating and interest expenses. Property tax expense
remained relatively constant. Depreciation expense decreased due to assets
becoming fully depreciated during the third quarter of 2004. Operating expense
increased due to increases in property and maintenance expenses partially offset
by a decrease in advertising expense. Property expense increased due to an
increase in utility costs, salaries and related benefits. Maintenance expense
increased due to an increase in contract services at the Partnership's
investment property. Advertising expense decreased due to a decrease in leasing
promotions. Interest expense increased due to interest charged on the advances
outstanding to an affiliate of the General Partner.
Total expenses increased for the six months ended June 30, 2005 due to increases
in operating and interest expenses partially offset by decreases in depreciation
and general and administrative expenses as discussed above and below. Property
tax expense remained relatively constant.
General and administrative expenses decreased for the three and six months ended
June 30, 2005 due to a decrease in audit fees partially offset by an increase in
the costs of services included in the management reimbursements to the General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative expenses at both June 30, 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.
Liquidity and Capital Resources
At June 30, 2005, the Partnership had cash and cash equivalents of approximately
$42,000 compared to approximately $348,000 at June 30, 2004. The decrease in
cash and cash equivalents of approximately $114,000 since December 31, 2004 is
due to approximately $377,000 of cash used in investing activities, partially
offset by approximately $169,000 and $94,000 of cash provided by operating and
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. The Partnership
invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment property to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, local, legal and regulatory requirements. The General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance. Capital improvements planned for the
Partnership's property are detailed below.
The Lakes Apartments
During the six months ended June 30, 2005, the Partnership completed
approximately $411,000 of capital improvements at The Lakes Apartments,
consisting primarily of structural and building upgrades and interior lighting,
plumbing fixtures and floor covering replacements. These improvements were
funded from operating cash flow 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 replacement reserves and anticipated cash
flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations,
from Partnership reserves or from advances from an affiliate of the General
Partner. To the extent that capital improvements are completed, the
Partnership's distributable cash flow, if any, may be adversely affected at
least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the investment property of approximately $12,240,000
requires monthly interest only payments until December 1, 2005 at which time a
balloon payment is due. The General Partner is currently evaluating its options
with respect to obtaining financing for the investment property. The General
Partner will attempt to refinance such indebtedness and/or sell the property
prior to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing the property through
foreclosure.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2006. Accordingly, prior to such date the Partnership
will need to either sell its investment property or extend the term of the
Partnership.
The Partnership made no distributions during the six months ended June 30, 2005
and 2004. Future cash distributions will depend on the levels of cash generated
from operations, and the timing of the debt maturity, property sale and/or
refinancing. The Partnership's cash available for distribution is reviewed on a
monthly basis. In light of the amounts accrued and payable to an affiliate of
the General Partner at June 30, 2005, there can be no assurance that the
Partnership will generate sufficient funds from operations after required
capital expenditures to permit any distributions to its partners during 2005 or
subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 32,142.75 limited partnership units
(the "Units") in the Partnership representing 65.34% of the outstanding Units at
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, unit holders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 65.34% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
such voting decisions with respect to the Partnership. Although the General
Partner owes fiduciary duties to the limited partners of the Partnership, the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the General Partner, as general partner, to the
Partnership and its limited partners may come into conflict with the duties of
the General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the property may be impaired, the Partnership will make an assessment
of its recoverability by estimating the undiscounted future cash flows,
excluding interest charges, of the property. If the carrying amount exceeds the
aggregate future cash flows, the Partnership would recognize an impairment loss
to the extent the carrying amount exceeds the fair value of the property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. 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. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. 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
financial condition or results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL GROWTH FUND
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 12, 2005
CONSOLIDATED CAPITAL GROWTH FUND
EXHIBIT INDEX
Exhibit
3 Certificate of Limited Partnership, as amended to date.
10.30 Multifamily Note dated November 30, 1995 between
Consolidated Capital Growth Fund, a California limited
partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holdings, Inc.
(Incorporate by reference to the Annual Report on Form
10-KSB for the year ended December 31, 1995).
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of equivalent of Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Consolidated
Capital Growth Fund;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: 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 Growth Fund;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: 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
Growth Fund (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.