UNITED SATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K/A No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2004
or
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Name of small business issuer in its charter)
California 94-2768742
(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)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes ______ No __X__
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 2004. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
Explanatory Note
Consolidated Capital Properties IV (the "Partnership" or "Registrant") is filing
this Amendment on Form 10-K (the "Amendment") for the sole purpose of amending
the Partnership's Annual Report on Form 10-K for the year ended December 31,
2004 (the "Original Filing"). This Amendment adjusts the capitalization of
interest expense associated with the redevelopment of one of the Partnership's
investment properties during 2004. Because of the errors noted above, the
Partnership's financial statements showed an understatement of net income for
the year ended December 31, 2004 and an understatement of assets and
overstatement of partners' deficit as of December 31, 2004. This error has been
corrected in the restated financial statements.
Please note that this amendment restates only those items of the Original Filing
that were affected by the above-described corrections. Furthermore, the
information contained in this Amendment is as of the date of the Original Filing
and does not reflect any subsequent information or events occurring after the
date of the Original Filing. Therefore, you should read this Amendment together
with other documents that the Partnership has filed with the United States
Securities and Exchange Commission (the "SEC") subsequent to the filing of the
Original Filing. Information in such reports and documents updates and
supersedes certain information contained in this Amendment.
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.
PART I
Item 1. Description of Business
The Partnership was organized on September 22, 1981 as a limited partnership
under the California Uniform Limited Partnership Act. On December 18, 1981, the
Partnership commenced a public offering for the sale of 200,000 units (the
"Units") with the general partner's right to increase the offering to 400,000
units. The Units represent equity interests in the Partnership and entitle the
holders thereof to participate in certain allocations and distributions of the
Partnership. The sale of Units closed on December 14, 1983, with 343,106 Units
sold at $500 each, or gross proceeds of $171,553,000 to the Partnership. Since
its initial offering, the Partnership has not received, nor are limited partners
required to make, additional capital contributions.
By the end of fiscal year 1985, approximately 73% of the proceeds raised had
been invested in 48 properties. Of the remaining 27%, 11% was required for
organizational and offering expenses, sales commissions and acquisition fees,
and 16% was retained in Partnership reserves for project improvements and
working capital as required by the Partnership Agreement.
The general partner of the Partnership is ConCap Equities, Inc., a Delaware
corporation (the "General Partner" or "CEI"). The General Partner is a
subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust. The directors and officers of the General
Partner also serve as executive officers of AIMCO. The Partnership Agreement
provides that the Partnership is to terminate on December 31, 2011 unless
terminated prior to that date.
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership is engaged in the business of operating and
holding real estate properties for investment. As of the close of fiscal year
1985, the Partnership had completed its property acquisition stage and had
acquired 48 properties. At December 31, 2004, the Partnership owned 10
income-producing properties (or interests therein) and one property which is
under development in Atlanta, Georgia, which range in age from 27 to 32 years
old and are principally located in the midwest, southeastern and southwestern
United States. Prior to 2004, the Partnership had disposed of 34 properties
originally owned by the Partnership. Three properties were sold in 2004. See
"Item 2. Description of Properties" for further information about the
Partnership's remaining properties.
Risk Factors
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner, in
such market area could have a material effect on the rental market for the
apartments at the Partnership's properties and the rents that may be charged for
such apartments. While the General Partner and its affiliates own and/or control
a significant number of apartment units in the United States, such units
represent an insignificant percentage of total apartment units in the United
States and competition for the apartments is local.
Laws benefiting disabled persons may result in the Partnership's incurrence of
unanticipated expenses. Under the Americans with Disabilities Act of 1990, or
ADA, all places intended to be used by the public are required to meet certain
Federal requirements related to access and use by disabled persons. Likewise,
the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties
first occupied after March 13, 1990 to be accessible to the handicapped. These
and other Federal, state and local laws may require modifications to the
Partnership's properties, or restrict renovations of the properties.
Noncompliance with these laws could result in the imposition of fines or an
award of damages to private litigants and also could result in an order to
correct any non-complying feature, which could result in substantial capital
expenditures. Although the General Partner believes that the Partnership's
properties are substantially in compliance with the present requirements, the
Partnership may incur unanticipated expenses to comply with the ADA and the
FHAA.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
From time to time, the Federal Bureau of Investigation, or FBI, and the United
States Department of Homeland Security issue alerts regarding potential
terrorist threats involving apartment buildings. Threats of future terrorist
attacks, such as those announced by the FBI and the Department of Homeland
Security, could have a negative effect on rent and occupancy levels at the
Partnership's properties. The effect that future terrorist activities or threats
of such activities could have on the Partnership's operations is uncertain and
unpredictable. If the Partnership were to incur a loss at a property as a result
of an act of terrorism, the Partnership could lose all or a portion of the
capital invested in the property, as well as the future revenue from the
property. In this regard, the Partnership has purchased insurance to cover acts
of terrorism. The General Partner does not anticipate that these costs will have
a negative effect on the Partnership's consolidated financial condition or
results of operations.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
The Partnership has no employees. Property management and administrative
services are provided by the General Partner and by agents of the General
Partner. The General Partner has also selected an affiliate to provide real
estate advisory and asset management services to the Partnership. As advisor,
such affiliate provides all Partnership accounting and administrative services,
investment management, and supervisory services over property management and
leasing.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis of Financial Condition and Results of Operation"
included in "Item 7" of this Form 10-K/A No. 1.
Transfers of Control
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1988, through a series of
transactions, Southmark Corporation ("Southmark") acquired a controlling
interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter
11 of the United States Bankruptcy Code. In 1990, as part of its reorganization
plan, CEI acquired CCEC's general partner interests in the Partnership and in 15
other affiliated public limited partnerships (the "Affiliated Partnerships") and
CEI replaced CCEC as managing general partner in all 16 partnerships. The
selection of CEI as the sole managing general partner was approved by a majority
of the Limited Partners in the Partnership and in each of the affiliated
partnerships pursuant to a solicitation of the Limited Partners dated August 10,
1990. As part of this solicitation, the Limited Partners also approved an
amendment to the Partnership Agreement to limit changes of control of the
Partnership, and the conversion of CCMC from a general partner to a special
limited partner, thereby leaving CEI as the sole general partner of the
Partnership. On November 14, 1990, CCMC was dissolved and its special limited
partnership interest was divided among its former partners. All of CEI's
outstanding stock was owned by Insignia Properties Trust ("IPT").
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the General Partner. The General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Item 2. Description of Properties
The Partnership originally acquired 48 properties of which seventeen (17) were
sold, ten (10) were conveyed to lenders in lieu of foreclosure, and ten (10)
were foreclosed upon by the lenders. As of December 31, 2004, the Partnership
owned eleven (11) apartment complexes, including one which is currently under
development. Additional information about the properties is found in "Item 8.
Financial Statements and Supplementary Data".
Date of
Property Purchase Type of Ownership Use
The Apartments (1) 04/84 Fee ownership, subject to Apartment
Omaha, Nebraska a first mortgage 204 units
Arbours of Hermitage Apts. (1) 09/83 Fee ownership subject to Apartment
Nashville, Tennessee a first mortgage 350 units
Belmont Place Apts. (2) 08/82 Fee ownership subject to Land being
Marietta, Georgia a first mortgage developed
Citadel Apts. (1) 05/83 Fee ownership subject Apartment
El Paso, Texas to first and second
mortgages 261 units
Citadel Village Apts. (1) 12/82 Fee ownership subject Apartment
Colorado Springs, Colorado to a first mortgage 122 units
Foothill Place Apts. (2) 08/85 Fee ownership subject Apartment
Salt Lake City, Utah to a first mortgage 450 units
Knollwood Apts. (1) 07/82 Fee ownership subject Apartment
Nashville, Tennessee to a first mortgage 326 units
Lake Forest Apts. 04/84 Fee ownership subject Apartment
Omaha, Nebraska to first and second
mortgages 312 units
Post Ridge Apts. (2) 07/82 Fee ownership subject Apartment
Nashville, Tennessee to first and second 150 units
mortgages
Rivers Edge Apts. (2) 04/83 Fee ownership subject Apartment
Auburn, Washington to a first mortgage 120 units
Village East Apts. (1) 12/82 Fee ownership subject Apartment
Cimarron Hills, Colorado to a first mortgage 137 units
(1) Property is held by a limited partnership and/or limited liability
corporation in which the Partnership owns a 100% interest.
(2) Property is held by a limited partnership in which the Partnership owns a
99% interest.
On March 28, 2003, the Partnership sold South Port Apartments to a third party,
for a gross sale price of $8,625,000. The net proceeds realized by the
Partnership were approximately $8,137,000 after payment of closing costs of
approximately $488,000. The Partnership used approximately $4,229,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $6,232,000 for the year ended December 31,
2003, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $8,000 and
$497,000 for the years ended December 31, 2003 and 2002, respectively, are
included in income from discontinued operations and include revenues of
approximately $327,000, and $1,571,000, respectively. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$13,000 for the year ended December 31, 2003 due to the write-off of unamortized
loan costs, which is also included in income from discontinued operations in the
accompanying consolidated statements of operations.
On March 31, 2004, the Partnership sold Point West Apartments to a third party,
for a gross sale price of $3,900,000. The net proceeds realized by the
Partnership were approximately $3,794,000 after payment of closing costs of
approximately $106,000. The Partnership used approximately $2,204,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $3,210,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, losses of approximately $87,000 and
$62,000 and income of approximately $44,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $189,000, $811,000 and
$822,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $48,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third
party, for a gross sale price of $10,700,000. The net proceeds realized by the
Partnership were approximately $10,519,000 after payment of closing costs of
approximately $181,000. The Partnership used approximately $6,328,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $7,962,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, a loss of approximately $108,000 and
income of approximately $24,000 and $273,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $2,071,000, $2,642,000 and
$2,702,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $23,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party,
for a gross sale price of $20,352,000. The net proceeds realized by the
Partnership were approximately $19,644,000 after payment of closing costs of
approximately $708,000. The Partnership used approximately $3,500,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $18,109,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $308,000,
$637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002,
respectively, are included in income from discontinued operations and include
revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively.
In addition, for the year ended December 31, 2004 the Partnership recorded a
loss on early extinguishment of debt of approximately $16,000 due to the
write-off of unamortized loan costs and approximately $98,000 due to pre-payment
penalties paid. These amounts are included in income from discontinued
operations in the accompanying consolidated statements of operations.
Schedule of Properties
Set forth below for each of the Partnership's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Gross
Carrying Accumulated Depreciable Method of Federal
Property Value Depreciation Life Depreciation Tax Basis
(as restated)
(in thousands) (in thousands)
The Apartments $ 9,751 $ 8,246 5-30 yrs S/L $ 1,541
Arbours of Hermitage
Apartments 15,448 12,715 5-30 yrs S/L 3,187
Belmont Place
Apartments 24,261 -- 5-30 yrs S/L 22,350
Citadel Apartments 8,295 7,200 5-30 yrs S/L 935
Citadel Village
Apartments 5,238 3,930 5-30 yrs S/L 1,645
Foothill Place
Apartments 18,072 12,804 5-30 yrs S/L 6,165
Knollwood Apartments 12,999 11,147 5-30 yrs S/L 2,384
Lake Forest Apartments 10,389 8,710 5-30 yrs S/L 1,760
Post Ridge Apartments 5,960 4,785 5-30 yrs S/L 1,436
Rivers Edge Apartments 3,808 3,000 5-30 yrs S/L 982
Village East Apartments 4,559 3,559 5-30 yrs S/L 1,008
Total $118,780 $ 76,096 $ 43,393
See "Note B - Organization and Significant Accounting Policies" to the
consolidated financial statements included in "Item 8. Financial Statements and
Supplementary Data" for a description of the Partnership's capitalization and
depreciation policies.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Partnership's properties.
Principal Principal Principal
Balance At Balance At Stated Balance
December 31, December 31, Interest Period Maturity Due At
Property 2004 2003 Rate Amortized Date Maturity (h)
(in thousands) (in
thousands)
The Apartments $ 4,235 $ 4,367 8.37% (a) 20 yrs 03/20 $ --
Arbours of Hermitage
Apartments 5,650 5,650 6.95% (a) (c) 12/05 5,650
Belmont Place Apartments -- 5,400 6.95% (a) (d) (d) --
Briar Bay Racquet Club
Apartments -- 3,500 6.95% (a) (e) (e) --
Citadel Apartments
1st mortgage 4,215 4,303 8.55% (a) 30 yrs 7/14 3,748
2nd mortgage 1,310 -- (b) (c)(f) 7/07 1,310
Citadel Village 2,450 2,450 6.95% (a) (c) 12/05 2,450
Apartments
Foothill Place 10,100 10,100 6.95% (a) (c) 12/05 10,100
Apartments
Knollwood Apartments 6,780 6,780 6.95% (a) (c) 12/05 6,780
Lake Forest Apartments
1st mortgage 6,027 6,156 7.43% (a) 30 yrs 7/14 5,255
2nd mortgage 2,500 -- (b) (c)(f) 7/07 2,500
Nob Hill Villa -- 6,476 9.20% (a) (e) (e) --
Apartments
Point West Apartments -- 2,221 7.86% (a) (e) (e) --
Post Ridge Apartments
1st mortgage 4,152 4,279 6.63% (a) 20 yrs 01/22 --
2nd mortgage 369 375 7.04% (a) 18 yrs 01/22 173
(g)
Rivers Edge Apartments 3,582 3,693 7.82% (a) 20 yrs 09/20 --
Village East Apartments 2,150 2,150 6.95% (a) (c) 12/05 2,150
Totals $53,520 $67,900 $40,116
(a) Fixed rate mortgage.
(b) Interest rate is variable and is equal to the one month LIBOR rate plus
300 basis points (5.42% at December 31, 2004).
(c) Monthly payments of interest only at the stated rate until maturity. (d)
Mortgage was repaid in September 2004. (e) Property was sold during 2004.
(f) The first mortgage was modified and the second mortgage was obtained in
June 2004 (see below for further explanation).
(g) Debt was obtained October 22, 2003 (see below for further explanation).
(h) See "Note D - Mortgage Notes Payable" to the consolidated financial
statements included in "Item 8. Financial Statements and Supplementary
Data" for information with respect to the Partnership's ability to prepay
these loans and other specific details about the loans.
On October 22, 2003, the Partnership entered into a second mortgage for Post
Ridge Apartments. The second mortgage is in the principal amount of $375,000 and
has a stated interest rate of 7.04% per annum. Payments of principal and
interest of approximately $3,000 are due on the first day of each month
commencing December 2003 until January 2022 at which time a balloon payment of
approximately $173,000 is required. The proceeds from the second mortgage were
used as a cross collateralized loan to Belmont Place Apartments to establish a
capital escrow reserve as required by the mortgage lender. Belmont Place
Apartments used these proceeds to fund the reconstruction of the property.
On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest
Apartments in the amount of $2,500,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $83,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Lake Forest Apartments.
The modification of terms consisted of an interest rate of 7.43%, a payment of
approximately $44,000 due on July 1, 2004 and monthly payments of approximately
$42,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $5,255,000 is due. The previous
terms consisted of monthly payments of approximately $51,000 with a stated
interest rate of 7.13% through the maturity date of October 1, 2021, at which
time the loan was scheduled to be fully amortized.
On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel
Apartments in the amount of $1,310,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $66,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Citadel Apartments. The
modification of terms consisted of an interest rate of 8.55%, a payment of
approximately $38,000 due on July 1, 2004 and monthly payments of approximately
$33,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $3,748,000 is due. The previous
terms consisted of monthly payments of approximately $40,000 with a stated
interest rate of 8.25% through the maturity date of March 1, 2020, at which time
the loan was scheduled to be fully amortized.
Rental Rates and Occupancy
The following table sets forth the average annual rental rates and occupancy for
2004 and 2003 for each property.
Average Annual Average
Rental Rates Occupancy
(per unit)
Property 2004 2003 2004 2003
The Apartments $ 6,907 $ 6,812 92% 94%
Arbours of Hermitage Apartments 7,307 7,159 94% 95%
Belmont Place Apartments -- -- --% 2%
Citadel Apartments 6,647 6,497 92% 95%
Citadel Village Apartments 7,598 7,311 89% 80%
Foothill Place Apartments 7,679 7,776 86% 91%
Knollwood Apartments 7,452 7,661 92% 95%
Lake Forest Apartments 6,945 6,862 94% 95%
Post Ridge Apartments 8,976 8,949 91% 95%
Rivers Edge Apartments 8,328 8,316 96% 93%
Village East Apartments 6,248 6,574 77% 68%
The decrease in occupancy at Citadel Apartments is primarily due to military
deployments in the local area. The increases in occupancy at Citadel Village and
Village East Apartments is due to a more aggressive marketing campaign and the
use of competitive pricing strategies in the local market coupled with the
return of military personnel from overseas deployment. The decrease in occupancy
at Foothill Place Apartments is due to a more stringent tenant acceptance policy
in order to create a more stable customer base and due to the addition of new
student housing in the local area, which has created greater competition for
tenants. The decreases in occupancy at Knollwood and Post Ridge Apartments are
due to a more stringent tenant acceptance policy in order to create a more
stable customer base. In addition, some units were uninhabitable due to fire
damage at Knollwood Apartments and roofing issues at Post Ridge Apartments. The
increase in occupancy at Rivers Edge Apartments is due to a more aggressive
marketing campaign and the use of competitive pricing strategies in the local
market.
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner has designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003.
The Partnership has entered into a construction contract with Casden Builders,
Inc. (a related party) to develop the new Belmont Place Apartments at an
estimated cost of approximately $26.9 million. The construction contract
provides for the payment of the cost of the work plus a fee without a maximum
guaranteed price. Construction is expected to be completed in 2005 at a total
project cost of approximately $31.6 million. The Partnership has funded
construction expenditures from operating cash flow, proceeds from a cross
collateralized loan, Partnership reserves, loans from an affiliate of the
General Partner and sales proceeds. During the year ended December 31, 2004,
approximately $20,338,000 of construction costs were incurred. During the years
ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest
costs of approximately $705,000, $390,000, and $107,000, tax and insurance
expenses of approximately $136,000, $226,000, and $31,000, and other
construction period operating expenses of approximately $105,000, $351,000, and
$65,000, respectively. In addition, during 2004 the Partnership paid prepayment
penalties of approximately $170,000, which were also capitalized as part of the
construction cost, see discussion below. The Partnership anticipates additional
construction costs of approximately $11.3 million during 2005 which will be
funded by, among other things, additional loans from the General Partner.
As part of the redevelopment, during the year ended December 31, 2004, an
affiliate of the General Partner advanced the Partnership approximately
$5,600,000 to repay the mortgage and associated accrued interest encumbering
Belmont Place Apartments. The loan was scheduled to mature in December 2005. In
addition to repaying the mortgage of approximately $5,400,000, the Partnership
wrote off unamortized loan costs of approximately $109,000, which is shown as
loss on early extinguishment of debt on the accompanying consolidated statements
of operations. The Partnership also paid prepayment penalties of approximately
$170,000, which were capitalized as part of the construction cost.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes in the area. The General Partner believes that
all of the properties are adequately insured. Each property is an apartment
complex which leases units for lease terms of one year or less. No residential
tenant leases 10% or more of the available rental space. All of the properties
are in good physical condition, with the exception of Belmont Place Apartments,
as described above, subject to normal depreciation and deterioration as is
typical for assets of this type and age.
Real Estate Taxes and Rates
Real estate taxes and rates in 2004 and 2003 for each property were:
2004 2004 2003 2003
Billing Rate Billing Rate
(in thousands) (in thousands)
The Apartments $127 2.2% $127 2.2%
Arbours of Hermitage Apartments 181 3.8% 186 3.8%
Belmont Place Apartments 55 3.0% 152 3.0%
Citadel Apartments 188 3.1% 184 3.0%
Citadel Village Apartments 19 5.9% 19 5.9%
Foothill Place Apartments 196 1.5% 175 1.5%
Knollwood Apartments 183 3.8% 183 3.8%
Lake Forest Apartments 196 2.2% 196 2.2%
Post Ridge Apartments 98 3.8% 98 3.8%
Rivers Edge Apartments 69 1.3% 70 1.4%
Village East Apartments 22 6.1% 22 6.0%
Capital Improvements
The Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$448,000 of capital improvements at the property, consisting primarily of
structural and building improvements, water heater and floor covering
replacements and golf cart purchases. These improvements were funded from
operating cash flow and insurance proceeds. The Partnership regularly evaluates
the capital improvement needs of the property. While the Partnership has no
material commitments for property improvements and replacements, certain routine
capital expenditures are anticipated during 2005. Such capital expenditures will
depend on the physical condition of the property as well as anticipated cash
flow generated by the property.
Arbours of Hermitage Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$245,000 of capital improvements at the property, consisting primarily of
parking area upgrade, roof replacement, major landscaping, structural
improvements, and floor covering replacements. These improvements were funded
from operating cash flow. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Briar Bay Racquet Club Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$53,000 of capital improvements at the property consisting primarily of
structural improvements and floor covering replacements. These improvements were
funded from operating cash flow. This property was sold October 29, 2004.
Belmont Place Apartments
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the building's foundation and as
such, demolished the property. The General Partner has designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003.
The Partnership has entered into a construction contract with Casden Builders,
Inc. (a related party) to develop the new Belmont Place Apartments at an
estimated cost of approximately $26.9 million. The construction contract
provides for the payment of the cost of the work plus a fee without a maximum
guaranteed price. Construction is expected to be completed in 2005 at a total
project cost of approximately $31.6 million. The Partnership has funded these
construction expenditures from operating cash flows, proceeds from a cross
collateralized loan, partnership reserves, loans from an affiliate of the
General Partner and sales proceeds. During 2004, approximately $20,338,000 of
construction costs were incurred. These expenditures included capitalized
construction period interest of approximately $705,000, capitalized prepayment
penalties of approximately $170,000, capitalized property tax expense of
approximately $136,000 and capitalized construction period operating costs of
approximately $105,000. The Partnership anticipates additional construction
costs of approximately $11.3 million during 2005 which will be funded by, among
other things, additional loans from the General Partner.
Citadel Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$55,000 of capital improvements at the property, consisting primarily of water
heater, air conditioning unit, floor covering and appliance replacements. These
improvements were funded from operating cash flow. The Partnership regularly
evaluates the capital improvement needs of the property. While the Partnership
has no material commitments for property improvements and replacements, certain
routine capital expenditures are anticipated during 2005. Such capital
expenditures will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Citadel Village Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$555,000 of capital improvements at the property, consisting primarily of
casualty repairs from a fire, building improvements, swimming pool and fencing
upgrades, major landscaping, parking lot resurfacing, and appliance and floor
covering replacements. These improvements were funded from operating cash flow
and insurance proceeds. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Foothill Place Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$793,000 of capital improvements at the property, consisting primarily of floor
covering, countertop, water heater and appliance replacements, plumbing fixture
replacements, structural improvements, air conditioning upgrades and major
landscaping. These improvements were funded from operating cash flow. The
Partnership regularly evaluates the capital improvement needs of the property.
While the Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as anticipated cash flow generated by the property.
Knollwood Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$233,000 of capital improvements at the property, consisting primarily of roof
replacements, and floor covering and appliance replacements. These improvements
were funded from operating cash flow and insurance proceeds. The Partnership
regularly evaluates the capital improvement needs of the property. While the
Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as anticipated cash flow generated by the property.
Lake Forest Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$205,000 of capital improvements at the property, consisting primarily of water
heater and air conditioning upgrades, tennis court resurfacing, structural
improvements, and floor covering and appliance replacements. These improvements
were funded from operating cash flow and insurance proceeds. The Partnership
regularly evaluates the capital improvement needs of the property. While the
Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as replacement reserves and anticipated cash flow generated by the
property.
Nob Hill Villa Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$215,000 of capital improvements at the property consisting primarily of
appliance and floor covering replacements, water heater replacements, and
plumbing fixtures. These improvements were funded from replacement reserves and
operating cash flow. The property was sold October 29, 2004.
Point West Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$3,000 of capital improvements at Point West Apartments consisting primarily of
floor covering replacements. These improvements were funded from operating cash
flow. The property was sold on March 31, 2004.
Post Ridge Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$216,000 of capital improvements at the property, consisting primarily of floor
covering and appliance replacements, structural improvements, and roof repairs.
These improvements were funded from operating cash flow. The Partnership
regularly evaluates the capital improvement needs of the property. While the
Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as anticipated cash flow generated by the property.
Rivers Edge Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$63,000 of capital improvements at the property, consisting primarily of floor
covering and appliance replacements and structural improvements. These
improvements were funded from operating cash flow. The Partnership regularly
evaluates the capital improvement needs of the property. While the Partnership
has no material commitments for property improvements and replacements, certain
routine capital expenditures are anticipated during 2005. Such capital
expenditures will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
Village East Apartments
During the year ended December 31, 2004, the Partnership completed approximately
$224,000 of capital improvements at the property, consisting primarily of
structural improvements, plumbing fixture replacement, and floor covering and
appliance replacements. These improvements were funded from operating cash flow.
The Partnership regularly evaluates the capital improvement needs of the
property. While the Partnership has no material commitments for property
improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Capital expenditures will be incurred only if cash is available from operations
or from Partnership reserves. To the extent that capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected at least in the short term.
Item 3. 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 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
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 November 24,
2003, the Objector filed an application requesting the court order AIMCO to
withdraw settlement tender offers it had commenced, refrain from making further
offers pending the appeal and auction any units tendered to third parties,
contending that the offers did not conform with the terms of the settlement.
Counsel for the Objector (on behalf of another investor) had alternatively
requested the court take certain action purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions and denied them both in their entirety. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the Appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. The plaintiffs have also
filed a brief in support of the settlement. On June 4, 2004, Objector filed a
reply to the briefs submitted by the General Partner and Plaintiffs. In addition
both the Objector and plaintiffs filed briefs in connection with the second
appeal. 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.
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 an action in the United
States District Court, District of Columbia. The plaintiffs have styled their
complaint as a collective action under the Fair Labor Standards Act ("FLSA") and
seek to certify state subclasses in California, Maryland, and the District of
Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed
to compensate maintenance workers for time that they were required to be
"on-call". Additionally, plaintiffs allege AIMCO Properties L.P. failed to
comply with the FLSA in compensating maintenance workers for time that they
worked in responding to a call while "on-call". The defendants have filed an
answer to the amended complaint denying the substantive allegations. Discovery
relating to the certification of the collective action has concluded and
briefing on the matter is underway. Although the outcome of any litigation is
uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome
will have a material adverse effect on its financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnership did not vote on any matter during the
quarter ended December 31, 2004.
PART II
Item 5. Market for the Registrant's Units of Limited Partnership and
Related Security Holder Matters
(A) No established trading market for the Partnership's Units exists, nor is
one expected to develop.
(B) Title of Class Number of Unitholders of Record
Limited Partnership Units 5,925 as of December 31, 2004
There were 342,773 Units outstanding at December 31, 2004, of which affiliates
of the General Partner owned 222,900 Units or approximately 65.03%.
The following table sets forth the distributions declared by the Partnership for
the years ended December 31, 2004, 2003 and 2002 (in thousands except per unit
data) (see "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations" for more details):
Per Per Per
Year Ended Limited Year Ended Limited Year Ended Limited
December 31, Partnership December 31, Partnership December 31, Partnership
2004 Unit 2003 Unit 2002 Unit
Operations $ -- $ -- $1,827 $ 5.12 $5,515 $15.45
Refinance (1) -- -- -- -- 76 0.21
Sale (2) -- -- 3,743 10.50 -- --
$ -- $ -- $5,570 $15.62 $5,591 $15.66
(1) From refinance proceeds of Post Ridge Apartments distributed in 2002.
(2) From sale proceeds of Southport Apartments distributed in 2003.
In conjunction with the transfer of funds from their certain majority-owned
sub-tier limited partnerships to the Partnership, approximately $7,000, $9,000
and $29,000 was distributed to the general partner of the majority owned
sub-tier limited partnerships during the years ended December 31, 2004, 2003,
and 2002, respectively.
Future cash distributions will depend on the levels of net cash generated from
operations and the timing of debt maturities, property sales and/or
refinancings. The Partnership's cash available for distribution is reviewed on a
monthly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations after required capital expenditures to
permit any distributions to its partners in the year 2005 or subsequent periods.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for information relating to anticipated capital
expenditures at the properties.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 222,900 limited partnership units
(the "Units") in the Partnership representing 65.03% of the outstanding Units at
December 31, 2004. 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 65.03% 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.
Item 6. Selected Financial Data
The following table sets forth a summary of certain financial data for the
Partnership. The 2004 results have been restated to adjust the capitalization of
interest expense associated with the redevelopment of one of the Partnership's
investment properties during 2004. See "Item 8. Financial Statements and
Supplementary Data - Note A" for further information. Certain 2000, 2001, 2002
and 2003 amounts have been restated due to property sales to conform to the 2004
presentation in accordance with accounting principles generally accepted in the
United States. This summary should be read in conjunction with the Partnership's
consolidated financial statements and notes thereto appearing in "Item 8.
Financial Statements and Supplementary Data."
Years Ended December 31,
(in thousands, except per unit data)
Consolidated Statements
of Operations 2004 2003 2002 2001 2000
(Restated) (Restated) (Restated) (Restated) (Restated)
Total revenues $18,453 $17,836 $20,445 $ 21,704 $ 21,276
Total expenses (16,347) (16,475) (17,791) (19,403) (18,220)
Income from continuing
operations 2,106 1,361 2,654 2,301 3,056
Gain on sales of discontinued
operations 29,281 6,232 -- -- 3,440
Income from discontinued
operations 113 607 1,610 1,857 1,978
Net income $31,500 $ 8,200 $ 4,264 $ 4,158 $ 8,474
Per Limited Partnership Unit:
Income from continuing
operations $ 5.89 $ 3.82 $ 7.43 $ 6.45 $ 8.56
Gain on sales of discontinued
operations 82.01 17.45 -- -- 9.63
Income from discontinued
operations 0.32 1.70 4.51 5.20 5.54
Net income $ 88.22 $ 22.97 $ 11.94 $ 11.65 $ 23.73
Distributions per Limited
Partnership Unit $ -- $ 15.62 $ 15.66 $ 25.59 $ 31.32
Limited Partnership Units
outstanding 342,773 342,773 342,773 342,773 342,773
Consolidated Balance Sheets
Total assets $50,195 $30,775 $ 32,287 $ 34,180 $ 38,870
Mortgage notes payable $53,520 $67,900 $ 72,630 $ 73,475 $ 71,791
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The operations of the Partnership primarily include operating and holding
income-producing real estate properties for the benefit of its partners.
Therefore, the following discussion of operations, liquidity and capital
resources will focus on these activities and should be read in conjunction with
"Item 8. Financial Statements and Supplementary Data" and the notes related
thereto included elsewhere in this report.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Partnership, the General Partner monitors the rental market
environment of its investment properties to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses. As part of this plan, the General Partner attempts
to protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, the General Partner may use rental concessions and rental rate
reductions to offset softening market conditions, accordingly, there is no
guarantee that the General Partner will be able to sustain such a plan. Further,
a number of factors that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
RESULTS OF OPERATIONS
The Partnership's net income was approximately $31,500,000 for the year ended
December 31, 2004, compared to approximately $8,200,000 and $4,264,000 for the
years ended December 31, 2003 and 2002, respectively. The increase in net income
was primarily due to the increase in gain on sale of discontinued operations.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying consolidated statements of operations have been restated as of
January 1, 2002 to reflect the operations of South Port Apartments, Point West
Apartments, Nob Hill Apartments and Briar Bay Apartments as income from
discontinued operations due to their sales in March 2003, March 2004, and
October 2004, respectively.
On March 28, 2003, the Partnership sold South Port Apartments to a third party,
for a gross sale price of $8,625,000. The net proceeds realized by the
Partnership were approximately $8,137,000 after payment of closing costs of
approximately $488,000. The Partnership used approximately $4,229,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $6,232,000 for the year ended December 31,
2003, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $8,000 and
$497,000, for the years ended December 31, 2003 and 2002, respectively, are
included in income from discontinued operations and include revenues of
approximately $327,000 and $1,571,000, respectively. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$13,000 for the year ended December 31, 2003 due to the write-off of unamortized
loan costs, which is also included in income from discontinued operations in the
accompanying consolidated statements of operations.
On March 31, 2004, the Partnership sold Point West Apartments to a third party,
for a gross sale price of $3,900,000. The net proceeds realized by the
Partnership were approximately $3,794,000 after payment of closing costs of
approximately $106,000. The Partnership used approximately $2,204,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $3,210,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, losses of approximately $87,000 and
$62,000 and income of approximately $44,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $189,000, $811,000 and
$822,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $48,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third
party, for a gross sale price of $10,700,000. The net proceeds realized by the
Partnership were approximately $10,519,000 after payment of closing costs of
approximately $181,000. The Partnership used approximately $6,328,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $7,962,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, a loss of approximately $108,000 and
income of approximately $24,000 and $273,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $2,071,000, $2,642,000 and
$2,702,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $23,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party,
for a gross sale price of $20,352,000. The net proceeds realized by the
Partnership were approximately $19,644,000 after payment of closing costs of
approximately $708,000. The Partnership used approximately $3,500,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $18,109,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $308,000,
$637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002,
respectively, are included in income from discontinued operations and include
revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively.
In addition, for the year ended December 31, 2004 the Partnership recorded a
loss on early extinguishment of debt of approximately $16,000 due to the
write-off of unamortized loan costs, and approximately $98,000 due to
pre-payment penalties paid. These amount are included in income from
discontinued operations in the accompanying consolidated statements of
operations.
2004 Compared to 2003
Excluding the impact of discontinued operations and the gain on sale of
discontinued operations, the Partnership's income from continuing operations was
approximately $2,106,000 for the year ended December 31, 2004, compared to
approximately $1,361,000 for the year ended December 31, 2003. Income from
continuing operations increased due to an increase in total revenues and a
decrease in total expenses.
The increase in total revenues is due to increases in other income and casualty
gains partially offset by a decrease in rental income. The increase in other
income is due to increases in lease cancellation fees at Foothill Place and Lake
Forest Apartments and The Apartments and in utility reimbursements at most of
the investment properties partially offset by decreases in late charges at
Citadel Village and Village East Apartments. The decrease in rental income is
due to a decrease in occupancy at eight investment properties and a decrease in
the average rental rate at three investment properties partially offset by an
increase in occupancy at three investment properties, an increase in the average
rental rate at seven investment properties and a decrease in bad debt expense,
primarily at Citadel Village and Village East Apartments.
In October 2003, Citadel Village Apartments suffered fire damage to five
apartment units. Insurance proceeds of approximately $219,000 were received
during the year ended December 31, 2004. The Partnership recognized a casualty
gain of approximately $219,000 during the year ended December 31, 2004 as the
damaged assets were fully depreciated at the time of the casualty.
In November 2003, Lake Forest Apartments suffered water damage to some of its
rental units. Insurance proceeds of approximately $44,000 were received during
the year ended December 31, 2004. The Partnership recognized a casualty gain of
approximately $44,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In February 2004, The Apartments suffered damage to 180 apartment units due to
an ice storm. During the year ended December 31, 2004, the Partnership received
insurance proceeds of approximately $322,000, which included approximately
$30,000 for emergency expenses. The Partnership recognized a casualty gain of
approximately $292,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In February 2004, Knollwood Apartments suffered fire damage to some of its
rental units. Insurance proceeds of approximately $46,000 were received during
the year ended December 31, 2004. The Partnership recognized a casualty gain of
approximately $46,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In March 2004, Village East Apartments suffered an electrical fire that damaged
six apartment units. Insurance proceeds of approximately $77,000 were received
during the year ended December 31, 2004. The Partnership recognized a casualty
gain of approximately $77,000 during the year ended December 31, 2004 as the
damaged assets were fully depreciated at the time of the casualty.
In January 2003, The Apartments had a fire which damaged five apartment units
and a hallway. Insurance proceeds of approximately $23,000 were received during
the year ended December 31, 2003. The Partnership recognized a casualty gain of
approximately $23,000 during the year ended December 31, 2003 as the damaged
assets were fully depreciated at the time of the casualty.
Total expenses decreased as a result of decreases in general and administrative,
depreciation and interest expenses partially offset by an increase in operating
expense and a loss on early extinguishment of debt (as discussed in Liquidity
and Capital Resources). Depreciation expense decreased due to assets becoming
fully depreciated at Foothill Place Apartments and no depreciation being charged
at Belmont Place Apartments during 2004 while the property was being
reconstructed. Interest expense decreased due to interest capitalized on the
redevelopment of Belmont Place Apartments partially offset by the addition of
second mortgages at Citadel and Lake Forest Apartments. Operating expense
increased due to increases in advertising, property and maintenance expenses.
Advertising expense increased due to increased marketing costs at Belmont Place
Apartments as the construction nears completion. Property expense increased due
to an increase in payroll and related expenses at all of the investment
properties, partially offset by a decrease in utilities at Belmont Place
Apartments which was not operational during 2004. Maintenance expense increased
due to fewer capitalized costs associated with the reconstruction of Belmont
Place Apartments.
General and administrative expense decreased due to a decrease in management
reimbursements to the General Partner, as allowed under the Partnership
Agreement, a decrease in management fees paid to the General Partner in
connection with distributions made from operations and a decrease in the cost of
the annual audit. Also included in general and administrative expenses are costs
associated with the quarterly and annual communications with investors and
regulatory agencies.
2003 Compared to 2002
Income from continuing operations decreased due to a decrease in total revenues
partially offset by a decrease in total expenses. The decrease in total revenues
is due to decreases in rental and other income partially offset by the casualty
gain recognized in 2003. The decrease in rental income is due to decreased
average rental rates at eleven of the Partnership's fourteen properties, a
decrease in occupancy levels at five of the investment properties and an
increase in concessions at nine of the investment properties partially offset by
an increase in occupancy at nine of the investment properties. The decrease in
other income is due to decreases in late charges at Village East and Belmont
Place Apartments and in lease cancellation fees at Foothill Place Apartments.
In March 2000, South Port Apartments had wind and hail damage, which damaged the
majority of the 240 rental units. The repairs included roof replacements to the
majority of the units. During 2001, insurance proceeds of approximately $182,000
were received and a partial casualty gain of approximately $128,000 was
recognized. During the year ended December 31, 2002, additional insurance
proceeds of approximately $168,000 were received and additional net assets of
approximately $48,000 were written off. This resulted in the Partnership
recognizing a casualty gain of approximately $120,000 during the year ended
December 31, 2002. This amount is included in income from discontinued
operations.
Total expenses decreased due to decreases in general and administrative,
depreciation, interest and property tax expenses. General and administrative
expense decreased due to a decrease in the management fee on distributions from
operating cash flows. Depreciation expense decreased due to fixed assets
becoming fully depreciated at The Apartments, Lake Forest Apartments and
Foothill Place Apartments during 2003. Interest expense decreased due to the
capitalization of interest at Belmont Place Apartments related to the
construction project during 2003. The decrease in property tax expense is due to
the increased capitalization of property taxes at Belmont Place Apartments and
decreases in the assessed values of nine of the Partnership's investment
properties.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2004, the Partnership had cash and cash equivalents of
approximately $4,539,000 compared to approximately $1,537,000 at December 31,
2003. Cash and cash equivalents increased approximately $3,002,000 since
December 31, 2003 due to approximately $3,216,000 of cash provided by operating
activities and approximately $14,375,000 of cash provided by investing
activities partially offset by approximately $14,589,000 of cash used in
financing activities. Cash provided by investing activities consisted of
proceeds from the sales of Nob Hill Villa, Briar Bay, and Point West Apartments,
insurance proceeds received and net withdrawals from restricted escrows
partially offset by property improvements and replacements. Cash used in
financing activities consisted of repayment of the mortgages encumbering Briar
Bay, Nob Hill, Point West and Belmont Place Apartments, payments of principal
made on the mortgages encumbering the Partnership's investment properties, loan
costs and pre-payment penalties paid and payment on advances from an affiliate
of the General Partner partially offset by proceeds from second mortgages
obtained on Citadel and Lake Forest Apartments and 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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and local legal and regulatory requirements. The General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance. The Partnership regularly evaluates the
capital improvement needs of the properties. Except as discussed below, the
Partnership has no material commitments for property improvements and
replacements however certain routine capital expenditures are anticipated during
2005. Such capital expenditures will depend on the physical condition of the
properties as well as replacement reserves and cash flow generated by the
properties. Capital expenditures will be incurred only if cash is available from
operations or from Partnership reserves. To the extent that capital improvements
are completed, the Partnership's distributable cash flow, if any, may be
adversely affected at least in the short term.
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner has designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003.
The Partnership has entered into a construction contract with Casden Builders,
Inc. (a related party) to develop the new Belmont Place Apartments at an
estimated cost of approximately $26.9 million. The construction contract
provides for the payment of the cost of the work plus a fee without a maximum
guaranteed price. Construction is expected to be completed in 2005 at a total
project cost of approximately $31.6 million. The Partnership has funded
construction expenditures from operating cash flow, proceeds from a cross
collateralized loan, Partnership reserves, loans from an affiliate of the
General Partner and sales proceeds. During the year ended December 31, 2004,
approximately $20,338,000 of construction costs were incurred. During the years
ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest
costs of approximately $705,000, $390,000, and $107,000, tax and insurance
expenses of approximately $136,000, $226,000, and $31,000, and other
construction period operating expenses of approximately $105,000, $351,000, and
$65,000, respectively. In addition, during 2004 the Partnership paid prepayment
penalties of approximately $170,000, which were also capitalized as part of the
construction cost, see discussion below. The Partnership anticipates additional
construction costs of approximately $11.3 million during 2005 which will be
funded by, among other things, additional loans from the General Partner.
As part of the redevelopment, during the year ended December 31, 2004, an
affiliate of the General Partner advanced the Partnership approximately
$5,600,000 to repay the mortgage and associated accrued interest encumbering
Belmont Place Apartments. The loan was scheduled to mature in December 2005. In
addition to repaying the mortgage of approximately $5,400,000, the Partnership
wrote off unamortized loan costs of approximately $109,000, which is shown as
loss on early extinguishment of debt on the accompanying consolidated statements
of operations. The Partnership also paid prepayment penalties of approximately
$170,000, which were capitalized as part of the construction cost.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the Partnership's investment properties of
approximately $53,520,000 matures at various dates between 2005 and 2022 with
balloon payments of approximately $27,130,000, $3,810,000 $9,003,000 and
$173,000 due in 2005, 2007, 2014 and 2022, respectively. The General Partner
will attempt to refinance such indebtedness and/or sell the properties prior to
such maturity dates. If a property cannot be refinanced or sold for a sufficient
amount, the Partnership will risk losing such property through foreclosure.
On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest
Apartments in the amount of $2,500,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $83,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Lake Forest Apartments.
The modification of terms consisted of an interest rate of 7.43%, a payment of
approximately $44,000 due on July 1, 2004 and monthly payments of approximately
$42,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $5,255,000 is due. The previous
terms consisted of monthly payments of approximately $51,000 with a stated
interest rate of 7.13% through the maturity date of October 1, 2021, at which
time the loan was scheduled to be fully amortized.
On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel
Apartments in the amount of $1,310,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $66,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Citadel Apartments. The
modification of terms consisted of an interest rate of 8.55%, a payment of
approximately $38,000 due on July 1, 2004 and monthly payments of approximately
$33,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $3,748,000 is due. The previous
terms consisted of monthly payments of approximately $40,000 with a stated
interest rate of 8.25% through the maturity date of March 1, 2020, at which time
the loan was scheduled to be fully amortized.
On October 22, 2003, the Partnership entered into a second mortgage for Post
Ridge Apartments. The second mortgage is in the principal amount of $375,000 and
has a stated interest rate of 7.04% per annum. Payments of principal and
interest of approximately $3,000 are due on the first day of each month
commencing December 2003 until January 2022 at which time a balloon payment of
approximately $173,000 is required. The proceeds from the second mortgage were
used as a cross collateralized loan to Belmont Place Apartments to establish a
capital escrow reserve as required by the mortgage lender. Belmont Place
Apartments used these proceeds to fund the construction project at the property.
The Partnership declared the following distributions during the years ended
December 31, 2004, 2003 and 2002 (in thousands except per unit data):
Per Per Per
Year Ended Limited Year Ended Limited Year Ended Limited
December 31, Partnership December 31, Partnership December 31, Partnership
2004 Unit 2003 Unit 2002 Unit
Operations $ -- $ -- $1,827 $ 5.12 $5,515 $15.45
Refinance (1) -- -- -- -- 76 0.21
Sale (2) -- -- 3,743 10.50 -- --
$ -- $ -- $5,570 $15.62 $5,591 $15.66
(1) From refinance proceeds of Post Ridge Apartments distributed in 2002.
(2) From sale proceeds of Southport Apartments distributed in 2003.
In conjunction with the transfer of funds from their certain majority-owned
sub-tier limited partnerships to the Partnership, approximately $7,000, $9,000
and $29,000 was distributed to the general partner of the majority owned
sub-tier limited partnerships during the years ended December 31, 2004, 2003,
and 2002, respectively.
Future cash distributions will depend on the levels of cash generated from
operations and the timing of debt maturities, property sales and/or
refinancings. The Partnership's cash available for distribution is reviewed on a
monthly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations, after planned capital improvement
expenditures, to permit any distributions to its partners in 2005 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 222,900 limited partnership units
(the "Units") in the Partnership representing 65.03% of the outstanding Units at
December 31, 2004. 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 65.03% 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
A summary of the Partnership's significant accounting policies is included in
"Note B - Organization and Summary of Significant Accounting Policies" to the
consolidated financial statements included in "Item 8. Financial Statements and
Supplementary Data." The General Partner believes that the consistent
application of these policies enables the Partnership to provide readers of the
financial statements with useful and reliable information about the
Partnership's operating results and financial condition. The preparation of
consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires the Partnership to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the financial statements as
well as reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Judgments and assessments of
uncertainties are required in applying the Partnership's accounting policies in
many areas. The following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause an impairment of the
Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
Item 7a. Market Risk Factors
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains 93% of its debt as fixed rate in
nature by borrowing on a long-term basis. Based on interest rates at December
31, 2004, a 100 basis point increase or decrease in market interest rates would
have no material impact on the Partnership.
The following table summarizes the Partnership's fixed rate debt obligations at
December 31, 2004. The interest rates represent the weighted-average rates. The
fair value of the total debt obligations after discounting the scheduled loan
payments to maturity, at the Partnership's incremental borrowing rate was
approximately $53,520,000 at December 31, 2004.
Long-term Debt
Principal amount by expected maturity: Fixed Rate Debt Average Interest Rate
(in thousands)
2005 $ 27,619 7.33%
2006 538 7.64%
2007 580 7.64%
2008 626 7.64%
2009 676 7.64%
Thereafter 19,671 7.64%
Total $ 49,710
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPITAL PROPERTIES IV
LIST OF FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2004 (as restated) and 2003
Consolidated Statements of Operations - Years ended December 31, 2004 (as
restated), 2003 and 2002
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 2004 (as restated), 2003, and 2002
Consolidated Statements of Cash Flows - Years ended December 31, 2004 (as
restated), 2003 and 2002
Notes to Consolidated Financial Statements, as restated
Report of Independent Registered Public Accounting Firm
The Partners
Consolidated Capital Properties IV
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Properties IV as of December 31, 2004 and 2003, and the related
consolidated statements of operations, changes in partners' deficit, and cash
flows for each of the three years in the period ended December 31, 2004. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Partnership's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Partnership's internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Properties IV at December 31, 2004 and 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States.
As discussed in Note A to the financial statements, in 2005 the management of
Consolidated Capital Properties IV determined that the interest capitalized on
the redevelopment of one of its properties was understated for the year ended
December 31, 2004.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
March 21, 2005
Except for Notes A, G, H, and J as to which the date is August 19, 2005
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
December 31,
2004 2003
(as restated -
Assets See Note A)
Cash and cash equivalents $ 4,539 $ 1,537
Receivables and deposits 1,187 1,163
Restricted escrows 426 748
Other assets 1,359 1,504
Investment properties (Notes D and G):
Land 11,030 12,996
Buildings and related personal property 107,750 109,374
118,780 122,370
Less accumulated depreciation (76,096) (96,547)
42,684 25,823
$ 50,195 $ 30,775
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 3,704 $ 731
Tenant security deposit liabilities 306 510
Accrued property taxes 991 1,247
Other liabilities 901 1,107
Distribution payable (Note F) 715 715
Mortgage notes payable (Note D) 53,520 67,900
60,137 72,210
Partners' Deficit
General partners (Note F) (5,791) (7,044)
Limited partners (342,773 units issued and
outstanding) (4,151) (34,391)
(9,942) (41,435)
$ 50,195 $ 30,775
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
Years Ended December 31,
2004 2003 2002
(Restated - (Restated) (Restated)
Revenues: see Note A)
Rental income $15,757 $15,850 $18,395
Other income 2,018 1,963 2,050
Casualty gains (Note I) 678 23 --
Total revenues 18,453 17,836 20,445
Expenses:
Operating 8,581 7,566 7,591
General and administrative 881 1,334 1,565
Depreciation 2,130 2,654 2,978
Interest 3,529 3,788 4,105
Property taxes 1,117 1,133 1,552
Loss on early extinguishment of debt (Note H) 109 -- --
Total expenses 16,347 16,475 17,791
Income from continuing operations 2,106 1,361 2,654
Income from discontinued operations 113 607 1,610
Gain on sale of discontinued operations
(Note E) 29,281 6,232 --
Net income (Note J) $31,500 $ 8,200 $ 4,264
Net income allocated to general partners (4%) $ 1,260 $ 328 $ 171
Net income allocated to limited partners (96%) 30,240 7,872 4,093
Net income $31,500 $ 8,200 $ 4,264
Per limited partnership unit:
Income from continuing operations $ 5.89 $ 3.82 $ 7.43
Income from discontinued operations 0.32 1.70 4.51
Gain on sale of discontinued operations 82.01 17.45 --
Net income $ 88.22 $ 22.97 $ 11.94
Distributions per limited partnership unit $ -- $ 15.62 $ 15.66
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 2001 342,773 $ (7,064) $(35,636) $(42,700)
Net income for the year ended
December 31, 2002 -- 171 4,093 4,264
Distributions to partners -- (253) (5,367) (5,620)
Partners' deficit at
December 31, 2002 342,773 (7,146) (36,910) (44,056)
Net income for the year ended
December 31, 2003 -- 328 7,872 8,200
Distributions to partners -- (226) (5,353) (5,579)
Partners' deficit at
December 31, 2003 342,773 (7,044) (34,391) (41,435)
Net income for the year ended
December 31, 2004, restated -- 1,260 30,240 31,500
Distributions to partners -- (7) -- (7)
Partners' deficit at
December 31, 2004, as restated
see Note A 342,773 $ (5,791) $ (4,151) $ (9,942)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2004 2003 2002
(Restated -
see Note A)
Cash flows from operating activities:
Net income $31,500 $ 8,200 $ 4,264
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,523 3,293 3,770
Amortization of loan costs 145 211 208
Gain on sale of discontinued operations (29,281) (6,232) --
Casualty gains (678) (23) (120)
Loss on early extinguishment of debt 294 13 --
Change in accounts:
Receivables and deposits (24) 3 20
Due from affiliates -- 149 (149)
Other assets (47) (279) (29)
Accounts payable (505) 64 203
Tenant security deposit liabilities (204) (13) 26
(13)
Accrued property taxes (256) (145) 203
Other liabilities (251) 287 (127)
Net cash provided by operating activities 3,216 5,528 8,269
Cash flows from investing activities:
Property improvements and replacements (20,582) (4,021) (2,565)
Net proceeds from sales of discontinued operations 33,957 8,137 --
Net withdrawals from (deposits to) restricted
escrows 322 (92) (12)
Insurance proceeds received 678 23 168
Net cash provided by (used in)
investing activities 14,375 4,047 (2,409)
Cash flows from financing activities:
Payments on mortgage notes payable (758) (876) (845)
Repayment of mortgage notes payable (17,432) (4,229) --
Proceeds from mortgage notes payable 3,810 375 --
Loan costs and pre-payment penalties paid (247) -- --
Advances from affiliates 14,035 -- --
Payments on advances from affiliates (13,990) -- --
Distributions to partners (7) (5,435) (5,617)
Net cash used in financing activities (14,589) (10,165) (6,462)
Net increase (decrease) in cash and cash equivalents 3,002 (590) (602)
Cash and cash equivalents at beginning of the year 1,537 2,127 2,729
Cash and cash equivalents at end of year $ 4,539 $ 1,537 $ 2,127
See Accompanying Notes to Consolidated Financial Statements
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
At December 31, 2003 and 2002, distributions payable to partners were each
adjusted by approximately $144,000 and $3,000 for non-cash activity,
respectively.
Cash paid for interest was approximately $4,942,000, $5,251,000 and $5,401,000
for the years ended December 31, 2004, 2003 and 2002, respectively.
At December 31, 2004 and 2003, property improvements and replacements of
approximately $3,307,000 and $243,000, respectively, were included in accounts
payable.
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
Note A - Correction of an Error
As disclosed in Note H to the financial statements, Consolidated Capital
Properties IV (the "Partnership" or "Registrant") has been redeveloping one of
its investment properties, Belmont Place Apartments, which was completely
demolished during 2003 and was under reconstruction during 2004. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 34,
"Capitalization of Interest Cost", the Partnership capitalized certain operating
costs and interest and tax expenses during the redevelopment. However, once the
mortgage encumbering Belmont Place Apartments was repaid in November 2004, the
Partnership failed to consider the Partnership's consolidated debt and
associated interest expense when determining the proper amount of interest to
capitalize. In addition, the Partnership paid a pre-payment penalty associated
with the retirement of the mortgage encumbering Belmont Place Apartments. The
Partnership has determined that this pre-payment penalty should also be
capitalized, as the Partnership was required by the mortgage lender to repay the
mortgage.
During the year ended December 31, 2004, the Partnership recorded capitalized
interest of approximately $299,000. The Partnership has determined that
capitalized interest, including the pre-payment penalty of approximately
$170,000, should have been approximately $875,000. The following tables set
forth the adjustments to the balance sheet as of December 31, 2004 and the
statement of operations for the year ended December 31, 2004. The only financial
statement line items included below are those that have been restated from the
originally reported amounts.
As of December 31, 2004
(in thousands)
As Previously
Reported As Restated
Buildings and related personal property $107,174 $107,750
Total land, buildings and related personal
property 118,204 118,780
Net investment properties 42,108 42,684
Partners' deficit (10,518) (9,942)
Year Ended December 31, 2004
(in thousands, except per unit data)
As Previously
Reported Restated
Interest $ 3,935 $ 3,529
Loss on early extinguishment of debt 279 109
Total expenses 16,923 16,347
Income from continuing operations 1,530 2,106
Net income 30,924 31,500
Net income allocated to general partners 1,237 1,260
Net income allocated to limited partners 29,687 30,240
Income from continuing operations per
limited partnership unit 4.28 5.89
Net income per limited partnership unit 86.61 88.22
Note B - Organization and Summary of Significant Accounting Policies
Organization: The Partnership, a California limited partnership, was formed on
September 22, 1981, to operate and hold real estate properties. The general
partner of the Partnership is ConCap Equities, Inc. (the "General Partner" or
"CEI"), a Delaware corporation. Additionally, the General Partner is a
subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust. The Partnership Agreement provides that the
Partnership is to terminate on December 31, 2011 unless terminated prior to that
date. As of December 31, 2004, the Partnership operates 10 residential
properties in or near major urban areas in the United States and one residential
property is nearing completion.
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1988, through a series of
transactions, Southmark Corporation ("Southmark") acquired controlling interest
in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the
United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan,
CEI acquired CCEC's general partner interests in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships") and CEI
replaced CCEC as managing general partner in all 16 partnerships. The selection
of CEI as the sole managing general partner was approved by a majority of the
limited partners in the Partnership and in each of the Affiliated Partnerships
pursuant to a solicitation of the Limited Partners dated August 10, 1990. As
part of the solicitation, the Limited Partners also approved an amendment to the
Partnership Agreement to limit changes of control of the Partnership, and the
conversion of CCMC from a general partner to a Special Limited Partner, thereby
leaving CEI as the sole general partner of the Partnership. On November 14,
1990, CCMC was dissolved and its Special Limited Partnership interest was
divided among its former partners.
All of CEI's outstanding stock is owned by Insignia Properties Trust ("IPT"),
which is an affiliate of AIMCO. In December 1994, the parent of GII Realty,
Inc., entered into a transaction (the "Insignia Transaction") in which an
affiliate of Insignia acquired an option (exercisable in whole or in part from
time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to
a partial exercise of such option, acquired 50.5% of that stock. As part of the
Insignia Transaction, the Insignia affiliate also acquired all of the
outstanding stock of Partnership Services, Inc., an asset management entity, and
a subsidiary of Insignia acquired all of the outstanding stock of Coventry
Properties, Inc., a property management entity. In addition, confidentiality,
non-competition, and standstill arrangements were entered into between certain
of the parties. Those arrangements, among other things, prohibit GII Realty's
former sole shareholder from purchasing Partnership Units for a period of three
years. On October 24, 1995, the Insignia affiliate exercised the remaining
portion of its option to purchase all of the remaining outstanding capital stock
of GII Realty, Inc.
Basis of Presentation: In accordance with SFAS No. 144, the accompanying
consolidated statements of operations have been restated as of January 1, 2002
to reflect the operations of South Port Apartments, Point West Apartments, Nob
Hill Apartments and Briar Bay Apartments as income from discontinued operations
due to their sales in March 2003, March 2004, and October 2004, respectively.
Consolidation: The consolidated financial statements include the Partnership's
majority interest in a joint venture which owned South Port Apartments. The
Partnership has the ability to control the major operating and financial
policies of the joint venture. No minority interest has been reflected for the
joint venture because minority interests are limited to the extent of their
equity capital, and losses in excess of the minority interest equity capital are
charged against the Partnership's interest. Should the losses reverse, the
Partnership would be credited with the amount of minority interest losses
previously absorbed. The other partner of this joint venture is AIMCO
Properties, LP, an affiliate of the General Partner. South Port Apartments was
sold in March 2003.
The Partnership's consolidated financial statements also include the accounts of
the Partnership, its wholly-owned partnerships, and its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
Concap River's Edge Associates, Ltd., Foothill Chimney Associates, L.P., and
ConCap Stratford Associates, Ltd. The Partnership may remove the general partner
of its 99% owned partnerships; therefore, the partnerships are deemed controlled
and therefore consolidated by the Partnership. All significant interpartnership
balances have been eliminated. Briar Bay Apartments was sold in October 2004.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in
banks. At certain times, the amount of cash deposited at a bank may exceed the
limit on insured deposits. Cash balances include approximately $4,394,000 and
$1,358,000 at December 31, 2004 and 2003, respectively, that are maintained by
the affiliated management company on behalf of affiliated entities in a cash
concentration account.
Security Deposits: The Partnership requires security deposits from lessees for
the duration of the lease and such deposits are included in receivables and
deposits. Deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
Restricted Escrows:
Tax Escrow Account: In connection with the second mortgages obtained on
Citadel and Lake Forest Apartments in June 2004, the lender required the
establishment of a property tax escrow account to be maintained by the
mortgage lender. The Partnership was required to make initial deposits of
approximately $115,000 and $136,000 for Citadel and Lake Forest
Apartments, respectively, at the time the mortgages were obtained and is
required to make monthly deposits of approximately $16,000 and $17,000,
respectively. At December 31, 2004, the total reserve balance was
approximately $353,000.
Replacement Reserve Account - At the time of the refinancings of the
mortgage notes payable encumbering the Arbours of Hermitage Apartments,
Briar Bay Apartments, Nob Hill Villa Apartments, South Port Apartments,
Belmont Place Apartments, Citadel Village Apartments, Foothill Place
Apartments, Knollwood Apartments, and Village East Apartments, $507,000 of
the proceeds, ranging from $191 to $325 per unit, were designated for
replacement reserves. These funds were established to cover necessary
repairs and replacements of existing improvements. At December 31, 2003,
the total reserve balance was approximately $373,000 and had been fully
utilized at December 31, 2004.
In connection with the second mortgages obtained on Citadel and Lake
Forest Apartments in June 2004, the lender required the establishment of a
replacement reserve to be used for the funding of capital replacements
throughout the loan terms. The Partnership is required to make monthly
deposits of approximately $6,000 and $7,000 for Citadel and Lake Forest
Apartments, respectively. At December 31, 2004, the total reserve balance
was approximately $73,000.
Repair Reserve Account - As part of the redevelopment of Belmont Place
Apartments, the mortgage lender required a repair escrow account to be set
by the Partnership. In order to fulfill this requirement, the Partnership
entered into a second mortgage of approximately $375,000 on Post Ridge
Apartments. The proceeds from the second mortgage were transferred to
Belmont Place Apartments as a cross-collateralized loan to fund the repair
escrow required by the mortgage lender. The repair escrow balance at
Belmont Place Apartments was approximately $375,000 at December 31, 2003
and had been fully utilized at December 31, 2004.
Investments in Real Estate: Investment properties consist of ten apartment
complexes and one property under construction and are stated at cost.
Acquisition fees are capitalized as a cost of real estate. The Partnership
capitalizes all expenditures in excess of $250 that clearly relate to the
acquisition and installation of real and personal property components. These
expenditures include costs incurred to replace existing property components,
costs incurred to add a material new feature to a property, and costs that
increase the useful life or service potential of a property component. These
capitalized costs are depreciated over the useful life of the asset.
Expenditures for ordinary repairs, maintenance and apartment turnover costs are
expensed as incurred.
In accordance with SFAS No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets," the Partnership records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets. No adjustments
for impairment of value were recorded in the years ended December 31, 2004,
2003, or 2002.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the investment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used for
real property over 19 years for additions after May 8, 1985 and before January
1, 1987. As a result of the Tax Reform Act of 1986, for additions after December
31, 1986, the modified accelerated cost recovery method is used for depreciation
of (1) real property over 27 1/2 years and (2) personal property additions over
5 years.
Leases: 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.
Deferred Costs: Loan costs of approximately $1,744,000 and $2,330,000, net of
accumulated amortization of approximately $882,000 and $1,270,000, are included
in other assets at December 31, 2004 and 2003, respectively. The loan costs are
amortized over the terms of the related loan agreements. Amortization expense is
included in interest expense and income from discontinued operations.
Amortization expense is expected to be approximately $211,000 in 2005, $103,000
in 2006, $78,000 in 2007, $51,000 in 2008 and $50,000 in 2009.
Leasing commissions and other direct costs incurred in connection with
successful leasing efforts are deferred and amortized over the terms of the
related leases. Amortization of these costs is included in operating expenses.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments", as amended by SFAS No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The Partnership estimates the fair value of its long-term debt by
discounting future cash flows using a discount rate commensurate with that
currently believed to be available to the Partnership for similar term, fully
amortizing long-term debt. The fair value of the Partnership's long term debt at
the Partnership's incremental borrowing rate approximates its fair value at
December 31, 2004.
Allocation of Net Income and Net Loss: The Partnership Agreement provides for
net income (losses) and distributions of distributable cash from operations to
be allocated generally 96% to the Limited Partners and 4% to the General
Partner.
Net Income Per Limited Partnership Unit: Net income per Limited Partnership Unit
is computed by dividing net income allocated to the Limited Partners by the
number of Units outstanding. Per Unit information has been computed based on the
number of Units outstanding at the beginning of each year.
Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also established standards
for related disclosures about products and services, geographic areas, and major
customers. As defined in SFAS No. 131, the Partnership has only one reportable
segment.
Advertising Costs: Advertising costs of approximately $909,000, $553,000 and
$542,000 in 2004, 2003 and 2002, respectively, are expensed as incurred and are
included in operating expense and income from discontinued operations.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Reclassification: Certain reclassifications have been made to the 2002 and 2003
balances to conform to the 2004 presentation.
Note C - 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 certain payments to affiliates for
services and for reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $1,075,000,
$1,161,000 and $1,382,000 for the years ended December 31, 2004, 2003 and 2002,
respectively, which is included in operating expense and income from
discontinued operations.
Affiliates of the General Partner charged the Partnership reimbursement of
accountable administrative expenses amounting to approximately $914,000,
$955,000 and $906,000 for the years ended December 31, 2004, 2003, and 2002,
respectively, which is included in general and administrative expenses and
investment properties. The portion of these reimbursements included in
investment properties for the years ended December 31, 2004, 2003, and 2002 are
fees related to construction management services provided by an affiliate of the
General Partner of approximately $223,000, $104,000, and $55,000, respectively.
The construction management service fees are calculated based on a percentage of
current additions to investment properties. The first three quarters of 2002
were based on estimated amounts and in the fourth quarter of 2002 the
reimbursements were adjusted by $111,000 to actual costs. This amount was
refunded to the Partnership in 2003. The adjustment to management reimbursements
was included in general and administrative expense.
In accordance with the Partnership Agreement, an affiliate of the General
Partner advanced the Partnership approximately $14,035,000 during the year ended
December 31, 2004 to assist with the construction of Belmont Place Apartments
and to repay the mortgage encumbering the property (see Note H). During the same
period, the Partnership repaid approximately $14,105,000, which included
approximately $115,000 of interest. There were no such advances or repayments
during the years ended December 31, 2003 or 2002. Interest on advances is
charged at prime plus 2% or 7.25% at December 31, 2004. Interest expense was
approximately $115,000 for the year ended December 31, 2004. There was no
interest expense for the years ended December 31, 2003 and 2002. At December 31,
2004, the Partnership owed approximately $45,000 for advances and accrued
interest, which is included in other liabilities.
Subsequent to December 31, 2004, an affiliate of the General Partner advanced
the Partnership approximately $3,005,000 to assist in the construction of
Belmont Place Apartments and to pay redevelopment costs at Foothill Place
Apartments. The Partnership has repaid approximately $338,000 in principal and
interest on these loans.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. Affiliates of the General Partner were paid approximately
$158,000 and $477,000 under this provision of the Partnership Agreement during
the years ended December 31, 2003 and 2002, respectively. There were no such
special management fees paid or earned during the year ended December 31, 2004.
For acting as a real estate broker in connection with the sale of South Port
Apartments in March 2003, the General Partner was paid a real estate commission
of approximately $295,000 during the year ended December 31, 2003. For acting as
real estate broker in connection with the sale of Stratford Place Apartments in
December 2000, a real estate commission of approximately $228,000 was accrued in
December 2000 and paid to the General Partner during the year ended December 31,
2001. For acting as real estate broker in connection with the sale of Overlook
Apartments in December 1999, the General Partner was paid a real estate
commission of approximately $40,000 during the year ended December 31, 2000.
When the Partnership terminates, the General Partner will have to return these
commissions if the limited partners do not receive their original invested
capital plus a 6% per annum cumulative return.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During the years ended December 31, 2004, 2003, and 2002, respectively,
the Partnership paid AIMCO and its affiliates approximately $377,000, $350,000
and $423,000 for insurance coverage and fees associated with policy claims
administration.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 222,900 limited partnership units
(the "Units") in the Partnership representing 65.03% of the outstanding Units at
December 31, 2004. 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 65.03% 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.
Note D - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
Principal Principal Monthly Principal
Balance At Balance At Payment Stated Balance
December 31, December 31, Including Interest Maturity Due At
Property 2004 2003 Interest Rate Date Maturity
(in thousands) (in thousands)
The Apartments $ 4,235 $ 4,367 $ 41 8.37% (f) 03/20 $ --
Arbours of Hermitage
Apartments 5,650 5,650 33 (a) 6.95% (f) 12/05 5,650
Belmont Place -- 5,400 -- (b) 6.95% (f) (b) --
Apartments
Briar Bay Racquet Club
Apartments -- 3,500 -- (c) 6.95% (f) (c) --
Citadel Apartments
1st mortgage 4,215 4,303 33 (d) 8.55% (f) 7/14 3,748
2nd mortgage 1,310 -- 5(a)(d) (g) 7/07 1,310
Citadel Village 2,450 2,450 14 (a) 6.95% (f) 12/05 2,450
Apartments
Foothill Place 10,100 10,100 58 (a) 6.95% (f) 12/05 10,100
Apartments
Knollwood Apartments 6,780 6,780 39 (a) 6.95% (f) 12/05 6,780
Lake Forest Apartments
1st mortgage 6,027 6,156 42 (d) 7.43% (f) 7/14 5,255
2nd mortgage 2,500 -- 17(a)(d) (g) 7/07 2,500
Nob Hill Villa -- 6,476 -- (c) 9.20% (f) (c) --
Apartments
Point West Apartments -- 2,221 -- (c) 7.86% (f) (c) --
Post Ridge Apartments
1st mortgage 4,152 4,279 34 6.63% (f) 01/22 --
2nd mortgage 369 375 3 (e) 7.04% (f) 01/22 173
Rivers Edge Apartments 3,582 3,693 33 7.82% (f) 09/20 --
Village East Apartments 2,150 2,150 12 (a) 6.95% (f) 12/05 2,150
Total $53,520 $67,900 $ 364 $40,116
(a) Monthly payments of interest only at the stated rate until maturity. (b)
Mortgage was repaid in September 2004 (see Note H). (c) Property was sold
during 2004 (see Note E).
(d) The first mortgage was modified and the second mortgage was obtained in
June 2004 (see below for further explanation).
(e) Debt was obtained October 22, 2003 (see below for further explanation).
(f) Fixed rate mortgage. (g) Interest rate is variable and is equal to the
one month LIBOR rate plus
300 basis points (5.42% at December 31, 2004).
The notes payable represent borrowings on the properties purchased by the
Partnership. The notes are non-recourse, and are collateralized by deeds of
trust on the investment properties. The notes mature between 2005 and 2022 with
balloon payments of approximately $27,130,000, $3,810,000, $9,003,000 and
$173,000 due in 2005, 2007, 2014 and 2022, respectively, and bear interest at
rates ranging from 5.42% to 9.20%. Various mortgages require prepayment
penalties if repaid prior to maturity. Further, the properties may not be sold
subject to existing indebtedness.
On October 22, 2003, the Partnership entered into a second mortgage for Post
Ridge Apartments. The second mortgage is in the principal amount of $375,000 and
has a stated interest rate of 7.04% per annum. Payments of principal and
interest of approximately $3,000 are due on the first day of each month
commencing December 2003 until January 2022 at which time a balloon payment of
approximately $173,000 is required. The proceeds from the second mortgage were
used as a cross collateralized loan to Belmont Place Apartments to establish a
capital escrow reserve as required by the mortgage lender. Belmont Place
Apartments used these proceeds to fund the construction project of the property
(See Note G - Redevelopment of Belmont Place).
On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest
Apartments in the amount of $2,500,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $83,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Lake Forest Apartments.
The modification of terms consisted of an interest rate of 7.43%, a payment of
approximately $44,000 due on July 1, 2004 and monthly payments of approximately
$42,000 commencing August 1, 2004 through the maturity of July 1, 2014, at which
time a balloon payment of approximately $5,255,000 is due. The previous terms
consisted of monthly payments of approximately $51,000 with a stated interest
rate of 7.13% through the maturity date of October 1, 2021, at which time the
loan was scheduled to be fully amortized.
On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel
Apartments in the amount of $1,310,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (5.42% at December 31, 2004). Capitalized loan costs incurred on
the financing were approximately $66,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Citadel Apartments. The
modification of terms consisted of an interest rate of 8.55%, a payment of
approximately $38,000 due on July 1, 2004 through the maturity date of July 1,
2014, at which time a balloon payment of approximately $3,748,000 is due. The
previous terms consisted of monthly payments of approximately $40,000 with a
stated interest rate of 8.25% through the maturity date of March 1, 2020, at
which time the loan was scheduled to be fully amortized.
Future annual principal payments required under the terms of the mortgage notes
payable subsequent to December 31, 2004, are as follows (in thousands):
2005 $27,619
2006 538
2007 4,390
2008 626
2009 676
Thereafter 19,671
Total $53,520
Note E - Disposition of Investment Properties
On March 28, 2003, the Partnership sold South Port Apartments to a third party,
for a gross sale price of $8,625,000. The net proceeds realized by the
Partnership were approximately $8,137,000 after payment of closing costs of
approximately $488,000. The Partnership used approximately $4,229,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $6,232,000 for the year ended December 31,
2003, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $8,000 and
$497,000, for the years ended December 31, 2003 and 2002, respectively, are
included in income from discontinued operations and include revenues of
approximately $327,000 and $1,571,000, respectively. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$13,000 for the year ended December 31, 2003 due to the write-off of unamortized
loan costs, which is also included in income from discontinued operations in the
accompanying consolidated statements of operations.
On March 31, 2004, the Partnership sold Point West Apartments to a third party,
for a gross sale price of $3,900,000. The net proceeds realized by the
Partnership were approximately $3,794,000 after payment of closing costs of
approximately $106,000. The Partnership used approximately $2,204,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $3,210,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, losses of approximately $87,000 and
$62,000 and income of approximately $44,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $189,000, $811,000 and
$822,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $48,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Nob Hill Villa Apartments to a third
party, for a gross sale price of $10,700,000. The net proceeds realized by the
Partnership were approximately $10,519,000 after payment of closing costs of
approximately $181,000. The Partnership used approximately $6,328,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $7,962,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, a loss of approximately $108,000 and
income of approximately $24,000 and $273,000 for the years ended December 31,
2004, 2003, and 2002, respectively, are included in income from discontinued
operations and include revenues of approximately $2,071,000, $2,642,000 and
$2,702,000, respectively. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $23,000 for the year ended December 31,
2004 due to the write-off of unamortized loan costs, which is also included in
income from discontinued operations in the accompanying consolidated statements
of operations.
On October 29, 2004, the Partnership sold Briar Bay Apartments to a third party,
for a gross sale price of $20,352,000. The net proceeds realized by the
Partnership were approximately $19,644,000 after payment of closing costs of
approximately $708,000. The Partnership used approximately $3,500,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $18,109,000 for the year ended December 31,
2004, as a result of this sale. This amount is shown as gain on sale of
discontinued operations in the accompanying consolidated statements of
operations. The property's operations, income of approximately $308,000,
$637,000 and $796,000 for the years ended December 31, 2004, 2003, and 2002,
respectively, are included in income from discontinued operations and include
revenues of approximately $1,574,000, $1,805,000 and $1,927,000, respectively.
In addition, for the year ended December 31, 2004 the Partnership recorded a
loss on early extinguishment of debt of approximately $16,000 due to the
write-off of unamortized loan costs, and approximately $98,000 due to
pre-payment penalties paid. These amount are included in income from
discontinued operations in the accompanying consolidated statements of
operations.
Note F - Distributions
In conjunction with the transfer of funds from certain majority-owned sub-tier
limited partnerships to the Partnership, approximately $7,000 was distributed to
the general partner of the majority owned sub-tier limited partnership during
the year ended December 31, 2004.
During 2003, the Partnership declared distributions of approximately $5,570,000
(approximately $5,353,000 to the limited partners or $15.62 per limited
partnership unit) consisting of approximately $1,827,000 (approximately
$1,754,000 or $5.12 per limited partnership unit) from operations and
approximately $3,743,000 (approximately $3,599,000 or $10.50 per limited
partnership unit) from the sales proceeds of South Port Apartments, which sold
in March of 2003. Approximately $144,000 of these distributions from proceeds is
payable at December 31, 2004 to the General Partner and special limited partners
as this portion is subordinated and deferred per the Partnership Agreement until
the limited partners receive 100% of their original capital contributions from
surplus cash. In conjunction with the transfer of funds from their certain
majority owned sub-tier limited partnerships to the Partnership, approximately
$9,000 was distributed to the general partner of the majority owned sub-tier
limited partnerships.
During 2002, the Partnership declared distributions of approximately $5,591,000
(approximately $5,367,000 to the limited partners or $15.66 per limited
partnership unit) consisting of approximately $5,515,000 (approximately
$5,294,000 or $15.45 per limited partnership unit) from operations and
approximately $76,000 (approximately $73,000 to the limited partners or $0.21
per limited partnership unit) of refinancing proceeds from Post Ridge
Apartments. Approximately $3,000 of these distributions from proceeds is payable
at December 31, 2004 to the General Partner and special limited partners as this
portion is subordinated and deferred per the Partnership Agreement until the
limited partners receive 100% of their original capital contributions from
surplus cash. In conjunction with the transfer of funds from their certain
majority-owned sub-tier limited partnerships to the Partnership, approximately
$29,000 was distributed to the general partner of the majority owned sub-tier
limited partnerships.
In years prior to 2002, the Partnership distributed various amounts from the
proceeds of property sales and refinancings. At December 31, 2004, approximately
$568,000 of these distributions from proceeds is payable to the General Partner
and special limited partners as this distribution is subordinated and deferred
per the Partnership Agreement until the limited partners receive 100% of their
original capital contributions from surplus funds.
Note G - Investment Properties and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
Buildings Net Cost
and Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(as restated)
(in thousands) (in thousands)
The Apartments $ 4,235 $ 438 $ 6,218 $ 3,095
Arbours of Hermitage
Apartments 5,650 547 8,574 6,327
Belmont Place Apartments -- 659 7,188 16,414
Citadel Apartments 5,525 695 5,619 1,981
Citadel Village Apartments 2,450 337 3,334 1,567
Foothill Place Apartments 10,100 3,492 9,435 5,145
Knollwood Apartments 6,780 345 7,065 5,589
Lake Forest Apartments 8,527 692 5,811 3,886
Post Ridge Apartments 4,521 143 2,498 3,319
Rivers Edge Apartments 3,582 512 2,160 1,136
Village East Apartments 2,150 184 2,236 2,139
Totals $53,520 $ 8,044 $60,138 $50,598
Gross Amount At Which
Carried
At December 31, 2004
(in thousands)
Buildings
And
Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation ConstructioAcquiredLife-Years
(as restated) (in thousands)
The Apartments $ 438 $ 9,313 $ 9,751 $ 8,246 1973 04/84 5-30
Arbours of Hermitage
Apartments 547 14,901 15,448 12,715 1973 09/83 5-30
Belmont Place 3,737 20,524 24,261 -- -- 08/82 5-30
Apartments
Citadel Apartments 694 7,601 8,295 7,200 1973 05/83 5-30
Citadel Village 337 4,901 5,238 3,930 1974 12/82 5-30
Apartments
Foothill Place 3,402 14,670 18,072 12,804 1973 08/85 5-30
Apartments
Knollwood Apartments 345 12,654 12,999 11,147 1972 07/82 5-30
Lake Forest 692 9,697 10,389 8,710 1971 04/84 5-30
Apartments
Post Ridge Apartments 143 5,817 5,960 4,785 1972 07/82 5-30
Rivers Edge 512 3,296 3,808 3,000 1976 04/83 5-30
Apartments
Village East 183 4,376 4,559 3,559 1973 12/82 5-30
Apartments
Totals $11,030 $107,750 $118,780 $ 76,096
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years ended December 31,
2004 2003 2002
(as restated) (in thousands)
Investment Properties
Balance at beginning of year $122,370 $137,657 $135,208
Additions 23,646 4,264 2,565
Property dispositions - other (27,236) (19,551) (116)
Balance at end of year $118,780 $122,370 $137,657
Accumulated Depreciation
Balance at beginning of year $ 96,547 $110,917 $107,215
Additions charged to expense 2,523 3,293 3,770
Property dispositions - other (22,974) (17,663) (68)
Balance at end of year $ 76,096 $ 96,547 $110,917
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 2004, 2003 and 2002, is approximately $128,255,000, $150,401,000,
and $149,635,000, respectively. The accumulated depreciation taken for Federal
income tax purposes at December 31, 2004, 2003 and 2002, is approximately
$84,862,000, $120,662,000 and $118,176,000, respectively.
Note H - Redevelopment of Belmont Place Apartments
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner has designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003.
The Partnership has entered into a construction contract with Casden Builders,
Inc. (a related party) to develop the new Belmont Place Apartments at an
estimated cost of approximately $26.9 million. The construction contract
provides for the payment of the cost of the work plus a fee without a maximum
guaranteed price. Construction is expected to be completed in 2005 at a total
project cost of approximately $31.6 million. The Partnership has funded
construction expenditures from operating cash flow, proceeds from a cross
collateralized loan, Partnership reserves, loans from an affiliate of the
General Partner and sales proceeds. During the year ended December 31, 2004,
approximately $20,338,000 of construction costs were incurred. During the years
ended December 31, 2004, 2003, and 2002, the Partnership capitalized interest
costs of approximately $705,000, $390,000, and $107,000, tax and insurance
expenses of approximately $136,000, $226,000, and $351,000, and other
construction period operating expenses of approximately $105,000, $351,000, and
$65,000, respectively. In addition, during 2004 the Partnership paid prepayment
penalties of approximately $170,000, which were also capitalized as part of the
construction cost, see discussion below. The Partnership anticipates additional
construction costs of approximately $11.3 million during 2005 which will be
funded by, among other things, additional loans from the General Partner.
As part of the redevelopment, during the year ended December 31, 2004, an
affiliate of the General Partner advanced the Partnership approximately
$5,600,000 to repay the mortgage and associated accrued interest encumbering
Belmont Place Apartments. The loan was scheduled to mature in December 2005. In
addition to repaying the mortgage of approximately $5,400,000, the Partnership
wrote off unamortized loan costs of approximately $109,000, which is shown as
loss on early extinguishment of debt on the accompanying consolidated statements
of operations. The Partnership also paid prepayment penalties of approximately
$170,000, which were capitalized as part of the construction cost.
Note I - Casualty Events
In October 2003, Citadel Village Apartments suffered fire damage to five
apartment units. Insurance proceeds of approximately $219,000 were received
during the year ended December 31, 2004. The Partnership recognized a casualty
gain of approximately $219,000 during the year ended December 31, 2004 as the
damaged assets were fully depreciated at the time of casualty.
In November 2003, Lake Forest Apartments suffered water damage to some of its
rental units. Insurance proceeds of approximately $44,000 were received during
the year ended December 31, 2004. The Partnership recognized a casualty gain of
approximately $44,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In February 2004, The Apartments suffered damage to 180 apartment units due to
an ice storm. During the year ended December 31, 2004, the Partnership received
insurance proceeds of approximately $322,000, which included approximately
$30,000 for emergency expenses. The Partnership recognized a casualty gain of
approximately $292,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In February 2004, Knollwood Apartments suffered fire damage to some of its
rental units. Insurance proceeds of approximately $46,000 were received during
the year ended December 31, 2004. The Partnership recognized a casualty gain of
approximately $46,000 during the year ended December 31, 2004 as the damaged
assets were fully depreciated at the time of the casualty.
In March 2004, Village East Apartments suffered an electrical fire that damaged
six apartment units. Insurance proceeds of approximately $77,000 were received
during the year ended December 31, 2004. The Partnership recognized a casualty
gain of approximately $77,000 during the year ended December 31, 2004 as the
damaged assets were fully depreciated at the time of the casualty.
In January 2003, The Apartments had a fire which damaged five apartment units
and a hallway. Insurance proceeds of approximately $23,000 were received during
the year ended December 31, 2003. The Partnership recognized a casualty gain of
approximately $23,000 during the year ended December 31, 2003 as the damaged
assets were fully depreciated at the time of the casualty.
In March 2000, South Port Apartments had wind and hail damage, which damaged the
majority of the 240 rental units. The repairs included roof replacements to the
majority of the units. During 2001, insurance proceeds of approximately $182,000
were received and a partial casualty gain of approximately $128,000 was
recognized. During the year ended December 31, 2002, additional insurance
proceeds of approximately $168,000 were received and additional net assets of
approximately $48,000 were written off. This resulted in the Partnership
recognizing a casualty gain of approximately $120,000 during the year ended
December 31, 2002. This amount is included in income from discontinued
operations.
Note J - Income Taxes
The Partnership is classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the consolidated financial
statements of the Partnership. Taxable income or loss of the Partnership is
reported in the income tax returns of its partners.
The following is a reconciliation between net income as reported in the
consolidated financial statements and Federal taxable income allocated to the
partners in the Partnership's information return for the years ended December
31, 2004, 2003 and 2002 (in thousands, except per unit data):
2004 2003 2002
(Restated)
Net income as reported $31,500 $ 8,200 $ 4,264
(Deduct) add: Deferred revenue and other
liabilities (162) (2) 150
Depreciation differences (32) 56 130
Accrued expenses (74) (7) (35)
Minority interest -- -- (305)
Other (780) 274 (283)
Gain on casualty/
disposition/foreclosure (1,513) (1,720) (119)
Federal taxable income $28,939 $ 6,801 $ 3,802
Federal taxable income per
Limited Partnership unit $ 81.05 $ 20.55 $ 10.65
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets, as restated (in thousands):
Net liabilities as reported $ (9,942)
Land and buildings 9,475
Accumulated depreciation (8,766)
Syndication fees 18,871
Other 6,228
Net assets - Federal tax basis $ 15,866
Note K - 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 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
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 November 24,
2003, the Objector filed an application requesting the court order AIMCO to
withdraw settlement tender offers it had commenced, refrain from making further
offers pending the appeal and auction any units tendered to third parties,
contending that the offers did not conform with the terms of the settlement.
Counsel for the Objector (on behalf of another investor) had alternatively
requested the court take certain action purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions and denied them both in their entirety. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the Appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. The plaintiffs have also
filed a brief in support of the settlement. On June 4, 2004, Objector filed a
reply to the briefs submitted by the General Partner and Plaintiffs. In addition
both the Objector and plaintiffs filed briefs in connection with the second
appeal. 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.
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 an action in the United
States District Court, District of Columbia. The plaintiffs have styled their
complaint as a collective action under the Fair Labor Standards Act ("FLSA") and
seek to certify state subclasses in California, Maryland, and the District of
Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed
to compensate maintenance workers for time that they were required to be
"on-call". Additionally, plaintiffs allege AIMCO Properties L.P. failed to
comply with the FLSA in compensating maintenance workers for time that they
worked in responding to a call while "on-call". The defendants have filed an
answer to the amended complaint denying the substantive allegations. Discovery
relating to the certification of the collective action has concluded and
briefing on the matter is underway. Although the outcome of any litigation is
uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome
will have a material adverse effect on its financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, the presence of hazardous
substances on a property could result in claims by private plaintiffs for
personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership and operation of its properties, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the General Partner believes that these measures will
eliminate, or at least minimize, the effects that mold could have on residents.
To date, the Partnership has not incurred any material costs or liabilities
relating to claims of mold exposure or to abate mold conditions. Because the law
regarding mold is unsettled and subject to change the General Partner can make
no assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
SEC Investigation
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission (the "SEC") is conducting a formal
investigation relating to certain matters. Although the staff of the SEC is not
limited in the areas that it may investigate, AIMCO believes the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003, forecasted guidance, accounts payable, rent concessions,
vendor rebates, capitalization of payroll and certain other costs, and tax
credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict
when the matter 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.
Note L - Selected Quarterly Financial Data (unaudited)
The following is a summary of the unaudited quarterly results of operations for
the Partnership (in thousands, except per unit data):
2004 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
(Restated) (Restated) (Restated)
Total revenues $ 4,382 $ 4,716 $ 4,656 $ 4,699 $ 18,453
Total expenses (3,863) (4,048) (4,527) (3,909) (16,347)
Income from continuing
operations 519 668 129 790 2,106
Discontinued operations 148 81 205 (321) 113
Gain on sale of discontinued
operations 3,141 -- -- 26,140 29,281
Net income $ 3,808 $ 749 $ 334 $ 26,609 $ 31,500
Per limited partnership unit:
Income from continuing
operations $ 1.46 $ 1.86 $ 0.37 $ 2.20 $ 5.89
Discontinued operations 0.41 0.23 0.57 (0.89) 0.32
Gain on sale of discontinued
operations 8.80 -- -- 73.21 82.01
Net income $ 10.67 $ 2.09 $ 0.94 $ 74.52 $ 88.22
2003 (restated) 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
Total revenues $ 4,299 $ 4,422 $ 4,704 $ 4,411 $ 17,836
Total expenses (4,293) (3,825) (4,310) (4,047) (16,475)
Income from continuing
operations 6 597 394 364 1,361
Discontinued operations 104 69 172 262 607
Gain on sale of discontinued
operations 6,149 -- 83 -- 6,232
Net income $ 6,259 $ 666 $ 649 $ 626 $ 8,200
Per limited partnership unit:
Income from continuing
operations $ 0.02 $ 1.67 $ 1.10 $ 1.03 $ 3.82
Discontinued operations 0.29 0.19 0.49 0.73 1.70
Gain on sale of discontinued
operations 17.22 -- 0.23 -- 17.45
Net income $ 17.53 $ 1.86 $ 1.82 $ 1.76 $ 22.97
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Item 9A. 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 were not effective due to the
Partnership's failure to properly record capitalized interest costs. Actions
taken include improving the education of accounting personnel to ensure the
understanding and application of appropriate accounting treatment, as well as
improving the Partnership's accounting review procedures. The Partnership's
management believes that, as of the date of this filing, the Partnership's
ineffective disclosure controls have been fully remediated.
(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
fourth quarter of 2004 that have materially affected, or are reasonably likely
to materially affect, the Partnership's internal control over financial
reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Consolidated Capital Properties IV (the "Registrant" or "Partnership") has no
directors or officers. ConCap Equities, Inc. ("CEI" or the "General Partner")
manages and controls the Partnership and has general responsibility and
authority in all matters affecting its business.
The names of the directors and officers of the General Partner, their ages and
the nature of all positions presently held by them are set forth below.
Martha L. Long 45 Director and Senior Vice President
Harry G. Alcock 42 Director and Executive Vice President
Miles Cortez 61 Executive Vice President, General Counsel
and Secretary
Patti K. Fielding 41 Executive Vice President
Paul J. McAuliffe 48 Executive Vice President and Chief
Financial Officer
Thomas M. Herzog 42 Senior Vice President and Chief Accounting
Officer
Stephen B. Waters 43 Vice President
Martha L. Long has been a Director and Senior Vice President of the General
Partner since February 2004. Ms. Long has been with AIMCO since October 1998 and
has served in various capacities. From 1998 to 2001, Ms. Long served as Senior
Vice President and Controller of AIMCO and the General Partner. During 2002 and
2003, Ms. Long served as Senior Vice President of Continuous Improvement for
AIMCO.
Harry G. Alcock was appointed as a Director of the General Partner in October
2004 and was appointed Executive Vice President of the General Partner in
February 2004 and has been Executive Vice President and Chief Investment Officer
of AIMCO since October 1999. Prior to October 1999 Mr. Alcock served as a Vice
President of AIMCO from July 1996 to October 1997, when he was promoted to
Senior Vice President Acquisitions where he served until October 1999. Mr.
Alcock has had responsibility for acquisition and financing activities of AIMCO
since July 1994.
Miles Cortez was appointed Executive Vice President, General Counsel and
Secretary of the General Partner in February 2004 and of AIMCO in August 2001.
Prior to joining AIMCO, Mr. Cortez was the senior partner of Cortez Macaulay
Bernhardt & Schuetze LLC, a Denver law firm, from December 1997 through
September 2001.
Patti K. Fielding was appointed Executive Vice President - Securities and Debt
of the General Partner in February 2004 and of AIMCO in February 2003. Ms.
Fielding was appointed Treasurer of AIMCO in January 2005. Ms. Fielding is
responsible for debt financing and the treasury department. Ms. Fielding
previously served as Senior Vice President - Securities and Debt of AIMCO from
January 2000 to February 2003. Ms. Fielding joined AIMCO in February 1997 as a
Vice President.
Paul J. McAuliffe has been Executive Vice President and Chief Financial Officer
of the General Partner since April 2002. Mr. McAuliffe has served as Executive
Vice President of AIMCO since February 1999 and was appointed Chief Financial
Officer of AIMCO in October 1999. From May 1996 until he joined AIMCO, Mr.
McAuliffe was Senior Managing Director of Secured Capital Corp.
Thomas M. Herzog was appointed Senior Vice President and Chief Accounting
Officer of the General Partner in February 2004 and of AIMCO in January 2004.
Prior to joining AIMCO in January 2004, Mr. Herzog was at GE Real Estate,
serving as Chief Accounting Officer & Global Controller from April 2002 to
January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior
to joining GE Real Estate, Mr. Herzog was at Deloitte & Touche LLP from 1990
until 2000.
Stephen B. Waters was appointed Vice President of the General Partner in April
2004. Mr. Waters previously served as a Director of Real Estate Accounting since
joining AIMCO in September 1999. Mr. Waters has responsibilities for real estate
and partnership accounting with AIMCO.
One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited partnerships which
either have a class of securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section 15(d) of such Act. Further, one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general partner of AIMCO Properties, L.P., entities that have a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting requirements of Section 15 (d) of such
Act.
The board of directors of the General Partner does not have a separate audit
committee. As such, the board of directors of the General Partner fulfills the
functions of an audit committee. The board of directors has determined that
Martha L. Long meets the requirement of an "audit committee financial expert".
The directors and officers of the General Partner with authority over the
Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code
of ethics that applies to such directors and officers that is posted on AIMCO's
website (www.AIMCO.com). AIMCO's website is not incorporated by reference to
this filing.
Item 11. Executive Compensation
Neither the directors nor officers of the General Partner received any
remuneration from the Partnership during the year ended December 31, 2004.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Except as provided below, as of December 31, 2004, no person or group was known
to CEI to own of record or beneficially more than five percent of the Units of
the Partnership:
Entity Number of Units Percentage
AIMCO IPLP, L.P. 67,033.5 19.55%
(an affiliate of AIMCO)
IPLP Acquisition I, LLC 29,612.5 8.64%
(an affiliate of AIMCO)
AIMCO Properties, L.P. 126,254.0 36.84%
(an affiliate of AIMCO)
AIMCO IPLP, L.P. and IPLP Acquisition I, LLC are indirectly, ultimately owned
by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29602.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its
business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado
80237.
(b) Beneficial Owners of Management
Neither CEI nor any of the directors or officers or associates of CEI own any
Units of the Partnership of record or beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of December 31, 2004, the following persons were known to CEI to be the
beneficial owners of more than five percent (5%) of its common stock:
Number of Percent
Name and Address CEI Shares Of Total
Insignia Properties Trust ("IPT") 100,000 100%
55 Beattie Place, Greenville, SC 29602
Effective February 26, 1999, IPT was merged with and into AIMCO. As of December
31, 2004, AIMCO owns 51% of the outstanding common shares of beneficial interest
of IPT.
Item 13. Certain Relationships and Related 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 certain payments to affiliates for
services and for reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $1,075,000,
$1,161,000 and $1,382,000 for the years ended December 31, 2004, 2003 and 2002,
respectively, which is included in operating expense and income from
discontinued operations.
Affiliates of the General Partner charged the Partnership reimbursement of
accountable administrative expenses amounting to approximately $914,000,
$955,000 and $906,000 for the years ended December 31, 2004, 2003, and 2002,
respectively, which is included in general and administrative expenses and
investment properties. The portion of these reimbursements included in
investment properties for the years ended December 31, 2004, 2003, and 2002 are
fees related to construction management services provided by an affiliate of the
General Partner of approximately $223,000, $104,000, and $55,000, respectively.
The construction management service fees are calculated based on a percentage of
current additions to investment properties. The first three quarters of 2002
were based on estimated amounts and in the fourth quarter of 2002 the
reimbursements were adjusted by $111,000 to actual costs. This amount was
refunded to the Partnership in 2003. The adjustment to management reimbursements
was included in general and administrative expense.
In accordance with the Partnership Agreement, an affiliate of the General
Partner advanced the Partnership approximately $14,035,000 during the year ended
December 31, 2004 to assist with the construction of Belmont Place Apartments
and to repay the mortgage encumbering the property. During the same period, the
Partnership repaid approximately $14,105,000, which included approximately
$115,000 of interest. There were no such advances or repayments during the years
ended December 31, 2003 or 2002. Interest on advances is charged at prime plus
2% or 7.25% at December 31, 2004. Interest expense was approximately $115,000
for the year ended December 31, 2004. There was no interest expense for the
years ended December 31, 2003 and 2002. At December 31, 2004, the Partnership
owed approximately $45,000 for advances and accrued interest, which is included
in other liabilities.
Subsequent to December 31, 2004, an affiliate of the General Partner advanced
the Partnership approximately $3,005,000 to assist in the construction of
Belmont Place Apartments and to pay redevelopment costs at Foothill Place
Apartments. The Partnership has repaid approximately $338,000 in principal and
interest on these loans.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. Affiliates of the General Partner were paid approximately
$158,000 and $477,000 under this provision of the Partnership Agreement during
the years ended December 31, 2003 and 2002, respectively. There were no such
special management fees paid or earned during the year ended December 31, 2004.
For acting as a real estate broker in connection with the sale of South Port
Apartments in March 2003, the General Partner was paid a real estate commission
of approximately $295,000 during the year ended December 31, 2003. For acting as
real estate broker in connection with the sale of Stratford Place Apartments in
December 2000, a real estate commission of approximately $228,000 was accrued in
December 2000 and paid to the General Partner during the year ended December 31,
2001. For acting as real estate broker in connection with the sale of Overlook
Apartments in December 1999, the General Partner was paid a real estate
commission of approximately $40,000 during the year ended December 31, 2000.
When the Partnership terminates, the General Partner will have to return these
commissions if the limited partners do not receive their original invested
capital plus a 6% per annum cumulative return.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During the years ended December 31, 2004, 2003, and 2002, respectively,
the Partnership paid AIMCO and its affiliates approximately $377,000, $350,000
and $423,000 for insurance coverage and fees associated with policy claims
administration.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 222,900 limited partnership units
(the "Units") in the Partnership representing 65.03% of the outstanding Units at
December 31, 2004. 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 65.03% 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.
Item 14. Principal Accounting Fees and Services
The General Partner has reappointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Partnership for 2005. The aggregate fees
billed for services rendered by Ernst & Young LLP for 2004 and 2003 are
described below.
Audit Fees. Fees for audit services totaled approximately $104,000 and $112,000
for 2004 and 2003, respectively. Fees for audit services also include fees for
the reviews of the Partnership's Quarterly Reports on Form 10-Q.
Tax Fees. Fees for tax services totaled approximately $49,000 and $69,000 for
2004 and 2003, respectively.
Item 15. Exhibits and Financial Statements Schedules
(a) The following documents are filed as part of this report:
1. Financial Statements
Consolidated Balance Sheets - December 31, 2004 (as restated) and
2003
Consolidated Statements of Operations - Years Ended December 31,
2004 (as restated), 2003 and 2002
Consolidated Statements of Changes in Partners' Deficit - Years
Ended December 31, 2004 (as restated), 2003 and 2002
Consolidated Statements of Cash Flows - Years Ended December 31,
2004 (as restated), 2003 and 2002
Notes to Consolidated Financial Statements, as restated
2. Schedules
All schedules are omitted because either they are not required, or
not applicable or the financial information is included in the
financial statements or notes thereto.
3. Exhibits
S-K Reference
Number Document Description
3 Certificate of Limited Partnership, as amended to date.
10.62 Contracts related to refinancing of debt:
(a) Deed of Trust and Security Agreement dated March 27, 1995
between Nob Hill Villa Apartment Associates, L.P., a Tennessee
limited partnership, and First Union National Bank of North
Carolina, a North Carolina Corporation.
(b) Promissory Note dated March 27, 1995 between Nob Hill
Villa Apartment Associates, L.P., a Tennessee limited
partnership, and First Union National Bank of North Carolina,
a North Carolina Corporation.
(c) Assignment of leases and Rents dated March 27, 1995
between Nob Hill Villa Apartment Associates, L.P., a Tennessee
limited partnership, and First Union National Bank of North
Carolina, a North Carolina Corporation.
10.63 Multifamily Note dated November 30, 1995 between Briar Bay
Apartments, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.*
10.64 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Village East)
10.65 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Knollwood)
10.66 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Citadel
Village)
10.67 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Arbour East)
10.69 Multifamily Note dated November 30, 1995 between Foothill
Chimney Associates Limited Partnership, a Georgia limited
partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holdings Inc.*
10.78 Multifamily Note dated February 2, 2000 between Apartment
Associates, Ltd., a Texas limited partnership and ARCS
Commercial Mortgage Co., L.P., a California limited
partnership. (Incorporated by reference to Annual Report on
Form 10-K ended December 31, 1999).
10.79 Multifamily Note dated February 28, 2000 between ConCap
Citadel Associated, Ltd., a Texas limited partnership and
ARCs Commercial Mortgage Cl., L.P., a California
corporation. (Incorporated by reference to Annual Report on
Form 10-K ended December 31, 1999).
10.81 Multifamily Note dated August 29, 2000 between ConCap
Rivers Edge Associates, Ltd., a Texas Limited Partnership,
and GMAC Commercial Mortgage Corporation, a California
Corporation. (Incorporated by reference to Quarterly Report
on Form 10-Q for quarter ended September 30, 2000.)
10.85 Multifamily Note dated September 27, 2001 between Consolidated
Capital Properties IV, a California limited partnership, doing
business in Nebraska as Consolidated Capital Properties IV
Limited Partnership and AIMCO Properties, L.P., a Delaware
limited partnership, in favor of GMAC Commercial Mortgage
Corporation, a California corporation.** (mortgage for Lake
Forest)
10.86 Multifamily Note dated December 20, 2001 between Post Ridge
Associates, Ltd., a Tennessee limited partnership, and GMAC
Commercial Mortgage Corporation, a California
corporation.***
10.87 Purchase and Sale Contract dated January 14, 2003 between
South Port CCP IV, L.L.C., a South Carolina limited
liability company, and Warren Lortie Associates, Inc., a
California corporation.****
10.88 Reinstatement and First Amendment of Purchase and Sale
Contract between South Port IV, L.L.C., a South Carolina
limited liability company, and Warren Lortie Associates,
Inc., a California corporation.****
10.89 Form of Multifamily Note dated October 22, 2003 between Post
Ridge Associates, Ltd., Limited Partnership, a Tennessee
limited partnership, and GMAC Commercial Mortgage Corporation,
a California corporation.****
10.90 Form of Replacement Reserve Agreement dated October 22,
2003 between Post Ridge Associates, Ltd., Limited
Partnership, a Tennessee limited partnership, and GMAC
Commercial Mortgage Corporation, a California
corporation.****
10.91 Form of Repair Agreement dated October 22, 2003 between Post
Ridge Associates, Ltd., Limited Partnership, a Tennessee
limited partnership, and GMAC Commercial Mortgage Corporation,
a California corporation.****
10.92 Form of Cross-Collateralization Agreement dated October 22,
2003 between Post Ridge Associates, Ltd., Limited Partnership,
a Tennessee limited partnership, and Federal Home Loan
Mortgage Corporation, a corporation organized and existing
under the laws of the United States of America.****
10.93 Form of Cross-Collateralization Agreement dated October 22,
2003 between Foothill Chimney Associates Limited Partnership,
a Georgia limited partnership, and Federal Home Loan Mortgage
Corporation, a corporation organized and existing under the
laws of the United States of America.****
10.94 Form of Debt Service Escrow Agreement dated October 22, 2003
between Foothill Chimney Associates Limited Partnership, a
Georgia limited partnership, and Federal Homes Loan Mortgage
Corporation, a corporate instrumentality of the United States
of America.****
10.95 Form of Second Modification to Replacement Reserve Agreement
dated October 22, 2003 between Foothill Chimney Associates
Limited Partnership, a Georgia limited partnership, and
Federal Homes Loan Mortgage Corporation, a corporate
instrumentality of the United States of America.****
10.96 Purchase and Sale Contract between Point West Associates
Limited Partnership, a Georgia limited partnership, as Seller
and Focus Development, Inc., a Georgia corporation, as
Purchaser, effective November 17, 2003. (Incorporated by
reference to Form 8-K dated March 31, 2004).
10.97 First Amendment to Purchase and Sale Contract dated January
23, 2004 between Point West Associates Limited Partnership, a
Georgia limited partnership, as Seller and Focus Development,
Inc., a Georgia corporation, as Purchaser. (Incorporated by
reference to Form 8-K dated March 31, 2004).
10.98 Multifamily Note dated June 21, 2004 between Concap Citadel
Associates, Ltd., a Texas limited partnership, and GMAC
Commercial Mortgage Bank. (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended June
30, 2004).
10.99 Replacement Reserve Agreement dated June 21, 2004 between
Concap Citadel Associates, Ltd. a Texas limited
partnership, and GMAC Commercial Mortgage Bank.
(Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2004).
10.100 Allonge and Amendment to Multifamily Note dated June 21,
2004 between Concap Citadel Associates, Ltd., a Texas
limited partnership, and Federal Home Loan Mortgage
Corporation. (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004).
10.101 Multifamily Note dated June 8, 2004 between Consolidated
Capital Properties IV, a California limited partnership, doing
business in Nebraska as Consolidated Capital Properties IV
Limited Partnership and GMAC Commercial Mortgage Bank.
(Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2004).
10.102 Replacement Reserve Agreement dated June 8, 2004 between
Consolidated Capital Properties IV, a California limited
partnership, doing business in Nebraska as Consolidated
Capital Properties IV Limited Partnership and GMAC
Commercial Mortgage Bank. (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended June
30, 2004).
10.103 Allonge and Amendment to Multifamily Note dated June 8, 2004
between Consolidated Capital Properties IV, a California
limited partnership, doing business in Nebraska as
Consolidated Capital Properties IV Limited Partnership and
Federal Home Loan Mortgage Corporation. (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004).
10.104 Purchase and Sale Contract between Briar Bay Associates,
Ltd., a Texas limited partnership, as Seller, and Victoria
Real Estate Management, Inc., a Florida corporation, as
Purchaser, effective September 13, 2004. (Incorporated by
reference to Form 8-K dated September 13, 2004).
10.105 Purchase and Sale Contract between Nob Hill Villa Apartments
Associates, L.P., a Tennessee limited partnership, as Seller,
and DAMA Realty Investors, LLC, a New York limited liability
company, as Purchaser, effective August 18, 2004.
(Incorporated by reference to Form 8-K dated October 29,
2004.)
10.106 Assignment and Assumption of Real Estate Agreement between The
DAMA Realty Investors, LLC, and Nob Hill General Partnership,
dated August 18, 2004. (Incorporated by reference to Form 8-K
dated October 29, 2004.)
11 Statement regarding computation of Net Income per Limited
Partnership Unit (Incorporated by reference to Note A of
Item 8 - Financial Statements of this Form 10-K).
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.
*(Incorporated by reference to the Annual Report on Form 10-K for the year
ended December 31, 1995).
**(Incorporated by reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001).
***(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 2001).
****(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 2003).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED CAPITAL PROPERTIES IV
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 19, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/Harry G. Alcock Director and Executive Date: August 19, 2005
Harry G. Alcock Vice President
/s/Martha L. Long Director and Senior Vice Date: August 19, 2005
Martha L. Long President
/s/Stephen B. Waters Vice President Date: August 19, 2005
Stephen B. Waters
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this annual report on Form 10-K/A No. 1 of Consolidated
Capital Properties IV;
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 registrant as of, and for, the periods presented in this report;
4. The registrant'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 registrant
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
registrant, 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 registrant'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 registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant'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 registrant'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 registrant's
internal control over financial reporting.
Date: August 19, 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 annual report on Form 10-K/A No. 1 of Consolidated
Capital Properties IV;
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 registrant as of, and for, the periods presented in this report;
4. The registrant'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 registrant
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
registrant, 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 registrant'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 registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant'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 registrant'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 registrant's
internal control over financial reporting.
Date: August 19, 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 Annual Report on Form 10-K/A No. 1 of Consolidated
Capital Properties IV (the "Partnership"), for the year ended December 31, 2004
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 19, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 19, 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.