UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-14099
CONSOLIDATED CAPITAL PROPERTIES VI
(Exact name of small business issuer as specified in its charter)
California 94-2940204
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes __ No X_
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2005
Assets
Cash and cash equivalents $ 11
Receivables and deposits 31
Other assets 48
Assets held for sale (Note A) 5,810
$ 5,900
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 111
Other liabilities 57
Due to affiliates (Note B) 1,020
Liabilities related to assets held for sale (Note A) 4,933
Partners' Deficit
General partner $ (2)
Special limited partners (79)
Limited partners (181,300 units issued and
outstanding) (140) (221)
$ 5,900
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 409 $ 391 $ 1,232 $ 1,221
Other income 66 60 173 174
Casualty gain (Note C) -- 12 20 21
Total revenues 475 463 1,425 1,416
Expenses:
Operating 291 249 751 637
General and administrative 34 39 111 139
Depreciation 87 113 331 347
Interest 114 100 327 298
Property taxes 32 30 96 89
Total expenses 558 531 1,616 1,510
Net loss from discontinued
operations $ (83) $ (68) $ (191) $ (94)
Net loss allocated to
general partner (0.2%) $ -- $ -- $ -- $ --
Net loss allocated to
limited partners (99.8%) (83) (68) (191) (94)
$ (83) $ (68) $ (191) $ (94)
Net loss per limited
partnership unit $ (0.46) $ (0.38) $ (1.05) $ (0.52)
Distributions per limited
partnership unit $ -- $ -- $ -- $ 0.57
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
Original capital contributions 181,808 $ 1 $ -- $45,452 $45,453
Partners' (deficiency) capital
at December 31, 2004 181,300 $ (2) $ (79) $ 51 $ (30)
Net loss for the nine months
ended September 30, 2005 -- -- -- (191) (191)
Partners' deficit
at September 30, 2005 181,300 $ (2) $ (79) $ (140) $ (221)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net loss $ (191) $ (94)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 331 347
Amortization of loan costs 5 6
Casualty gain (20) (21)
Change in accounts:
Receivables and deposits (5) (1)
Other assets (9) (17)
Accounts payable 54 (47)
Tenant security deposit liabilities (17) (1)
Accrued property taxes (30) (35)
Other liabilities (40) 52
Due to affiliates 114 (33)
Net cash provided by operating activities 192 156
Cash flows from investing activities:
Property improvements and replacements (620) (186)
Insurance proceeds received 21 41
Net cash used in investing activities (599) (145)
Cash flows from financing activities:
Payments on mortgage note payable (134) (111)
Advances from affiliates 492 --
Distributions paid to partners -- (107)
Net cash provided by (used in) financing
activities 358 (218)
Net decrease in cash and cash equivalents (49) (207)
Cash and cash equivalents at beginning of period 60 243
Cash and cash equivalents at end of period $ 11 $ 36
Supplemental disclosure of cash flow information:
Cash paid for interest $ 281 $ 259
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 28 $ 294
Included in property improvements and replacements for the nine months ended
September 30, 2005 are approximately $11,000 of improvements which were included
in accounts payable at December 31, 2004.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES VI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties VI (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. ("CEI" or the
"General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 2005, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2005. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2004. The General
Partner is an affiliate of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
accompanying consolidated statements of operations for the three and nine months
ended September 30, 2005 and 2004 reflect the operations of Colony of Springdale
Apartments as loss from discontinued operations due to its sale on October 28,
2005 (see Note D - Subsequent Event). In accordance with SFAS No. 144, the
assets and liabilities of Colony of Springdale Apartments have been classified
as held for sale at September 30, 2005.
Note B - Related Party Transactions
The Partnership has no employees and depends on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from the
Partnership's property as compensation for providing property management
services. The Partnership paid to such affiliates approximately $69,000 and
$68,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses.
Affiliates of the General Partner charged the Partnership for reimbursement of
accountable administrative expenses amounting to approximately $145,000 and
$103,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in general and administrative expenses and assets held for
sale. The portion of these reimbursements included in investment property for
the nine months ended September 30, 2005 and 2004 are fees related to
construction management services provided by an affiliate of the General Partner
of approximately $67,000 and $7,000, respectively. The construction management
service fees are calculated based on a percentage of additions to the investment
property. Approximately $135,000 of the accountable administrative expenses
remained unpaid as of September 30, 2005 and are included in due to affiliates.
These expenses were paid subsequent to September 30, 2005.
The Partnership Agreement also provides for a special management fee equal to 9%
of the total distributions made from operations to the Limited Partners to be
paid to the General Partner for executive and administrative management
services. The General Partner earned approximately $9,000 during the nine months
ended September 30, 2004 which is included in general and administrative
expenses. No such fee was earned for the nine months ended September 30, 2005 as
there were no operating distributions.
During the nine months ended September 30, 2005, the General Partner advanced
the Partnership approximately $492,000. Interest was charged at the prime rate
plus 2% (8.75% at September 30, 2005) and amounted to approximately $37,000 for
the nine months ended September 30, 2005. At September 30, 2005, the amount of
outstanding loans and accrued interest was approximately $885,000 and is
included in due to affiliates. These loans were repaid subsequent to September
30, 2005 out of proceeds from the sale of Colony of Springdale (see Note D -
Subsequent Event). There were no loans from the General Partner or associated
interest expense during the nine months ended September 30, 2004.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty, general
liability and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the nine months ended September
30, 2005 and 2004, the Partnership was charged by AIMCO and its affiliates
approximately $24,000 for both periods for insurance coverage and fees
associated with policy claims administration.
Note C - Casualty Events
In January 2004 a pipe bomb explosion occurred at the property which damaged 16
electrical meters and exterior siding. No apartment units were damaged. A
casualty gain of approximately $9,000 was recognized during the nine months
ended September 30, 2004 due to the receipt of approximately $16,000 in
insurance proceeds, net of the write off of undepreciated property and
improvements of approximately $7,000.
In April 2004 there was a fire at the property that damaged two apartment units.
A casualty gain of approximately $12,000 was recognized during the nine months
ended September 30, 2004 due to the receipt of approximately $25,000 in
insurance proceeds, net of the write off of undepreciated property and
improvements of approximately $13,000. During the nine months ended September
30, 2005, there was an additional casualty gain of approximately $20,000
recorded at the property. This gain was the result of the receipt of the
remaining insurance proceeds of approximately $21,000, less the write off of
additional undepreciated property and improvements of approximately $1,000.
Note D - Subsequent Event
On October 28, 2005, the Registrant sold its investment property, Colony of
Springdale Apartments, a 261-unit apartment complex located in Springdale, Ohio
to an unrelated third party for a gross sales price of $10,400,000. The sale of
the property resulted in a gain on the sale during the fourth quarter of 2005 of
approximately $4,215,000. In addition, a loss on early extinguishment of debt of
approximately $1,248,000 was recorded due to the write off of unamortized loan
costs and prepayment penalties. In accordance with SFAS No. 144, the assets and
liabilities of Colony of Springdale Apartments have been classified as held for
sale at September 30, 2005 and its operations have been shown as loss from
discontinued operations for the three and nine months ended September 30, 2005
and 2004.
Because Colony of Springdale Apartments was the only property held by the
Partnership, the General Partner is considering liquidating the Partnership
pending the resolution of the items discussed in "Note E - Contingencies."
Note E - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the General
Partner, are defendants in a lawsuit alleging that they willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The complaint, filed in the
United States District Court for the District of Columbia, attempts to bring a
collective action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. and NHP Management Company failed to
compensate maintenance workers for time that they were required to be "on-call".
Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management
Company failed to comply with the FLSA in compensating maintenance workers for
time that they worked in excess of 40 hours in a week. In June 2005 the Court
conditionally certified the collective action on both the on-call and overtime
issues, which allows the plaintiffs to provide notice of the collective action
to all non-exempt maintenance workers from August 7, 2000 through the present.
Those employees will have the opportunity to opt-in to the collective action,
and AIMCO Properties, L.P. and NHP Management Company will have the opportunity
to move to decertify the collective action. Because the court denied plaintiffs'
motion to certify state subclasses, on September 26, 2005, the plaintiffs filed
a class action with the same allegations in the Superior Court of California
(Contra Costa County). Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its consolidated financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the General Partner believes that these measures will
minimize the effects that mold could have on residents. To date, the Partnership
has not incurred any material costs or liabilities relating to claims of mold
exposure or to abate mold conditions. Because the law regarding mold is
unsettled and subject to change the General Partner can make no assurance that
liabilities resulting from the presence of or exposure to mold will not have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation have included AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, tax credit transactions and
tender offers for limited partnership interests. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation will be resolved. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex, Colony
of Springdale Apartments, located in Springdale, Ohio, which was held for sale
at September 30, 2005. The average occupancy for the nine month periods ended
September 30, 2005 and 2004, was 89% and 90%, respectively. The property was
sold to a third party on October 28, 2005.
The Partnership's financial results depended upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage loans, costs incurred to operate the investment property,
general economic conditions and weather. The General Partner monitored the
rental market environment of its investment property to assess the feasibility
of increasing rents, maintaining or increasing occupancy levels and protecting
the Partnership from increases in expenses. The General Partner attempted 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 have used rental concessions and rental rate
reductions to offset softening market conditions. Further, a number of factors
that are outside the control of the Partnership such as the local economic
climate and weather can adversely or positively affect the Partnership's
financial results.
Results of Operations
The Partnership's net loss from discontinued operations for the three and nine
months ended September 30, 2005 was approximately $83,000 and $191,000 compared
to a net loss of approximately $68,000 and $94,000 for the corresponding periods
in 2004. The increase in net loss for the three and nine months ended September
30, 2005 was primarily due to an increase in total expenses partially offset by
a slight increase in total revenues.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
accompanying consolidated statements of operations for the three and nine months
ended September 30, 2005 and 2004 reflect the operations of Colony of Springdale
Apartments as loss from discontinued operations due to its sale on October 28,
2005. In accordance with SFAS No. 144, the assets and liabilities of Colony of
Springdale Apartments have been classified as held for sale at September 30,
2005.
On October 28, 2005, the Registrant sold its investment property, Colony of
Springdale Apartments, a 261-unit apartment complex located in Springdale, Ohio
to an unrelated third party for a gross sales price of $10,400,000. The sale of
the property resulted in a gain on the sale during the fourth quarter of 2005 of
approximately $4,215,000. In addition, a loss on early extinguishment of debt of
approximately $1,248,000 was recorded due to the write off of unamortized loan
costs and prepayment penalties. In accordance with SFAS No. 144, the assets and
liabilities of Colony of Springdale Apartments have been classified as held for
sale at September 30, 2005 and its operations have been shown as loss from
discontinued operations for the three and nine months ended September 30, 2005
and 2004.
Because Colony of Springdale Apartments was the only property held by the
Partnership, the General Partner is considering liquidating the Partnership
pending the resolution of the items discussed in "Note E - Contingencies."
Total expenses increased for the three and nine months ended September 30, 2005
due to increases in operating and interest expenses partially offset by a
decrease in general and administrative and depreciation expenses. Operating
expenses increased primarily due to increases in property, administrative and
maintenance expenses. The increase in property expenses for the three and nine
months ended September 30, 2005 is primarily due to increased salaries and
related benefits at the Partnership's property. The increase in property
expenses for the nine months ended September 30, 2005 is also due to increased
utility expenses at the Partnership's property. The increase in administrative
expenses is due to an increase in phone sales. The increase in maintenance
expenses is primarily due to an increase in contract services at the
Partnership's property. The decrease in depreciation expense is due to fixed
assets being held for sale at September 30, 2005 (as discussed above). The
increase in interest expense is primarily due to increases in interest incurred
on advances from affiliates. There were no advances during the nine months ended
September 30, 2004.
General and administrative expenses decreased for the three and nine months
ended September 30, 2005 due to a decrease in the cost of services included in
the management reimbursements to the General Partner as allowed under the
Partnership Agreement partially offset by an increase in costs associated with
the annual audit required by the Partnership Agreement. The decrease in general
and administrative expenses for the nine months ended September 30, 2005 is also
due to a decrease in the special management fees earned by the General Partner
for executive and administration management services. The fee is equal to 9% of
the total distributions made from operations to the Limited Partners and there
were no operating distributions during the nine months ended September 30, 2004.
Also included in general and administrative expenses are costs associated with
the quarterly and annual communications with investors and regulatory agencies.
The increase in total revenues for the three and nine months ended September 30,
2005 is primarily due to an increase in rental income. The increase in total
revenues for the three months ended September 30, 2005 is also due to an
increase in other income partially offset by a decrease in casualty gain (as
discussed below). The increase in rental income for the three months ended
September 30, 2005 is primarily due to an increase in occupancy. The increase in
rental income for the nine months ended September 30, 2005 is primarily due to
an increase in average rental rates. The increase in rental income for the three
and nine months ended September 30, 2005 is also due to a decrease in bad debt
expense at the property. Other income increased during the three months ended
September 30, 2005 primarily due to an increase in lease cancellation fees at
the property.
In January 2004 a pipe bomb explosion occurred at the property which damaged 16
electrical meters and exterior siding. No apartment units were damaged. A
casualty gain of approximately $9,000 was recognized during the nine months
ended September 30, 2004 due to the receipt of approximately $16,000 in
insurance proceeds, net of the write off of undepreciated property and
improvements of approximately $7,000.
In April 2004 there was a fire at the property that damaged two apartment units.
A casualty gain of approximately $12,000 was recognized during the nine months
ended September 30, 2004 due to the receipt of approximately $25,000 in
insurance proceeds, net of the write off of undepreciated property and
improvements of approximately $13,000. During the nine months ended September
30, 2005, there was an additional casualty gain of approximately $20,000
recorded at the property. This gain was the result of the receipt of the
remaining insurance proceeds of approximately $21,000, less the write off of
additional undepreciated property and improvements of approximately $1,000.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $11,000 compared to approximately $36,000 at September 30, 2004.
Cash and cash equivalents decreased by approximately $49,000 since December 31,
2004 due to approximately $599,000 of cash used in investing activities,
partially offset by approximately $358,000 and $192,000 of cash provided by
financing and operating activities, respectively. Cash used in investing
activities consisted of property improvements and replacements partially offset
by insurance proceeds received. Cash provided by financing activities consisted
of advances from affiliates partially offset by principal payments made on the
mortgage encumbering the Partnership's property. The Partnership invests its
working capital reserves in interest bearing accounts.
During the nine months ended September 30, 2005, the Partnership completed
approximately $637,000 of capital improvements at Colony of Springdale
Apartments, consisting primarily of vinyl siding, floor covering and appliance
replacements, balcony replacements, structural improvements, roof replacements
and air conditioning unit replacements. These improvements were funded from
operating cash flow, insurance proceeds and advances from affiliates. The
Partnership sold Colony of Springdale Apartments on October 28, 2005.
The Partnership's assets are thought to be sufficient for any near term needs of
the Partnership. The mortgage indebtedness encumbering the Partnership's
property of approximately $4,739,000 matured in November 2019 at which time the
mortgage was scheduled to be fully amortized. This property was sold to a third
party on October 28, 2005.
The Partnership distributed the following amounts during the nine months ended
September 30, 2005 and 2004 (in thousands, except per unit data):
Nine Months Per Nine Months Per
Ended Limited Ended Limited
September 30, Partnership September 30, Partnership
2005 Unit 2004 Unit
Operations $ -- $ -- $ 107 $ 0.57
Because Colony of Springdale Apartments was the only property held by the
Partnership, the General Partner is considering liquidating the Partnership
pending the resolution of the items discussed in "Note E - Contingencies."
The Partnership is currently reviewing what portion of the sale proceeds of
Colony of Springdale Apartments will be distributed to the partners.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 102,000 limited partnership units
(the "Units") in the Partnership representing 56.26% of the outstanding Units at
September 30, 2005. A number of these Units were acquired pursuant to tender
offers made by AIMCO or its affiliates. Pursuant to the Partnership Agreement,
unitholders holding a majority of the Units are entitled to take action with
respect to a variety of matters that include, but are not limited to, voting on
certain amendments to the Partnership Agreement and voting to remove the General
Partner. As a result of its ownership of 56.26% of the outstanding Units, AIMCO
and its affiliates are in a position to control all voting decisions with
respect to the Partnership. Although the General Partner owes fiduciary duties
to the limited partners of the Partnership, the General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the General Partner, as general partner, to the Partnership and its limited
partners may come into conflict with the duties of the General Partner to AIMCO
as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
The investment property is recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property was impaired, the Partnership would make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeded the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeded the fair value of the
property.
Revenue Recognition
The Partnership generally leased apartment units for twelve-month terms or less.
The Partnership offered 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, was recognized on a
straight-line basis over the term of the lease. The Partnership evaluated all
accounts receivable from residents and established an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
ITEM 3. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the General
Partner, are defendants in a lawsuit alleging that they willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The complaint, filed in the
United States District Court for the District of Columbia, attempts to bring a
collective action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. and NHP Management Company failed to
compensate maintenance workers for time that they were required to be "on-call".
Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management
Company failed to comply with the FLSA in compensating maintenance workers for
time that they worked in excess of 40 hours in a week. In June 2005 the Court
conditionally certified the collective action on both the on-call and overtime
issues, which allows the plaintiffs to provide notice of the collective action
to all non-exempt maintenance workers from August 7, 2000 through the present.
Those employees will have the opportunity to opt-in to the collective action,
and AIMCO Properties, L.P. and NHP Management Company will have the opportunity
to move to decertify the collective action. Because the court denied plaintiffs'
motion to certify state subclasses, on September 26, 2005, the plaintiffs filed
a class action with the same allegations in the Superior Court of California
(Contra Costa County). Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its consolidated financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index Attached.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES VI
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
CONSOLIDATED CAPITAL PROPERTIES VI
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Certificate of Limited Partnership, incorporated by
reference to the Registration Statement of Registrant filed
October 22, 1984, as amended to date.
3.2 Agreement of Limited Partnership, incorporated by reference
to the Registration Statement of Registrant filed October
22, 1984, as amended to date.
10.22 Multi-family note between Colony of Springdale Associates,
Ltd. and GMAC Commercial Mortgage Corporation dated October
25, 1999. (Incorporated by reference to the Annual Report on
Form 10-K dated December 31, 1999.)
10.23 Purchase and Sale Contract between Colony of Springdale
Associates, Ltd., a Texas limited partnership, and CNC
Investments, Ltd., LLP, a Texas limited liability partnership
dated August 19, 2005.* (Incorporated by reference to Current
Form 8-K dated October 28, 2005 and filed November 3, 2005).
10.24 Amendment of Purchase and Sale Contract between Colony of
Springdale Associates Ltd., a Texas limited partnership, and
CNC Investments, Ltd., LLP, a Texas limited liability
partnership dated September 12, 2005. (Incorporated by
reference to Current Form 8-K dated October 28, 2005 and filed
November 3, 2005).
10.25 Assignment and Assumption Agreement between CNC Investments,
Ltd., LLP, a Texas limited liability partnership and Mayuri,
LLC, a Delaware limited liability company dated October 7,
2005. (Incorporated by reference to Current Form 8-K dated
October 28, 2005 and filed November 3, 2005).
10.26 Second Amendment of Purchase and Sale Contract between Colony
of Springdale Associates Ltd., a Texas limited partnership,
and CNC Investments, Ltd., LLP, a Texas limited liability
partnership and Mayuri, LLC a Delaware limited liability
company dated October 13, 2005. (Incorporated by reference to
Current Form 8-K dated October 28, 2005 and filed November 3,
2005).
10.27 Third Amendment of Purchase and Sale Contract between Colony
of Springdale Associates Ltd., a Texas limited partnership,
and CNC Investments, Ltd., LLP, a Texas limited liability
partnership and Mayuri, LLC a Delaware limited liability
company dated October 27, 2005. (Incorporated by reference to
Current Form 8-K dated October 28, 2005 and filed November 3,
2005).
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive
Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
*Schedules and supplemental materials to the exhibit have been
omitted but will be provided to the Securities and Exchange
Commission upon request.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Consolidated
Capital Properties VI;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap
Equities, Inc., equivalent of the
chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Consolidated
Capital Properties VI;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of ConCap
Equities, Inc., equivalent of
the chief financial officer of
the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Consolidated Capital
Properties VI (the "Partnership"), for the quarterly period ended September 30,
2005 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Stephen B. Waters, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 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.