FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period from.........to.........
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
BALANCE SHEET
(Unaudited)
(in thousands, except for unit data)
September 30, 1995
Assets
Cash and cash equivalents $ 1,957
Securities available for sale 476
Prepaid and other assets 475
Investment properties:
Land $ 1,896
Buildings and related personal property 11,694
13,590
Less accumulated depreciation (5,283) 8,307
$11,215
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 309
Notes and interest payable 1,913
Partners' Capital (Deficit)
General partner $ (155)
Corporate limited partners - on behalf
of the Unitholders - (128,810 Units
(Note A) issued and outstanding) 9,148 8,993
$11,215
[FN]
See Accompanying Notes to Financial Statements
b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rental income $ 584 $ 561 $1,661 $1,673
Interest and dividend income 30 61 163 172
Total revenues 614 622 1,824 1,845
Expenses:
Property operations 283 247 743 738
Depreciation and amortization 124 168 402 530
Interest 46 48 134 144
Administrative 71 78 266 231
Total expenses 524 541 1,545 1,643
Income from operations 90 81 279 202
Loss on sales of securities
available for sale -- (18) -- (18)
Other income (Note D) -- -- -- 251
Net income $ 90 $ 63 $ 279 $ 435
Net income allocated to
general partners (1%) $ 1 $ 1 $ 3 $ 4
Net income allocated to
limited partners (99%) 89 62 276 431
$ 90 $ 63 $ 279 $ 435
Net income per weighted
average Unit of Depositary
Receipt (Note A): $ .69 $ .48 $ 2.14 $ 3.34
[FN]
See Accompanying Notes to Financial Statements
c) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Unitholders
Units of
Units of Depositary
Depositary General Receipts
Receipts Partners (Note A) Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' capital (deficit)
at December 31, 1994 128,810 $ (148) $ 9,862 $ 9,714
Net income for the nine months
ended September 30, 1995 -- 3 276 279
Distributions paid -- (10) (990) (1,000)
Partners' capital (deficit) at
September 30, 1995 128,810 $ (155) $ 9,148 $ 8,993
[FN]
See Accompanying Notes to Financial Statements
d) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income $ 279 $ 435
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
discounts, loan costs and lease
commissions 413 541
Loss on sale of securities available
for sale -- 18
Change in accounts:
Prepaids and other assets (107) (49)
Accounts payable and accrued
expenses 195 (226)
Interest payable 13 --
Net cash provided by operating
activities 793 719
Cash flows from investing activities:
Property improvements and replacements (78) (66)
Purchase of securities available for sale (1,009) (1,704)
Proceeds from sale of securities
available for sale 2,713 2,922
Deposits to restricted escrows (16) --
Proceeds from sale of real estate -- 1,500
Net cash provided by investing
activities 1,610 2,652
Cash flows from financing activities:
Payments on notes payable (37) (39)
Partners' distributions (1,000) (3,720)
Net cash used in financing
activities (1,037) (3,759)
Net increase in cash 1,366 (388)
Cash and cash equivalents at beginning of period 591 835
Cash and cash equivalents at end of period $ 1,957 $ 447
Supplemental disclosure of cash flow information:
Cash paid for interest $ 107 $ 132
[FN]
See Accompanying Notes to Financial Statements
e) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the General Partner, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1995, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto included in
the annual report on Form 10-K for the fiscal year ended December 31, 1994, for
Johnstown/Consolidated Income Partners (the "Partnership").
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents includes cash
on hand, demand deposits and money market funds, and U.S. Treasury Bills with
original maturities of three months or less.
Units of Depositary Receipts
Johnstown/Consolidated Depositary Corporation, an affiliate of the General
Partner, serves as a depositary of certain Units of Depositary Receipts
("Units"). The Units represent economic rights attributable to the limited
partnership interests in the Partnership and entitle the holders thereof
("Unitholders") to certain economic benefits, allocations and distributions of
the Partnership.
Net Income Per Unit
Net income per Unit is computed by dividing net income allocated to the
Unitholders by the weighted average number of Units outstanding. Per Unit
information has been computed based on weighted average Units outstanding of
128,810 and 128,851 for the nine months ended September 30, 1995 and 1994,
respectively.
Note B - Related Party Transactions
The Partnership Agreement provides that the Partnership shall pay in monthly
installments to the General Partner, or an affiliate, a yearly asset management
Note B - Related Party Transactions - continued
fee equal to: (i) 3/8 of 1% of the original principal balance of mortgage loans
outstanding at the end of the month preceding the installment payment; (ii) 1/8
of 1% of the market value of guaranteed mortgage-backed securities ("MBS") as of
the end of the Partnership quarter immediately preceding the installment
payment; and (iii) 5/8 of 1% of the purchase price of the properties plus
improvements for managing the Partnership's assets. In the event the property
was not owned at the beginning or end of the year, such fee shall be pro-rated
for the short-year period of ownership. These asset management fees are
included in compensation to related parties in the table below.
The Partnership has paid the property management fees noted below based on
collected gross rental revenues ("Rental Revenues") for property management
services in each of the nine months ended September 30, 1995 and 1994,
respectively. For the nine months ended September 30, 1994, a portion of such
property management fees equal to 4% of Rental Revenues was paid to the property
management companies performing day-to-day property management services and a
portion equal to 1% of Rental Revenues was paid to Partnership Services, Inc.
("PSI") or its predecessor for advisory services related to day-to-day property
operations. In July 1993, Coventry Properties, Inc. ("Coventry"), an affiliate
of the General Partner, assumed day-to-day property management responsibilities
for two of the Partnership's properties under the same management fee
arrangement as the unaffiliated management companies. In late December 1994, an
affiliate of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day
property management responsibilities for all of the Partnership's properties
except for Cedar Brooke Apartments. Management of Cedar Brooke was assumed by
an Insignia affiliate on February 15, 1995. Fees paid to Insignia and
affiliates for the nine months ended September 30, 1995, and fees paid to PSI
and Coventry for the nine months ended September 30, 1994, have been reflected
in the following table as compensation to related parties in the applicable
periods:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Asset management fee $74 $83
Property management fees 92 44
Note B - Related Party Transactions - continued
The Partnership Agreement also provides for reimbursement to the General
Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The General Partner and its
affiliates, which includes Coventry for the nine months ended September 30,
1994, received reimbursements as reflected in the following table:
For the Nine Months Ended
September 30,
1995 1994
(in thousands)
Reimbursement for services of affiliates $106 $77
In July 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner, who
receives payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
Note C - Sale of Real Estate
In March 1994, the Partnership sold the Evergreen Heights Office Building for
a gross sales price of approximately $1.6 million. The Partnership received net
cash proceeds of $1.5 million after payment of related closing costs. As a
result of the sale, $665,000 was charged to the allowance for possible losses in
the nine months ended September 30, 1994. No gain or loss was recognized on the
sale. The sales transaction is summarized in the following table:
Cash proceeds received $1,500
Cost of sales:
Net real estate $1,578
Other (78)
Total cost of sales $1,500
Net real estate represents real estate, net of accumulated depreciation and
allowance for possible loss.
Note D - Other Income
In 1991, the Partnership (and simultaneously other affiliated partnerships)
entered claims in Southmark Corporation's Chapter 11 bankruptcy proceeding.
These claims related to Southmark Corporation's activities while it exercised
control (directly or indirectly through its affiliates) over the Partnership.
The Bankruptcy Court set the Partnership's and the other affiliated
partnerships' allowed claim at $11 million, in the aggregate. In March 1994,
the Partnership received 4,405 shares of Southmark Corporation Redeemable Series
A Preferred Stock and 29,585 shares of Southmark Corporation New Common Stock
with an aggregate market value on the date of receipt of approximately $29,000
and $222,000 in cash representing the Partnership's share of the recovery,
based on its pro rata share of the claims filed.
Note E - Commitment
The Partnership is required by the Partnership Agreement to maintain working
capital for contingencies of not less than 5% of Net Invested Capital as defined
in the Partnership Agreement. In the event expenditures are made from these
reserves, operating revenue shall be allocated to such reserves to the extent
necessary to maintain the foregoing level. Reserves, including cash and cash
equivalents and securities available for sale totalling approximately $2.4
million at September 30, 1995, exceeded the Partnership's reserve requirement of
approximately $1.4 million.
Note F - Distributions
In March of 1995, the General Partner declared and paid distributions
attributable to cash flow from operations totalling approximately $495,000 or
$3.84 per Unit to the Unitholders along with a corresponding General Partner
distribution of approximately $5,000. In September 1995, the General Partner
declared and paid distributions attributable to cash flow from operations
totalling approximately $495,000 or $3.84 per Unit to the Unitholders along with
a corresponding General Partner distribution of approximately $5,000.
In March 1994, the General Partner declared and paid distributions of
approximately $2.2 million or $17.27 per Unit to the Unitholders, representing a
return of capital from repayment of a note receivable in September 1993. In
September 1994, the General Partner declared and paid distributions of
approximately $1.5 million or $11.60 per Unit to the Unitholders, representing a
return of capital from proceeds of a property sale in March 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one apartment complex, two
commercial properties and a one-third (1/3) undivided interest in the Florida #6
Mini-Warehouse property. The following table sets forth the average occupancy
of the properties for the nine months ended September 30, 1995 and 1994:
Average
Occupancy
1995 1994
Cedar Brooke Apartments
Independence, Missouri 99% 99%
Florida #6 Mini-Warehouse
Lauderhill, Florida 91% 99%
Florida #11 Mini-Warehouse
Davie, Florida 96% 99%
Phoenix Business Center
College Park, Georgia 57% 82%
The decrease in occupancy at the Florida #6 Mini-Warehouse is due to
commercial clients reducing their inventory levels, which resulted in reduced
usage of storage facilities in 1995 compared to 1994. The decrease in occupancy
at the Phoenix Business Center is primarily due to a large tenant vacating their
space after building their own office facilities in 1995. As of September 30,
1995, this space remains vacant with the Partnership actively searching for new
tenants, as well as considering sub-dividing the space to increase its
leasability. The impact of the decrease in rental income as a result of this
tenant vacating has been mitigated by rent increases on the Partnership's other
investment properties.
The Partnership realized income from operations of $279,000 for the nine
months ended September 30, 1995, compared to $202,000 for the nine months ended
September 30, 1994. For the three months ended September 30, 1995, the
Partnership realized income from operations of $90,000 compared to $81,000 for
the three months ended September 30, 1994.
Property operations increased for the three months ended September 30, 1995,
due to increased maintenance expenditures to improve the curb appeal of the
Partnership's properties in an effort to increase occupancy. Depreciation
expense decreased due to the reduced carrying values of depreciable assets
resulting from the valuation reserves recorded in prior years. Administrative
expenses increased for the nine months ended September 30, 1995, due to
increased mailing costs, professional fees, and expense reimbursements related
to the combined efforts of the Dallas and Greenville partnership administration
staffs during the transition period. The reimbursements for the Dallas office
amounted to approximately $63,000 for the nine months ended September 30, 1995.
The increased costs related to the transition efforts were incurred to
minimize any disruption in the year-end reporting function including the
financial reporting and K-1 preparation and distribution. The General Partner
expects recurring administrative expenses to be reduced now that the management
transition is completed.
Other income realized in the nine months ended September 30, 1994, related to
the receipt of the Partnership's pro rata share of the claims filed in
Southmark's Chapter 11 bankruptcy proceeding (See Note D of the Notes to the
Financial Statements in Item 1).
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each 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, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
As of September 30, 1995, the Partnership had cash and cash equivalents of
$1,957,000 compared to $447,000 at September 30, 1994. Net cash provided by
operating activities increased primarily due to increases in accounts payable
and other accrued expenses. Net cash provided by investing activities decreased
due to the receipt of proceeds from the sale of the Evergreen Heights Office
Building in March of 1994 (See Note D of the Notes to Financial Statements in
Item 1), partially offset by a decrease in purchases of securities available for
sale. Net cash used in financing activities decreased as a result of reduced
Partners' distributions for the nine months ended September 30, 1995, compared
to the nine months ended September 30, 1994.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $1.9 million, net of discount, matures in
2013, at which time the related property will either be refinanced or sold.
Future cash distributions will depend on the levels of net cash generated from
operations, capital expenditure requirements, property sales and the
availability of cash reserves. As part of the Partnership's ongoing attempt to
maximize return to the Unitholders, the Partnership is exploring the possibility
of selling the Florida #6 Mini-Warehouse in which it has invested. Currently,
no such disposition is considered imminent. Additionally, other investing
parties are involved who must be considered before such a transaction can be
approved. For the nine months ended September 30, 1995, cash distributions of
approximately $1 million were declared and paid compared to cash distributions
of approximately $3.7 million for the nine months ended September 30, 1994.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is
not of a routine nature. The General Partner of the Partnership believes that
all such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K.
None.
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.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 9, 1995