FORM 10-Q--Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
(As last amended by Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from.........to.........
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission file number 0-14187
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
(Exact name of registrant as specified in its charter)
California 94-2940208
(State or other jurisdiction of (I.R.S. 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)
Registrant's telephone number (864) 239-1000
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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
BALANCE SHEET
(in thousands, except unit data)
March 31, December 31,
1996 1995
(Unaudited) (Note)
Assets
Cash:
Unrestricted $ 6,439 $ 9,871
Restricted - tenant security deposits 353 349
Note receivable -- 4,400
Investments 109 109
Restricted escrows 1,007 1,188
Other assets 943 1,069
Investment properties:
Land 12,345 10,365
Building and related personal property 48,097 45,470
60,442 55,835
Less accumulated depreciation (10,594) (9,958)
49,848 45,877
$ 58,699 $ 62,863
Liabilities and Partners' Capital (Deficit)
Liabilities
Mortgage notes payable and accrued interest $ 18,014 $ 18,029
Accounts payable and accrued expenses 588 857
Tenant security deposits 345 339
Accrued taxes 336 177
19,283 19,402
Partners' Capital (Deficit)
General partner (422) (407)
Limited partners (383,033 units outstanding) 39,838 43,868
39,416 43,461
$ 58,699 $ 62,863
<FN>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See Accompanying Notes to Financial Statements
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 3,123 $ 2,858
Interest and other income 121 215
Total revenues 3,244 3,073
Expenses:
Operating 1,776 1,254
General and administrative 160 235
Depreciation and amortization 664 580
Interest 369 291
Total expenses 2,969 2,360
Net income $ 275 $ 713
Net income allocated to general partners (1%) $ 3 $ 7
Net income allocated to limited partners (99%) 272 706
$ 275 $ 713
Net income per limited partnership unit $ .71 $ 1.86
See Accompanying Notes to Financial Statements
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 383,033 $ 1 $95,758 $95,759
Partners' capital (deficit) at
December 31, 1994 383,033 $ (355) $49,084 $48,729
Distributions to partners -- (18) (1,804) (1,822)
Net income for the three months
ended March 31, 1995 -- 7 706 713
Partners' capital (deficit) at
March 31, 1995 383,033 $ (366) $47,986 $47,620
Partners' capital at
December 31, 1995 383,033 $ (407) $43,868 $43,461
Distributions to partners -- (18) (4,302) (4,320)
Net income for the three months
ended March 31, 1996 -- 3 272 275
Partners' capital (deficit) at
March 31, 1996 383,033 $ (422) $39,838 $39,416
<FN>
See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income $ 275 $ 713
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 662 578
Amortization of lease commissions and
loan costs 14 1
Loss on disposal of property 61 --
Change in accounts:
Restricted cash (4) (73)
Other assets 139 (186)
Interest, taxes, accounts payable and
tenant security deposits (74) 517
Net cash provided by
operating activities 1,073 1,550
Cash flows from investing activities:
Property improvements and replacements (368) (130)
Deposits to restricted escrows (7) --
Receipts from restricted escrows 188 --
Purchase of investments -- (1,749)
Proceeds from sales of investments -- 1,704
Cash received from borrower on foreclosed
property 74 --
Net cash used in investing activities (113) (175)
Cash flows from financing activities:
Loan costs paid (27) --
Payments on mortgage notes payable (45) (96)
Distributions to partners (4,320) (1,822)
Net cash used in financing activities (4,392) (1,918)
Net decrease in cash (3,432) (543)
Cash at beginning of period 9,871 3,642
Cash at end of period $ 6,439 $ 3,099
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 358 $ 248
See Accompanying Notes to Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOW (Continued)
(Unaudited)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Acquisition
On February 14, 1996, Consolidated Capital Institutional Properties/3 foreclosed
on South City Business Center, the investment property collateralizing the note
receivable between Consolidated Capital Institutional Properties/3 and Lincoln
South City Business Center Limited Partnership. In connection with this
transaction, the following accounts were adjusted by the amounts noted in 1996:
Receipt of cash $ 74,000
Investment Property 4,326,000
Note Receivable (4,400,000)
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Consolidated Capital
Institutional Properties/3 (the "Registrant" or "Partnership") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 month period
ended March 31, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-K for the fiscal year ended December 31,
1995.
Presentation of Accounts
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Investments
Investments consisting primarily of commercial paper with original maturities of
more than ninety days, are considered to be held-to-maturity securities.
Note B - Investment Property Acquired
During 1995, it was determined that the note secured by the South City Business
Center was impaired. Accordingly, during 1995, the Partnership recorded a
write-down of $3,255,000 on the note receivable to adjust the note balance to
the estimated net realizable value of the collateral. Foreclosure proceedings
were completed on February 14, 1996, at which time the Partnership assumed
operations at the property. The estimated net realizable value at the time of
acquisition was $4,400,000 including cash of $74,000 which the partnership
received along with the South City assets of approximately $4,326,000.
Note C - Related Party Transactions
The Partnership has paid property management fees based upon collected gross
rental revenues for property management services in each of the three months
ended March 31, 1996 and 1995. Fees paid to affiliates of the General Partner
for the three months ended March 31, 1996 and 1995, are presented below. These
property management fees are included in operating expenses.
THREE MONTHS ENDED MARCH 31,
COMPENSATION 1996 1995
(in thousands)
Property management fees $ 161 $ 143
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with administration of
Partnership activities. The General Partner and its affiliates received
reimbursements as noted below:
THREE MONTHS ENDED MARCH 31,
REIMBURSEMENTS 1996 1995
(in thousands)
Reimbursement for services of affiliates $ 87 $ 118
On July 1, 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 agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments 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 D - Commitment
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital,
as defined in the Partnership Agreement. Cash, tenant security deposits and
investments, totalling approximately $6,901,000 were greater than the reserve
requirement of approximately $3,939,000 million at March 31, 1996.
Note E - Notes Payable
The Partnership had two notes payable, originally maturing in January 1995,
which were extended to June 1995. Lamplighter Park Apartments secured
approximately $4.6 million, and Tamarac Village secured a third mortgage of
approximately $2.5 million. On June 30, 1995, an extension agreement was
reached on the indebtedness secured by Lamplighter Park Apartments which extends
the maturity of this mortgage debt to June 30, 1997. In December 1995, the
third mortgage indebtedness secured by Tamarac Village was re-paid.
Note E - Notes Payable (continued)
The mortgage notes payable are nonrecourse and are secured by pledge of the
respective properties. All notes require prepayment penalties if repaid prior
to maturity and prohibit resale of the properties subject to existing
indebtedness. Beginning March 1, 1996, the lender has the right, upon six
months written notice, to call the second mortgage on Tamarac Village.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of eight apartment complexes and
two commercial properties. The following table sets forth the average occupancy
of the properties for the three months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Cedar Rim Apartments 91% 88%
Renton, Washington
City Heights Apartments 96% 86%
Seattle, Washington
Corporate Center Office Complex 96% 97%
Tampa, Florida
Hidden Cove by the Lake Apartments 89% 96%
Belleville, Michigan
Lamplighter Park Apartments 98% 96%
Belleview, Washington
Park Capitol Apartments 99% 95%
Salt Lake City, Utah
Sandpiper I & II Apartments 83% 81%
St. Petersburg, Florida
Tamarac Village I, II, III & IV Apartments 89% 92%
Denver, Colorado
Williamsburg Manor Apartments 95% 98%
Cary, North Carolina
South City Business Center 83% --
Chula Vista, California
South City Business Center was foreclosed on by the Partnership in February of
1996, therefore, 1995 occupancy information is not applicable.
The General Partner attributes the increases in occupancy at City Heights
Apartments to a stronger employment market in the area and to water damage to
six units which resulted in move-outs in 1995. The damage was caused by a poor
drainage system between the buildings. After repairs were made, the occupancy
has increased. The increase in occupancy at Park Capitol Apartments is
attributed to increased economic growth in the area. The decrease in occupancy
at Tamarac Village I, II, III and IV Apartments is due primarily to increased
home purchases. The General Partner attributes the decrease at Hidden Cove by
the Lake Apartments to management's effort to increase resident qualification
standards in order to reduce unit damages and delinquencies.
The Partnership's net income for the three months ended March 31, 1996, was
$275,000 compared to $713,000 for the corresponding period of 1995. The
decrease in net income is primarily attributable to the increase in operating,
depreciation, amortization and interest expenses. The increases in operating,
depreciation and amortization expenses are due in part to the acquisition of
South City Business Center through foreclosure of a note receivable between
Consolidated Capital Institutional Properties/3 and Lincoln South City Business
Center Limited Partnership in February of 1996. The increase in operating
expenses was also impacted by increased repair and maintenance expenditures in
efforts to increase the curb appeal of several of the Partnership's properties.
Depreciation and amortization expenses increased due to an increase in the
depreciable asset base at several of the Partnership's properties from capital
additions of approximately $1,401,000 in 1995. The increase in interest expense
is due primarily to the net increase in the debt balance of approximately $6
million as a result of the refinancing of Williamsburg Manor, Park Capitol and
Sandpiper I and II, partially offset by the debt retirement of the third
mortgage secured by Tamarac Village in December of 1995. Also contributing to
the lower net income is the decrease in other income due to the absence of
interest income from the note receivable in 1996. In addition, general and
administrative expense decreased due to lower expense reimbursements related
primarily to the efforts of the Dallas partnership administration staff during
the management transition period in 1995.
During 1995, it was determined that the note secured by the South City Business
Center was impaired. Accordingly, during 1995, the Partnership recorded a
write-down of $3,255,000 on the note receivable to adjust the note balance to
the estimated net realizable value of the collateral. Foreclosure proceedings
were completed on February 14, 1996, at which time the Partnership assumed
operations of the property. The estimated net realizable value at the time of
acquisition was $4,400,000 including cash of $74,000 which the partnership
received along with the South City assets of approximately $4,326,000.
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.
At March 31, 1996, the Partnership held unrestricted cash of approximately
$6,439,000 compared to approximately $3,099,000 at March 31, 1995. Net cash
provided by operating activities decreased primarily as a result of the
increased operating expenses discussed above. Net cash used in investing
activities decreased due to greater property improvements and replacements
during the first quarter of 1996. Net cash used in financing activities
increased due to greater distributions to partners during the first three months
of 1996 compared to 1995.
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. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The notes payable of approximately $17,951,000 have maturity dates ranging from
1997 to 2007, at which time the individual properties will be refinanced or
sold. The mortgage notes payable are nonrecourse and are secured by pledges of
the respective properties. All notes require prepayment penalties if repaid
prior to maturity and prohibit resale of the properties subject to existing
indebtedness. Beginning March 1, 1996, the lender has the right, upon six
months written notice, to call the second mortgage on Tamarac Village.
Distributions of approximately $4,320,000 and $1,822,000 were made to the
partners during the three months ended March 31, 1996 and 1995, respectively.
Future cash distributions will depend on the levels of net cash generated from
operations, property sales, and the availability of cash reserves.
PART II - OTHER INFORMATION
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.
CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES/3
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.
Vice President/CAO
Date: May 14, 1996