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 June 30, 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)
June 30, December 31,
1996 1995
(Unaudited) (Note)
Assets
Cash:
Unrestricted $ 7,185 $ 9,871
Restricted - tenant security deposits 354 349
Note receivable -- 4,400
Investments 109 109
Restricted escrows 901 1,188
Other assets 1,071 1,069
Investment properties:
Land 12,345 10,365
Building and related personal property 48,380 45,470
60,725 55,835
Less accumulated depreciation (11,268) (9,958)
49,457 45,877
$ 59,077 $ 62,863
Liabilities and Partners' Capital (Deficit)
Liabilities
Mortgage notes payable and accrued interest $ 17,965 $ 18,029
Accounts payable and accrued expenses 599 857
Tenant security deposits 350 339
Accrued taxes 320 177
19,234 19,402
Partners' Capital (Deficit)
General partner (418) (407)
Limited partners (383,033 units outstanding) 40,261 43,868
39,843 43,461
$ 59,077 $ 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
</table.
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Rental income $ 3,109 $ 2,713 $ 6,232 $ 5,571
Interest and other income 329 565 450 780
Total revenues 3,438 3,278 6,682 6,351
Expenses:
Operating 1,815 1,560 3,591 2,818
General and administrative 161 196 321 434
Depreciation 672 643 1,336 1,217
Interest 363 330 732 620
Write-down of note receivable -- 1,755 -- 1,755
Total expenses 3,011 4,484 5,980 6,844
Net income (loss) $ 427 $ (1,206) $ 702 $ (493)
Net income (loss) allocated
to general partners (1%) $ 4 $ (12) $ 7 $ (5)
Net income (loss) allocated
to limited partners (99%) 423 (1,194) 695 (488)
$ 427 $ (1,206) $ 702 $ (493)
Net income (loss) per limited
partnership unit $ 1.10 $ (3.12) $ 1.81 $ (1.28)
<FN>
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 six months
ended June 30, 1995 -- (5) (488) (493)
Partners' capital (deficit) at
June 30, 1995 383,033 $ (378) $46,792 $46,414
Partners' capital (deficit)
at December 31, 1995 383,033 $ (407) $43,868 $43,461
Distributions to partners -- (18) (4,302) (4,320)
Net income for the six months
ended June 30, 1996 -- 7 695 702
Partners' capital (deficit) at
June 30, 1996 383,033 $ (418) $40,261 $39,843
<FN>
See Accompanying Notes to Financial Statements
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 702 $ (493)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 1,336 1,217
Amortization of lease commissions and
loan costs 28 29
Write-down of note receivable -- 1,755
Loss on disposal of property 61 --
Change in accounts:
Restricted cash (5) (231)
Other assets 56 (140)
Interest, taxes, accounts payable and
tenant security deposits (75) 686
Net cash provided by
operating activities 2,103 2,823
Cash flows from investing activities:
Property improvements and replacements (651) (323)
Deposits to restricted escrows (12) --
Receipts from restricted escrows 299 --
Purchase of investments -- (6,852)
Proceeds from sales of investments -- 6,254
Cash received from borrower on foreclosed
property 74 --
Net cash used in investing activities (290) (921)
Cash flows from financing activities:
Loan costs paid (86) --
Payments on mortgage notes payable (93) (213)
Distributions to partners (4,320) (1,822)
Net cash used in financing activities (4,499) (2,035)
Net decrease in cash (2,686) (133)
Cash at beginning of period 9,871 3,642
Cash at end of period $ 7,185 $ 3,509
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 683 $ 553
<FN>
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, the Partnership foreclosed on South City Business Center,
the investment property collateralizing the note receivable between the
Partnership 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 properties 4,326,000
Note receivable (4,400,000)
No gain or loss was recorded upon the foreclosure due to the carrying value of
the note receivable being adjusted to the value of the underlying collateral
during 1995.
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
(ConCap Equities, Inc.), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 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 of the
collateral 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 six months
ended June 30, 1996 and 1995. Fees paid to affiliates of the General Partner
for each of the six months ended June 30, 1996 and 1995, are presented below.
These property management fees are included in operating expenses.
SIX MONTHS ENDED JUNE 30,
COMPENSATION 1996 1995
(in thousands)
Property management fees $321 $279
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 received reimbursements as noted below:
SIX MONTHS ENDED JUNE 30,
REIMBURSEMENTS 1996 1995
(in thousands)
Reimbursement for services of affiliates $ 182 $ 266
Additionally, the Partnership paid $23,000 and $11,000 during the six months
ended June 30,1996 and 1995, respectively, to an affilate of the General Partner
for lease comissions related to new leases of the Partnership's commercial
properties. These lease commissions are included in other assets and amortized
over the term of the respective leases.
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 $7.6 million were greater than the reserve
requirement of approximately $3.9 million at June 30, 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 a first
mortgage of 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 satisfied.
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. The
lender has thus far expressed no intent to call the mortgage.
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 each of the six months ended June 30, 1996 and
1995:
Average
Occupancy
Property 1996 1995
Cedar Rim Apartments 92% 87%
Renton, Washington
City Heights Apartments 96% 83%
Seattle, Washington
Corporate Center Office Complex 94% 98%
Tampa, Florida
Hidden Cove by the Lake Apartments 92% 96%
Belleville, Michigan
Lamplighter Park Apartments 98% 94%
Belleview, Washington
Park Capitol Apartments 98% 95%
Salt Lake City, Utah
Sandpiper I & II Apartments 87% 86%
St. Petersburg, Florida
Tamarac Village I, II, III & IV Apartments 92% 91%
Denver, Colorado
Williamsburg Manor Apartments 95% 97%
Cary, North Carolina
South City Business Center 86% (1)
Chula Vista, California
(1) The South City Business Center was foreclosed on by the Partnership in
February of 1996. The 1995 occupancy information is not available.
The General Partner attributes the increase in occupancy at Cedar Rim to
property improvements and increased leasing efforts. The increase in
occupancy at City Heights Apartments is attributed to a stronger employment
market in the area and to water damage to six units which negatively impacted
1995 occupancy levels. The damage was caused by a poor drainage system between
the buildings. Subsequent to repairs being made, the occupancy has increased.
Lamplighter Park's increased occupancy is due to a growing local economy as
well as exterior renovations to the property. The increase in occupancy at
Park Capitol Apartments is attributed to increased economic growth in the area.
The occupancy decrease at Corporate Center is due to the move-out of a tenant
who had leased 4,800 square feet. The occupancy decrease at Hidden Cove
resulted from management's effort to increase resident qualification standards
in order to reduce unit damages and delinquencies and is expected to be
temporary.
The Partnership's net income for the six months ended June 30, 1996, was
$702,000 compared to a net loss of $493,000 for the six months ended June 30,
1995. The Partnership realized net income of $427,000 for the three months
ended June 30, 1996, compared to a net loss of $1,206,000 for the corresponding
period of 1995. The increase in net income for both the three and six month
periods ended June 30, 1996, is primarily attributable to the write-down
recorded in 1995 on the note receivable between the Partnership and Lincoln
South City Business Center Limited Partnership. This note receivable was
subsequently foreclosed on in February 1996. In addition, rental income
increased due to improved occupancy and increased rental rates at several
properties. General and administrative expenses decreased due to lower expense
reimbursements related to the combined efforts of the Dallas and Greenville
partnership administration staffs during the transition period in the first
quarter of 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.
Offsetting these changes were increases in operating, depreciation and
amortization expenses, which are due in part to the acquisition of South City
Business Center. The increase in operating expenses was also impacted by
increased repair and maintenance expenditures resulting from 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. Also contributing to the
reduced net income is a decrease in other income resulting from no interest
income being recognized on the South City note receivable in 1996 while
$275,000 of interest income was collected in 1995. The increase in interest
expense is due primarily to debt balances increasing approximately $6,000,000
as a result of the refinancing of Williamsburg Manor, Park Capitol and
Sandpiper I and II, partially offset by the retirement of the third mortgage
secured by Tamarac Village in December 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 of the
collateral 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 June 30, 1996, the Partnership held unrestricted cash of approximately
$7,185,000 compared to approximately $3,509,000 at June 30, 1995. Net cash
provided by operations decreased primarily due to increased operating expenses,
interest payments and reduced interest income mitigated by higher rental
revenue collections and lower general and administrative expenses. Net cash
used in investing activities decreased due to fewer purchases of long-term
investments as the partnership moved to invest in primarily short-term cash
equivalents during 1996. Net cash used in financing activities increased due
to greater distributions to partners during the first six 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.
Notes payable of approximately $17,965,000 (including accrued interest) 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. The lender has thus far expressed no intent to
call the mortgage. Distributions of approximately $4,320,000 and $1,822,000
were made to the partners during the six months ended June 30, 1996 and 1995,
respectively. Future cash distributions will depend on the levels of net cash
generated from operations or property sales, if any, 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: August 12, 1996