FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
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 March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-16682
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
(Exact name of small business issuer as specified in its charter)
California 94-3032501
(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 (864) 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/2
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1997
Assets
Cash and cash equivalents $ 683
Accounts receivable 5
Escrows for taxes 19
Other assets 6
Investment property held for sale 1,701
$2,414
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 1
Accrued taxes 13
Other liabilities 21
Partners' Capital (Deficit)
General partner $ (36)
Corporate limited partners - on behalf
of the Unitholders - (67,814 Units
issued and outstanding) 2,415 2,379
$2,414
See Accompanying Notes to Financial Statements
b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 96 $ 99
Other income 11 9
Total revenues 107 108
Expenses:
Operating 23 19
General and administrative 12 9
Maintenance 4 4
Depreciation -- 20
Property taxes 13 12
Total expenses 52 64
Net income $ 55 $ 44
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to Unitholders (99%) 54 43
$ 55 $ 44
Net income per Unit of Depositary Receipts $ .80 $ .63
See Accompanying Notes to Financial Statements
c) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Unitholders
Units of
Units of Depositary
Depositary General Receipt
Receipt Partner (Note A) Total
Original capital contributions 68,854 $ 1 $6,885 $6,886
Partners' capital (deficit)
at December 31, 1996 67,814 $ (37) $2,361 $2,324
Net income for the three months
ended March 31, 1997 -- 1 54 55
Partners' capital (deficit) at
March 31, 1997 67,814 $ (36) $2,415 $2,379
<FN>
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income $ 55 $ 44
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation -- 20
Change in accounts:
Accounts receivable (1) 1
Escrows for taxes (13) (12)
Other assets 1 5
Accounts payable (1) (4)
Accrued taxes 13 12
Other liabilities (4) 5
Net cash provided by
operating activities 50 71
Cash flows from investing activities: -- --
Cash flows from financing activities: -- --
Net increase in cash and cash equivalents 50 71
Cash and cash equivalents at beginning of period 633 424
Cash and cash equivalents at end of period $ 683 $ 495
See Accompanying Notes to Financial Statements
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Johnstown/Consolidated Income
Partners/2 (the "Partnership") 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. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March, 1997, are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 1997. For further information, refer to
the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-KSB for the fiscal year ended December 31, 1996.
Units of Depositary Receipt
Johnstown/Consolidated Depositary Corporation/2 (the "Corporate Limited
Partner"), an affiliate of the former General Partner, serves as a depositary of
certain Units of Depositary Receipt ("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. For this reason, Partner's
capital (deficit) is herein represented as an interest of the Unitholders.
Investment Property Held for Sale
Effective December 31, 1996, the Partnership's investment property was
classified as investment property held for sale. Accordingly, the property has
been recorded at the lower of carrying amount or fair value less costs to sell
and no additional depreciation expense will be recorded during the period the
assets are held for sale.
NOTE B - RELATED PARTY TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all the Partnership
activities, as provided for in the partnership agreement.
The Partnership has paid property management fees based upon collected gross
rental revenues for property management services for each of the three month
periods ended March 31, 1997 and 1996. Property management fees of
approximately $6,000 were paid to affiliates of the General Partner for the
three months ended March 31, 1997 and 1996, respectively. These fees are
included in operating expenses.
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. Reimbursements for services of affiliates of
approximately $4,000 were paid to the General Partner and its affiliates for the
three months ended March 31, 1997 and 1996, respectively.
In July 1995, the Partnership began insuring its property 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 - COMMITMENT
The Partnership is required by the Partnership Agreement to maintain working
capital for contingencies of not less than 3% 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 of approximately $683,000 exceeded the Partnership's reserve
requirement of approximately $73,000 at March 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment property consists of a two-thirds interest in a
mini-warehouse. The following table sets forth the average occupancy of the
property for the three months ended March 31, 1997 and 1996:
Average Occupancy
1997 1996
Florida #6 Mini-Warehouse 90% 91%
Lauderhill, Florida
The Partnership realized net income of approximately $55,000 for the three
months ended March 31, 1997, compared to net income of approximately $44,000 for
the three months ended March 31, 1996.
The increase in net income is primarily due to a decrease in depreciation
expense resulting from the classification of the property as investment property
held for sale at December 31, 1996. Accordingly, no depreciation expense is
recognized during the period the assets are held for sale.
Operating expenses increased as a result of increased advertising costs
resulting from efforts to increase occupancy and increased insurance expense
resulting from premium increases. General and administrative expenses increased
primarily as a result of increased audit and tax fees.
As part of the ongoing business plan of the Partnership, the General Partner
monitors 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. 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, 1997, the Partnership held cash and cash equivalents of
approximately $683,000 compared to approximately $495,000 at March 31, 1996.
Net cash provided by operating activities decreased for the three months ended
March 31, 1997 compared to the three months ended March 31, 1996 due primarily
to increased operating and administrative expenses. No cash was provided by or
used in either investing or financing activities during the three months ended
March 31, 1997 or 1996, respectively.
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 other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales and the availability of cash reserves.
On September 20, 1996, the General Partner distributed a consent solicitation to
the Limited Partners to modify the Partnership Agreement for a certain proposal
(the "Proposal") as described in the proxy statement. The Partnership filed a
definitive Schedule 14A Information Statement with the Securities and Exchange
Commission concurrent with the distribution of the consent solicitation.
The General Partner formulated the Proposal to amend the Partnership Agreement
to authorize the General Partner to sell all or substantially all of the
Partnership's assets to unaffiliated entities pursuant to a binding agreement to
be entered into on or before June 30, 1997, at a price of not less than
$2,000,000. A consequence of the closing of such a sale would likely be the
dissolution and termination of the Partnership.
On November 22, 1996, the proposal was adopted with a majority of the
outstanding units approving the proposals. The Unitholders voted 53% in favor
of the matter, 5% opposed or abstained and 42% did not respond. The General
Partner is currently in negotiations to sell the Florida #6 Mini-Warehouse. It
is not certain that these negotiations will ultimately result in the sale of the
Partnership's investment property.
During the first three months of 1997 and 1996, no cash distributions were
declared or paid.
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 Partnership
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS/2
By: CONCAP EQUITIES, INC.
General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: May 1, 1997