FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant as specified in its charter)
California 94-2768742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
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 PROPERTIES IV
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
September 30, December 31,
1997 1996
(Unaudited) (Note)
Assets
Cash and cash equivalents:
Unrestricted $ 11,591 $ 9,239
Restricted - tenant security deposits 602 648
Investments -- 492
Accounts receivable 72 111
Note and interest receivable 1,092 1,124
Escrows for taxes and insurance 1,221 1,016
Restricted escrows 2,635 2,910
Other assets 1,973 2,110
Investment Properties:
Land 12,491 12,491
Buildings and personal property 117,434 115,637
129,925 128,128
Less accumulated depreciation (96,850) (91,934)
33,075 36,194
$ 52,261 $ 53,844
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 329 $ 644
Tenant security deposits 601 659
Accrued taxes 1,164 1,105
Other liabilities 900 915
Mortgage notes payable 71,456 71,763
74,450 75,086
Partners' Deficit
General partner (6,129) (6,089)
Limited partners (343,106 units issued and
342,783 units outstanding in 1997 and 1996) (16,060) (15,153)
(22,189) (21,242)
$ 52,261 $ 53,844
Note: The balance sheet at December 31, 1996, has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 6,833 $ 6,631 $20,256 $19,493
Other income 544 552 1,452 1,554
Total revenues 7,377 7,183 21,708 21,047
Expenses:
Operating 2,460 2,338 7,064 6,676
General and administrative 194 300 651 1,125
Maintenance 1,242 969 2,896 2,721
Depreciation 1,682 1,771 4,919 5,228
Interest 1,468 1,542 4,415 4,574
Property taxes 431 443 1,255 1,320
Total expenses 7,477 7,363 21,200 21,644
(Loss) income before gain on foreclosure
of investment property and
extraordinary items (100) (180) 508 (597)
Gain on foreclosure of investment
property (Note H) -- -- -- 2,999
(Loss) income before extraordinary items (100) (180) 508 2,402
Extraordinary loss on refinancing (Note I) -- (81) -- (81)
Extraordinary loss on retirement of
debt (Note E) -- -- -- (5)
Net (loss) income $ (100) $ (261) $ 508 $ 2,316
Net (loss) income allocated to general
partner (4%) $ (4) $ (10) $ 20 $ 93
Net (loss) income allocated to limited
partners (96%) (96) (251) 488 2,223
Net (loss) income $ (100) $ (261) $ 508 $ 2,316
Net (loss) income per limited
partnership unit:
(Loss) income before extraordinary
items $ (.28) $ (.50) $ 1.42 $ 6.73
Extraordinary loss on refinancing -- (.23) -- (.23)
Extraordinary loss on retirement of debt -- -- -- (.01)
Net (loss) income $ (.28) $ (.73) $ 1.42 $ 6.49
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
c) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partner Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $ 171,554
Partners' deficit at
December 31, 1995 342,783 $ (5,951) $(12,682) $ (18,633)
Net income for the nine months
ended September 30, 1996 -- 93 2,223 2,316
Distribution to partners -- (219) (4,425) (4,644)
Partners' deficit at
September 30, 1996 342,783 $ (6,077) $(14,884) $(20,961)
Partners' deficit at
December 31, 1996 342,783 $ (6,089) $(15,153) $(21,242)
Net income for the nine months
ended September 30, 1997 -- 20 488 508
Distribution to partners -- (60) (1,395) (1,455)
Partners' deficit at
September 30, 1997 342,783 $ (6,129) $(16,060) $(22,189)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
d) CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income $ 508 $ 2,316
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,919 5,228
Amortization of loan costs 213 210
Casualty loss 14 --
Loss on disposal of investment property -- 36
Gain on foreclosure of investment property -- (2,999)
Extraordinary loss on retirement of debt -- 5
Extraordinary loss on refinancing -- 81
Change in accounts:
Tenant security deposits 46 (9)
Accounts receivable 39 (30)
Escrows for taxes and insurance (205) 96
Other assets (44) 472
Accounts payable (315) (431)
Security deposit liabilities (58) 7
Accrued taxes 59 281
Other liabilities (15) (142)
Net cash provided by operating activities 5,161 5,121
Cash flows from investing activities:
Property improvements and replacements (1,832) (3,859)
Proceeds from sale of investments 492 25
Deposits to restricted escrows (731) (733)
Receipts from restricted escrows 1,006 868
Collections on note receivable 32 29
Casualty loss, net of insurance proceeds (14) --
Net cash used in investing activities (1,047) (3,670)
Cash flows from financing activities:
Payments on notes payable (307) (382)
Repayment of notes payable -- (4,725)
Distributions to partners (1,455) (4,644)
Prepayment penalties -- (5)
Loan costs -- (141)
Proceeds from long-term borrowings -- 4,050
Net cash used in financing activities (1,762) (5,847)
Net increase (decrease) in unrestricted cash and
cash equivalents 2,352 (4,396)
Unrestricted cash and cash equivalents at beginning
of period 9,239 10,865
Unrestricted cash and cash equivalents at end
of period $11,591 $ 6,469
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $4,201,000 and $4,403,000 for the nine
months ended September 30, 1997 and 1996, respectively.
Foreclosure
In February 1996, Metro Centre Office Building was foreclosed upon by the
lender. In connection with this foreclosure, the following accounts were
adjusted by the amounts noted below (in thousands).
September 30, 1996
Tenant security deposits remitted to the lender $ (12)
Other assets (5)
Buildings and personal property (1,605)
Accumulated depreciation 1,079
Tenant security deposit liability 9
Accrued taxes 15
Interest payable 1,021
Notes payable 2,497
Extraordinary gain on foreclosure of investment property (2,999)
The net book value of the property approximated its fair market value at the
date of foreclosure.
See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership" or the "Registrant") 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 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 and nine months ended September 30, 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 consolidated financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-K
for the fiscal year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
Consolidation
The consolidated financial statements include the Partnership's equity interest
in a joint-venture which owns South Port Apartments. No minority interest has
been reflected for the joint venture because minority interests are limited to
the extent of their equity capital, and losses in excess of the minority
interest equity capital are charged against the Partnership's interest.
The Partnership's consolidated financial statements include the accounts of
certain majority-owned limited partnerships and the Partnership's majority
interest in a joint venture. All intercompany transactions have been
eliminated.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and
affiliates for the management and administration of all of the partnership
activities.
Property management fees of approximately $1,039,000 and $979,000 were paid to
affiliates of the General Partner for the nine months ended September 30, 1997
and 1996, respectively. These fees are included in operating expenses.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. The Partnership paid approximately $48,000 and $392,000
under this provision of the Partnership Agreement to affiliates of the General
Partner for the nine months ended September 30, 1997 and 1996, respectively.
These fees are included in general and administrative 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 $402,000 and $425,000 were paid to the General Partner and
affiliates for the nine months ended September 30, 1997, and 1996, respectively.
These reimbursements are included in general and administrative expenses.
The Partnership paid fees to an affiliate of the General Partner of
approximately $48,000 and $35,000 for construction oversight costs for the nine
months ended September 30, 1997 and 1996, respectively.
For the period January 1, 1996, to August 31, 1997, the Partnership insured 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 master policy. The
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 that accrued to the benefit of the affiliate of
the General Partner by virtue of the agent's obligations was not significant.
On August 28, 1997, an Insignia affiliate commenced tender offers for limited
partnership interests in six real estate limited partnerships (including the
Partnership) in which various Insignia affiliates act as general partner. The
Purchaser offered to purchase up to 85,000 of the outstanding units of limited
partnership interest in the Partnership, at $140.00 per Unit, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 28, 1997 (the "Offer to Purchase") and the related
Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed
with the Securities and Exchange Commission on August 28, 1997. Because of the
existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the partnership nor the General Partner expressed
any opinion as to the Offer to Purchase and made no recommendation as to whether
unit holders should tender their units in response to the Offer to Purchase.
NOTE C - COMMITMENT
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies. The capital reserve requirement amounts to
$500 per apartment unit or approximately $2,100,000. 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 unrestricted cash and cash equivalents, tenant security deposits and
investments, totaling approximately $12,200,000 at September 30, 1997, exceeded
the Partnership's reserve requirements of approximately $2,100,000.
NOTE D - DISTRIBUTIONS
In September 1997, in conjunction with the transfer of funds from certain
majority-owned sub-tier limited partnerships to the Partnership, approximately
$2,000 was distributed to the general partners of the majority-owned sub-tier
limited partnerships.
In March 1997, the General Partner declared and paid distributions attributable
to cash flow from operations totaling approximately $550,000 and approximately
$903,000 representing a return of capital.
In March 1996, the General Partner declared and paid distributions attributable
to cash flow from operations totaling approximately $3,617,000 and approximately
$71,000 representing a return of capital. In conjunction with the transfer of
funds from certain majority-owned sub-tier limited partnerships to the
Partnership, approximately $35,000 was distributed to the general partners of
the majority-owned sub-tier limited partnerships. In September 1996, the
General Partner declared and paid distributions attributable to cash flow from
operations totaling approximately $921,000.
NOTE E - NOTE PAYOFF
In February 1996, the $484,000 balance of the first-lien note secured by the
Point West Apartments, with an original maturity of May 2001, was paid off to
retire debt with interest rates higher than the current market rate. As a
result of the note pay-off, the Partnership paid approximately $5,000 in
prepayment penalties, which resulted in an extraordinary loss on retirement of
debt.
NOTE F - NOTE AND INTEREST RECEIVABLE
When the Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a 9% interest-bearing promissory note which matured in March 1996. The
Partnership negotiated with the purchaser to extend the note until April 1,
1997. The note matured and the principal outstanding was not repaid. The
Partnership has now negotiated with the borrower to extend the terms of the note
until April 1, 1998. All other terms of the note remained unchanged.
NOTE G - CASUALTY LOSSES
On January 12, 1997, a severe storm caused extensive wind and flood damage to
Foothill Place Apartments. The strong winds damaged plumbing and exterior
fencing, ripped siding from buildings, blew chimney covers off, downed trees and
created leaks in approximately 65 units. In February 1997, a fire occurred on
one of Foothill Place Apartments balconies. Damage occurred to the balcony,
railing, siding, roof, windows and interior hallway. On April 2, 1997, a severe
storm caused extensive wind damage to Foothill Place Apartments. The strong
winds ripped doors from their hinges and bent frames, knocked down trees, and
tore siding and screens from the buildings.
The insurance proceeds received less the costs to repair Foothill Place
Apartments and the write-off of assets that were replaced, resulted in a net
casualty loss for these events of $14,000, which is included in maintenance
expense at September 30, 1997. All repairs relating to the April 2, 1997,
casualty are not yet complete, however, the estimated cost of the casualty is
expected to be the insurance deductible of $10,000.
NOTE H - FORECLOSURE OF METRO CENTRE OFFICE BUILDING
Approximately $2,500,000 of nonrecourse mortgage debt secured by the Metro
Centre Office Building, located in Southern California, matured July 1, 1995.
The property historically had difficulty making its scheduled debt service
payments, and since 1985, the property had made quarterly cash flow payments
pursuant to a modified and restructured loan agreement, however, no payments
were made in 1996. Given the economic conditions in Southern California,
property operations were not expected to improve sufficiently to enable the
Partnership to refinance the existing indebtedness under prevailing market
conditions. In September 1995, a "Notice of Default and Election to Sell Under
Deed of Trust" was filed by the lender. The Partnership did not contest this
foreclosure action and the property was foreclosed upon on February 7, 1996,
resulting in a gain on foreclosure of approximately $2,999,000 to the
Partnership.
NOTE I - NOTE REFINANCING
The Post Ridge Apartments formerly secured a mortgage note totaling
approximately $4,200,000, which was guaranteed by HUD. Operating cash flow from
Post Ridge Apartments did not support its scheduled debt service payments. As
a result, in January 1991, the Partnership suspended scheduled debt service for
Post Ridge Apartments. From 1991 through March 1995, the Partnership remitted
excess cash flow from the properties' operations as debt service. On March 28,
1995, this debt was sold to an unaffiliated third party. Accordingly, since the
closing of the sale on May 8, 1995, this debt is no longer regulated by HUD.
In September 1996, the Partnership entered into an interim financing arrangement
and refinanced the non-recourse mortgage note of approximately $4,200,000
secured by Post Ridge Apartments. Under the terms of the interim financing
arrangement, the new $4,100,000 mortgage note bore interest at 8% through
October 31, 1996, and from November 1, 1996, through the maturity date of
November 15, 1996, the note bore interest at a rate equal to 2.5% plus the
average one month LIBOR (totaling 7.875%). As a result of this refinancing, the
Partnership realized a $16,000 gain on the forgiveness of accrued interest, a
$61,000 gain on the forgiveness of advances from prior years, and a $158,000
loss on the write-off of loan costs which resulted in a net extraordinary loss
on refinancing of $81,000. In November 1996, the General Partner obtained
permanent financing by securing a new mortgage note of approximately $4,100,000
collateralized by Post Ridge Apartments. Under the terms of the agreement this
mortgage note bears interest at 7.33% and matures in November 2003.
NOTE J - SUBSEQUENT EVENTS
In October 1997, the General Partner declared and paid a distribution
attributable to cash flow from operations totaling approximately $1,050,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of seventeen apartment
complexes. The following table sets forth the average occupancy of the
properties for the nine months ended September 30, 1997 and 1996:
Average Occupancy
1997 1996
The Apartments
Omaha, NE 96% 93%
Arbor East Apartments
Nashville, TN 96% 95%
Briar Bay Racquet Club Apartments
Miami, FL 93% 97%
Chimney Hills Apartments
Marietta, GA 90% 93%
Citadel Apartments
El Paso, TX 92% 91%
Citadel Village Apartments
Colorado Springs, CO 98% 98%
Foothill Place Apartments
Salt Lake City, UT 94% 97%
Knollwood Apartments
Nashville, TN 95% 98%
Lake Forest Apartments
Omaha, NE 95% 96%
Nob Hill Villa Apartments
Nashville, TN 95% 96%
Overlook Apartments
Memphis, TN 90% 84%
Point West Apartments
Charleston, SC 98% 87%
Post Ridge Apartments
Nashville, TN 97% 97%
Rivers Edge Apartments
Auburn, WA 97% 96%
South Port Apartments
Tulsa, OK 93% 96%
Stratford Place Apartments
Austin, TX 89% 93%
Village East Apartments
Cimarron Hills, CO 99% 99%
The decrease in occupancy at Briar Bay Racquet Club Apartments is due to the
local municipality restricting marketing efforts. In addition, the exterior
appearance of the property has impacted marketing. Exterior repairs and
painting is underway and should be completed in 1997. The decrease in occupancy
at Chimney Hills Apartments is attributable to a significant decline in the job
market after the completion of the 1996 Olympic summer games and the
construction of new multi-family units, which increased competition in the
Atlanta market. The low occupancy at Citadel Apartments is due to the soft
market in the El Paso area. The increase in occupancy at Overlook Apartments is
due to increased marketing, combined with the availability of attractive, well
maintained units. Although, occupancy remains low at this investment property
due to it being located in a low income neighborhood that is high in crime and
heavily populated with similar complexes. The increased occupancy at Point West
Apartments is due to interior and exterior building improvements that increased
unit appeal and an overall improvement in the strength of the local market. The
decreased occupancy at Stratford Place Apartments is due to increased
competition in the Austin market, resulting from the construction of two new
apartment complexes in the area.
The Partnership realized a loss before gain on foreclosure of investment
property and extraordinary items of approximately $100,000 and income before
gain on foreclosure of investment property and extraordinary items of $508,000
for the three and nine months ended September 30, 1997, respectively. The
Partnership recognized losses before the gain on foreclosure of investment
property and extraordinary items of approximately $180,000 and $597,000,
respectively, for the same periods in 1996. This increase in income is due
primarily to increases in rental income and a decrease in total expenses,
partially offset by increases in operating and maintenance expenses. The
Partnership realized a net loss of $100,000 and net income of $508,000 for
the three and nine months ended September 30, 1997, respectively, versus a net
loss of $261,000 and net income of $2,316,000 for the three and nine months
ended September 30, 1996, respectively.
Rental income increased for the three and nine months ended September 30, 1997,
compared to the three and nine months ended September 30, 1996. Despite
occupancy decreases at several of the Partnership's properties, as discussed
above, rental income increased due to increased rental rates at most of the
Partnership's properties.
Administrative expenses decreased for the nine months ended September 30, 1997,
compared to the nine months ended September 30, 1996, due primarily to a
decrease in the special 9% management fees on distributions from operating cash
flows. The Partnership distributed approximately $550,000 and $4,538,000,
respectively, from operating cash flow for the nine month periods ended
September 30, 1997 and 1996. The increase in operating expense is primarily due
to increased utility costs at several properties due to the severity of the
winter of 1997. Also, contributing to increased operating costs were higher
rental concessions resulting from efforts to increase occupancy. The increase
in maintenance expense is due to parking lot repairs and improvements and
interior and exterior painting projects at Post Ridge Apartments and Foothill
Place Apartments. There was also a door and window replacement project at Arbor
East Apartments, as well as, an interior repair project on some of the units at
Knollwood Apartments.
The $2,999,000 extraordinary gain on foreclosure of investment property realized
during the nine months ended September 30, 1996, is due to the foreclosure of
the Metro Centre Office Building in February 1996 (See "Note H").
Also in February 1996, the $484,000 balance of the first-lien note secured by
the Point West Apartments, with an original maturity of May 2001, was repaid so
that the Partnership could retire debt with interest rates higher than the
current market rate. As a result of the note pay-off, the Partnership paid
approximately $5,000 in prepayment penalties, which resulted in an extraordinary
loss on retirement of debt.
In September 1996, the Partnership refinanced the nonrecourse mortgage note of
approximately $4,200,000 which was secured by Post Ridge Apartments. As a
result of the refinancing, the Partnership realized a $16,000 gain on the
forgiveness of accrued interest, a $61,000 gain on the forgiveness of advances
from prior years, and a $158,000 loss on the write off of loan costs, which
resulted in a net extraordinary loss on refinancing of $81,000 (See "Note I").
Included in maintenance expense for the nine months ended September 30, 1997, is
approximately $808,000 of major repairs and maintenance comprised primarily of
major landscaping, parking lot repairs, exterior painting and exterior building
improvements. For the nine months ended September 30, 1996, approximately
$540,000 of major repairs and maintenance comprised primarily of exterior
building improvements, parking lot repairs, major landscaping, swimming pool
repairs, exterior painting and window coverings were included in maintenance
expense.
When the Denbigh Village Apartments was sold in August 1994, the Partnership
accepted a 9% interest-bearing promissory note which matured in March 1996. The
Partnership negotiated with the purchaser to extend the note until April 1,
1997. The note matured and the principal outstanding was not repaid. The
Partnership has now negotiated with the borrower to extend the terms of the note
until April 1, 1998. All other terms of the note remain unchanged.
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 September 30, 1997, the Partnership held unrestricted cash and cash
equivalents of $11,591,000 compared to $6,469,000 at September 30, 1996. Net
cash provided by operating activities remained relatively constant for the nine
months ended September 30, 1997, as compared to September 30, 1996, despite an
increase in net income. Several items resulted in decreases in cash from
operations. Decreases in cash provided by operating activities are primarily
due to the timing of tax payments, the receipt in 1996 of an insurance refund
from a fire at the Overlook Apartments in December 1995, and an escrow receipt
in 1996 from the refinancing of the debt secured by the Knollwood Apartments in
December 1995. Also, there was a significant decrease in accounts payable for
the nine months ended September 30, 1997, due to the timing of payments. Net
cash used in investing activities decreased primarily due to the increase in
proceeds received from the sale of Treasury Bills during 1997 and decreased
property improvements and replacements during 1997, despite continuing upgrades
at the properties. Net cash used in financing activities decreased as a result
of decreased distributions to partners during the nine months ended September
30, 1997, compared to the corresponding period of 1996. Also, during the nine
months ended September 30, 1996, the mortgage debt secured by Point West
Apartments was repaid and the mortgage debt secured by Post Ridge Apartments
was refinanced. The Point West Apartments repayment of the mortgage note and
the Post Ridge Apartments refinance resulted in an increase in the cash used for
repayments of notes payable for the nine months ended September 30, 1996,
however, this was partially offset by the proceeds from long-term borrowings as
a result of the Post Ridge Apartments refinance. There have been no repayments
of mortgage notes or refinances during the nine months ended September 30, 1997.
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 properties 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 $71,456,000 matures from December
1998 to December 2005 with balloon payments due at maturity, at which time the
properties 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. During the
nine months ended September 30, 1997 and 1996, cash distributions of
approximately $1,455,000 and $4,644,000, respectively, were declared and paid.
In October 1997, the General Partner declared and paid a distribution
attributable to cash flow from operations totaling approximately $1,050,000.
On August 28, 1997, an Insignia affiliate commenced tender offers for limited
partnership interests in six real estate limited partnerships (including the
Partnership) in which various Insignia affiliates act as general partner. The
Purchaser offered to purchase up to 85,000 of the outstanding units of limited
partnership interest in the Partnership, at $140.00 per Unit, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 28, 1997 (the "Offer to Purchase") and the related
Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed
with the Securities and Exchange Commission on August 28, 1997. Because of the
existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the partnership nor the General Partner expressed
any opinion as to the Offer to Purchase and made no recommendation as to whether
unit holders should tender their units in response to the Offer to Purchase.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1997, an Insignia affiliate (the "Purchaser") commenced tender offers
for limited partner interests in six real estate limited partnerships including
the Partnership (collectively, the "Tender Partnerships"), in which various
Insignia affiliates act as general partner. On September 5, 1997, a partnership
claiming to be a holder of limited partnership units in one of the Tender
Partnerships, filed a complaint with respect to a putative class action in the
Court of Chancery in the State of Delaware in and for New Castle County (the
"City Partnerships complaint") challenging the actions of the defendants
(including Insignia, certain Insignia affiliates) in connection with the tender
offers. Neither the Partnership nor the General Partner were named as
defendants in the action. The City Partnerships complaint alleges that, among
other things, the defendants have intentionally mismanaged the Tender
Partnerships and coerced the limited partners into selling their units pursuant
to the tender offers for substantially lower prices than the units are worth.
The plaintiffs also allege that the defendants breached an alleged duty to
provide an independent analysis of the fair market value of the limited
partnership units, failed to appoint a disinterested committee to review the
tender offer and did not adequately consider other alternatives available to the
limited partners.
On September 8, 1997, persons claiming to be holders of limited partnership
units in the Tender Partnerships filed a complaint with respect to a putative
class action and derivative suit in the Superior Court for the State of
California for the County of San Mateo (the "Kline complaint") challenging the
actions of the defendants (including Insignia, certain Insignia affiliates and
the Tender Partnerships) in connection with the tender offers. The Kline
complaint alleges that, among other things, the defendants have intentionally
mismanaged the Tender Partnerships and that, as a result of the tender offers,
the Purchaser will acquire effective voting control over the Tender Partnerships
at substantially lower prices, than the units are worth. On September 24, 1997,
the court denied the plaintiffs' application for a temporary restraining order
and their request for preliminary injunctive relief preventing the completion of
the tender offers.
On September 10, 1997, persons claiming to be holders of limited partnership
units in the Tender Partnerships filed a complaint with respect to a putative
class action and derivative suit in the Superior Court for the State of
California for the County of Alameda (the "Heller complaint") challenging the
actions of the defendants (including Insignia, certain Insignia affiliates and
the Tender Partnerships) in connection with the tender offers. The Heller
complaint alleges that, among other things, the defendants have intentionally
mismanaged the Tender Partnerships and that, as a result of the tender offers,
the Purchaser will acquire effective voting control of the Tender Partnerships
at substantially lower prices than the units are worth. The Plaintiffs also
allege that the defendants breached an alleged duty to retain an independent
advisor to consider alternatives to the tender offers.
The General Partner believes that the allegations contained in the City
Partnerships, Kline and Heller complaints are without merit and intends to
vigorously contest each of those complaints to which it and the Partnership have
been named as defendants.
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.
CONSOLIDATED CAPITAL PROPERTIES IV
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: November 4, 1997