SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
CONSOLIDATED CAPITAL GROWTH FUND
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
___________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
(5) Total fee paid:
___________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
___________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
(3) Filing Party:
___________________________________________________________________________
(4) Date Filed:
___________________________________________________________________________
CONSOLIDATED CAPITAL GROWTH FUND
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET, THIRD FLOOR
LYNDHURST, NEW JERSEY 07071
(800) 217-9608
_________, 2005
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
Dear Limited Partner:
The attached Information Statement describes an amendment (the "Amendment")
to the Amended Limited Partnership Agreement, as amended (the "Partnership
Agreement"), of Consolidated Capital Growth Fund, a California limited
partnership (your "Partnership"), to extend the term of your Partnership from
December 31, 2006 to December 31, 2022.
Your Partnership is refinancing (with an independent, third party lender)
its mortgage indebtedness secured by The Lakes Apartments, a 600-unit apartment
complex located in Raleigh, North Carolina (the "Property"), which your
Partnership owns. ConCap Equities, Inc., the general partner of the Partnership
(the "General Partner"), is of the opinion that the refinancing is necessary,
because the Partnership will not have sufficient funds from the continuing
operation of the Property to repay the outstanding balance of the Partnership's
existing mortgage indebtedness on its maturity date of December 1, 2005, and the
Partnership will not likely consummate the sale of the Property by that time.
The Partnership anticipates that the financing agreements between the
Partnership and the lender will require the extension of the Partnership's term
beyond the maturity date of the mortgage indebtedness. The Partnership's new
mortgage indebtedness is expected to mature on September 1, 2007. After the
Partnership closes the refinancing, the new lender will be able to exercise
remedies, which include accelerating the maturity of the mortgage indebtedness
and foreclosing on Property, if the Partnership's term is not extended.
Between now and the maturity date of the new mortgage indebtedness, the
General Partner intends to market the Property to potential purchasers. If the
General Partner is unable to complete a sale of the Property within this time
period, it will seek to obtain a long-term extension in the maturity date of our
mortgage indebtedness. In order to allow it to seek such an extension without
having to again extend the term of the Partnership, the General Partner has
elected to extend the term of the Partnership at this time to December 21, 2022.
The General Partner is of the opinion that additional time may be required in
order to locate a buyer for the Property and close the sale. The refinancing and
the extension in the Partnership term will provide the Partnership with
additional time to market the Property for sale to a third party. The
Partnership's term currently expires on December 31, 2006, and the General
Partner is of the opinion that the Partnership's negotiating leverage will be
enhanced, and the net proceeds to the Partnership and the limited partners from
a sale of the Property could be increased, if the Partnership has greater
flexibility with respect to the timing of a sale of the Property. There can be
no assurance, however, that the Partnership's negotiating leverage will in fact
be enhanced, or that the net proceeds from a sale of the Property will be
increased, by an extension of the Partnership's term or that the Partnership
will complete a sale of the Property.
The General Partner has conflicts of interest with respect to the
Amendment. Continuation of the Partnership beyond 2006 will result in the
General Partner and its affiliates continuing to receive management fees from
the Partnership. These fees would not continue to be payable beyond 2006 if the
Amendment is not adopted.
Pursuant to the Partnership Agreement, the consent of the General Partner
and holders of a majority of the outstanding units of limited partnership
interest in the Partnership ("Units") is required to approve the Amendment. As
of _________, 2005, 49,196 Units were issued and outstanding. As of _________,
AIMCO Properties, L.P. and its affiliates own 32,142.75, or approximately
65.34%, of the outstanding Units. AIMCO Properties, L.P. and its affiliates will
vote their Units in favor of the Amendment. Accordingly, approval of the
Amendment is assured. We are providing the attached Information Statement in
order to notify you of the background and terms of the Amendment.
The Amendment will become effective when the General Partner executes the
Amendment. The General Partner expects that the Amendment will become effective
on or about _______, 2005. There can be no assurance, however, that the
Amendment will not become effective sooner or later than such date.
Questions may be directed to the Information Agent, The Altman Group, Inc.,
at its address set forth below.
Very truly yours,
CONCAP EQUITIES, INC.
THE INFORMATION AGENT IS:
THE ALTMAN GROUP, INC.
By Mail, Overnight Courier or Hand: By Facsimile: For Information please call:
- ----------------------------------- -------------- ----------------------------
1200 Wall Street, Third Floor (201) 460-0050 TOLL FREE (800) 217-9608
Lyndhurst, New Jersey 07071
CONSOLIDATED CAPITAL GROWTH FUND
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET, THIRD FLOOR
LYNDHURST, NEW JERSEY 07071
(800) 217-9608
INFORMATION STATEMENT
________, 2005
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished to the holders (the "Limited
Partners") of limited partnership interests of record as of the close of
business on _________, 2005 (the "Record Date"), of Consolidated Capital Growth
Fund, a California limited partnership (the "Partnership"), in connection with
an amendment (the "Amendment") to the Partnership's Amended Limited Partnership
Agreement, as amended (the "Partnership Agreement"), to extend the term of the
Partnership from December 31, 2006 to December 31, 2022. This Information
Statement is first being mailed to Limited Partners on or about ______, 2005.
Your Partnership is refinancing (with an independent, third party lender)
its mortgage indebtedness secured by The Lakes Apartments, a 600-unit apartment
complex located in Raleigh, North Carolina (the "Property"), which your
Partnership owns. ConCap Equities, Inc., the general partner of the Partnership
(the "General Partner"), is of the opinion that the refinancing is necessary,
because the Partnership will not have sufficient funds from the continuing
operation of the Property to repay the outstanding balance of the Partnership's
existing mortgage indebtedness on its maturity date of December 1, 2005, and the
Partnership will not likely consummate the sale of the Property by that time.
The Partnership anticipates that the financing agreements between the
Partnership and the lender will require the extension of the Partnership's term
beyond the maturity date of the mortgage indebtedness. The Partnership's new
mortgage indebtedness is expected to mature on September 1, 2007. After the
Partnership closes the refinancing, the new lender will be able to exercise
remedies, which include accelerating the maturity of the mortgage indebtedness
and foreclosing on Property, if the Partnership's term is not extended.
Between now and the maturity date of the new mortgage indebtedness, the
General Partner intends to market the Property to potential purchasers. If the
General Partner is unable to complete a sale of the Property within this time
period, it will seek to obtain a long-term extension in the maturity date of our
mortgage indebtedness. In order to allow it to seek such an extension without
having to again extend the term of the Partnership, the General Partner has
elected to extend the term of the Partnership at this time to December 21, 2022.
The General Partner is of the opinion that additional time may be required in
order to locate a buyer for the Property and close the sale. The refinancing and
the extension in the Partnership term will provide the Partnership with
additional time to market the Property for sale to a third party. The
Partnership's term currently expires on December 31, 2006, and the General
Partner is of the opinion that the Partnership's negotiating leverage will be
enhanced, and the net proceeds to the Partnership and the limited partners from
a sale of the Property could be increased, if the Partnership has greater
flexibility with respect to the timing of a sale of the Property. There can be
no assurance, however, that the Partnership's negotiating leverage will in fact
be enhanced, or that the net proceeds from a sale of the Property will be
increased, by an extension of the Partnership's term or that the Partnership
will complete a sale of the Property.
The General Partner has conflicts of interest with respect to the
Amendment. Continuation of the Partnership beyond 2006 will result in the
General Partner and its affiliates continuing to receive management fees from
the Partnership. These fees would not continue to be payable beyond 2006 if the
Amendment is not adopted.
Pursuant to the Partnership Agreement, the consent of the General Partner
and holders of a majority of the outstanding units of limited partnership
interest in the Partnership ("Units") is required to approve the Amendment. As
of _________, 2005, 49,196 Units were issued and outstanding. As of _________,
AIMCO Properties, L.P. and its affiliates own 32,142.75, or approximately
65.34%, of the outstanding Units. AIMCO Properties, L.P. and its
affiliates will vote their Units in favor of the Amendment. Accordingly,
approval of the Amendment is assured. We are providing this Information
Statement in order to notify you of the background and terms of the Amendment.
The Amendment will become effective when the General Partner executes the
Amendment. The General Partner expects that the Amendment will become effective
on or about ______, 2005. There can be no assurance, however, that the Amendment
will not become effective sooner or later than such date.
Questions may be directed to the Information Agent, The Altman Group, Inc.,
at 1200 Wall Street, Third Floor, Lyndhurst, New Jersey 07071, telephone (800)
217-9608.
RISK FACTORS
There are risks associated with the Amendment. In addition, the General
Partner is an affiliate of Apartment Investment and Management Company, a
publicly traded real estate investment trust ("AIMCO"), which, together with its
other affiliates, may have interests that conflict with the interests of the
Limited Partners. You should consider the following risks carefully:
RISKS OF THE AMENDMENT
CONTINUATION OF THE PARTNERSHIP; NO DEFINITE TIME FRAME REGARDING SALE OF
THE PROPERTY. Although the General Partner intends to sell the Property, there
can be no assurance as to when the sale will occur, if at all. The Partnership's
prospectus, dated February 25, 1977, pursuant to which Units were sold,
indicated that the Partnership was intended to be self-liquidating and that it
was anticipated that the Partnership's properties would be sold within three to
seven years of their acquisition, subject to market conditions. The prospectus
also indicated that there would be no assurance that the Partnership would be
able to so liquidate and that, unless sooner terminated as provided in the
Partnership Agreement, the existence of the Partnership would continue until
December 31, 2006. There may be no way to liquidate your investment in the
Partnership in the future until the Property is sold and your Partnership is
liquidated.
If the Amendment is approved, you may not be able to exit from the
Partnership until a termination of the Partnership in December 31, 2022, or if
the termination date is further extended, until that extended date.
YOU MAY BE REQUIRED TO HOLD YOUR UNITS INDEFINITELY. Although the General
Partner intends to sell the Property, there can be no assurance as to when any
sale will occur, if at all. Therefore, there may not be any way to liquidate
your investment in the Partnership until the Property is sold and your
Partnership is liquidated.
THERE IS NO ACTIVE TRADING MARKET FOR YOUR UNITS. Although the Units are
registered with the Securities and Exchange Commission (the "SEC"), there is no
active trading market for the Units. There may be a limited number of
prospective buyers for your Units in the future, and you may find it difficult
or impossible to liquidate your investment at a price that exceeds the amounts
you might receive on the liquidation and dissolution of the Partnership. The
General Partner cannot predict when the sale or other disposition of the
Property will occur. If the Amendment is not approved, your Partnership will
terminate on December 31, 2006; if the Amendment is approved, you may not be
able to exit from the Partnership until December 31, 2022, or if the termination
date is further extended, until such extended date.
THE VALUE OF THE PROPERTY MAY DECLINE, AND YOUR INVESTMENT WILL CONTINUE TO
BE AT RISK. Until the Property is sold, the Partnership will continue to bear
the investment risk associated with the continued ownership of the Property. The
Partnership's future success will depend upon many factors beyond the control of
the General Partner, including competitive activity, the need for capital
expenditures, prevailing economic and market conditions and financial, business
and other factors. These factors, and others, may cause the value of the
Property and the Partnership to decline.
AIMCO PROPERTIES AND ITS AFFILIATES CONTROL YOUR PARTNERSHIP AND THEIR
CONTROL MAY INCREASE. Decisions with respect to the day-to-day management of
your Partnership, including a refinancing of the Partnership's mortgage
indebtedness, are the responsibility of the General Partner. The General Partner
is controlled by AIMCO. In addition, affiliates of the General Partner hold
32,142.75, or approximately 65.34%, of the
-2-
outstanding Units. Pursuant to the Partnership Agreement, Limited Partners
holding a majority of the outstanding Units must approve certain transactions,
including most amendments to the Partnership Agreement and the sale of all or
substantially all of the Partnership's assets. The General Partner and its
affiliates can significantly influence, and may have the ability to control
under certain circumstances, many voting decisions with respect to the
Partnership.
From time to time, AIMCO Properties and its affiliates have purchased Units
of the Partnership with a view to making a profit. The Amendment provides
additional time to AIMCO Properties and its affiliates to purchase additional
Units in the future, thereby increasing the influence AIMCO Properties and its
affiliates have over the voting decisions of the Partnership. Accordingly, the
Amendment may result in increased control of the Partnership by AIMCO Properties
and its affiliates.
AFFILIATES OF THE GENERAL PARTNER WILL CONTINUE TO RECEIVE FEES. Affiliates
of the General Partner are entitled to receive 5% of gross receipts from the
Property as compensation for providing property management services. The
Partnership paid approximately $81,000 for the six months ended June 30, 2005
and approximately $147,000 and $155,000 for the years ended December 31, 2004
and 2003, respectively, to affiliates of the General Partner.
An affiliate of the General Partner charged the Partnership for
reimbursement of accountable administrative expenses of approximately $84,000
for the six months ended June 30, 2005 and $153,000 and $266,000 for the years
ended December 31, 2004 and 2003, respectively. The amounts for the six months
ended June 30, 2005 and the years ended December 31, 2004 and 2003 include fees
related to construction management services provided by an affiliate of the
General Partner of approximately $19,000, $24,000 and $36,000, respectively.
The Partnership Agreement provides for a fee equal to 9% of the total
distributions made to the Limited Partners from "cash available for
distribution" (as defined in the Partnership Agreement) to be paid to the
General Partner for executive and administrative management services. No fees
were earned or paid for the six months ended June 30, 2005 or the year ended
December 31, 2004. Affiliates of the General Partner received approximately
$28,000 for the year ended December 31, 2003 for providing these services.
During the six months ended June 30, 2005, an affiliate of the General
Partner advanced to the Partnership approximately $94,000 to fund property and
Partnership operations. Subsequent to June 30, 2005, an affiliate of the General
Partner advanced to the Partnership approximately $22,000 to fund capital
improvements at the Property. During the year ended December 31, 2004, advances
of approximately $830,000 were made by an affiliate of the General Partner to
the Partnership to assist in paying city taxes related to the sales of two
investment properties and to fund replacement reserves at the Property. Interest
on advances is charged at the prime rate plus 2% (8.25% at June 30, 2005).
Interest expense was approximately $34,000 and $28,000 for the six months ended
June 30, 2005 and the year ended December 31, 2004, respectively. There were no
advances during the year ended December 31, 2003.
The Partnership insures the Property up to certain limits through coverage
provided by AIMCO, an affiliate of the General Partner, which is generally
self-insured for a portion of losses and liabilities related to workers
compensation, property casualty, general liability and vehicle liability. The
Partnership insures the Property above the AIMCO limits through insurance
policies obtained by AIMCO from insurers unaffiliated with the General Partner.
During the six months ended June 30, 2005 and the years ended December 31, 2004
and 2003, the Partnership was charged by AIMCO and its affiliates approximately
$64,000, $62,000 and $127,000, respectively, for insurance coverage and fees
associated with policy claims administration.
The adoption of the Amendment and extension of the Partnership's term will
result in similar fees continuing to be paid for a longer period than would be
the case if the term of the Partnership expired in 2006. Therefore, the
interests of the General Partner and its affiliates in continuing the
Partnership may be different than those of any Limited Partners who desire to
have the Partnership earlier dissolved and liquidated. See "Security Ownership
of Certain Beneficial Owners and Management."
-3-
RISKS IF THE AMENDMENT IS NOT ADOPTED
THE NEW LENDER MAY BE ABLE TO EXERCISE REMEDIES AGAINST THE PARTNERSHIP IF
THE AMENDMENT IS NOT ADOPTED. The terms of the financing agreements between the
Partnership and the new lender will require the extension of the Partnership's
term beyond the maturity date of the mortgage indebtedness. The Partnership's
new mortgage indebtedness is expected to mature on September 1, 2007. After the
Partnership closes the refinancing, the new lender will be able to exercise
remedies, which include accelerating the maturity of the mortgage indebtedness
and foreclosing on the Property, if the Partnership's term is not extended.
THE PARTNERSHIP WILL HAVE LESS FLEXIBILITY WITH RESPECT TO THE SALE OF THE
PROPERTY. The Amendment will provide the Partnership with additional time to
market the Property for sale to a third party. The Partnership's term currently
expires on December 31, 2006, and the General Partner is of the opinion that the
Partnership's negotiating leverage will be enhanced, and the net proceeds to the
Partnership and the Limited Partners from a sale of the Property could be
increased, if the Partnership has greater flexibility with respect to the timing
of the sale of the Property. There can be no assurance, however, that the
Partnership's negotiating leverage or sales proceeds from the Property will in
fact be enhanced, or that the net proceeds from a sale of the Property will be
increased, by an extension of the Partnership's term or that the Partnership
will complete a sale of the Property.
YOU MAY RECOGNIZE GAIN ON A DISPOSITION OF THE PROPERTY, INCLUDING BY
FORECLOSURE. If the Amendment is adopted, the disposition of the Property, and
therefore the tax consequences described in this paragraph, may take place in a
later taxable year than if the Amendment is not adopted. Any sale or other
disposition of the Property by the Partnership at any time, including by
foreclosure, would likely result in the recognition of gain or loss by the
Partnership equal to the difference between (i) the amount realized for the
Property and (ii) the Partnership's tax basis (which has been reduced because of
depreciation deductions) in the Property. The amount realized for the Property
would be the selling price for the Property, less any expenses of sale, plus any
liabilities assumed by the purchaser of the Property or liabilities that the
purchaser takes the Property subject to. Any taxable gain or loss will pass
through to the partners of the Partnership. See "Material U.S. Federal Income
Tax Consequences" below. However, the Partnership intends to market the Property
for sale to potential purchasers whether or not the Amendment is adopted, and
the Amendment will not necessarily cause the disposition of the Property to take
place in a later taxable year than it would have otherwise taken place. Thus,
there is no guarantee that the disposition of the Property, and therefore the
tax consequences described in this paragraph, will be deferred if the Amendment
is adopted.
DISTRIBUTIONS FROM YOUR PARTNERSHIP MAY NOT BE SUFFICIENT TO COVER CURRENT
TAX LIABILITIES OF THE PARTNERS. As noted above, if the Property is disposed of,
including a disposition through the exercise of remedies by the lender, the
Partnership generally will recognize taxable gain or loss equal to the
difference between the amount realized and the Partnership's basis in the
Property. Any taxable gain or loss will pass through to the partners of the
Partnership. Depending on the form and amount of the purchase price and related
sales costs, a partner's tax liability could be greater than the funds, if any,
it receives from the Partnership. Because the amount realized for tax purposes
includes liabilities assumed by a purchaser of the Property, or liabilities that
the purchaser takes the Property subject to, a partner may have a significant
tax liability in excess of the funds available on a sale for distribution to the
partner. Similarly, on a foreclosure the amount realized would generally include
the full amount of the debt. As noted above, the tax consequences of disposing
of the Property would likely result at some time regardless of whether the
Amendment is adopted, but may result earlier if the Amendment is not adopted.
THE AMENDMENT
The Amendment amends and restates Section 1.03(b) of the Partnership
Agreement in its entirety as follows:
"1.03 Term of Partnership. The Partnership shall commence as of the
date of this Agreement (the "effective date") and shall continue for a
period ending the earlier of:
(b) December 31, 2022;"
-4-
EFFECTIVENESS
The Amendment will become effective when the General Partner executes the
Amendment. The General Partner expects that the Amendment will become effective
on or about ______, 2005. There can be no assurance, however, that the Amendment
will not become effective sooner or later than such date.
REASONS FOR THE AMENDMENT
Your Partnership is refinancing (with an independent, third party lender)
its mortgage indebtedness secured by the Property. The General Partner is of the
opinion that the refinancing is necessary, because the Partnership will not have
sufficient funds from the continuing operation of the Property to repay the
outstanding balance of the Partnership's existing mortgage indebtedness on its
maturity date of December 1, 2005, and the Partnership will not likely
consummate a sale of the Property by that time. The Partnership anticipates that
the financing agreements between the Partnership and the lender will require the
extension of the Partnership's term beyond the maturity date of the mortgage
indebtedness. The Partnership's new mortgage indebtedness is expected to mature
on September 1, 2007. After the Partnership closes the refinancing, the new
lender will be able to exercise remedies, which include accelerating the
maturity of the mortgage indebtedness and foreclosing on Property, if the
Partnership's term is not extended.
Between now and the maturity date of the new mortgage indebtedness, the
General Partner intends to market the Property to potential purchasers. If the
General Partner is unable to complete a sale of the Property within this time
period, it will seek to obtain a long-term extension in the maturity date of our
mortgage indebtedness. In order to allow it to seek such an extension without
having to again extend the term of the Partnership, the General Partner has
elected to extend the term of the Partnership at this time to December 21, 2022.
The General Partner is of the opinion that additional time may be required in
order to locate a buyer for the Property and close the sale. The refinancing and
the extension in the Partnership term will provide the Partnership with
additional time to market the Property for sale to a third party. The
Partnership's term currently expires on December 31, 2006, and the General
Partner is of the opinion that the Partnership's negotiating leverage will be
enhanced, and the net proceeds to the Partnership and the Limited Partners from
a sale of the Property could be increased, if the Partnership has greater
flexibility with respect to the timing of a sale of the Property. There can be
no assurance, however, that the Partnership's negotiating leverage will in fact
be enhanced, or that the net proceeds from a sale of the Property will be
increased, by an extension of the Partnership's term or that the Partnership
will complete a sale of the Property.
ALTERNATIVES TO THE AMENDMENT
The Partnership's existing mortgage indebtedness is scheduled to mature on
December 1, 2005. The Partnership's existing mortgage indebtedness can be
refinanced with no prepayment penalty and at a lower rate than such existing
indebtedness, but only on terms and conditions that included extending the
Partnership's term beyond the maturity date of the new mortgage indebtedness.
The General Partner has discussed with the lender the terms of the financing
agreements, including the requirement to extend the Partnership's term.
Alternatively, the General Partner could negotiate a shorter loan term such that
the maturity of the mortgage indebtedness would occur prior to the expiration of
the Partnership's term. The General Partner is of the opinion that refinancing
with such a loan term would likely result in one or more of the following
undesirable effects: 1) monthly payments that the Partnership is unable to
service and 2) more frequent refinancings, resulting in repeated unnecessary
refinancing costs and potentially higher interest costs to the Partnership.
An alternative to extending the Partnership's term as required by the new
financing agreement is to allow the Partnership to default on either the
existing mortgage or the new mortgage and to allow the holder of such debt to
foreclose on the Property. However, such a disposition of the Property by the
Partnership would likely result in 1) less net proceeds than might be received
following an orderly sale of the Property in a more advantageous climate for the
disposition of real estate such as the Property and 2) the recognition of gain
or loss by the Partnership equal to the difference between (i) the amount
realized for the Property and (ii) the Partnership's tax basis (which has been
reduced because of depreciation deductions) in the Property. The amount realized
for the Property would include the amount of the outstanding indebtedness
secured by the Property, less any expenses of sale, plus any other
-5-
liabilities either assumed by the purchaser of the Property or that the
purchaser takes the Property subject to. Any taxable gain or loss would pass
through to the partners of the Partnership.
ALTERNATIVES TO THE REFINANCING
The General Partner intends to market the Property for sale to potential
purchasers. However, the General Partner is of the opinion that the Partnership
will not likely consummate the sale of the Property by the maturity date of the
Partnership's existing mortgage indebtedness, December 1, 2005. The Amendment
will provide the Partnership with additional time to market the Property for
sale to a third party. The Partnership's term currently expires on December 31,
2006, and the General Partner is of the opinion that the Partnership's
negotiating leverage will be enhanced, and the net proceeds to the Partnership
and the Limited Partners from a sale of the Property could be increased, if the
Partnership has greater flexibility with respect to the timing of a sale of the
Property. There can be no assurance, however, that the Partnership's negotiating
leverage will in fact be enhanced, or that the net proceeds from a sale of the
Property will be increased, by an extension of the Partnership's term or that
the Partnership will complete a sale of the Property.
Another alternative to refinancing the Property is to allow the Partnership
to default on the existing mortgage and to allow the holder of such debt to
foreclose on the Property. However, such disposition of the Property by the
Partnership would likely result in 1) less net proceeds than might be received
following an orderly sale of the Property in a more advantageous climate for the
disposition of real estate such as the Property and 2) the recognition of gain
or loss by the Partnership equal to the difference between (i) the amount
realized for the Property and (ii) the Partnership's tax basis (which has been
reduced because of depreciation deductions) in the Property. The amount realized
for the Property would include the amount of the outstanding indebtedness
secured by the Property, less any expenses of sale, plus any liabilities assumed
by the purchasers of the Property or liabilities that the purchaser takes the
Property subject to. Any taxable gain or loss would pass through to the partners
of the Partnership.
CONFLICTS OF INTEREST
The General Partner is an affiliate of AIMCO. AIMCO and its affiliates,
including the General Partner, may have interests that conflict with the
interests of the Limited Partners.
Affiliates of the General Partner Will Continue to Receive Fees. Affiliates
of the General Partner are entitled to receive 5% of gross receipts from the
Property as compensation for providing property management services. The
Partnership paid approximately $81,000 for the six months ended June 30, 2005
and approximately $147,000 and $155,000 for the years ended December 31, 2004
and 2003, respectively, to affiliates of the General Partner.
An affiliate of the General Partner charged the Partnership for
reimbursement of accountable administrative expenses of approximately $84,000
for the six months ended June 30, 2005 and $153,000 and $266,000 for the years
ended December 31, 2004 and 2003, respectively. The amounts for the six months
ended June 30, 2005 and the years ended December 31, 2004 and 2003 include fees
related to construction management services provided by an affiliate of the
General Partner of approximately $19,000, $24,000 and $36,000, respectively.
The Partnership Agreement provides for a fee equal to 9% of the total
distributions made to the Limited Partners from "cash available for
distribution" (as defined in the Partnership Agreement) to be paid to the
General Partner for executive and administrative management services. No fees
were earned or paid for the six months ended June 30, 2005 or the year ended
December 31, 2004. Affiliates of the General Partner received approximately
$28,000 for the year ended December 31, 2003 for providing these services.
During the six months ended June 30, 2005, an affiliate of the General
Partner advanced to the Partnership approximately $94,000 to fund property and
Partnership operations. Subsequent to June 30, 2005, an affiliate of the General
Partner advanced to the Partnership approximately $22,000 to fund capital
improvements at the Property. During the year ended December 31, 2004, advances
of approximately $830,000 were made by an affiliate of the General Partner to
the Partnership to assist in paying city taxes related to the sales of two
investment properties and to fund replacement reserves at the Property. Interest
on advances is charged at the prime rate plus 2% (8.25% at
-6-
June 30, 2005). Interest expense was approximately $34,000 and $28,000 for the
six months ended June 30, 2005 and the year ended December 31, 2004,
respectively. There were no advances during the year ended December 31, 2003.
The Partnership insures the Property up to certain limits through coverage
provided by AIMCO, an affiliate of the General Partner, which is generally
self-insured for a portion of losses and liabilities related to workers
compensation, property casualty, general liability and vehicle liability. The
Partnership insures the Property above the AIMCO limits through insurance
policies obtained by AIMCO from insurers unaffiliated with the General Partner.
During the six months ended June 30, 2005 and the years ended December 31, 2004
and 2003, the Partnership was charged by AIMCO and its affiliates approximately
$64,000, $62,000 and $127,000, respectively, for insurance coverage and fees
associated with policy claims administration.
The adoption of the Amendment and extension of the Partnership's term will
result in similar fees continuing to be paid for a longer period than would be
the case if the term of the Partnership expired in 2006. Therefore, the
interests of the General Partner and its affiliates in continuing the
Partnership may be different than those of any Limited Partners who desire to
have the Partnership earlier dissolved and liquidated. See "Security Ownership
of Certain Beneficial Owners and Management."
AIMCO Properties May Buy Units in Future Tender Offers. AIMCO Properties
indirectly owns the General Partner. From time to time, AIMCO Properties and its
affiliates have purchased Units of the Partnership with a view to making a
profit. AIMCO Properties and its affiliates hold 32,142.75, or approximately
65.34%, of the outstanding Units. The Amendment provides additional time to
AIMCO Properties and its affiliates to purchase additional Units in the future,
thereby increasing the influence AIMCO Properties and its affiliates have over
the voting decisions of the Partnership. Accordingly, the Amendment may result
in increased control of the Partnership by AIMCO Properties and its affiliates.
NO APPRAISAL RIGHTS
Limited Partners are not entitled to dissenters' appraisal rights under
California law or the Partnership Agreement in connection with the Amendment.
INFORMATION ABOUT YOUR PARTNERSHIP
GENERAL. Your Partnership was organized under the laws of the State of
California on December 20, 1976 for the purpose of acquiring, owning, operating,
improving, leasing and otherwise managing for investment purposes a diversified
portfolio of improved, income-producing properties, such as apartment buildings,
shopping centers, industrial projects, office buildings and other similar
properties. The General Partner owns a 0.2% general partnership interest in the
Partnership. The General Partner is an affiliate of AIMCO. The Partnership's
principal executive offices are located at 55 Beattie Place, P.O. Box 1089,
Greenville, South Carolina 29602, and its telephone number is (864) 239-1000.
The Partnership does not have any employees and depends on the General
Partner and its affiliates for the management and administration of all
Partnership activities.
APPRAISAL. As part of the settlement of a class and derivative litigation
entitled Nuanes et al. v. Insignia Financial Group, Inc. et al. and Heller v.
Insignia Financial Group, Inc., et al. filed by limited partners in your
partnership and others, the Partnership's property was appraised in 2003 by
American Appraisal Associates, Inc., an independent appraiser appointed by the
court. The appraiser represented that its report was prepared in conformity with
the Uniform Standards of Professional Appraisal Practice and the Code of
Professional Ethics and Standards of Professional Practice of the Appraisal
Institute. The appraiser was paid $619,100 for the appraisals and has conducted
other appraisals of property held by our affiliates. AIMCO furnished the
appraiser with all of the information requested by the appraiser in connection
with the appraisal.
According to the appraiser's report, the scope of the appraisal included an
inspection of the property and an analysis of the surrounding market. In
addition, the appraiser reviewed the historical operating statements for the
Property for 2000, 2001 and 2002 and the operating budget for 2003, as prepared
by the Partnership. No limitations
-7-
were imposed on the appraiser by AIMCO or its affiliates. The appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach. Although the sales comparison approach is
considered a reliable method for valuing real property, the income
capitalization approach is the primary approach used for valuing income
producing property, such as the Partnership's Property.
Based on the values determined under the valuation approaches described
below, the appraiser determined the estimated market value of the fee simple
estate for the Property. The appraiser concluded that the appraised value of the
Property is $22,800,000.
Under the sales comparison approach, the appraiser utilized the following
methods to derive a value for your partnership's property: (1) price per unit
analysis; (2) net operating income analysis; and (3) effective gross income
analysis. Based on these valuation methods under the sales comparison approach,
the appraiser estimated the value of the Property at $23,700,000.
Under the income capitalization approach, the appraiser performed a
direct capitalization analysis and a discounted cash flow analysis to derive a
value for the Property. The direct capitalization analysis determines the value
of a property by applying a capitalization rate that takes into account all of
the factors influencing the value of such property to the net operating income
of such property for a single year. The discounted cash flow analysis determines
the value of a property by discounting to present value the estimated operating
cash flow of such property and the estimated proceeds of a hypothetical sale of
such property at the end of an assumed holding period. Based on these analyses
under the income capitalization approach, the appraiser estimated the value of
the Property at $22,800,000.
ADDITIONAL INFORMATION. Your Partnership, AIMCO and AIMCO Properties are
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, file reports and other
information with the SEC relating to the business, financial condition and other
matters of each of the foregoing entities. Such reports and other information
may be inspected at the public reference facility maintained by the SEC at 100 F
St. NE, Room 1580, Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Room of the SEC in Washington, D.C. at
prescribed rates. The SEC also maintains a site on the world wide web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of material U.S. Federal income tax consequences is
based upon current U.S. Federal tax law, which is subject to change, possibly
with retroactive effect. This summary is for general information only and does
not address all aspects of U.S. Federal income taxation that may be relevant in
the particular circumstances of each Limited Partner or to Limited Partners
subject to special treatment under the Internal Revenue Code (the "Code"),
including (but not limited to) Limited Partners that are corporations, foreign
persons, or tax exempt organizations, or are subject to the alternative minimum
tax. In addition, this summary does not address any state, local or foreign tax
consequences. No Federal or state income tax consequences are expected to result
solely from the approval of the Amendment. However, if the Partnership sells or
otherwise disposes of the Property (including a disposition on foreclosure on
the Property by the lender), the Partnership likely would recognize gain or
loss, which would pass through to the partners of the Partnership, and
additional tax consequences may result on a liquidation of the Partnership after
such sale. Partners are urged to consult their tax advisors as to the specific
tax consequences to them of a sale of the Property and a liquidation of the
Partnerships.
TAX CONSEQUENCES OF SALE OF PARTNERSHIP PROPERTY OR FORECLOSURE. The
description set forth below is a general description of the tax consequences
that a partner of the Partnership generally will incur as a result of a
disposition of the Property (including a foreclosure by the lender) in the
future, assuming that the applicable tax rates and tax laws remain unchanged
from those in existence for the 2005 tax year. You should consult with your own
tax advisor to determine your particular tax consequences.
A sale or other disposition of the Property by the Partnership (including a
foreclosure by the lender) generally would result in the recognition of gain or
loss by the Partnership equal to the difference between (i) the amount realized
for the Property and (ii) the Partnership's tax basis (which has been reduced
because of depreciation
-8-
deductions) in the Property. The amount realized for the Property would be the
selling price for the Property, less any expenses of sale, plus any liabilities
assumed by the purchaser of the Property or liabilities that the purchaser takes
the Property subject to. The Partnership also may recognize cancellation of
indebtedness income to the extent it is unable to satisfy other Partnership
indebtedness. Any taxable gain or loss and cancellation of indebtedness income
will pass through to the partners of the Partnership.
Any gain or loss recognized as a result of the disposition of any Property
may be characterized for taxation purposes as ordinary or capital, or a
combination of both. Currently, long-term capital gains recognized by
individuals generally will be subject to a maximum Federal income tax rate of
15%. If the amount realized that is attributable to your share of "unrealized
receivables" of the Partnership exceeds the tax basis attributable to those
assets, then such excess will be treated as ordinary income. Among other things,
"unrealized receivables" include depreciation recapture for certain types of
property. Thus, to the extent that gain is attributable to any depreciation
taken with respect to personal property under Code Section 1245, or to
accelerated depreciation taken with respect to real property under Code Section
1250, gain on a sale of such Property may be treated as ordinary income. In
addition, the maximum Federal income tax rate applicable to individual taxpayers
for long-term net capital gains attributable to "unrecaptured Section 1250" gain
(in general, gain attributable to straight-line depreciation on real property )
is currently 25% rather than 15%. A loss from a disposition of the Property,
however, might be characterized as ordinary loss, subject to certain rules that
may require a partner to re-characterize the loss as capital loss depending upon
such partner's particular circumstances. Any cancellation of indebtedness income
would be taxable as ordinary income, at a maximum Federal individual rate of
35.0%. The rates set forth above are the Federal tax rates that currently are in
effect for 2005.
The proceeds available for distribution to the partners of the Partnership
in the event of a sale or other disposition of the Property (including a
foreclosure by the lender) may be less than any tax liabilities of the partners
resulting from such sale or foreclosure. Any taxable income of the Partnership
would pass through to the partners. Accordingly, a Limited Partner may need to
use funds from other sources to satisfy any such tax liabilities. Because the
amount realized on a sale includes liabilities assumed by the purchaser of the
Property, or liabilities that the purchaser takes the Property subject to, there
may be a significant tax liability in excess of the funds available. Similarly,
on a foreclosure the amount realized would generally include the full amount of
the debt.
In addition, a Partner may recognize gain or loss on the liquidation of the
Partnership, equal to the difference between the sum of the amount of cash
(including deemed cash) and other property distributed to the Partner and the
Partner's adjusted basis in its interest in the Partnership (after adjustment
for the Partner's share of various items, including gain or loss from the
disposition of the Property).
If a partner possesses suspended tax losses, tax credits, or other items of
tax benefit, that partner may be able to use such items to reduce any tax
liability that arises with respect to gain recognized on the disposition of the
Property or the liquidation of the Partnership. The amount, if any, of a
partner's suspended tax losses, tax credits, or other items of tax benefit, will
depend on the partner's individual circumstances.
SINCE THE TAX CONSEQUENCES TO A PARTICULAR PARTNER DEPEND IN PART ON FACTS THAT
ARE UNIQUE TO THAT PARTNER, YOU ARE URGED TO CONSULT YOUR TAX ADVISORS AS TO THE
EXACT CONSEQUENCES TO YOU, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person or entity was known by the General Partner
to be the beneficial owner of more than 5% of the Units of the Partnership as of
_________, 2005.
ENTITY NUMBER OF UNITS PERCENT OF CLASS
- ------ --------------- ----------------
AIMCO Properties, L.P. 10,142.10 20.62%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237
-9-
Madison River Properties LLC 2,690.00 5.47%
55 Beattie Place
Greenville, SC 29602
AIMCO IPLP, L.P. 19,310.65 39.25%
55 Beattie Place
Greenville, SC 29602
AIMCO Properties, L.P. is controlled by AIMCO through AIMCO's direct
subsidiaries. Its principal executive offices are located at 4582 South Ulster
Street Parkway, Suite 1100, Denver, Colorado 80237, and their telephone number
is (303) 757-8101.
NO CONSENTS REQUIRED
The Partnership has fixed _________, 2005 as the Record Date for
determining Limited Partners entitled to notice of the Amendment.
Pursuant to the Partnership Agreement, approval of the Amendment requires
the consent of the General Partner and Limited Partners who own more than 50% of
the Partnership's outstanding Units. As of the Record Date, there were 49,196
Units issued and outstanding. AIMCO Properties and its affiliates currently own
32,142.75, or approximately 65.34%, of the outstanding Units. AIMCO Properties
and its affiliates have notified the General Partner that they will consent in
writing to the Amendment. Accordingly, approval of the Amendment is assured.
EXPENSES
The cost of preparing, assembling, printing and mailing this Information
Statement will be borne by the Partnership. The fees and expenses of the
Information Agent are expected to be $34,000 and will be borne by the
Partnership.
CONSOLIDATED CAPITAL GROWTH FUND
THE INFORMATION AGENT IS:
THE ALTMAN GROUP, INC.
By Mail, Overnight Courier or Hand: By Facsimile: For Information please call:
- ----------------------------------- -------------- ----------------------------
1200 Wall Street, 3rd Floor (201) 460-0050 TOLL FREE (800) 217-9608
Lyndhurst, New Jersey 07071
-10-