FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
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 June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the transition period from.........to.........
Commission file number 0-16010
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3004963
(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 (803) 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
BALANCE SHEET
(Unaudited)
(in thousands, except for unit data)
June 30, 1995
Assets
Cash $ 2,024
Securities available for sale 730
Prepaid and other assets 403
Investment properties:
Land $ 1,888
Buildings and related personal
property 11,727
13,615
Less accumulated depreciation (5,166) 8,449
$11,606
Liabilities and Partners' Capital (Deficit)
Accounts payable and accrued expenses $ 279
Notes and interest payable 1,924
Partners' Capital (Deficit)
General partner $ (151)
Corporate limited partners - on behalf
of the Unitholders - (128,810 Units
(Note A) issued and outstanding) 9,554 9,403
$11,606
See Accompanying Notes to Financial Statements
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b) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Rental income $ 530 $ 562 $1,077 $1,112
Interest and dividend income 111 66 133 111
Total revenues 641 628 1,210 1,223
Expenses:
Property operations 218 206 460 491
Depreciation and amortization 155 167 278 362
Interest 44 48 88 96
Administrative 112 93 195 185
Total expenses 529 514 1,021 1,134
Income from operations 112 114 189 89
Other income (Note D) -- -- -- 251
Net income $ 112 $ 114 $ 189 $ 340
Net income allocated to
general partners (1%) $ 1 $ 1 $ 2 $ 3
Net income allocated to
limited partners (99%) 111 113 187 337
$ 112 $ 114 $ 189 $ 340
Net income per weighted
average Unit of Depositary
Receipt (Note A):
Income from operations $ .86 $ .87 $ 1.45 $ .68
Other income -- -- -- 1.93
Net income per unit $ .86 $ .87 $ 1.45 $ 2.61
See Accompanying Notes to Financial Statements
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c) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Unitholders
Units of
Units of Depositary
Depositary General Receipts
Receipts Partners (Note A) Total
Original capital contributions 129,266 $ 1 $32,317 $32,318
Partners' capital (deficit)
at December 31, 1994 128,810 $ (148) $ 9,862 $ 9,714
Net income for the six months
ended June 30, 1995 -- 2 187 189
Distributions paid -- (5) (495) (500)
Partners' capital (deficit) at
June 30, 1995 128,810 $ (151) $ 9,554 $ 9,403
See Accompanying Notes to Consolidated Financial Statements
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d) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net income $ 189 $ 340
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
discounts, loan costs and lease
commissions 286 368
Change in accounts:
Prepaids and other assets (35) 22
Accounts payable and accrued
expenses 128 (271)
Interest payable 13 --
Net cash provided by
operating activities
581 459
Cash flows from investing activities:
Property improvements and replacements (66) (55)
Purchase of securities available for sale (1,009) --
Proceeds from sale of securities
available for sale 2,460 2,172
Deposits to restricted escrows (10) --
Proceeds from sale of real estate -- 1,500
Net cash provided by
investing activities 1,375 3,617
See Accompanying Notes to Financial Statements
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Six Months Ended
June 30,
1995 1994
Cash flows from financing activities:
Payments on notes payable $ (23) $ (26)
Partners' distributions (500) (2,225)
Net cash used in
financing activities (523) (2,251)
Net increase in cash 1,433 1,825
Cash at beginning of period 591 835
Cash at end of period $ 2,024 $ 2,660
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 67 $ 88
See Accompanying Notes to Financial Statements
5
e) JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements 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 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 six month periods ended
June 30, 1995, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto
included in the annual report on Form 10-K for the fiscal year ended
December 31, 1994, for Johnstown/Consolidated Income Partners (the
"Partnership").
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Cash
For purposes of reporting cash flows, cash includes cash on hand,
demand deposits and money market funds.
Units of Depositary Receipts
Johnstown/Consolidated Depositary Corporation (the "Corporate Limited
Partner"), an affiliate of the General Partner, serves as a depositary
of certain Units of Depositary Receipts ("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.
Net Income Per Unit
Net income per Unit is computed by dividing net income allocated to
the Unitholders by the weighted average number of Units outstanding.
Per Unit information has been computed based on weighted average Units
outstanding of 128,810 and 128,856 for the six months ended June 30,
1995 and 1994, respectively.
Note B - Related Party Transactions
The Partnership Agreement provides that the Partnership shall pay in
monthly installments to the General Partner, or an affiliate, a yearly
asset management fee equal to: (i) 3/8 of 1% of the original principal
balance of mortgage loans
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Note B - Related Party Transactions - continued
outstanding at the end of the month preceding the installment payment;
(ii) 1/8 of 1% of the market value of guaranteed mortgage-backed
securities ("MBS") as of the end of the Partnership quarter immediately
preceding the installment payment; and (iii) 5/8 of 1% of the purchase
price of the properties plus improvements for managing the Partnership's
assets. In the event the property was not owned at the beginning or end
of the year, such fee shall be pro-rated for the short-year period of
ownership. These asset management fees are included in compensation to
related parties in the table below.
The Partnership has paid the property management fees noted below
based on collected gross rental revenues ("Rental Revenues") for
property management services in each of the six months ended June 30,
1995 and 1994, respectively. For the six months ended June 30, 1994, a
portion of such property management fees equal to 4% of Rental Revenues
were paid to the property management companies performing day-to-day
property management services and a portion equal to 1% of Rental
Revenues were paid to Partnership Services, Inc. ("PSI") or its
predecessor for advisory services related to day-to-day property
operations. In July 1993, Coventry Properties, Inc. ("Coventry"), an
affiliate of the General Partner, assumed day-to-day property management
responsibilities for three of the Partnership's properties under the
same management fee arrangement as the unaffiliated management
companies. In late December 1994, an affiliate of Insignia Financial
Group, Inc. ("Insignia") assumed day-to-day property management
responsibilities for all of the Partnership's properties except for
Cedar Brooke Apartments. Management of Cedar Brooke was assumed on
February 15, 1995. Fees paid to Insignia and affiliates for the six
months ended June 30, 1995, and fees paid to PSI and Coventry for the
six months ended June 30, 1994, have been reflected in the following
table as compensation to related parties in the applicable periods:
For the Six Months Ended
June 30,
1995 1994
(in thousands)
Asset management fee $50 $60
Property management fees 53 30
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Note B - Related Party Transactions - continued
The Partnership Agreement also provides for reimbursement to the
General Partner and its affiliates for costs incurred in connection with
the administration of Partnership activities. The General Partner and
its affiliates, which includes Coventry for the six months ended June
30, 1994, received reimbursements as reflected in the following table:
For the Six Months Ended
June 30,
1995 1994
(in thousands)
Reimbursement for services of affiliates $91 $79
Note C - Sale of Real Estate
In March 1994, the Partnership sold the Evergreen Heights Office
Building for a gross sales price of approximately $1.6 million. The
Partnership received net cash proceeds of $1.5 million after payment of
related closing costs. As a result of the sale, $665,000 was charged to
the allowance for possible losses in the six months ended June 30, 1994.
No gain or loss was recognized on the sale. The sales transaction is
summarized in the following table:
Cash proceeds received $1,500
Cost of sales:
Net real estate 1,578
Other (78)
Total cost of sales $1,500
Net real estate represents real estate, net of accumulated
depreciation and allowance for possible loss.
Note D - Other Income
In 1991, the Partnership (and simultaneously other affiliated
partnerships) entered claims in Southmark Corporation's Chapter 11
bankruptcy proceeding. These claims related to Southmark Corporation's
activities while it exercised control (directly or indirectly through
its affiliates) over the Partnership. The Bankruptcy Court set the
Partnership's and the other affiliated partnerships' allowed claim at
$11 million, in the aggregate. In March 1994, the Partnership
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Note D - Other Income - continued
received 4,405 shares of Southmark Corporation Redeemable Series A
Preferred Stock and 29,585 shares of Southmark Corporation New Common
Stock with an aggregate market value on the date of receipt of
approximately $29,000 and $222,000 in cash representing the
Partnership's share of the recovery, based on its pro rata share of the
claims filed.
Note E - Commitment
The Partnership is required by the Partnership Agreement to maintain
working capital for contingencies of not less than 5% 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 securities available for
sale totalling approximately $2.8 million at June 30, 1995, exceeded the
Partnership's reserve requirement of approximately $1.4 million.
Note F - Distributions
In March of 1995, the General Partner declared and paid distributions
attributable to cash flow from operations totalling approximately
$495,000 or $3.84 per Unit to the Unitholders along with a corresponding
General Partner distribution of approximately $5,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one apartment
complex, two commercial properties and a one-third (1/3) undivided
interest in the Florida #6 Mini-Warehouse property. The following table
sets forth the average occupancy of the properties for the six months
ended June 30, 1995 and 1994:
Average
Occupancy
1995 1994
Cedar Brooke Apartments
Independence, Missouri 98% 99%
Florida #6 Mini-Warehouse
Lauderhill, Florida 92% 99%
Florida #11 Mini-Warehouse
Davie, Florida 95% 99%
Phoenix Business Center
College Park, Georgia 57% 78%
The decrease in occupancy at the Florida #6 Mini-Warehouse is due to
commercial clients reducing their inventory levels, which resulted in
reduced usage of storage facilities in 1995 compared to 1994. The
decrease in occupancy at the Phoenix Business Center is primarily due to
a large tenant building their own office facilities in 1995. This
decrease in occupancy did not affect rental income substantially due to
the tenant still being obligated for its rental payments until March 31,
1995, even though the tenant vacated in February 1995. The total
decrease in rental income related to this tenant approximated $44,000.
As of June 30, 1995, this space remains vacant. However, the
Partnership is actively searching for new tenants, as well as
considering sub-dividing the space to increase its leasability.
The Partnership realized income from operations of $189,000 for the
six months ended June 30, 1995, compared to $89,000 for the six months
ended June 30, 1994. For the three months ended June 30, 1995, the
Partnership realized income from operations of $112,000 compared to
$114,000 for the three months ended June 30, 1994. The increase in
income from operations for the six months ended June 30, 1995, is
related to lower operational expenses in 1995, resulting from the sale
of the Evergreen Heights Office Building in March of 1994. (See Note C
of the Notes to Financial Statements in Item 1).
Interest and dividend income increased for the six and three months
ended June 30, 1995, due to dividends received on the Partnership's
investment in Southmark Preferred Stock, offset by decreased interest
income due to smaller cash balances available for investment in 1995
compared to 1994. Property operations and depreciation expense
decreased as a result of the sale of Evergreen Heights Office Building
in March of 1994. Depreciation expense also decreased due to the
reduced carrying values of depreciable assets resulting from the
valuation reserves recorded in prior years.
10
Other income realized in the six months ended June 30, 1994, related
to the receipt of the Partnership's pro rata share of the claims filed
in Southmark's Chapter 11 bankruptcy proceeding (See Note D of the Notes
to the Financial Statements in Item 1).
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.
As of June 30, 1995, the Partnership had cash of approximately $2.0
million compared to approximately $2.7 million at June 30, 1994. Net
cash provided by operating activities increased primarily due to
increases in accounts payable and other accrued expenses. Net cash
provided by investing activities decreased as a result of increased
purchases of securities available for sale and due to the receipt of
proceeds from the sale of the Evergreen Heights Office Building in March
of 1994 (See Note D of the Notes to Financial Statements in Item 1).
Net cash used in financing activities decreased as a result of reduced
Partners' distributions for the six months ended June 30, 1995, compared
to June 30, 1994.
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. The mortgage indebtedness of approximately $1.9
million, net of discount, matures in 2013, at which time the related
property 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. For the six months ended June 30, 1995, cash distributions of
approximately $500,000 were declared and paid compared to cash
distributions of approximately $2.2 million for the six months ended
June 30, 1994.
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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.
A Form 8-K dated May 3, 1995, was filed reporting a change in
accountants of the Registrant.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS
By: CONCAP EQUITIES, INC.
General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: August 11, 1995
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