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March 30, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Consolidated Capital Properties IV
Form 10-K
File No. 0-11002
To Whom it May Concern:
The accompanying Form 10-K for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
FORM 10-K--ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from _________to _________
Commission file number 0-11002
CONSOLIDATED CAPTIAL PROPERTIES IV
(Name of small business issuer in its charter)
California 94-2768742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interests
(Title of class)
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___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Consolidated Capital Properties IV (the "Partnership" or "Registrant") was
organized on September 22, 1981 as a limited partnership under the California
Uniform Limited Partnership Act. On December 18, 1981, the Partnership commenced
a public offering for the sale of 200,000 Units with the general partner's right
to increase the offering to 400,000 Units. The Units represent equity interests
in the Partnership and entitle the holders thereof to participate in certain
allocations and distributions of the Partnership. The sale of Units closed on
December 14, 1983, with 343,106 Units sold at $500 each, or gross proceeds of
$171,553,000 to the Partnership. Since its initial offering, the Partnership has
not received, nor are limited partners required to make, additional capital
contributions.
By the end of fiscal year 1985, approximately 73% of the proceeds raised had
been invested in 48 properties. Of the remaining 27%, 11% was required for
organizational and offering expenses, sales commissions and acquisition fees,
and 16% was retained in Partnership reserves for project improvements and
working capital as required by the Partnership Agreement.
The general partner of the Partnership is ConCap Equities, Inc., a Delaware
corporation (the "General Partner" or "CEI"). The General Partner is a
subsidiary of Apartment Investment and Management Company ("AIMCO"). The
directors and officers of the General Partner also serve as executive officers
of AIMCO. The Partnership Agreement provides that the Partnership is to
terminate on December 31, 2011 unless terminated prior to that date.
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership is engaged in the business of operating and
holding real estate properties for investment. As of the close of fiscal year
1985, the Partnership had completed its property acquisition stage and had
acquired 48 properties. At December 31, 1999, the Partnership owned 16
income-producing properties (or interests therein), which range in age from 23
to 28 years old, principally located in the midwest, southeastern and
southwestern United States. Prior to 1999, the Partnership had disposed of 31
properties originally owned by the Partnership. In December 1999, the
Partnership sold an additional property. See "Item 2. Description of Properties"
for further information about the Partnership's remaining properties.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Registrant's properties and the rents that may be
charged for such apartments. While the General Partner and its affiliates own
and/or control a significant number of apartment units in the United States,
such units represent an insignificant percentage of total apartment units in the
United States and competition for the apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
The Registrant has no employees. Property management and administrative services
are provided by the General Partner and by agents of the General Partner. The
General Partner has also selected an affiliate to provide real estate advisory
and asset management services to the Partnership. As advisor, such affiliate
provides all partnership accounting and administrative services, investment
management, and supervisory services over property management and leasing.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in "Item 7" of this Form 10-K.
Transfers of Control
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1998, through a series of
transactions, Southmark Corporation ("Southmark") acquired a controlling
interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter
11 of the United States Bankruptcy Code. In 1990, as part of its reorganization
plan, CEI acquired CCEC's general partner interests in the Partnership and in 15
other affiliated public limited partnerships (the "Affiliated Partnerships") and
CEI replaced CCEC as managing general partner in all 16 partnerships. The
selection of CEI as the sole managing general partner was approved by a majority
of the Limited Partners in the Partnership and in each of the affiliated
partnerships pursuant to a solicitation of the Limited Partners dated August 10,
1990. As part of this solicitation, the Limited Partners also approved an
amendment to the Partnership Agreement to limit changes of control of the
Partnership, and the conversion of CCMC from a general partner to a special
limited partner, thereby leaving CEI as the sole general partner of the
Partnership. On November 14, 1990, CCMC was dissolved and its special limited
partnership interest was divided among its former partners. All of CEI's
outstanding stock was owned by Insignia Properties Trust ("IPT") (See below).
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the General Partner. The General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Segments
Segment data for the years ended December 31, 1999, 1998, and 1997 is included
in "Item 8. Financial Statements and Supplementary Date - Note M" and is an
integral part of the Form 10-K.
Item 2. Description of Properties:
The Partnership originally acquired 48 properties of which twelve (12) were
sold, ten (10) were conveyed to lenders in lieu of foreclosure, and ten (10)
were foreclosed upon by the lenders. As of December 31, 1999, the Partnership
owned sixteen (16) apartment complexes. Additional information about the
properties is found in "Item 8. Financial Statements and Supplementary Data".
Date of
Property Purchase Type of Ownership Use
The Apartments (1) 04/84 Fee ownership, subject to Apartment
Omaha, Nebraska a first mortgage 204 units
Arbours of Hermitage Apts. (1) 09/83 Fee ownership subject to Apartment
Nashville, Tennessee a first mortgage 350 units
Briar Bay Racquet Club Apts. (2) 09/82 Fee ownership subject to Apartment
Miami, Florida a first mortgage 194 units
Chimney Hill Apts. (2) 08/82 Fee ownership subject to Apartment
Marietta, Georgia a first mortgage 326 units
Citadel Apts. (1) 05/83 Fee ownership subject Apartment
El Paso, Texas to a first mortgage 261 units
Citadel Village Apts. (1) 12/82 Fee ownership subject Apartment
Colorado Springs, Colorado to a first mortgage 122 units
Foothill Place Apts. (2) 08/85 Fee ownership subject Apartment
Salt Lake City, Utah to a first mortgage 450 units
Knollwood Apts. (1) 07/82 Fee ownership subject Apartment
Nashville, Tennessee to a first mortgage 326 units
Lake Forest Apts. 04/84 Fee ownership subject Apartment
Omaha, Nebraska to a first mortgage 312 units
Nob Hill Villa Apts. (1) 04/83 Fee ownership subject Apartment
Nashville, Tennessee to a first mortgage 472 units
Point West Apts. (1) 11/85 Fee ownership subject Apartment
Charleston, South Carolina a first mortgage 120 units
Post Ridge Apts. (2) 07/82 Fee ownership subject Apartment
Nashville, Tennessee to a first mortgage 150 units
Rivers Edge Apts. (2) 04/83 Fee ownership subject Apartment
Auburn, Washington to a first mortgage 120 units
South Port Apts. (3) 11/83 Fee ownership subject Apartment
Tulsa, Oklahoma to a first mortgage 240 units
Stratford Place Apts. (2) 08/85 Fee ownership subject Apartment
Austin, Texas to a first mortgage 223 units
Village East Apts. (1) 12/82 Fee ownership subject Apartment
Cimarron Hills, Colorado to a first mortgage 137 units
(1) Property is held by a limited partnership and/or limited liability
corporation in which the Partnership owns a 100% interest.
(2) Property is held by a limited partnership in which the Registrant owns a
99% interest.
(3) Property is held by a limited partnership in which the Partnership owns a
50% interest.
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
The Apartments $ 9,026 $ 6,845 5-18 yrs S/L $ 2,322
Arbours of Hermitage Apartments 13,142 10,941 5-18 yrs S/L 2,717
Briar Bay Racquet Club
Apartments 7,848 6,488 5-18 yrs S/L 2,006
Chimney Hill Apartments 11,237 9,689 5-18 yrs S/L 2,492
Citadel Apartments 7,855 6,539 5-18 yrs S/L 1,187
Citadel Village Apartments 4,285 3,448 5-18 yrs S/L 1,364
Foothill Place Apartments 15,544 9,533 5-18 yrs S/L 7,507
Knollwood Apartments 11,453 9,531 5-18 yrs S/L 2,458
Lake Forest Apartments 9,576 6,727 5-18 yrs S/L 2,522
Nob Hill Villa Apartments 13,208 11,221 5-18 yrs S/L 2,020
Point West Apartments 3,171 2,312 5-40 yrs S/L 1,293
Post Ridge Apartments 4,941 3,863 5-18 yrs S/L 1,227
Rivers Edge Apartments 3,424 2,636 5-18 yrs S/L 971
South Port Apartments 8,178 6,660 5-18 yrs S/L 1,692
Stratford Place Apartments 8,083 4,549 5-20 yrs S/L 3,023
Village East Apartments 3,662 3,075 5-18 yrs S/L 737
Total $134,633 $104,057 $ 35,538
See "Note A" to the consolidated financial statements included in "Item 8.
Financial Statements and Supplementary Data" for a description of the
Partnership's depreciation policy and "Note O - Change in Accounting Principle".
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)
The Apartments $ 3,294 8.34% 25 years 09/00 $ 3,244
Arbours of Hermitage Apartments 5,650 6.95% (1) 12/05 5,650
Briar Bay Racquet Club Apartments 3,500 6.95% (1) 12/05 3,500
Chimney Hill Apartments 5,400 6.95% (1) 12/05 5,400
Citadel Apartments 4,565 8.38% 25 years 10/00 4,488
Citadel Village Apartments 2,450 6.95% (1) 12/05 2,450
Foothill Place Apartments 10,100 6.95% (1) 12/05 10,100
Knollwood Apartments 6,780 6.95% (1) 12/05 6,780
Lake Forest Apartments 4,700 7.33% (1) 11/03 4,700
Nob Hill Villa Apartments 7,050 9.20% 25 years 04/05 6,250
Point West Apartments 2,460 7.86% 20 years 12/19 --
Post Ridge Apartments 4,050 7.33% (1) 11/03 4,050
Rivers Edge Apartments 1,924 8.40% 25 years 09/00 1,895
South Port Apartments 4,409 7.19% 30 years 12/04 4,119
Stratford Place Apartments 2,515 8.65% 25 years 09/00 2,478
Village East Apartments 2,150 6.95% (1) 12/05 2,150
Totals $70,997 $67,254
(1) Monthly payments of interest only at the stated rate until maturity.
(2) See "Item 8. Financial Statements and Supplementary Date - Note D" for
information with respect to the Registrant's ability to prepay these loans
and other specific details about the loans.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for information relating to the refinancing of the
mortgage encumbering South Port Apartments in the fourth quarter of 1997, the
financing at Point West Apartments in the fourth quarter of 1999, and the
refinancing of the mortgages encumbering The Apartments and Citadel Apartments
in February 2000.
Rental Rate and Occupancy:
The following table sets forth the average annual rental rates and occupancy for
1999 and 1998 for each property.
Average Annual Average
Rental Rates Occupancy
(per unit)
Property 1999 1998 1999 1998
The Apartments $ 6,989 $ 6,733 93% 94%
Arbours of Hermitage Apartments 7,388 7,166 96% 95%
Briar Bay Racquet Club Apartments 8,922 8,648 96% 97%
Chimney Hill Apartments 8,238 8,025 95% 91%
Citadel Apartments 6,800 6,779 94% 96%
Citadel Village Apartments 8,818 8,556 97% 96%
Foothill Place Apartments 7,973 7,893 97% 94%
Knollwood Apartments 7,983 7,821 96% 95%
Lake Forest Apartments 7,452 7,160 87% 92%
Nob Hill Villa Apartments 6,191 6,074 94% 92%
Point West Apartments 6,002 5,606 97% 98%
Post Ridge Apartments 9,440 9,261 96% 96%
Rivers Edge Apartments 7,448 7,068 97% 96%
South Port Apartments 6,346 5,874 95% 97%
Stratford Place Apartments 7,387 7,185 95% 92%
Village East Apartments 7,422 7,182 98% 96%
The increase in occupancy at Chimney Hill Apartments, Foothill Place Apartments
and Stratford Place Apartments is attributable to a strong local market and more
aggressive marketing plan in 1999. The decrease in occupancy at Lake Forest
Apartments is due to a number of units temporarily lost during completion of
structural improvements in 1999 and increased competition in the local market.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes in the area. The General Partner believes that
all of the properties are adequately insured. Each property is an apartment
complex which leases units for lease terms of one year or less. No residential
tenant leases 10% or more of the available rental space. All of the properties
are in good physical condition, subject to normal depreciation and deterioration
as is typical for assets of this type and age.
Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 for each property were:
1999 1999
Billing Rate
(in thousands)
The Apartments $121 2.2%
Arbours of Hermitage Apartments 149 1.4%
Briar Bay Racquet Club Apartments 170 2.3%
Chimney Hill Apartments 130 2.9%
Citadel Apartments 147 2.9%
Citadel Village Apartments 21 .6%
Foothill Place Apartments 188 1.5%
Knollwood Apartments 163 1.4%
Lake Forest Apartments 166 2.2%
Nob Hill Villa Apartments 205 1.7%
Point West Apartments 35 2.2%
Post Ridge Apartments 92 1.4%
Rivers Edge Apartments 56 1.5%
South Port Apartments 61 1.5%
Stratford Place Apartments 153 2.6%
Village East Apartments 20 .6%
Capital Improvements:
The Apartments
During 1999, the Partnership completed approximately $322,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, air conditioning units, roof replacement, major landscaping, and
other building improvements. These improvements were funded from the
Partnership's reserves and operating cash flow. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $61,200.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Arbours of Hermitage Apartments
During 1999, the Partnership completed approximately $464,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, roof replacement, structural upgrades, parking lot upgrades, major
landscaping, and electrical upgrades. These improvements were funded from the
Partnership's operating cash flow and reserves. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $105,000.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Briar Bay Racquet Club Apartments
During 1999, the Partnership completed approximately $123,000 of capital
improvements at the property, consisting primarily of plumbing upgrades, parking
lot resurfacing, carpet and vinyl replacement, major landscaping, and roof
replacements. These improvements were funded from Partnership operating cash
flow. The Partnership is currently evaluating the capital improvement needs of
the property for the upcoming year. The minimum amount to be budgeted is
expected to be $300 per unit or $58,200. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Chimney Hill Apartments
During 1999, the Partnership completed approximately $210,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, cabinet upgrades, air conditioning unit replacements, major
landscaping, and structural upgrades. These improvements were funded from the
Partnership's operating cash flow. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or $97,800. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Citadel Apartments
During 1999, the Partnership completed approximately $278,000 of capital
improvements at the property, consisting primarily of carpet and appliance
replacements, major landscaping, other building improvements and parking area
upgrades. These improvements were funded from the Partnership's operating cash
flow. The Partnership is currently evaluating the capital improvement needs of
the property for the upcoming year. The minimum amount to be budgeted is
expected to be $300 per unit or $78,300. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Citadel Village Apartments
During 1999, the Partnership completed approximately $239,000 of capital
improvements at the property, consisting primarily of roof replacement, carpet
and vinyl replacement, recreational facilities upgrades, major landscaping,
signage, and other building improvements. These improvements were funded from
the Partnership's reserves and operating cash flow. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $36,600.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Foothill Place Apartments
During 1999, the Partnership completed approximately $373,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, other improvements, swimming pool improvements, major landscaping,
parking area upgrades, and roof replacement. These improvements were funded from
the Partnership's operating cash flow. The Partnership is currently evaluating
the capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or $135,000. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Knollwood Apartments
During 1999, the Partnership completed approximately $587,000 of capital
improvements at the property, consisting primarily of roof replacement,
structural upgrades, carpet and vinyl replacement, parking area upgrades, other
building improvements, and electrical upgrades. These improvements were funded
from the Partnership's operating cash flow and reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $97,800. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Lake Forest Apartments
During 1999, the Partnership completed approximately $482,000 of capital
improvements at the property, consisting primarily of structural upgrades,
carpet and vinyl replacement, parking area upgrades, air conditioning units
replacement, major landscaping, and other building improvements. These
improvements were primarily funded from the Partnership replacement and capital
reserves. The Partnership is currently evaluating the capital improvement needs
of the property for the upcoming year. The minimum amount to be budgeted is
expected to be $300 per unit or $93,600. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Nob Hill Villa Apartments
During 1999, the Partnership completed approximately $319,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, electrical upgrades, other building improvements, major
landscaping, appliance replacement, and plumbing upgrades. These improvements
were primarily funded from the Partnership's operating cash flow. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $141,600. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
Point West Apartments
During 1999, the Partnership completed approximately $138,000 of capital
improvements at the property, consisting primarily of fencing, roof replacement,
carpet and vinyl replacement, electrical upgrades, major landscaping, and other
building improvements. These improvements were funded from the Partnership's
operating cash flow. The Partnership is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $300 per unit or $36,000. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Post Ridge Apartments
During 1999, the Partnership completed approximately $391,000 of capital
improvements at the property, consisting primarily of roof replacement, carpet
and vinyl replacement, plumbing upgrades, major landscaping, other building
improvements, and light fixture replacement. These improvements were primarily
funded from Partnership reserves. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or $45,000. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Rivers Edge Apartments
During 1999, the Partnership completed approximately $82,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, appliance replacement, and other improvements. These improvements
were funded from the Partnership's reserves and operating cash flow. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $36,000. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
South Port Apartments
During 1999, the Partnership completed approximately $244,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, appliance replacements, major landscaping, and structural upgrades.
These improvements were funded from operating cash flow. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $72,000. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Stratford Place Apartments
During 1999, the Partnership completed approximately $587,000 of capital
improvements at the property, consisting primarily of structural upgrades, air
conditioning units, parking area upgrades, carpet and vinyl replacement, major
landscaping, and electrical upgrades. These improvements were funded from the
Partnership's operating cash flow. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or $66,900. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Village East Apartments
During 1999, the Partnership completed approximately $202,000 of capital
improvements at the property, consisting primarily of model interior upgrades,
roofing replacement, structural upgrades, exterior painting, and carpet and
vinyl replacement. These improvements were funded from the Partnership's
operating cash flow and replacement reserves. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or
approximately $41,100. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Overlook Apartments
During 1999, the Partnership completed approximately $166,000 of capital
improvements at the property, consisting primarily of carpet and vinyl
replacement, appliance replacement, major landscaping, and other building
improvements. The property was sold on December 13, 1999.
Item 3. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 8. Financial Statements and Supplementary Data, Note B - Transfer of
Control"). The plaintiffs seek monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs have filed an amended complaint. The General Partner
filed demurrers to the amended complaint which were heard February 1999. Pending
the ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement, settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
General Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnership did not vote on any matter during the
quarter ended December 31, 1999.
PART II
Item 5. Market for the Registrant's Units of Limited Partnership and Related
Security Holder Matters
(A) No established trading market for the Partnership's Units exists, nor is
one expected to develop.
(B) Title of Class Number of Unitholders of Record
Limited Partnership Units 8,881 as of December 31, 1999
There were 342,773 Units outstanding at December 31, 1999, of which affiliates
of the General Partner owned 166,949 Units or approximately 48.71%.
The following table sets forth the distributions declared by the Partnership for
the years ended December 31, 1997, 1998 and 1999 (see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more details):
Distributions
Per Limited
Aggregate Partnership Unit
(in thousands)
01/01/97 - 12/31/97 $2,503 (1) $ 7.01
01/01/98 - 12/31/98 3,951 (1) 11.07
01/01/99 - 12/31/99 17,601 (2) 49.29
(1) Distributions were made from cash from operations.
(2) Consists of approximately $12,544,000 of cash from operations and
approximately $5,057,000 of cash from surplus funds. The surplus funds
were from the financing at Point West Apartments and previously
undistributed refinance proceeds from 1996 and 1997. Of these amounts,
$4,318,000 was accrued at December 31, 1999 and paid in January 2000.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of the debt
maturities, refinancings and/or property sales. The Partnership's distribution
policy is reviewed on a quarterly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit any distributions to its partners in the
year 2000 or subsequent periods. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" for information
relating to anticipated capital expenditures at the properties and the working
capital reserve requirement.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999, 1998, and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 166,949
limited partnership units in the Partnership representing approximately 48.71%
of the outstanding units. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Item 6. Selected Financial Data
The following table sets forth a summary of certain financial data for the
Partnership. Certain reclassifications have been made to the 1995 through 1997
information to conform to the 1998 and 1999 presentation. This summary should be
read in conjunction with the Partnership's consolidated financial statements and
notes thereto appearing in "Item 8. Financial Statements and Supplementary
Data."
Consolidated Statements of Operations Years Ended December 31,
(in thousands, except per unit data)
1999 1998 1997 1996 1995
Total revenues $ 31,189 $ 30,093 $ 28,710 $ 27,907 $ 27,195
Total expenses (25,071) (26,164) (28,296) (28,780) (28,435)
Income (loss) before extraordinary
items 6,118 3,929 414 (873) (1,240)
Extraordinary items -- (5) (47) 2,909 43
Net income (loss) $ 6,118 $ 3,924 $ 367 $ 2,036 $ (1,197)
Net income (loss) per Limited
Partnership Unit:
Income (loss) before extraordinary
items 17.13 11.00 1.15 (2.45) (3.47)
Extraordinary items -- (.01) (.12) 8.15 .12
Net income (loss) $ 17.13 $ 10.99 $ 1.03 $ 5.70 $ (3.35)
Distributions per Limited
Partnership
Unit $ 49.29 $ 11.07 $ 7.01 $ 12.91 $ 2.58
Limited Partnership Units
outstanding 342,773 342,773 342,773 342,783 342,783
Consolidated Balance Sheets
Total assets $ 44,464 $ 50,671 $ 52,381 $ 53,844 $ 61,146
Mortgage notes payable $ 70,997 $ 70,775 $ 72,439 $ 71,763 $ 76,336
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
The operations of the Partnership primarily include operating and holding
income-producing real estate properties for the benefit of its partners.
Therefore, the following discussion of operations, liquidity and capital
resources will focus on these activities and should be read in conjunction with
"Item 8. Financial Statements and Supplementary Data" and the notes related
thereto included elsewhere in this report.
Results of Operations
The Partnership's net income before extraordinary items total approximately
$6,118,000 for the year ended December 31, 1999, as compared to approximately
$3,929,000 for the year ended December 31, 1998 and net income before
extraordinary items of approximately $414,000 for the year ended December 31,
1997. For the year ended December 31, 1999, an increase in total revenues and an
overall decrease in expenses resulted in an increase in income before
extraordinary items as compared to 1998.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
increase net income by approximately $287,000 ($0.80 per limited partnership
unit). The cumulative effect, had this change been applied to prior periods, is
not material. The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the General Partner
and affiliates.
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.
1999 Compared to 1998
Revenues:
The increase in total revenues is primarily attributable to increased rental
income for the year ended December 31, 1999, as compared to the year ended
December 31, 1998. These increases are due to increased rental rates at the
Partnership's investment properties accompanied by increased occupancy levels at
some of the properties which more than offset occupancy decreases at other
properties. An increase in bad debt expense at most of the Partnership's
properties partially offset the increase in rental income. The gain on the sale
of Overlook Apartments of approximately $638,000 recognized in 1999 also
contributed to the increase in total revenue versus a casualty gain of
approximately $363,000 recognized in 1998. Partially offsetting these increases
was a decrease in other income for 1999 as compared to 1998. The decrease in
other income is due to reduced interest income as a result of lower cash
balances being held in interest bearing accounts.
Expenses:
Expenses decreased primarily due to reductions in operating expense and, to a
lesser extent, reductions in depreciation expenses partially offset by increases
in general and administrative expense and property tax expense. Operating
expenses decreased due to a decrease in maintenance expenses in 1999 due to the
completion of repair and maintenance projects in 1998 as well as a change in the
Partnership's accounting policy as discussed above. In addition, there were
decreases in 1999 in expenses related to casualties at some of the Partnership's
properties incurred in 1998. Depreciation expense decreased due to major assets
at several of the Partnership's investment properties becoming fully depreciated
during 1999. General and administrative expenses increased primarily due to an
increase in the 9% management fee on distributions from operating cash flows.
Distributions from operations increased by approximately $8,593,000 during 1999
as compared to 1998. In addition, legal expenses increased due to the settlement
of a lawsuit as discussed in the Partnership's Form 10-K at December 31, 1998.
Included in general and administrative expenses at both December 31, 1999 and
1998, are reimbursements to the General Partner allowed under the Partnership
Agreement associated with the quarterly and annual communications with investors
and regulatory agencies and the annual audit required by the Partnership
Agreement are also included. Property tax expense increased due to an increase
in the assessed value at several of the Partnership's properties.
On December 14, 1999, Overlook Associates, Ltd. sold Overlook to an unaffiliated
third party for $1,975,000. After payment of closing costs of approximately
$84,000 the net proceeds received by the Partnership were approximately
$1,891,000. The Partnership used most of the proceeds to pay off the mortgage
encumbering the property of approximately $1,780,000. The remaining net proceeds
were used to establish additional cash reserves for the Partnership. The
Partnership's gain on the sale during the fourth quarter of 1999 was
approximately $638,000.
1998 Compared to 1997
Revenues:
The increase in revenues is primarily attributable to increased rental income
for the year ended December 31, 1998, as compared to the year ended December 31,
1997. These increases are due to increased rental rates at the Partnership's
investment properties accompanied by increased occupancy levels at some of the
properties which more than offset occupancy decreases at other properties. In
addition, revenues decreased due to an increase in other income resulting from
higher cash balances in interest bearing accounts, as well as the casualty gain
of approximately $363,000 recognized in 1998.
Expenses:
Expenses decreased primarily due to reductions in operating and depreciation
expenses, and, to a lesser extent, reductions in property tax expenses.
Operating expenses decreased due to the completion of repair projects at a
number of the Partnership's investment properties, including exterior building
repairs, parking lot repairs, and exterior painting, as well as decreases in
expenses related to the casualties which occurred in 1997 at some of the
Partnership's properties. Depreciation expense decreased due to major assets at
several of the Partnership's investment properties becoming fully depreciated
during 1997. Property tax expense decreased due to tax reductions received in
1998 for billings under appeal at December 31, 1997 at several of the
Partnership's investment properties. Partially offsetting these decreases in
expenses is an increase in general and administrative expenses. General and
administrative expenses increased primarily due to an increase in the special 9%
management fee on distributions from operating cash flows. Distributions from
operations increased by approximately $2,351,000 during 1998 as compared to
1997. Included in general and administrative expenses at both December 31, 1998
and 1997, are reimbursements to the General Partner allowed under the
Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
During 1998, the two mortgages secured by the Denbigh Woods property were paid
in full. Approximately $5,000 in prepayment penalties was paid in connection
with these repayments. Such amount is included on the consolidated statements of
operations as extraordinary loss on retirement of debt, which caused a slight
decrease in net income for 1998. See "Item 8. Financial Statements and
Supplementary Data - Note G" for additional information on these mortgages.
During 1998, a net casualty gain of approximately $192,000 resulted from fire
and smoke damage to Overlook Apartments suffered in November 1997. In March
1998, Nob Hill Apartments sustained damages from a fire in one of the property's
buildings, resulting in a net casualty gain of approximately $204,000. Other
minor damage claims less related insurance proceeds resulted in a net casualty
loss of approximately $6,000. Additionally in 1998, Foothill Place Apartments
suffered windstorm damage resulting in a net casualty loss of approximately
$27,000. The net result of all of the above was the recognition of a casualty
gain of $363,000 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
1999 Compared to 1998
At December 31, 1999, the Partnership held cash and cash equivalents of
approximately $9,502,000 as compared to approximately $13,241,000 at December
31, 1998. The decrease in cash and cash equivalents of approximately $3,739,000
since the Partnership's year ended December 31, 1998 is due to approximately
$13,108,000 and $1,975,000 of cash used in financing and investing activities,
respectively, partially offset by approximately $11,344,000 of cash provided by
operating activities. Cash used in financing activities consisted primarily of
distributions to partners and, to a lesser extent, payments of principal on the
mortgages encumbering the Partnership's properties, payoff of the Overlook
mortgage, and payment of loan costs slightly offset by proceeds from the
financing of Point West Apartments. Cash used in investing activities consisted
primarily of property improvements and replacements, which was partially offset
by proceeds from the sale of Overlook and net withdrawals from restricted
escrows. The Partnership invests its working capital reserves in money market
accounts.
On December 14, 1999, Overlook Associates, Ltd. sold Overlook Apartments to an
unaffiliated third party for $1,975,000. After payment of closing costs of
approximately $84,000 the net proceeds received by the Partnership were
approximately $1,891,000. The Partnership used most of the proceeds to pay off
the mortgage encumbering the property of approximately $1,780,000. The remaining
net proceeds were used to establish additional cash reserves for the
Partnership. The Partnership's gain on the sale during the fourth quarter of
1999 was approximately $638,000.
1998 Compared to 1997
At December 31, 1998, the Partnership held cash and cash equivalents of
approximately $13,241,000 as compared to approximately $12,090,000 at December
31, 1997. The increase in cash and cash equivalents of approximately $1,151,000
since the Partnership's year ended December 31, 1997 is due to approximately
$8,474,000 of cash provided by operating activities, which was partially offset
by approximately $2,751,000 and $4,572,000 of cash used in investing and
financing activities, respectively. Cash used in investing activities consisted
of property improvements and replacements, which was partially offset by note
receivable collections, net withdrawals from restricted escrows and insurance
proceeds from casualty losses. Cash used in financing activities consisted
primarily of distributions to partners and, to a lesser extent, payments of
principal on the mortgages encumbering the Partnership's properties, payoff of
the Denbigh Woods mortgages, and payment of loan costs. The Partnership invests
its working capital reserves in money market accounts.
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 other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Partnership is currently
evaluating the capital improvement needs of the properties for the upcoming
year. The minimum amount to be budgeted is expected to be $300 per unit or
$1,202,100. Additional improvements may be considered and will depend on the
physical condition of the properties as well as replacement reserves and
anticipated cash flow generated by the properties. The additional capital
expenditures will be incurred only if cash is available from operations or from
Partnership reserves. To the extent that such budgeted capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $70,997,000 matures at various dates between 2000
and 2019. On November 9, 1999, the Partnership obtained financing on Point West
Apartments in the amount of $2,460,000. The mortgage was financed at a rate of
7.86% and matures on December 1, 2019. The General Partner will attempt to
refinance such indebtedness and/or sell the properties prior to such maturity
dates. If the properties cannot be refinanced or sold for a sufficient amount,
the Partnership will risk losing such properties through foreclosure.
On November 18, 1997, the Partnership refinanced the mortgage encumbering the
South Port Apartments. The refinancing replaced indebtedness of $3,432,000,
including accrued interest of approximately $18,000, with a new mortgage in the
amount of $4,500,000. The mortgage was refinanced at a rate of 7.19%, compared
to the prior rate of 10.85% and matures on December 1, 2004. Capitalized loan
costs incurred for the refinancing were approximately $120,000 during the year
ended December 31, 1997. In 1998, approximately $17,000 of additional loan costs
were paid in connection with the South Port refinancing. The Partnership paid
approximately $34,000 in prepayment penalties and wrote off $13,000 in
unamortized loan costs, resulting in an extraordinary loss on extinguishment of
debt in the amount of approximately $47,000.
Subsequent to year end, the Partnership refinanced the mortgage encumbering The
Apartments. The refinancing replaced mortgage indebtedness of approximately
$3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a
rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020.
Capitalized loan costs incurred for the refinancing were approximately $112,000.
The Partnership wrote off approximately $12,000 in unamortized loan costs.
Subsequent to year end, the Partnership refinanced the mortgage encumbering
Citadel Apartments. The refinancing replaced mortgage indebtedness of
approximately $4,582,000 with a new mortgage of $4,710,000. The mortgage was
refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on
March 1, 2020. Capitalized loan costs incurred for the refinancing were
approximately $88,000. The Partnership wrote off approximately $27,000 in
unamortized loan costs.
During 1999, the Partnership paid distributions attributable to cash flow from
operations totaling approximately $10,670,000 (approximately $10,117,000 to the
limited partners or $29.52 per limited partnership unit) and approximately
$2,613,000 (all to the limited partners or $7.62 per limited partnership unit)
representing funds from previously undistributed refinance proceeds from 1996
and 1997. As of December 31, 1999, the Partnership had distributions payable
from cash from operations of approximately $1,874,000 (approximately $1,679,000
to the limited partners or $4.90 per limited partnership unit) and a
distribution of refinance proceeds representing funds from the financing of
Point West Apartments of approximately $2,444,000 (approximately $2,242,000 to
the limited partners or $6.54 per limited partnership unit). This distribution
was paid in January 2000.
During 1998, the Partnership declared and paid distributions attributable to
cash flow from operations totaling approximately $3,951,000 (approximately
$3,793,000 to the limited partners or $11.07 per limited partnership unit).
During 1997, the Partnership declared and paid distributions attributable to
cash flow from operations totaling approximately $1,600,000 (approximately
$1,536,000 to the limited partners or $4.48 per limited partnership unit) and
approximately $903,000 (approximately $867,000 to the limited partners or $2.53
per limited partnership unit) representing a portion of the previously
undistributed refinance proceeds from 1996.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Partnership's distribution
policy is reviewed on a quarterly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit any distributions to its partners in the
year 2000 or subsequent periods.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies. On September 25, 1995, the partners were
proxied and approved a reduction of the capital reserve requirements to $500 per
apartment unit. The replacement reserve requirement at the residential
properties is approximately $2,004,000. 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 cash and
cash equivalents, totaling approximately $9,502,000 at December 31, 1999,
exceeded the Partnership's reserve requirements of approximately $2,004,000.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999, 1998, and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 166,949
limited partnership units in the Partnership representing approximately 48.71%
of the outstanding units. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
Item 7a. Market Risk Factors
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. Based on interest rates at December 31, 1999, a
1% increase or decrease in market interest rate would not have a material impact
on the Partnership.
The following table summarizes the Partnership's debt obligations at December
31, 1999. The interest rates represent the weighted-average rates. The fair
value of the debt obligations approximated the recorded value as of December 31,
1999.
Long-term Debt
Principal amount by expected maturity: Fixed Rate Debt Average Interest Rate
(in thousands)
2000 $ 12,526 7.58%
2001 248 7.30%
2002 270 7.30%
2003 9,044 7.30%
2004 4,433 7.29%
Thereafter 44,476 7.30%
Total $70,997
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPTIAL PROPERTIES IV
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Operations - Years ended December 31, 1999,
1998 and 1997
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows - Years ended December 31, 1999,
1998 and 1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Properties IV
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Properties IV as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in partners' deficit and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital Properties IV at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
As discussed in Note O to the consolidated financial statements, the Partnership
changed its method of accounting to capitalize the cost of exterior painting and
major landscaping effective January 1, 1999.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 24, 2000
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
December 31,
Assets 1999 1998
Cash and cash equivalents $ 9,502 $ 13,241
Receivables and deposits 1,581 2,246
Restricted escrows 1,402 2,743
Other assets 1,403 1,459
Investment properties (Notes D and J):
Land 12,094 12,491
Buildings and related personal property 122,539 121,741
134,633 134,232
Less accumulated depreciation (104,057) (103,250)
30,576 30,982
$ 44,464 $ 50,671
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 960 $ 379
Tenant security deposit liabilities 506 568
Accrued property taxes 1,284 1,309
Other liabilities 1,287 1,045
Distribution payable 4,318 --
Mortgage notes payable (Note D) 70,997 70,775
79,352 74,076
Partners' Deficit
General partners (6,634) (6,175)
Limited partners (342,773 units issued and
outstanding) (28,254) (17,230)
(34,888) (23,405)
$ 44,464 $ 50,671
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPTIAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1999 1998 1997
Revenues:
Rental income $ 28,533 $ 27,620 $ 26,769
Other income 2,018 2,110 1,941
Gain on sale of investment property 638 -- --
Casualty gain -- 363 --
Total revenues 31,189 30,093 28,710
Expenses:
Operating 11,146 12,449 12,985
General and administrative 1,942 1,188 990
Depreciation 4,398 4,871 6,558
Interest 5,661 5,840 5,868
Property taxes 1,924 1,816 1,895
Total expenses 25,071 26,164 28,296
Income before extraordinary items 6,118 3,929 414
Extraordinary loss on refinancing -- -- (47)
Extraordinary loss on retirement of debt -- (5) --
Net income (Note L) $ 6,118 $ 3,924 $ 367
Net income allocated to general partners (4%) $ 245 $ 157 $ 15
Net income allocated to limited partners (96%) 5,873 3,767 352
Net income $ 6,118 $ 3,924 $ 367
Net income per limited partnership unit:
Income before extraordinary items $ 17.13 $ 11.00 $ 1.15
Extraordinary loss on refinancing -- -- (.12)
Extraordinary loss on retirement of debt -- (.01) --
Net income per limited partnership unit $ 17.13 $ 10.99 $ 1.03
Distributions per limited partnership unit $ 49.29 $ 11.07 $ 7.01
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPTIAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit
at December 31, 1996 342,783 $(6,089) $(15,153) $(21,242)
Net income for the year ended
December 31, 1997 -- 15 352 367
Distributions paid -- (100) (2,403) (2,503)
Abandonment of limited
Partnership units (Note F) (10) -- -- --
Partners' deficit at
December 31, 1997 342,773 (6,174) (17,204) (23,378)
Net income for the year ended
December 31, 1998 -- 157 3,767 3,924
Distributions paid -- (158) (3,793) (3,951)
Partners' deficit at
December 31, 1998 342,773 (6,175) (17,230) (23,405)
Net income for the year ended
December 31, 1999 -- 245 5,873 6,118
Distributions paid -- (704) (16,897) (17,601)
Partners' deficit at
December 31, 1999 342,773 $(6,634) $(28,254) $(34,888)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net income $ 6,118 $ 3,924 $ 367
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,398 4,871 6,558
Amortization of loan costs 315 317 284
Gain on sale of investment property (638) -- --
Casualty (gain) loss -- (363) 46
Extraordinary loss on refinancing -- -- 47
Extraordinary loss on retirement of debt -- 5 --
Change in accounts:
Receivables and deposits 613 (344) (128)
Other assets (203) 115 (22)
Accounts payable 581 (147) (118)
Tenant security deposit liabilities (62) (12) (79)
Accrued property taxes (25) (3) 207
Other liabilities 247 111 (13)
Net cash provided by operating activities 11,344 8,474 7,149
Cash flows from investing activities:
Property improvements and replacements (5,207) (3,717) (2,559)
Proceeds from sale of investment property 1,891 -- 492
Collections on notes receivable -- 48 43
Net withdrawals from (deposits to) restricted
escrows 1,341 431 (264)
Net insurance proceeds from casualty -- 487 (29)
Net cash used in investing activities (1,975) (2,751) (2,317)
Cash flows from financing activities:
Payments on mortgage notes payable (458) (437) (409)
Repayment of mortgage notes payable (1,780) (194) (3,415)
Proceeds from mortgage notes payable 2,460 -- 4,500
Prepayment penalties -- (5) (34)
Loan costs paid (47) (17) (120)
Distributions to partners (13,283) (3,919) (2,503)
Net cash used in financing activities (13,108) (4,572) (1,981)
Net (decrease) increase in cash and cash equivalents (3,739) 1,151 2,851
Cash and cash equivalents at beginning of the year 13,241 12,090 9,239
Cash and cash equivalents at end of year $ 9,502 $ 13,241 $ 12,090
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
At December 31, 1999, distributions payable and distributions to partners were
each adjusted by $4,318,000 for non-cash activity.
At December 31, 1998, notes and interest receivable and mortgage notes payable
were adjusted by approximately $1,033,000 related to Denbigh Wood Apartments
(see "Note G"), and distributions were adjusted by approximately $32,000,
respectively, for non-cash activity.
At December 31, 1997, accounts receivable and accounts payable were adjusted by
$64,000 and $49,000, respectively, for non-cash activity.
Cash paid for interest was approximately $5,372,000, $5,528,000 and $5,596,000
for the years ended December 31, 1999, 1998, and 1997, respectively.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: Consolidated Capital Properties IV (the "Partnership" or
"Registrant"), a California limited partnership, was formed on September 22,
1981, to operate and hold real estate properties. The general partner of the
Partnership is ConCap Equities, Inc. (the "General Partner" or "CEI"), a
Delaware corporation. Additionally, the General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"). The directors and
officers of the General Partner also serve as executive officers of AIMCO. The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2011 unless terminated prior to that date. As of December 31, 1999, the
Partnership operates 16 residential properties in or near major urban areas in
the United States.
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1988, through a series of
transactions, Southmark Corporation ("Southmark") acquired controlling interest
in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the
United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan,
CEI acquired CCEC's general partner interests in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships") and CEI
replaced CCEC as managing general partner in all 16 partnerships. The selection
of CEI as the sole managing general partner was approved by a majority of the
limited partners in the Partnership and in each of the Affiliated Partnerships
pursuant to a solicitation of the Limited Partners dated August 10, 1990. As
part of the solicitation, the Limited Partners also approved an amendment to the
Partnership Agreement to limit changes of control of the Partnership, and the
conversion of CCMC from a general partner to a Special Limited Partner, thereby
leaving CEI as the sole general partner of the Partnership. On November 14,
1990, CCMC was dissolved and its Special Limited Partnership interest was
divided among its former partners.
All of CEI's outstanding stock is owned by Insignia Properties Trust ("IPT"),
which is an affiliate of AIMCO. In December 1994, the parent of GII Realty,
Inc., entered into a transaction (the "Insignia Transaction") in which an
affiliate of Insignia acquired an option (exercisable in whole or in part from
time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to
a partial exercise of such option, acquired 50.5% of that stock. As part of the
Insignia Transaction, the Insignia affiliate also acquired all of the
outstanding stock of Partnership Services, Inc., an asset management entity, and
a subsidiary of Insignia acquired all of the outstanding stock of Coventry
Properties, Inc., a property management entity. In addition, confidentiality,
non-competition, and standstill arrangements were entered into between certain
of the parties. Those arrangements, among other things, prohibit GII Realty's
former sole shareholder from purchasing Partnership Units for a period of three
years. On October 24, 1995, the Insignia affiliate exercised the remaining
portion of its option to purchase all of the remaining outstanding capital stock
of GII Realty, Inc.
Consolidation: The consolidated financial statements include the Partnership's
majority interest in a joint venture which owns South Port Apartments. The
Partnership has the ability to control the major operating and financial
policies of the joint venture. 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. Should the losses reverse, the
Partnership would be credited with the amount of minority interest losses
previously absorbed.
The Partnership's consolidated financial statements also include the accounts of
the Partnership, its wholly-owned partnerships, its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
Concap River's Edge Associates, Ltd., Foothill Chimney Associates, L.P., and
ConCap Stratford Associates, Ltd. The Partnership may remove the general partner
of its 99% owned partnerships; therefore, the partnerships are deemed controlled
and therefore consolidated by the Partnership. All significant interpartnership
balances have been eliminated.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, in
banks, and money market accounts. At certain times, the amount of cash deposited
at a bank may exceed the limit on insured deposits.
Cash balances include approximately $218,000 at December 31, 1999 that are
maintained by the affiliated management company on behalf of affiliated entities
in a cash concentration account.
Security Deposits: The Partnership requires security deposits from lessees for
the duration of the lease and such deposits are included in receivables and
deposits. Deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
Restricted Escrows:
Capital Improvement Reserves - At the time of the refinancing of the
mortgage note payable encumbering Nob Hill Villa, $219,000 of the proceeds
were designated for certain capital improvements. At the time of the
refinancing of the mortgages note payable encumbering the Arbours of
Hermitage, Briar Bay, Chimney Hill, Citadel Village, Foothill Place,
Knollwood, and Village East, approximately $1,145,000 was designated for
certain capital improvements. At the time of the refinancing of the
mortgage note payable encumbering Lake Forest, $555,000 of the proceeds
were designated for certain capital improvements. At the time of the
refinancing of the mortgage note payable encumbering South Port, $238,000
of the proceeds were designated for certain capital improvements. At
December 31, 1999, the total remaining escrow balance is approximately
$49,000.
Replacement Reserve Account - At the time of the refinancing of the
mortgage notes payable encumbering the Arbours of Hermitage, Briar Bay,
Chimney Hill, Citadel Village, Foothill Place, Knollwood, and Village
East, $507,000 of the proceeds, ranging from $191 to $325 per unit, were
designated for replacement reserves. At the time of the refinancing of the
mortgage note payable encumbering Post Ridge, $389,000 of the proceeds
were designated for replacement reserves. These funds were established to
cover necessary repairs and replacements of existing improvements. At
December 31, 1999, the total remaining reserve balance was approximately
$1,070,000.
Investments in Real Estate: Investment properties consist of sixteen apartment
complexes, which are stated at cost. Acquisition fees are capitalized as a cost
of real estate. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting foe the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". The Partnership records impairment losses
on long-lived assets used in operations when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows estimated to
be generated by those assets are less than the carrying amounts of those assets.
The impairment loss is measured by comparing the fair value of the assets to its
carrying amount. Costs of apartment properties that have been permanently
impaired have been written down to appraised value. No adjustments for
impairment of value were recorded in any of the years ended December 31, 1999,
1998, or 1997.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the investment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 18 years for additions after March 15, 1984, and before
May 9, 1985, and 19 years for additions after May 8, 1985 and before January 1,
1987, and (2) for personal property over 5 years for additions prior to January
1, 1987. As a result of the Tax Reform Act of 1986, for additions after December
31, 1986, the alternative depreciation system is used for depreciation of (1)
real property over 40 years and (2) personal property additions over 5-20 years.
Effective January 1, 1999 the Partnership change its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note O).
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the General Partner's policy is to offer rental concessions during particularly
slow months or in response to heavy competition from other similar complexes in
the area. Concessions are charged against rental income as incurred.
Loan Costs: Loan costs, net of accumulated amortization, of $1,119,000 and
$1,377,000 at December 31, 1999 and 1998, respectively, are amortized using the
straight-line method over the lives of the related mortgage notes. Unamortized
loan costs are included in other assets. Amortization of loan costs is included
in interest expense.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments", as amended by SFAS No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Allocation of Net Income and Net Loss: The Partnership Agreement provides for
net income (losses) and distributions of distributable cash from operations to
be allocated, generally 96% to the Limited Partners and 4% to the General
Partner.
Net Income (Loss) Per Limited Partnership Unit: Net income (loss) per Limited
Partnership Unit is computed by dividing net income (loss) allocated to the
Limited Partners by the number of Units outstanding. Per Unit information has
been computed based on the number of Units outstanding at the beginning of each
year.
Segment Reporting: SFAS No. 131, Disclosure about Segments of an Enterprise and
Related Information established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. See "Note M" for required disclosure.
Advertising Costs: Advertising costs of approximately $549,000, $482,000 and
$441,000 in 1999, 1998 and 1997, respectively, are charged to operating expense
as incurred.
Uses of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the General Partner. The General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all of the Partnership
activities. The Partnership Agreement provides for certain payments to
affiliates for services and as reimbursements of certain expenses incurred by
affiliates on behalf of the Partnership. The following transactions with the
General Partner and/or its affiliates were charged to expense in 1999, 1998,
1997:
1999 1998 1997
(in thousands)
Property management fees (included in
operating expense) $ 1,547 $1,478 $1,413
Reimbursements for services of affiliates
(included in investment property
general and administrative expense
and operating expense) 565 627 608
Partnership management fee (included in
general and administrative expense) 1,084 341 138
Loan costs (included in other assets) 25 7 13
During the years ended December 31, 1999, 1998 and 1997, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all of
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $1,547,000,
$1,478,000 and $1,413,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $565,000, $627,000 and
$608,000, for the years ended December 31, 1999, 1998 and 1997, respectively.
The Limited Partnership Agreement ("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. Affiliates of the
General Partner of the Partnership earned approximately $1,084,000, $341,000 and
$138,000 under this provision of the Partnership Agreement for the years ended
December 31, 1999, 1998 and 1997, respectively.
In addition to reimbursement for services of affiliates, the Partnership paid an
affiliate of the General Partner approximately $25,000, $7,000, and $13,000 in
1999, 1998 and 1997, respectively, for loan costs which are capitalized and
included in other assets on the consolidated balance sheets. These loan costs
were associated with the refinancing of one of the Partnership's properties in
1999 and one in 1997 (See "Note D").
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999, 1998, and 1997. As a
result of these tender offers, AIMCO and its affiliates currently own 166,949
limited partnership units in the Partnership representing approximately 48.71%
of the outstanding units. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Note D - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in
thousands)
The Apartments $ 3,294 $ 29 (c) 8.34% 09/00 $ 3,244
Arbours of Hermitage 5,650 33 (a) 6.95% 12/05 5,650
Briar Bay Racquet Club 3,500 20 (a) 6.95% 12/05 3,500
Chimney Hill Apartments 5,400 31 (a) 6.95% 12/05 5,400
Citadel Apartments 4,565 40 (c) 8.38% 10/00 4,488
Citadel Village
Apartments 2,450 14 (a) 6.95% 12/05 2,450
Foothill Place
Apartments 10,100 58 (a) 6.95% 12/05 10,100
Knollwood Apartments 6,780 39 (a) 6.95% 12/05 6,780
Lake Forest Apartments 4,700 29 (a) 7.33% 11/03 4,700
Nob Hill Villa
Apartments 7,050 64 9.20% 04/05 6,250
Point West Apartments 2,460 20 (b) 7.86% 12/19 --
Post Ridge Apartments 4,050 25 (a) 7.33% 11/03 4,050
Rivers Edge Apartments 1,924 17 8.40% 09/00 1,895
South Port Apartments 4,409 31 7.19% 12/04 4,119
Stratford Place
Apartments 2,515 23 8.65% 09/00 2,478
Village East Apartments 2,150 12 (a) 6.95% 12/05 2,150
Total $ 70,997 $ 485 $ 67,254
(a) Monthly payments of interest only at the stated rate until maturity.
(b) Debt was obtained effective November 9, 1999 (see below for
further explanation).
(c) Debt was refinanced subsequent to December 31, 1999 (see "Note P" for
further detail).
On November 9, 1999, the Partnership obtained financing on Point West Apartments
in the amount of $2,460,000. The mortgage was financed at a rate equal to 7.86%
and matures on December 1, 2019. Capitalized loan costs incurred for the
financing were approximately $47,000 during the year ended December 31, 1999.
On November 18, 1997, the Partnership refinanced the mortgage encumbering the
South Port Apartments. The refinancing replaced indebtedness of $3,432,000,
including accrued interest of approximately $18,000, with a new mortgage in the
amount of $4,500,000. The mortgage was refinanced at a rate equal to 7.19%,
compared to the prior rate of 10.85% and matures on December 1, 2004.
Capitalized loan costs incurred for the refinancing were approximately $120,000
during the year ended December 31, 1997. In 1998, approximately $17,000 of
additional loan costs were paid in connection with the South Port refinancing.
The Partnership paid approximately $34,000 in prepayment penalties and wrote off
$13,000 in unamortized loan costs, resulting in an extraordinary loss on
extinguishment of debt in the amount of approximately $47,000.
The notes payable represent borrowings on the properties purchased by the
Partnership. The notes are non-recourse, and are collateralized by deeds of
trust on the investment properties. The notes mature between 2000 and 2019 and
bear interest at rates ranging from 6.95% to 9.20%. Various mortgages require
prepayment penalties if repaid prior to maturity. Further, the properties may
not be sold subject to existing indebtedness.
Future annual principal payments required under the terms of the mortgage notes
payable subsequent to December 31, 1999, are as follows (in thousands):
2000 $ 12,526
2001 248
2002 270
2003 9,044
2004 4,433
Thereafter 44,476
Total $ 70,997
Note E - Contingencies
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies. On September 25, 1995, the partners were
proxied and approved a reduction of the capital reserve requirements to $500 per
apartment unit. In the event expenditures are made from these reserves,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, including cash and cash equivalents,
totaling approximately $9,502,000 at December 31, 1999, exceeded the
Partnership's reserve requirements of approximately $2,004,000.
Note F - Abandoned Limited Partnership Units
In 1997, the number of Limited Partnership Units decreased by 10 units due to
Limited Partners abandoning their Limited Partnership Units. In abandoning his
or her Limited Partnership Units, a Limited Partner relinquishes all right,
title and interest in the Partnership as of the date of abandonment. However,
the Limited Partner is allocated his or her share of income (loss) for that
year. The income (loss) per Limited Partnership Unit in the accompanying
consolidated statements of operations is calculated based on the number of units
outstanding at the beginning of the year.
Note G - Sale of Real Estate
In August 1994, the Partnership sold the Denbigh Woods Apartments. In connection
with the sale, the Partnership accepted a $1,200,000 wrap-note receivable and
received net sales proceeds of $881,000. The wrap-note receivable accrued
interest at an annual rate of 9%, required monthly payments of principal and
interest totaling $11,814, and matured in March 1996. The Partnership negotiated
with the purchaser to extend the note on a number of occasions, at the same
interest rate, ultimately until December 31, 1998. All other terms of the note
remain unchanged. Since the wrap-around promissory note was subordinate and
inferior to the first-lien mortgages, the Partnership remained obligated under
two underlying first-lien mortgages totaling approximately $1,248,000 which were
secured by the Denbigh Woods Apartments. Pursuant to the sale contract, the
Partnership received, from the purchaser, a capital improvement escrow totaling
$150,000. After completion in 1997 of certain repairs and capital improvements
at the property, the Partnership fully reimbursed the purchaser the balance
remaining in the escrow account. The two mortgages, as well as the note and any
accrued interest receivable, were repaid in full on December 31, 1998.
Approximately $5,000 of prepayment penalties were paid in connection with
repayment of one of the mortgage notes payable.
Note H - Disposition of Real Estate
On December 14, 1999, Overlook Associates, Ltd. sold Overlook Apartments to an
unaffiliated third party for $1,975,000. After payment of closing costs of
approximately $84,000 the net proceeds received by the Partnership were
approximately $1,891,000. The Partnership used most of the proceeds to pay off
the mortgage encumbering the property of approximately $1,780,000. The remaining
net proceeds were used to establish additional cash reserves for the
Partnership. The Partnership's gain on the sale during the fourth quarter of
1999 was approximately $638,000.
The sales transactions are summarized as follows (amounts in thousands):
Net sale price, net of selling costs $ 1,891
Net real estate (1) (1,215)
Net other assets (38)
Gain on sale of real estate $ 638
(1) Net of accumulated depreciation of approximately $3,591,000.
The following pro-forma information reflects the operations of the Partnership
for the twelve months ended December 31, 1999 and 1998, as if Overlook
Apartments had been sold January 1, 1998.
1999 1998
(in thousands, except per unit data)
Revenues $29,558 $28,799
Net income 5,517 3,927
Income per limited partnership unit 15.45 11.00
Note I - Distributions
During 1999, the Partnership paid distributions attributable to cash flow from
operations totaling approximately $10,670,000 (approximately $10,117,000 to the
limited partners or $29.52 per limited partnership unit) and approximately
$2,613,000 (all to the limited partners or $7.62 per limited partnership unit)
representing funds from previously undistributed refinance proceeds from 1996
and 1997. As of December 31, 1999, the Partnership had distributions payable
from cash from operations of approximately $1,874,000 (approximately $1,679,000
to the limited partners or $4.90 per limited partnership unit) and a
distribution of refinance proceeds representing funds from the financing of
Point West Apartments of approximately $2,444,000 (approximately $2,242,000 to
the limited partners or $6.54 per limited partnership unit). This distribution
was paid in January 2000.
During 1998, the Partnership declared and paid distributions attributable to
cash flow from operations totaling approximately $3,951,000 ($11.07 per limited
partnership unit). During 1997, the Partnership declared and paid distributions
attributable to cash flow from operations totaling approximately $1,600,000
($4.48 per limited partnership unit) and approximately $903,000 ($2.53 per
limited partnership unit) representing a portion of the previously undistributed
refinance proceeds from 1996.
Note J - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
Net Cost
Buildings Capitalized
and (Written-Down)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
The Apartments $ 3,294 $ 438 $ 6,218 $ 2,370
Arbours of Hermitage
Apartments 5,650 547 8,574 4,021
Briar Bay Racquet
Club Apartments 3,500 1,084 5,271 1,493
Chimney Hill Apartments 5,400 659 7,188 3,390
Citadel Apartments 4,565 695 5,619 1,541
Citadel Village
Apartments 2,450 337 3,334 614
Foothill Place Apartments 10,100 3,492 9,435 2,617
Knollwood Apartments 6,780 345 7,065 4,043
Lake Forest Apartments 4,700 692 5,811 3,073
Nob Hill Villa Apartments 7,050 490 8,922 3,796
Point West Apartments 2,460 285 2,919 (33)
Post Ridge Apartments 4,050 143 2,498 2,300
Rivers Edge Apartments 1,924 512 2,160 752
South Port Apartments 4,409 1,175 6,496 507
Stratford Place
Apartments 2,515 1,186 4,628 2,269
Village East Apartments 2,150 184 2,236 1,242
Totals $ 70,997 $ 12,264 $ 88,374 $ 33,995
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And
Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
(in thousands)
The Apartments $ 438 $ 8,588 $ 9,026 $ 6,845 1973 4/84 5-18
Arbours of Hermitage 547 12,595 13,142 10,941 1973 9/83 5-18
Apts
Briar Bay Racquet 1,084 6,764 7,848 6,488 1975 9/82 5-18
Club Apt
Chimney Hill 659 10,578 11,237 9,689 1973 8/82 5-18
Apartments
Citadel Apartments 695 7,160 7,855 6,539 1973 5/83 5-18
Citadel Village 337 3,948 4,285 3,448 1974 12/82 5-18
Apartments
Foothill Place 3,402 12,142 15,544 9,533 1973 8/85 5-18
Apartments
Knollwood Apartments 345 11,108 11,453 9,531 1972 7/82 5-18
Lake Forest 692 8,884 9,576 6,727 1971 4/84 5-18
Apartments
Nob Hill Villa 490 12,718 13,208 11,221 1971 4/83 5-18
Apartments
Point West Apartments 206 2,965 3,171 2,312 1973 11/85 5-40
Post Ridge Apartments 143 4,798 4,941 3,863 1972 7/82 5-18
Rivers Edge 512 2,912 3,424 2,636 1976 4/83 5-18
Apartments
South Port Apartments 1,175 7,003 8,178 6,660 -- 11/83 5-18
Stratford Place 1,186 6,897 8,083 4,549 1975 8/85 5-20
Apartments
Village East 183 3,479 3,662 3,075 1973 12/82 5-18
Apartments
Totals $12,094 $122,539 $134,633 $104,057
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998 1997
(in thousands)
Real Estate
Balance at beginning of year $ 134,232 $ 130,653