UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact Name of Registrant as Specified in Its Charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No___
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 120-2 of the Exchange Act). Yes _____ No __X__
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
2004 2003
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 4,204 $ 2,417
Receivables and deposits 429 404
Restricted escrows 990 922
Other assets 1,941 999
Investment in affiliated partnerships (Note D) 1,050 992
Investment properties:
Land 21,814 22,780
Buildings and related personal property 96,759 100,078
118,573 122,858
Less: Accumulated depreciation (24,407) (23,194)
94,166 99,664
$102,780 $105,398
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 636 $ 211
Tenant security deposit liabilities 918 964
Accrued property taxes 339 564
Other liabilities 1,460 1,499
Due to affiliates (Note C) 665 255
Mortgage notes payable 71,250 75,195
75,268 78,688
Partners' Capital
General partner 136 128
Limited partners (199,043.2 units issued and
outstanding) 27,376 26,582
27,512 26,710
$102,780 $105,398
Note: The consolidated balance sheet at December 31, 2003 has been derived from
the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
Revenues: (Restated)
Rental income $ 5,705 $ 3,747
Other income 503 284
Total revenues 6,208 4,031
Expenses:
Operating 2,906 1,913
General and administrative 263 258
Depreciation 1,411 980
Interest 1,210 851
Property taxes 458 226
Total expenses 6,248 4,228
Loss from continuing operations (40) (197)
(Loss) income from discontinued operations (Notes A and E) (649) 24
Gain on sale of discontinued operations (Note E) 1,433 --
Equity in income of investment (Note D) 58 350
Net income $ 802 $ 177
Net income allocated to general partner (1%) $ 8 $ 2
Net income allocated to limited partners (99%) 794 175
$ 802 $ 177
Per limited partnership unit:
Loss from continuing operations (0.20) (.98)
(Loss) income from discontinued operations (3.23) .12
Gain on sale of discontinued operations 7.13 --
Equity in income from investment 0.29 1.74
Net income per limited partnership unit $ 3.99 $ .88
Distributions per limited partnership unit $ -- $ 9.99
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342.0 $ 1 $200,342 $200,343
Partners' capital at
December 31, 2003 199,043.2 $ 128 $ 26,582 $ 26,710
Net income for the three
months ended March 31, 2004 -- 8 794 802
Partners' capital at
March 31, 2004 199,043.20 $ 136 $ 27,376 $ 27,512
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net income $ 802 $ 177
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,452 1,019
Amortization of loan costs, lease commissions and
mortgage premiums (35) (18)
Equity in income of investment (58) (350)
Gain on sale of discontinued operations (1,433) --
Loss on early extinguishment of debt 685 --
Change in accounts:
Receivables and deposits (25) 229
Other assets (1,007) (694)
Accounts payable 241 324
Tenant security deposit liabilities (46) (7)
Accrued property taxes (225) (100)
Other liabilities (39) (198)
Due to affiliates 77 --
Net cash provided by operating activities 389 382
Cash flows from investing activities:
Net proceeds from sale of discontinued operations 6,501 --
Net (deposits to) receipts from restricted escrows (68) 2
Property improvements and replacements (503) (357)
Principal receipts on Master Loan -- 15
Distributions from affiliated partnerships -- 258
Net cash provided by (used in) investing activities 5,930 (82)
Cash flows from financing activities:
Distributions to partners -- (1,993)
Payments on mortgage notes payable (407) (258)
Repayment of mortgage note payable (3,248) --
Prepayment penalties (871) --
Lease commissions, paid (6) (12)
Net cash used in financing activities (4,532) (2,263)
Net increase (decrease) in cash and cash equivalents 1,787 (1,963)
Cash and cash equivalents at beginning of period 2,417 3,175
Cash and cash equivalents at end of period $ 4,204 $ 1,212
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,234 $ 934
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable $ 84 $ --
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Institutional Properties (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), which is ultimately owned by Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 2004 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2004. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003.
As a result of the sale of Silverado Apartments to an unrelated third party
during the three months ended March 31, 2004 and in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", the accompanying consolidated statement of
operations for the three months ended March 31, 2003 has been restated as of
January 1, 2003 to reflect the operations of Silverado Apartments as (loss)
income from discontinued operations of approximately $(649,000) and $24,000 for
the three months ended March 31, 2004 and 2003, respectively, including revenues
of approximately $338,000 and $341,000, respectively.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") 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 established standards for related disclosures
about products and services, geographic areas, and major customers. (See "Note
F" for detailed disclosure of the Partnership's segments).
Note B - Net Investment in Master Loan
The Partnership was initially formed for the benefit of its limited partners to
lend funds to Consolidated Capital Equity Partners ("CCEP"), a California
general partnership. The general partner of CCEP is an affiliate of the General
Partner. The Partnership loaned funds to CCEP subject to a nonrecourse note with
a participation interest (the "Master Loan"). The loans were made to, and the
real properties that secured the Master Loan were purchased and owned by, CCEP.
The Master Loan matured in November 2000. The General Partner had been
negotiating with CCEP with respect to its options which included foreclosing on
the properties which collateralized the Master Loan or extending the terms of
the Master Loan. The General Partner decided to foreclose on the properties that
collateralized the Master Loan. The General Partner began the process of
foreclosure or executing deeds in lieu of foreclosure during 2002 on all the
properties in CCEP. During August 2002, the General Partner executed deeds in
lieu of foreclosure on four of the active properties of CCEP. In addition, one
of the properties held by CCEP was sold in December 2002. On November 10, 2003
the Partnership acquired the remaining four properties held by CCEP through a
foreclosure sale. As the deeds were executed, title in the properties previously
owned by CCEP were transferred to the Partnership, subject to the existing liens
on such properties, including the first mortgage loans. As a result, during the
years ended December 2003 and 2002, the Partnership assumed responsibility for
the operations of such properties. The results of operations of the four
properties foreclosed on in 2002 are reflected in the accompanying consolidated
statements of operations for the three months ended March 31, 2004 and 2003. The
results of operations for the four properties foreclosed on in November 2003 are
included in the three months ended March 31, 2004.
Prior to the acquisition of the four remaining properties held by CCEP at a
foreclosure sale in 2003, the principal balance of the Master Loan due to the
Partnership totaled approximately $14,144,000 at December 31, 2002. This amount
represented the fair market value of the remaining properties held by CCEP at
December 31, 2002, less the net liabilities owed by the properties. Interest,
calculated on the accrual basis, due to the Partnership pursuant to the terms of
the Master Loan Agreement, but not recognized in the income statements due to
the impairment of the loan, totaled approximately $440,000 for the three months
ended March 31, 2003. Interest income was recognized on the cash basis as
required by SFAS 114.
During the three months ended March 31, 2003, the Partnership received
approximately $15,000 from escrows released by the mortgage lender of Society
Park which was sold during 2002 as principal payments on the Master Loan from
CCEP. No advances were made by the Partnership to CCEP on the Master Loan during
the three months ended March 31, 2003.
Note C - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Partnership's properties for providing property management services.
The Partnership paid to such affiliates approximately $323,000 and $234,000 for
the three months ended March 31, 2004 and 2003, respectively, which is included
in operating expenses and (loss) income from discontinued operations.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $192,000 and $129,000 for the
three months ended March 31, 2004 and 2003, respectively which is included in
general and administrative expenses. Approximately $333,000 was payable to the
General Partner at March 31, 2004 and is included in due to affiliates.
In connection with the sale of Silverado Apartments on March 31, 2004 (see "Note
E"), the General Partner earned a disposition fee of approximately $332,000. The
fee is included in gain on sale of discontinued operations and due to
affiliates.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers' compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During 2004, the Partnership anticipates its cost for insurance
coverage and fees associated with policy claims administration provided by AIMCO
and its affiliates will be approximately $190,000. The Partnership was charged
approximately $212,000 for 2003.
Note D - Investment in Affiliated Partnerships
Ownership Investment Balance
Partnership Type of Ownership Percentage March 31, 2004
(in thousands)
Consolidated Capital Non-controlling
Growth Fund General Partner 0.40% $ 14
Consolidated Capital Non-controlling
Properties III General Partner 1.85% 30
Consolidated Capital Non-controlling
Properties IV General Partner 1.85% 1,006
$1,050
These investments were assumed during the foreclosure of investment properties
from CCEP (see "Note B") and are accounted for on the equity method of
accounting. Distributions from the affiliated partnerships are accounted for as
a reduction of the investment balance until the investment balance is reduced to
zero. When the investment balance has been reduced to zero, subsequent
distributions received are recognized as income in the accompanying statements
of operations. During the three months ended March 31, 2004, the Partnership
recognized approximately $58,000 in equity in income of investment related to
the sale of a property in Consolidated Capital Properties IV. There was no
distribution associated with this sale. During the three months ended March 31,
2003, the Partnership received approximately $258,000 in distributions from two
of the partnerships. Approximately $243,000 of the distributions related to the
sale of a property in Consolidated Capital Growth Fund. Of this amount,
approximately $236,000 was recognized as equity in income from investment once
the investment balance allocated to that property had been reduced to zero. The
Partnership also recognized equity in income from investment of approximately
$114,000 related to the sale of a property in Consolidated Capital Properties
IV. There was no distribution associated with this sale.
Note E - Sale of Investment Property
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to an unaffiliated third party for $6,650,000. After payment of
closing costs, the net sales proceeds received by the Partnership were
approximately $6,501,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,248,000. The
sale resulted in a gain on sale of investment property of approximately
$1,433,000 during the three months ended March 31, 2004. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$685,000 as a result of prepayment penalties paid partially offset by the write
off of the unamortized mortgage premium which is included in (loss) income from
discontinued operations. Pursuant to the Partnership Agreement and in
conjunction with the sale, a disposition fee of approximately $332,000 was
earned by the General Partner in accordance with the Partnership Agreement which
was accrued and included in due to affiliates. The fee was paid subsequent to
March 31, 2004. The results of the property's operations for the three months
ended March 31, 2004 and 2003 are included in (loss) income from discontinued
operations which was approximately ($649,000) and $24,000, respectively and
includes revenues of approximately $338,000 and $341,000, respectively.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has two reportable segments:
residential properties and commercial property. The Partnership's property
segments consist of eight apartment complexes one each in North Carolina,
Colorado, Kansas, and Kentucky, four in Florida and one multiple use facility
consisting of apartment units and commercial space in Pennsylvania. The
Partnership rents apartment units to tenants for terms that are typically less
than twelve months. The commercial property leases space to various medical
offices, career service facilities, and retail shops at terms ranging from month
to month to five years.
Measurement of segment profit and loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those described in the summary of
significant accounting policies.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segments are business units (investment properties)
that offer different products and services. The reportable segments are each
managed separately because they provide distinct services with different types
of products and customers.
Segment information for the three months ended March 31, 2004 and 2003 is shown
in the tables below (in thousands). The "Other" Column includes partnership
administration related items and income and expense not allocated to reportable
segments.
2004 Residential Commercial Other Totals
Rental income $ 5,361 $ 344 $ -- $ 5,705
Other income 471 31 1 503
Equity in income of investment -- -- 58 58
Interest expense 1,154 56 -- 1,210
Depreciation 1,352 59 -- 1,411
General and administrative
expenses -- -- 263 263
Gain on sale of investment 1,433 -- -- 1,433
Loss from discontinued operations (649) -- -- (649)
Segment profit (loss) 1,212 (206) (204) 802
Total assets 97,256 1,409 4,115 102,780
Capital expenditures for
investment properties 289 298 -- 587
2003 Residential Commercial Other Totals
(Restated) (Restated)
Rental income $ 3,489 $ 258 $ -- $ 3,747
Other income 257 27 -- 284
Equity in income of investment -- -- 350 350
Interest expense 795 56 -- 851
Depreciation 938 42 -- 980
General and administrative
expenses -- -- 258 258
Income from discontinued operations 24 -- -- 24
Segment profit (loss) 203 (152) 126 177
Total assets 64,477 867 15,894 81,238
Capital expenditures for
investment properties 340 17 -- 357
Note G - Contingencies
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. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint (the "Heller action") was filed against the same defendants that are
named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the General Partner and
its affiliates filed a response brief in support of the settlement and the
judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the Managing General Partner. The Complaint is styled as a Collective Action
under the FLSA and seeks to certify state subclasses in California, Maryland,
and the District of Columbia. Specifically, the plaintiffs contend that AIMCO
Properties L.P. failed to compensate maintenance workers for time that they were
required to be "on-call". Additionally, the Complaint alleges AIMCO Properties
L.P. failed to comply with the FLSA in compensating maintenance workers for time
that they worked in responding to a call while "on-call". The Defendants have
filed an answer to the Amended Complaint denying the substantive allegations.
Discovery is currently underway.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's consolidated financial condition or results of
operations taken as a whole.
ITEM 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of nine properties. The Sterling
is a multiple-use facility which consists of an apartment complex and commercial
space. The following table sets forth the average occupancy of the properties
for the three months ended March 31, 2004 and 2003:
Average Occupancy
Property 2004 2003
The Loft Apartments (3) 86% 81%
Raleigh, North Carolina
The Sterling Apartment Homes (3) 96% 91%
The Sterling Commerce Center (1) 74% 54%
Philadelphia, Pennsylvania
The Knolls Apartments (2) 73% 82%
Colorado Springs, Colorado
Indian Creek Village Apartments (2) 88% 91%
Overland Park, Kansas
Tates Creek Village Apartments (3) 91% 86%
Lexington, Kentucky
Plantation Gardens Apartments 88% 90%
Plantation, Florida
Palm Lake Apartments (3) 96% 91%
Tampa, Florida
The Dunes Apartments (3) 95% 90%
Indian Harbor, Florida
Regency Oaks Apartments 93% 92%
Fern Park, Florida
(1) The General Partner attributes the low occupancy in 2003 at The Sterling
Commerce Center to the loss of a major tenant in late December 2001.
During the fourth quarter of 2003, a new tenant signed a lease and
occupied a large portion of the vacant space.
(2) The General Partner attributes the decrease in occupancy at The Knolls and
Indian Creek Village Apartments to the competitive market of the apartment
industry in the properties' locations.
(3) The General Partner attributes the increase in occupancy at The Loft
Apartments, The Sterling Apartment Homes, Tates Creek Village Apartments,
Palm Lake Apartments, and The Dunes Apartments to an increase in marketing
outreach and promotions.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the General Partner monitors the
rental market environment 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, the General Partner may use rental concessions and
rental rate reductions to offset softening market conditions, accordingly, there
is no guarantee that the General Partner will be able to sustain such a plan.
Further, a number of factors which are outside the control of the Partnership
such as the local economic climate and weather can adversely or positively
impact the Partnership's financial results.
Results of Operations
The Partnership's net income for the three months ended March 31, 2004 was
approximately $802,000 compared to net income of approximately $177,000 for the
corresponding period in 2003. The increase in net income for the three months
ended March 31, 2004 as compared to the three months ended March 31, 2003 is
primarily due to the gain on the sale of Silverado Apartments during the three
months ended March 31, 2004 and an increase in total revenues partially offset
by an increase in total expenses, a decrease in equity in income of investment
and a decrease in income from discontinued operations.
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to an unaffiliated third party for $6,650,000. After payment of
closing costs, the net sales proceeds received by the Partnership were
approximately $6,501,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,248,000. The
sale resulted in a gain on sale of investment property of approximately
$1,433,000 during the three months ended March 31, 2004. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$685,000 as a result of prepayment penalties paid partially offset by the write
off of the unamortized mortgage premium which is included in (loss) income from
discontinued operations. Pursuant to the Partnership Agreement and in
conjunction with the sale a disposition fee of approximately $332,000 was earned
by the General Partner in accordance with the Partnership Agreement which was
accrued and included in due to affiliates. The fee was paid subsequent to March
31, 2004.
As a result of the sale of Silverado Apartments to an unrelated third party
during the three months ended March 31, 2004 and in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", the accompanying consolidated statement of
operations for the three months ended March 31, 2003 has been restated as of
January 1, 2003 to reflect the operations of Silverado Apartments as (loss)
income from discontinued operations of approximately $(649,000) and $24,000 for
the three months ended March 31, 2004 and 2003, respectively, including revenues
of approximately $338,000 and $341,000, respectively.
The increase in total expenses and total revenues is largely due to the
acquisition at a foreclosure sale of four properties (Plantation Gardens, Palm
Lake, The Dunes and Regency Oaks Apartments) during November 2003. These
properties were sold at a foreclosure sale due to CCEP's inability to repay the
Master Loan and accrued interest. The Master Loan matured in November 2000. The
General Partner had been negotiating with CCEP with respect to its options which
included foreclosing on the properties which collateralized the Master Loan or
extending the terms of the Master Loan. The General Partner decided to foreclose
on the properties that collateralized the Master Loan. The General Partner began
the process of foreclosure or executing deeds in lieu of foreclosure during 2002
on all the properties in CCEP. The foreclosure process on the above four
properties held by CCEP was completed during the fourth quarter of 2003. As the
deeds were executed, title in the properties previously owned by CCEP were
transferred to the Partnership, subject to the existing liens on such
properties, including the first mortgage loans. As a result, the Partnership
assumed responsibility for the operations of such properties during the fourth
quarter of 2003.
Exclusive of the items related to the operations of the foreclosed properties,
the Partnership recognized a net loss from continuing operations for the three
months ended March 31, 2004 of approximately $112,000 compared to net income
from continuing operations of approximately $153,000 for the corresponding
period in 2003. The decrease in net income from continuing operations for the
three months ended March 31, 2004 as compared to the three months ended March
31, 2003 is primarily due to a decrease in equity in income from investment and
an increase in total expenses, partially offset by an increase in total
revenues.
Total expenses, exclusive of the foreclosed properties, increased during the
three months ended March 31, 2004 primarily due to increases in operating
expenses and property tax expense partially offset by a decrease in depreciation
expense. Operating expenses increased during the three months ended March 31,
2004 primarily due to an increase in property expenses. Property expenses
increased primarily due to an increase in utility expenses at The Sterling
Commerce Center, The Knolls Apartments, Indian Creek Apartments and Tates Creek
Village Apartments. Property tax expense increased primarily due to the timing
of the receipt of the tax bills, which affected the recording of the associated
accrual at March 31, 2003 at Indian Creek Village Apartments. Depreciation
expense decreased due to capital improvements and replacements becoming fully
depreciated at The Sterling during 2003.
General and administrative expenses remained relatively constant for the three
month periods ended March 31, 2004 and 2003 as increases in the costs of
services included in the management reimbursements to the General Partner as
allowed under the Partnership Agreement were offset by reduced legal fees
associated with the foreclosures of the properties held by CCEP during 2003.
Also included in general and administrative expenses for the three months ended
March 31, 2004 and 2003 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
The increase in total revenues, exclusive of the foreclosed properties, during
the three months ended March 31, 2004 is primarily due to an increase in rental
income. Rental income increased primarily due to an increase in occupancy at The
Sterling Apartment Homes and Commerce Center, The Loft Apartments and Tates
Creek Village Apartments and a decrease in bad debt expense at The Sterling and
Indian Creek Village Apartments partially offset by a decrease in rental rates
at The Sterling Commerce Center, The Loft Apartments and The Knolls Apartments
and a decrease in occupancy at Indian Creek Village and The Knolls Apartments.
Equity in income from investment for the three months ended March 31, 2004 and
2003 is due to the recognition of the Partnership's share of distributions
received and recognized as earnings from affiliated partnerships in excess of
investment balance during the three months ended March 31, 2003. The Partnership
assumed investments in three affiliated partnerships during the foreclosure of
investment properties from CCEP as discussed above. These investments are
accounted for on the equity method of accounting. Distributions from the
affiliated partnerships are accounted for as a reduction of the investment
balance until the investment balance is reduced to zero. When the investment
balance has been reduced to zero, subsequent distributions received are
recognized as income in the accompanying statements of operations. During the
three months ended March 31, 2004, the Partnership recognized approximately
$58,000 in equity in income of investment related to the sale of a property in
Consolidated Capital Properties IV. There was no distribution associated with
this sale. During the three months ended March 31, 2003, the Partnership
received approximately $258,000 in distributions from two of the investments.
Approximately $243,000 of the distribution related to the sale of a property in
Consolidated Capital Growth Fund. Of this amount, approximately $236,000 was
recognized as equity in income from investment once the investment balance
allocated to that property had been reduced to zero. The Partnership also
recognized equity in income from investment of approximately $114,000 related to
the sale of a property in Consolidated Capital Properties IV. There was no
distribution associated with this sale.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $4,204,000 compared to approximately $1,212,000 at March 31, 2003.
Cash and cash equivalents increased approximately $1,787,000 since December 31,
2003 due to approximately $5,930,000 and $389,000 of cash provided by investing
and operating activities, respectively, partially offset by approximately
$4,532,000 of cash used in financing activities. Cash provided by investing
activities consisted of proceeds from the sale of Silverado Apartments partially
offset by property improvements and replacements and net deposits to escrow
accounts maintained by the mortgage lenders. Cash used in financing activities
consisted of principal payments made on the mortgages encumbering the
Partnership's properties, repayment of the mortgage note payable as a result of
the sale of Silverado Apartments, prepayment penalties paid and lease
commissions paid. The Partnership invests its working capital reserves in
interest bearing 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 various 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. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The General Partner monitors developments in the area of legal and regulatory
compliance and is studying new federal laws, including the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance
measures with regard to governance, disclosure, audit and other areas. In light
of these changes, the Partnership expects that it will incur higher expenses
related to compliance, including increased legal and audit fees. Capital
improvements planned for each of the Partnership's properties are detailed
below.
The Loft Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $17,000 of capital improvements at The Loft Apartments, consisting
primarily of floor covering replacements. These improvements were funded from
operating cash flow. The Partnership evaluates the capital improvement needs of
the property during the year and currently expects to complete an additional
$84,000 in capital improvements during the remainder of 2004. The additional
capital improvements will consist primarily of roof replacement and structural
improvements. 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.
The Sterling Apartment Homes and Commerce Center
During the three months ended March 31, 2004, the Partnership completed
approximately $346,000 of capital improvements at The Sterling Apartment Homes
and Commerce Center, consisting primarily of tenant improvements, floor covering
replacements and heating upgrades. These improvements were funded from operating
cash flow. The Partnership evaluates the capital improvement needs of the
property during the year and currently expects to complete an additional
$247,000 in capital improvements during the remainder of 2004. The additional
capital improvements will consist primarily of electrical and plumbing upgrades,
air conditioning unit replacements and structural improvements. 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.
The Knolls Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $35,000 of capital improvements at The Knolls Apartments
consisting primarily of floor covering and appliance replacements and other
building improvements. These improvements were funded from operating cash flow.
The Partnership evaluates the capital improvement needs of the property during
the year and currently expects to complete an additional $109,000 in capital
improvements during the remainder of 2004. The additional capital improvements
will consist primarily of interior and exterior building improvements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Indian Creek Village Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $21,000 of capital improvements at Indian Creek Village Apartments
consisting primarily of floor covering replacements. These improvements were
funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $130,000 in capital improvements during the remainder of
2004. The additional capital improvements will consist primarily of roof
replacement and fitness equipment. Additional improvements may be considered and
will depend on the physical condition of the property as well as anticipated
cash flow generated by the property.
Tates Creek Village Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $15,000 of capital improvements at Tates Creek Village Apartments
consisting primarily of floor covering and HVAC replacements. These improvements
were funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $97,000 in capital improvements during the remainder of
2004. The additional capital improvements will consist primarily of interior and
exterior building improvements. Additional improvements may be considered and
will depend on the physical condition of the property as well as anticipated
cash flow generated by the property.
Plantation Gardens Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $24,000 of capital improvements at Plantation Gardens Apartments
consisting primarily of floor covering and appliance replacements. These
improvements were funded from operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $181,000 in capital improvements during the remainder
of 2004. The additional capital improvements will consist primarily of interior
and exterior building improvements. Additional improvements may be considered
and will depend on the physical condition of the property as well as anticipated
cash flow generated by the property.
Palm Lake Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $23,000 of capital improvements at Palm Lake Apartments consisting
primarily of structural improvements and floor covering replacements. These
improvements were funded from operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $60,000 in capital improvements during the remainder
of 2004. The additional capital improvements will consist primarily of roof
replacement, swimming pool and structural improvements. Additional improvements
may be considered and will depend on the physical condition of the property as
well as anticipated cash flow generated by the property.
The Dunes Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $24,000 of capital improvements at The Dunes Apartments consisting
primarily of floor covering replacements. These improvements were funded from
operating cash flow. The Partnership evaluates the capital improvement needs of
the property during the year and currently expects to complete an additional
$86,000 in capital improvements during the remainder of 2004. The additional
capital improvements will consist primarily of security equipment and swimming
pool improvements. Additional improvements may be considered and will depend on
the physical condition of the property as well as anticipated cash flow
generated by the property.
Regency Oaks Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $74,000 of capital improvements at Regency Oaks Apartments
consisting primarily of floor covering, air conditioning unit and appliance
replacements. These improvements were funded from operating cash flow. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $115,000 in capital
improvements during the remainder of 2004. The additional capital improvements
will consist primarily of interior and exterior building improvements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Silverado Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $8,000 of capital improvements at Silverado Apartments, consisting
primarily of floor covering replacements. These improvements were funded from
operating cash flow. The property was sold to an unrelated third party on March
31, 2004.
The additional capital improvements at the Partnership's properties will be made
only to the extent of cash available from operations and 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 assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the Partnership's properties of approximately
$71,250,000 requires monthly payments of principal and interest and balloon
payments of approximately $3,903,000, $19,975,000 and $34,057,000 during 2005,
2008 and 2010, respectively. 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
may risk losing such properties through foreclosure.
The Partnership distributed the following amounts during the three months ended
March 31, 2004 and 2003 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2004 Unit March 31, 2003 Unit
Operations $ -- $ -- $ 362 $ 1.80
Sale (1) -- -- 1,631 8.19
$ -- $ -- $1,993 $ 9.99
(1) From the sale of Society Park Apartments owned by CCEP and received as a
principal payment on the Master Loan.
The Partnership's cash available for distribution is reviewed on a monthly
basis. 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. There can be no assurance that
the Partnership will generate sufficient funds from operations, after planned
capital improvement expenditures, to permit any distributions to its partners
during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 129,695.10 limited partnership units
(the "Units") in the Partnership representing 65.16% of the outstanding Units at
March 31, 2004. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. In this regard on February 20, 2004,
AIMCO Properties, L.P. commenced a tender offer to acquire any and all units for
a purchase price of $239.13 per Unit. The tender offer will expire on May 14,
2004. Pursuant to the Partnership Agreement, unitholders holding a majority of
the Units are entitled to take action with respect to a variety of matters that
would include, but are not limited to, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 65.16% of the outstanding Units, AIMCO and its affiliates are
in a position to control all such voting decisions with respect to the
Partnership. Although the General Partner owes fiduciary duties to the limited
partners of the Partnership, the General Partner also owes fiduciary duties to
AIMCO as its sole stockholder. As a result, the duties of the General Partner,
as general partner, to the Partnership and its limited partners may come into
conflict with the duties of the General Partner to AIMCO, its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost less accumulated depreciation, unless
considered impaired. The investment properties foreclosed upon in the third
quarter of 2002 and fourth quarter of 2003 were recorded at fair market value at
the time of the foreclosure. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in national, regional and local economic climate; local conditions,
such as an oversupply of multifamily properties; competition from other
available multifamily property owners and changes in market rental rates. Any
adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
The Partnership leases certain commercial space to tenants under various lease
terms. The leases are accounted for as operating leases in accordance with SFAS
No. 13, "Accounting for Leases". Some of the leases contain stated rental
increases during their term. For leases with fixed rental increases, rents are
recognized on a straight-line basis over the terms of the leases. For all other
leases, minimum rents are recognized over the terms of the leases.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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 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 March 31, 2004, a 100 point increase or decrease in
market interest rates would not have a material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at March 31,
2004. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of March 31, 2004.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 7.67%
(in thousands)
2004 $ 1,283
2005 5,731
2006 1,886
2007 2,035
2008 22,060
Thereafter 36,204
Total $ 69,199
ITEM 4. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. 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. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint (the "Heller action") was filed against the same defendants that are
named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Managing General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the Managing General Partner. The Complaint is styled as a Collective Action
under the FLSA and seeks to certify state subclasses in California, Maryland,
and the District of Columbia. Specifically, the plaintiffs contend that AIMCO
Properties L.P. failed to compensate maintenance workers for time that they were
required to be "on-call". Additionally, the Complaint alleges AIMCO Properties
L.P. failed to comply with the FLSA in compensating maintenance workers for time
that they worked in responding to a call while "on-call". The Defendants have
filed an answer to the Amended Complaint denying the substantive allegations.
Discovery is currently underway.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
S-K Reference
Number Description
Exhibit 3.1 Certificate of Limited
Partnership, as amended to date
(Exhibit 3 to the Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1991, is incorporated
herein by reference).
Exhibit 3.2 Agreement of Limited Partnership,
incorporated by reference to the
Registration Statement of the
Registrant (File No. 2-72384) filed
April 23, 1981, as amended to date.
Exhibit 3.3 Fee Owner's Limited Partnership
Agreement dated November 14, 1990
(incorporated by reference to the 1990
Annual Report).
Exhibit 10.33* Purchase and Sale contract
between Consolidated Capital Equity
Partner, LP, a California limited
partnership and Cash Investments of El
Paso, LLC, a Texas limited liability
company dated December 8, 2003.
Exhibit 10.34* Assignment of purchase and sale
contract between Consolidated
Capital Equity Partners, LP, a
California limited partnership and
CCIP Silverado, LP, a Delaware
limited partnership dated December
8, 2003.
Exhibit 10.35* Reinstatement and first
amendment to purchase and sale
contract by and between CCIP
Silverado, LP, a Delaware limited
partnership, assignee of Consolidated
Capital Equity Partners, LP, a
California limited liability
partnership,and Cash Investments of
El Paso, LLC, a Texas limited
liability company and EPT San Mateo
Apartments, LP, a Texas limited
liability partnership, assignee of
original purchaser dated
February 6, 2004.
Exhibit 31.1 Certification of equivalent of
Chief Executive Officer pursuant to
Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of equivalent of
Chief Financial Officer pursuant to
Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification Pursuant to 18
U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Schedules and supplemental materials to the exhibit filed
herewith have been omitted but will be provided to the
Securities and Exchange Commission upon request.
b) Reports on Form 8-K filed during the quarter ended March 31,
2004:
None filed during the quarter ended March 31, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2004
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Institutional Properties;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap
Equities, Inc., equivalent of the
chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Thomas M. Herzog, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Institutional Properties;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 13, 2004
/s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief
Accounting Officer of ConCap
Equities, Inc., equivalent of
the chief financial officer of
the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Consolidated Capital
Institutional Properties (the "Partnership"), for the quarterly period ended
March 31, 2004 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive
officer of the Partnership, and Thomas M. Herzog, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: May 13, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 10.33
PURCHASE AND SALE CONTRACT
BETWEEN
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.,
a California limited partnership
AS SELLER
AND
CASH INVESTMENTS OF EL PASO, LLC,
a Texas limited liability company
AS PURCHASER
SILVERADO APARTMENTS
TABLE OF CONTENTS
Page(s)
ARTICLE 1 DEFINED TERMS......................................................1
ARTICLE 2 PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT........................6
2.1 Purchase and Sale................................................6
2.2 Purchase Price and Deposit.......................................6
2.3 Escrow Provisions Regarding Deposit..............................6
ARTICLE 3 FEASIBILITY PERIOD.................................................8
3.1 Feasibility Period...............................................8
3.2 Expiration of Feasibility Period.................................8
3.3 Conduct of Investigation.........................................9
3.4 Purchaser Indemnification........................................9
3.5 Property Materials..............................................10
3.6 Property Contracts..............................................10
ARTICLE 4 TITLE.............................................................11
4.1 Title Documents.................................................11
4.2 Survey..........................................................11
4.3 Objection and Response Process..................................11
4.4 Permitted Exceptions............................................12
4.5 Assumed Encumbrances............................................12
ARTICLE 5 CLOSING...........................................................14
5.1 Closing Date....................................................14
5.2 Seller Closing Deliveries.......................................14
5.3 Purchaser Closing Deliveries....................................15
5.4 Closing Prorations and Adjustments..............................16
5.5 Post Closing Adjustments........................................19
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER............19
6.1 Seller's Representations........................................19
6.2 AS-IS...........................................................20
6.3 Survival of Seller's Representations............................21
6.4 Definition of Seller's Knowledge................................21
6.5 Representations And Warranties Of Purchaser.....................22
ARTICLE 7 OPERATION OF THE PROPERTY.........................................22
7.1 Leases and Property Contracts...................................22
7.2 General Operation of Property...................................23
7.3 Liens...........................................................23
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING...................................23
8.1 Purchaser's Conditions to Closing...............................23
8.2 ................................................................24
ARTICLE 9 BROKERAGE.........................................................24
9.1 Indemnity.......................................................24
9.2 Survival........................................................24
9.3 Broker Signature Page...........................................24
9.4 Texas Real Estate License Act...................................25
ARTICLE 10 DEFAULTS AND REMEDIES............................................25
10.1 Purchaser Default...............................................25
10.2 Seller Default..................................................25
ARTICLE 11 RISK OF LOSS OR CASUALTY.........................................26
11.1 Major Damage....................................................26
11.2 Minor Damage....................................................26
11.3 Repairs.........................................................26
ARTICLE 12 EMINENT DOMAIN...................................................27
12.1 Eminent Domain..................................................27
ARTICLE 13 MISCELLANEOUS....................................................27
13.1 Binding Effect of Contract......................................27
13.2 Exhibits And Schedules..........................................27
13.3 Assignability...................................................27
13.4 Binding Effect..................................................27
13.5 Captions........................................................27
13.6 Number And Gender Of Words......................................28
13.7 Notices.........................................................28
13.8 Governing Law And Venue.........................................29
13.9 Entire Agreement................................................30
13.10 Amendments......................................................30
13.11 Severability....................................................30
13.12 Multiple Counterparts/Facsimile Signatures......................30
13.13 Construction....................................................30
13.14 Confidentiality.................................................30
13.15 Time Of The Essence.............................................31
13.16 Waiver..........................................................31
13.17 Attorneys Fees..................................................31
13.18 Time Periods....................................................31
13.19 1031 Exchange...................................................31
13.20 No Personal Liability of Officers, Trustees or directors of
Seller's Partners.........................................................32
13.21 No Personal Liability of Officers, Trustees or directors of
Purchaser's Partners......................................................32
13.22 No Exclusive Negotiations.......................................32
13.23 ADA Disclosure..................................................32
13.24 No Recording....................................................32
13.25 Relationship of Parties.........................................32
13.26 Dispute Resolution..............................................33
13.27 AIMCO Marks.....................................................33
13.28 Non-Solicitation of Employees...................................33
13.29 Survival........................................................33
13.29 Multiple Purchasers.............................................33
ARTICLE 14 LEAD-BASED PAINT DISCLOSURE......................................34
14.1 Disclosure......................................................34
14.2 Consent Agreement...............................................34
PURCHASE AND SALE CONTRACT
THIS PURCHASE AND SALE CONTRACT ("Purchase Contract") is made and entered
into as of the 8th day of December, 2003 (the "Effective Date") by and between
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California limited partnership,
having an address at 4582 South Ulster Street Parkway, Suite 1100, Denver,
Colorado 80237 ("Seller"), and CASH INVESTMENTS OF EL PASO, LLC, a Texas limited
liability company, having a principal address at 8201 Lockheed, Spectrum
Building, El Paso, Texas 79925 ("Purchaser").
NOW, THEREFORE, in consideration of mutual covenants set forth herein,
Seller and Purchaser hereby agree as follows:
RECITALS
A.....Seller owns the real estate located in El Paso County, Texas, as
more particularly described in Exhibit A attached hereto and made a part hereof,
and the improvements thereon, commonly known as Silverado Apartments.
B.....Purchaser desires to purchase, and Seller desires to sell, such
land, improvements and certain associated property, on the terms and conditions
set forth below.
ARTICLE 1...
DEFINED TERMS
Unless otherwise defined herein, any term with its initial letter
capitalized in this Contract shall have the meaning set forth in this ARTICLE 1.
1.1.1 ....."ADA" shall have the meaning set forth in Section 13.22.
1.1.2 ....."Additional Deposit" shall have the meaning set forth in
Section 2.2.2.
1.1.3 ....."AIMCO" shall have the meaning set forth in Section 14.2.
1.1.4 ....."AIMCO Marks" means all words, phrases, slogans, materials, software,
proprietary systems, trade secrets, proprietary information and lists, and other
intellectual property owned or used by Seller, the Property Manager, or AIMCO in
the marketing, operation or use of the Property (or in the marketing, operation
or use of any other properties managed by the Property Manager or owned by AIMCO
or an affiliate of either Property Manager or AIMCO).
1.1.5 ....."Assumed Deed of Trust" shall have the meaning set forth in Section
4.5.1.
1.1.6 ....."Assumed Encumbrances" shall have the meaning set forth in Section
4.5.1.
1.1.7 ....."Assumed Loan Documents" shall have the meaning set forth in Section
4.5.1.
1.1.8 ....."Assumption Guidelines" shall mean the Lender's requirements and
conditions to obtaining its approval and consent to the assumption by Purchaser
of the Existing Financing (and to the release of Seller from liability
thereunder) at the Closing, as provided to Purchaser and Seller prior to the
expiration of the Feasibility Period.
1.1.9 ....."Broker" [Intentionally Omitted]..
1.1.10 ...."Business Day" means any day other than a Saturday or Sunday or
Federal holiday or legal holiday in the States of Colorado and State of Texas.
1.1.11 ...."Closing" means the consummation of the purchase and sale and related
transactions contemplated by this Contract in accordance with the terms and
conditions of this Contract.
1.1.12 ...."Closing Date" means the date on which date the Closing of the
conveyance of the Property is required to be held pursuant to Section 5.1.
1.1.13 ...."Code" shall have the meaning set forth in Section 2.3.6.
1.1.14 ...."Consent Contract" shall have the meaning set forth in
Section 14.2.
1.1.15 ...."Consultants" shall have the meaning set forth in Section 3.1.
1.1.16 ...."Damage Notice" shall have the meaning set forth in Section 11.1.
1.1.17 ...."Deed" shall have the meaning set forth in Section 5.2.1.
1.1.18 ...."Deposit" means, to the extent actually deposited by Purchaser with
Escrow Agent, the Initial Deposit and the Additional Deposit.
1.1.19 ...."Escrow Agent" shall have the meaning set forth in Section 2.2.1.
1.1.20 ...."Excluded Permits" means those Permits which, under applicable law,
are nontransferable and such other Permits, if any, as may be designated as
Excluded Permits on Schedule 1.1.20.
1.1.21 ...."Feasibility Period" shall have the meaning set forth in
Section 3.1.
1.1.22 ...."FHA" shall have the meaning set forth in Section 13.22.
1.1.23 ...."Final Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.24 ...."Fixtures and Tangible Personal Property" means all fixtures,
furniture, furnishings, fittings, equipment, machinery, apparatus, appliances
and other articles of tangible personal property located on the Land or in the
Improvements as of the Effective Date and used or usable in connection with the
occupation or operation of all or any part of the Property, but only to the
extent transferable. The term "Fixtures and Tangible Personal Property" does not
include (a) equipment leased by Seller and the interest of Seller in any
equipment provided to the Property for use, but not owned or leased by Seller,
or (b) property owned or leased by any Tenant or guest, employee or other person
furnishing goods or services to the Property, or (c) property and equipment
owned by Seller, which in the ordinary course of business of the Property is not
used exclusively for the business, operation or management of the Property, or
(d) the property and equipment, if any, expressly identified in Schedule 1.1.24.
1.1.25 ...."General Assignment" shall have the meaning set forth in
Section 5.2.3.
1.1.26 ...."Good Funds" shall have the meaning set forth in Section 2.2.1.
1.1.27 ...."Improvements" means all buildings and improvements located on
the Land taken "as is."
1.1.28 ...."Independent Contract Consideration" shall have the meaning set
forhtin section 2.2.3.
1.1.29 ...."Initial Deposit" shall have the meaning set forth in
Section 2.2.1.
1.1.30 ...."Land" means all of those certain tracts of land located in the State
of Texas described on Exhibit A, and all rights, privileges and appurtenances
pertaining thereto.
1.1.31 ...."Lease(s)" means the interest of Seller in and to all leases,
subleases and other occupancy contracts, whether or not of record, which provide
for the use or occupancy of space or facilities on or relating to the Property
and which are in force as of the Closing Date for the applicable Property.
1.1.32 ...."Leases Assignment" shall have the meaning set forth in
Section 5.2.4.
1.1.33 ...."Lender" shall have the meaning set forth in Section 4.5.1.
1.1.34 ...."Lender's Assumption Fees" shall have the meaning set forth in
Section 4.5.3.
1.1.35 ...."Loan" shall have the meaning set forth in Section 4.5.1.
1.1.36 ...."Loan Assumption and Release" shall have the meaning set forth in
Section 4.5.2.
1.1.37 ...."Loan Balance" shall have the meaning set forth in Section 2.2.3.
1.1.38 ...."Loan Payoff" shall have the meaning set forth in Section 4.5.2.
1.1.39 ...."Losses" shall have the meaning set forth in Section 3.4.1.
1.1.40 ...."Materials" shall have the meaning set forth in Section 3.5.
1.1.41 ...."Miscellaneous Property Assets" means all contract rights, leases,
concessions, warranties, plans, drawings and other items of intangible personal
property relating to the ownership or operation of the Property and owned by
Seller, excluding, however, (a) receivables, (b) Property Contracts, (c) Leases,
(d) Permits, (e) cash or other funds, whether in petty cash or house "banks," or
on deposit in bank accounts or in transit for deposit, (f) refunds, rebates or
other claims, or any interest thereon, for periods or events occurring prior to
the Closing Date, (g) utility and similar deposits, (h) insurance or other
prepaid items, (i) Seller's proprietary books and records, or (j) any right,
title or interest in or to the AIMCO Marks. The term "Miscellaneous Property
Assets" also shall include all of Seller's rights, if any, in and to the name
"Silverado Apartments" as it relates solely to use in connection with the
Property (and not with respect to any other property owned or managed by Seller,
Property Manager, AIMCO, or their respective affiliates).
1.1.42 ...."Note" shall have the meaning set forth in Section 4.5.1.
1.1.43 ...."Objection Deadline" shall have the meaning set forth in
Section 4.3.
1.1.44 ...."Objection Notice" shall have the meaning set forth in
Section 4.3.
1.1.45 ...."Objections" shall have the meaning set forth in Section 4.3.
1.1.46 ...."Permits" means all licenses and permits granted by any governmental
authority having jurisdiction over the Property owned by Seller and required in
order to own and operate the Property.
1.1.47 ...."Permitted Exceptions" shall have the meaning set forth in Section
4.4.
1.1.48 ...."Property" means (a) the Land and Improvements and all rights of
Seller, if any, in and to all of the easements, rights, privileges, and
appurtenances belonging or in any way appertaining to the Land and Improvements,
(b) the right, if any and only to the extent transferable, of Seller in the
Property Contracts, Leases, Permits (other than Excluded Permits), and the
Fixtures and Tangible Personal Property, and (c) the Miscellaneous Property
Assets owned by Seller which are located on the Property and used in its
operation.
1.1.49 ...."Property Contracts" means all purchase orders, maintenance, service,
or utility contracts and similar contracts, excluding Leases, which relate to
the ownership, maintenance, construction or repair and/or operation of the
Property, but only to the extent the assignment of such contract to Purchaser is
permitted pursuant to the express terms of such contract, and not including (a)
any national contracts entered into by Seller, Property Manager, or AIMCO with
respect to the Property (i) which terminate automatically upon transfer of the
Property by Seller, or (ii) which Seller elects to terminate with respect to the
Property effective as of the Closing Date or which Purchaser does not accept
assignment of, or (b) any property management contract for the Property.
1.1.50 ...."Property Contracts Notice" shall have the meaning set forth in
Section 3.6.
1.1.51 ...."Property Manager" means the current property manager of the
Property.
1.1.52 ...."Proration Schedule" shall have the meaning set forth in
Section 5.4.1.
1.1.53 ...."Purchase Price" means the consideration to be paid by Purchaser to
Seller for the purchase of the Property pursuant to Section 2.2.
1.1.54 ...."Regional Property Manager" shall have the meaning set forth in
Section 6.4.
1.1.55 ...."Remediation" shall have the meaning set forth in Section 14.2.
1.1.56 ...."Required Loan Fund Amounts" shall have the meaning set forth in
Section 4.5.3.
1.1.57 ...."Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.58 ...."Response Notice" shall have the meaning set forth in Section 4.3.
1.1.59 ...."Seller's Indemnified Parties" shall have the meaning set forth
in Section 3.4.1
1.1.60 ...."Seller's Representations" shall have the meaning set forth in
Section 6.1.
1.1.61 ...."Survey" shall have the meaning ascribed thereto in Section 4.2.
1.1.62 ...."Survival Period" shall have the meaning set forth in Section 6.3.
1.1.63 ...."Survival Provisions" shall have the meaning set forth in Section
13.28.
1.1.64 ...."Tenant" means any person or entity entitled to occupy any portion of
the Property under a Lease.
1.1.65 ...."Tenant Deposits" means all security deposits, prepaid rentals,
cleaning fees and other refundable deposits and fees collected from Tenants,
plus any interest accrued thereon, paid by Tenants to Seller pursuant to the
Leases. Tenant deposits shall not included any non-refundable deposits or fees
paid by Tenants to Seller, either pursuant to the Leases or otherwise.
1.1.66 ...."Tenant Security Deposit Balance" shall have the meaning set forth in
Section 5.4.6.2.
1.1.67 ...."Terminated Contracts" shall have the meaning set forth in Section
3.6.
1.1.68 ...."Testing" shall have the meaning set forth in Section 14.2.
1.1.69 ...."Third Party Reports" means any reports, studies or other information
prepared or compiled for Purchaser by an Consultant or other third party in
connection with Purchaser's investigation of the Property.
1.1.70 ...."Title Commitment" shall have the meaning ascribed thereto in Section
4.1.
1.1.71 ...."Title Documents" shall have the meaning set forth in Section 4.1.
1.1.72 ...."Title Insurer" shall have the meaning set forth in Section 2.2.1.
1.1.73 ...."Title Policy" shall have the meaning set forth in Section 4.1.
1.1.74 ...."Uncollected Rents" shall have the meaning set forth in Section
5.4.6.1.
1.1.75 ...."Vendor Terminations" shall have the meaning set forth in Section
5.2.5.
ARTICLE 2...
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT
2.1 Purchase and Sale. Seller agrees to sell and convey the Property to
Purchaser and Purchaser agrees to purchase the Property from Seller, all in
accordance with the terms and conditions set forth in this Contract.
2.2 Purchase Price and Deposit. The total purchase price ("Purchase Price") for
the Property shall be $6,550,000.00, which shall be paid by Purchaser, as
follows:
2.2.1 .....Not later than 1 Business Day following the Effective Date, Purchaser
shall deliver to Stewart Title Guaranty Company, c/o Wendy Howell, National
Commercial Closing Specialist, 1980 Post Oak Boulevard, Suite 610, Houston,
Texas 77056, (800) 729-1906 ("Escrow Agent" or "Title Insurer") a deposit (the
"Deposit") of $64,500.00 in cash or other immediately available funds ("Good
Funds"). The Initial Deposit shall be held and disbursed in accordance with the
escrow provisions set forth in Section 2.3.
2.2.2 .....On the day that the Feasibility Period expires, Purchaser shall
deliver to Escrow Agent an additional deposit (the "Additional Deposit") of
$64,500.00 by wire transfer of Good Funds. The Additional Deposit shall be held
and disbursed in accordance with the escrow provisions set forth in Section 2.3.
2.2.3 .....In addition to the Deposit, Seller and Purchaser agree that the
amount of One Hundred and No/100 Dollars ($100.00) shall be paid by Purchaser to
Seller concurrently with the deposit into escrow of the Deposit, as
consideration for Seller's execution and delivery of this Purchase Contract (the
"Independent Contract Consideration"). The Independent Contract Consideration is
independent of any other consideration or payment provided for in this Purchase
Contract and, notwithstanding anything to the contrary herein, is non-refundable
in all events.
2.2.4 .....At the Closing, subject to Purchaser's obligations under Section 4.5,
Purchaser shall receive a credit against the Purchase Price in the amount of the
outstanding principal balance of the Note, together with all accrued but unpaid
interest (if any) thereon, as of the Closing Date (the "Loan Balance") to the
extent that the Loan Assumption and Release occurs at the Closing.
2.2.5 .....The balance of the Purchase Price for the Property shall be paid to
and received by Escrow Agent in Good Funds no later than 12:00 a.m. (Houston,
Texas, time) on the Closing Date (or such earlier time as required by Seller's
lender).
2.3 Escrow Provisions Regarding Deposit.
2.3.1 .....Escrow Agent shall hold the Deposit and make delivery of the Deposit
to the party entitled thereto under the terms of this Contract. Escrow Agent
shall invest the Deposit in such short-term, high-grade securities,
interest-bearing bank accounts, money market funds or accounts, bank
certificates of deposit or bank repurchase contracts as Escrow Agent, in its
discretion, deems suitable, and all interest and income thereon shall become
part of the Deposit and shall be remitted to the party entitled to the Deposit
pursuant to this Contract.
2.3.2 .....Escrow Agent shall hold the Deposit until the earlier occurrence of
(i) the Closing Date, at which time the Deposit shall be applied against the
Purchase Price, or (ii) the date on which Escrow Agent shall be authorized to
disburse the Deposit as set forth in Section 2.3.3. The tax identification
numbers of the parties shall be furnished to Escrow Agent upon request.
2.3.3 .....If the Deposit has not been released earlier in accordance with
Section 2.3.2, and either party makes a written demand upon Escrow Agent for
payment of the Deposit, Escrow Agent shall give written notice to the other
party of such demand. If Escrow Agent does not receive a written objection from
the other party to the proposed payment within 5 Business Days after the giving
of such notice, Escrow Agent is hereby authorized to make such payment (subject
to Purchaser's obligation under Section 3.5.2 to return all Third Party Reports
and information and Materials provided to Purchaser as a pre-condition to the
return of the Deposit to Purchaser). If Escrow Agent does receive such written
objection within such 5-Business Day period, Escrow Agent shall continue to hold
such amount until otherwise directed by written instructions from the parties to
this Contract or a final judgment or arbitrator's decision. However, Escrow
Agent shall have the right at any time to deposit the Deposit and interest
thereon, if any, with a court of competent jurisdiction in the state in which
the Property is located. Escrow Agent shall give written notice of such deposit
to Seller and Purchaser. Upon such deposit, Escrow Agent shall be relieved and
discharged of all further obligations and responsibilities hereunder.
2.3.4 .....The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, that Escrow Agent shall
not be deemed to be the agent of either of the parties for any act or omission
on its part unless taken or suffered in bad faith in willful disregard of this
Contract or involving gross negligence or illegal acts. Seller and Purchaser
jointly and severally shall indemnify and hold Escrow Agent harmless from and
against all costs, claims and expenses, including reasonable attorney's fees,
incurred in connection with the performance of Escrow Agent's duties hereunder,
except with respect to actions or omissions taken or suffered by Escrow Agent in
bad faith, in willful disregard of this Contract or involving gross negligence
on the part of the Escrow Agent.
2.3.5 .....The parties shall deliver to Escrow Agent an executed copy of this
Contract, which shall constitute the sole instructions to Escrow Agent. Escrow
Agent shall execute the signature page for Escrow Agent attached hereto with
respect to the provisions of this Section 2.3; provided, however, that (a)
Escrow Agent's signature hereon shall not be a prerequisite to the binding
nature of this Contract on Purchaser and Seller, and the same shall become fully
effective upon execution by Purchaser and Seller, and (b) the signature of
Escrow Agent will not be necessary to amend any provision of this Contract other
than this Section 2.3.
2.3.6 .....Escrow Agent, as the person responsible for closing the transaction
within the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), shall file all necessary information, reports,
returns, and statements regarding the transaction required by the Code
including, but not limited to, the tax reports required pursuant to Section 6045
of the Code. Further, Escrow Agent agrees to indemnify and hold Purchaser,
Seller, and their respective attorneys harmless from and against any Losses
resulting from Escrow Agent's failure to file the reports Escrow Agent is
required to file pursuant to this section.
2.3.7 .....The provisions of this Section 2.3 shall survive the termination of
this Contract, and if not so terminated, the Closing and delivery of the Deed to
Purchaser.
ARTICLE 3...
FEASIBILITY PERIOD
3.1 Feasibility Period. Subject to the terms of Section 3.3 and 3.4 and the
right of Tenants under the Leases, from the Effective Date to and including the
date which is 30 days after the Effective Date (the "Feasibility Period"),
Purchaser, and its agents, contractors, engineers, surveyors, attorneys, and
employees (collectively, "Consultants") shall have the right from time to time
to enter onto the Property:
3.1.1 .....To conduct and make any and all customary studies, tests,
examinations, inquiries, and inspections, or investigations (collectively, the
"Inspections") of or concerning the Property (including, without limitation,
engineering and feasibility studies, evaluation of drainage and flood plain,
soil tests for bearing capacity and percolation and surveys, including
topographical surveys);
3.1.2 .....To confirm any and all matters which Purchaser may reasonably desire
to confirm with respect to the Property;
3.1.3 .....To ascertain and confirm the suitability of the Property for
Purchaser's intended use of the Property; and
3.1.4 .....To review the Materials at Purchaser's sole cost and expense.
3.2 Expiration of Feasibility Period. If the results of any of the matters
referred to in Section 3.1 appear unsatisfactory to Purchaser for any reason or
if Purchaser elects not to proceed with the transaction contemplated by this
Contract for any other reason, or for no reason wha