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 June 30, 2004
or
[ ] 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
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No___
Indicate by check mark 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)
June 30, December 31,
2004 2003
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 3,665 $ 2,417
Receivables and deposits 788 404
Restricted escrows 816 922
Other assets 1,676 999
Investment in affiliated partnerships (Note D) 1,067 992
Investment properties:
Land 20,365 22,780
Buildings and related personal property 92,740 100,078
113,105 122,858
Less: Accumulated depreciation (25,383) (23,194)
87,722 99,664
$ 95,734 $105,398
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 574 $ 211
Tenant security deposit liabilities 891 964
Accrued property taxes 492 564
Other liabilities 1,340 1,499
Due to affiliates (Note C) 349 255
Mortgage notes payable 66,699 75,195
70,345 78,688
Partners' Capital
General partner 133 128
Limited partners (199,043.2 units issued and
outstanding) 25,256 26,582
25,389 26,710
$ 95,734 $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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenues: (Restated) (Restated)
Rental income $ 5,302 $ 3,466 $10,657 $ 6,892
Other income 556 299 1,050 571
Casualty (loss) gain (26) 25 (26) 25
Total revenues 5,832 3,790 11,681 7,488
Expenses:
Operating 3,014 1,630 5,702 3,360
General and administrative 222 269 485 527
Depreciation 1,318 916 2,671 1,842
Interest 1,168 785 2,308 1,564
Property taxes 423 258 866 468
Total expenses 6,145 3,858 12,032 7,761
Loss from continuing operations (313) (68) (351) (273)
(Loss) income from discontinued
operations (Notes A and E) (449) 36 (1,100) 68
Gain on sale of discontinued
operations (Note E) 283 -- 1,716 --
Gain on foreclosure of real
estate (Note B) 156 -- 156 --
Equity in income from investment
(Note D) 17 -- 75 350
Net (loss) income $ (306) $ (32) $ 496 $ 145
Net (loss) income allocated to general
Partner (1%) $ (3) $ -- $ 5 $ 1
Net (loss) income allocated to limited
partners (99%) (303) (32) 491 144
$ (306) $ (32) $ 496 $ 145
Per limited partnership unit:
Loss from continuing operations (1.56) (.34) (1.74) (1.36)
(Loss) income from discontinued
operations (2.23) .18 (5.47) 0.34
Gain on sale of discontinued operations 1.41 -- 8.54 --
Gain on foreclosure of real estate 0.77 -- 0.77 --
Equity in income from investment 0.09 -- 0.37 1.74
Net (loss) income per limited
partnership unit $ (1.52) $ (.16) $ 2.47 $ 0.72
Distributions per limited partnership
Unit $ 9.13 $ 1.75 $ 9.13 $ 11.74
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
Distributions to partners -- -- (1,817) (1,817)
Net income for the six months
ended June 30, 2004 -- 5 491 496
Partners' capital at
June 30, 2004 199,043.2 $ 133 $ 25,256 $ 25,389
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income $ 496 $ 145
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,808 2,029
Amortization of loan costs, lease commissions and
mortgage premiums (121) (30)
Casualty loss (gain) 26 (25)
Equity in income of investment (75) (350)
Gain on sale of discontinued operations (1,716) --
Loss on early extinguishment of debt 1,161 --
Gain on foreclosure of real estate (156) --
Change in accounts:
Receivables and deposits (373) 158
Other assets (738) (684)
Accounts payable 17 88
Tenant security deposit liabilities (73) (1)
Accrued property taxes (72) (57)
Other liabilities (159) (484)
Due to affiliates 94 --
Net cash provided by operating activities 1,119 789
Cash flows from investing activities:
Net proceeds from sale of discontinued operations 12,589 --
Net receipts from (deposits to) restricted escrows 106 (36)
Property improvements and replacements (1,461) (737)
Insurance proceeds received 42 73
Receipts on Master Loan 156 15
Distributions from affiliated partnerships -- 258
Net cash provided by (used in) investing activities 11,432 (427)
Cash flows from financing activities:
Distributions to partners (1,817) (2,343)
Payments on mortgage notes payable (854) (554)
Repayment of mortgage note payable (7,099) --
Prepayment penalties (1,527) --
Lease commissions, paid (6) (38)
Advances from general partner -- 32
Repayment of advances from general partner -- (32)
Net cash used in financing activities (11,303) (2,935)
Net increase (decrease) in cash and cash equivalents 1,248 (2,573)
Cash and cash equivalents at beginning of period 2,417 3,175
Cash and cash equivalents at end of period $ 3,665 $ 602
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,676 $ 2,040
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable $ 222 $ --
Insurance proceeds in accounts receivable $ 11 $ --
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 and six
month periods ended June 30, 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 sales of Silverado Apartments and Tates Creek Village
Apartments to third parties during the six months ended June 30, 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 statements of operations for the three and six months
ended June 30, 2003 have been restated as of January 1, 2003 to reflect the
operations of Silverado Apartments and Tates Creek Village Apartments as income
from discontinued operations of approximately $36,000 and $68,000 for the three
and six months ended June 30, 2003, respectively, including revenues of
approximately $691,000 and $1,365,000, respectively.
Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also 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 was 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 and six months ended June 30, 2004 and
2003. The results of operations for the four properties foreclosed on in
November 2003 are included in the three and six months ended June 30, 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 $881,000 for the six months
ended June 30, 2003. Interest income was recognized on the cash basis as
required by SFAS 114.
During the six months ended June 30, 2004, the Partnership received
approximately $156,000 from CCEP as the final payment on the Master Loan. During
the six months ended June 30, 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 six months
ended June 30, 2003 or 2004.
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 $634,000 and $453,000 for
the six months ended June 30, 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 $465,000 and $248,000 for the
six months ended June 30, 2004 and 2003, respectively which is included in
general and administrative expenses and investment properties. Included in these
amounts are fees related to construction management services provided by an
affiliate of the General Partner of approximately $88,000 and $23,000 for the
six months ended June 30, 2004 and 2003, respectively. The construction
management fees are calculated based on a percentage of current year additions
to investment properties.
In connection with the sale of Silverado Apartments on March 31, 2004 (see "Note
E"), the General Partner earned a disposition fee of approximately $333,000. The
fee is included in gain on sale of discontinued operations and was paid during
the six months ended June 30, 2004. In connection with the sale of Tates Creek
Village Apartments on June 28, 2004 the General Partner earned a disposition fee
of approximately $349,000. 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 the six months ended June 30, 2004 and 2003, the Partnership was
charged by AIMCO and its affiliates approximately $190,000 and $212,000,
respectively, for insurance coverage and fees associated with policy claims
administration.
Note D - Investment in Affiliated Partnerships
Ownership Investment Balance
Partnership Type of Ownership Percentage June 30, 2004
(in thousands)
Consolidated Capital Non-controlling
Growth Fund General Partner 0.40% $ 13
Consolidated Capital Non-controlling
Properties III General Partner 1.85% 27
Consolidated Capital Non-controlling
Properties IV General Partner 1.85% 1,027
$1,067
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 six months ended June 30, 2004, the Partnership
recognized approximately $75,000 in equity in income from investment primarily
related to the sale of a property in Consolidated Capital Properties IV. There
was no distribution associated with this sale. During the six months ended June
30, 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.
Note E - Sale of Investment Property
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to a third party for $6,650,000. After payment of closing costs,
the net sales proceeds received by the Partnership were approximately
$6,169,000. 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 $1,510,000 during the six
months ended June 30, 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 from discontinued operations. Pursuant to the
Partnership Agreement and in conjunction with the sale, a disposition fee of
approximately $333,000 was earned by and paid to the General Partner during the
six months ended June 30, 2004. Included in (loss) income from discontinued
operations for the three months ended June 30, 2004 and 2003 are results of the
property's operations of approximately $(23,000) and $11,000, respectively,
including revenues of approximately $1,000 and $347,000, respectively. Included
in (loss) income from discontinued operations for the six months ended June 30,
2004 and 2003 are results of the property's operations of approximately
$(672,000) and $35,000, respectively, including revenues of approximately
$339,000 and $688,000, respectively.
On June 28, 2004, the Partnership sold Tates Creek Village Apartments, located
in Lexington, Kentucky, to a third party for $6,980,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $6,420,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,851,000. The
sale resulted in a gain on sale of investment property of approximately $206,000
during the six months ended June 30, 2004. In addition, the Partnership recorded
a loss on early extinguishment of debt of approximately $476,000 as a result of
prepayment penalties paid, partially offset by the write off of the unamortized
mortgage premium which is included in loss from discontinued operations.
Pursuant to the Partnership Agreement and in conjunction with the sale, a
disposition fee of approximately $349,000 was earned by the General Partner
which was accrued and is included in due to affiliates. The fee was paid
subsequent to June 30, 2004. Included in (loss) income from discontinued
operations for the three months ended June 30, 2004 and 2003 are results of the
property's operations of approximately $(426,000) and $25,000, respectively,
including revenues of approximately $345,000 and $344,000, respectively.
Included in (loss) income from discontinued operations for the six months ended
June 30, 2004 and 2003 are results of the property's operations of approximately
$(428,000) and $33,000, respectively, including revenues of approximately
$704,000 and $677,000, 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 seven apartment complexes one each in North Carolina,
Colorado and Kansas, 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 six 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 and six months ended June 30, 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.
For the three months ended
June 30, 2004 Residential Commercial Other Totals
Rental income $ 4,935 $ 367 $ -- $ 5,302
Other income 534 21 1 556
Casualty loss (26) -- -- (26)
Equity in income of investment -- -- 17 17
Interest expense 1,109 55 4 1,168
Depreciation 1,246 72 -- 1,318
General and administrative expenses -- -- 222 222
Gain on sale of investment 283 -- -- 283
Loss from discontinued operations (449) -- -- (449)
Gain on foreclosure of real estate 156 -- -- 156
Segment profit (loss) 35 (133) (208) (306)
For the six months ended
June 30, 2004 Residential Commercial Other Totals
Rental income $ 9,946 $ 711 $ -- $10,657
Other income 996 52 2 1,050
Casualty loss (26) -- -- (26)
Equity in income of investment -- -- 75 75
Interest expense 2,193 111 4 2,308
Depreciation 2,540 131 -- 2,671
General and administrative expense -- -- 485 485
Gain on sale of investment 1,716 -- -- 1,716
Loss from discontinued operations (1,100) -- -- (1,100)
Gain on foreclosure of real estate 156 -- -- 156
Segment profit (loss) 1,247 (339) (412) 496
Total assets 90,438 1,620 3,676 95,734
Capital expenditures 1,117 566 -- 1,683
For the three months ended
June 30, 2003 Residential Commercial Other Totals
(restated)
Rental income $ 3,223 $ 243 $ -- $ 3,466
Other income 270 29 -- 299
Casualty gain 25 -- -- 25
Income from discontinued
operations 36 -- -- 36
Interest expense 729 56 -- 785
Depreciation 874 42 -- 916
General and administrative expense -- -- 269 269
Segment profit (loss) 391 (154) (269) (32)
For the six months ended
June 30, 2003 Residential Commercial Other Totals
(restated)
Rental income $ 6,391 $ 501 $ -- $ 6,892
Other income 515 56 -- 571
Casualty gain 25 -- -- 25
Equity in income of investment -- -- 350 350
Income from discontinued
operations 68 -- -- 68
Interest expense 1,452 112 -- 1,564
Depreciation 1,758 84 -- 1,842
General and administrative expense -- -- 527 527
Segment profit (loss) 628 (306) (177) 145
Total assets 63,855 881 15,318 80,054
Capital expenditures 682 55 -- 737
Note G - Casualty (Loss) Gain
During the six months ended June 30, 2004, there was a casualty loss of
approximately $26,000 recorded at Regency Oaks Apartments related to a fire that
damaged four apartment units. The loss was the result of the write off of net
fixed assets of approximately $79,000, net of the receipt of insurance proceeds
of approximately $42,000 and a receivable for an additional $11,000 of insurance
proceeds.
During the six months ended June 30, 2003, there was a casualty gain of
approximately $25,000 recorded at The Sterling Apartment Homes related to an
electrical fire that damaged two units. This gain was the result of the receipt
of insurance proceeds of approximately $73,000, net of the write off of net
fixed assets of approximately $48,000.
Note H - Subsequent Distribution
Subsequent to June 30, 2004, the Partnership declared and paid a distribution to
the limited partners of approximately $2,315,000 (approximately $11.63 per
limited partnership unit). Approximately $2,276,000 (approximately $11.43 per
limited partnership unit) related to the sale of Tates Creek Village Apartments
on June 28, 2004 and the sale of Silverado Apartments on March 31, 2004, and
approximately $39,000, (approximately $0.20 per limited partnership unit)
related to operations.
Note I - 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. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
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.
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 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. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its 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 financial condition or results of operations taken
as a whole.
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.
As previously disclosed, 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 eight 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 six months ended June 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
The Loft Apartments (3) 83% 80%
Raleigh, North Carolina
The Sterling Apartment Homes 94% 92%
The Sterling Commerce Center (1) 78% 55%
Philadelphia, Pennsylvania
The Knolls Apartments (2) 79% 83%
Colorado Springs, Colorado
Indian Creek Village Apartments (2) 86% 91%
Overland Park, Kansas
Plantation Gardens Apartments (2) 88% 92%
Plantation, Florida
Palm Lake Apartments 93% 92%
Tampa, Florida
The Dunes Apartments (3) 94% 90%
Indian Harbor, Florida
Regency Oaks Apartments 93% 95%
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,
Indian Creek Village and Plantation Gardens 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 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 (loss) income for the three and six months ended June 30,
2004 was approximately ($306,000) and $496,000 compared to net (loss) income of
approximately ($32,000) and $145,000 for the corresponding periods in 2003. The
increase in net loss for the three months ended June 30, 2004 as compared to the
three months ended June 30, 2003 is due to the loss from continuing operations
partially offset by an increase in equity in income from investment. The
increase in net income for the six months ended June 30, 2004 is largely due to
the sale of Silverado and Tates Creek Apartments during the six months ended
June 30, 2004.
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to a third party for $6,650,000. After payment of closing costs,
the net sales proceeds received by the Partnership were approximately
$6,169,000. 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 $1,510,000 during the six
months ended June 30, 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 from discontinued operations. Pursuant to the
Partnership Agreement and in conjunction with the sale, a disposition fee of
approximately $333,000 was earned by and paid to the General Partner during the
six months ended June 30, 2004.
On June 28, 2004, the Partnership sold Tates Creek Village Apartments, located
in Lexington, Kentucky, to a third party for $6,980,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $6,420,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,851,000. The
sale resulted in a gain on sale of investment property of approximately $206,000
during the six months ended June 30, 2004. In addition, the Partnership recorded
a loss on early extinguishment of debt of approximately $476,000 as a result of
prepayment penalties paid partially offset by the write off of the unamortized
mortgage premium which is included in loss from discontinued operations.
Pursuant to the Partnership Agreement and in conjunction with the sale, a
disposition fee of approximately $349,000 was earned by the General Partner
which was accrued and is included in due to affiliates. The fee was paid
subsequent to June 30, 2004.
As a result of the sales of Silverado Apartments and Tates Creek Village
Apartments to third parties during the six months ended June 30, 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 statements of operations for the three and six months
ended June 30, 2003 have been restated as of January 1, 2003 to reflect the
operations of Silverado Apartments and Tates Creek Village Apartments as income
from discontinued operations of approximately $68,000 for the six months ended
June 30, 2003, including revenues of approximately $1,365,000. For the three
months ended June 30, 2003 income from discontinued operations was approximately
$36,000, including revenues of approximately $691,000.
The increase in equity in income from investment for the three months ended June
30, 2004 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 June 30, 2004. The Partnership
assumed investments in three affiliated partnerships during the foreclosure of
investment properties from CCEP as discussed below. 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
six months ended June 30, 2004, the Partnership recognized approximately $75,000
in equity in income from investment primarily related to the sale of a property
in Consolidated Capital Properties IV. There was no distribution associated with
this sale. During the six months ended June 30, 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.
The Partnership recognized a loss from continuing operations for the three and
six months ended June 30, 2004 of approximately $313,000 and $351,000 compared
to approximately $68,000 and $273,000 for the corresponding periods in 2003. The
increase in loss from continuing operations for the three and six months ended
June 30, 2004, is due to an increase in total expenses partially offset by an
increase in total revenues. 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. During the three months ended June
30, 2004 the Partnership recognized a gain on foreclosure of real estate of
approximately $156,000. The gain on the foreclosure was primarily the result of
CCEP's remaining funds being sent to the Partnership. The remaining funds were
primarily a refund of reimbursement of accountable administrative expenses from
an affiliate of the General Partner.
For the three and six months ended June 30, 2004, the four properties foreclosed
in 2003 had income of approximately $54,000 and $185,000, respectively, which
includes revenues of approximately $2,042,000 and $4,114,000, respectively.
Exclusive of the items related to the operations of the properties foreclosed in
2003, the Partnership recognized a net loss from continuing operations,
including equity in income from investment, for the three and six months ended
June 30, 2004 of approximately $342,000 and $462,000 compared to a net loss from
continuing operations of approximately $68,000 for the three months ended June
30, 2003 and net income of $77,000 for the six months ended June 30, 2003. The
increase in net loss from continuing operations for the three months ended June
30, 2004 as compared to the three months ended June 30, 2003 is primarily due to
an increase in total expenses and a slight decrease in total revenues. The
decrease in net income from continuing operations for the six months ended June
30, 2004 as compared to the six months ended June 30, 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 properties foreclosed in 2003, increased during
the six months ended June 30, 2004 primarily due to increases in operating and
property tax expenses partially offset by decreases in interest, depreciation
and general and administrative expenses. Total expenses increased for the three
months ended June 30, 2004 due to an increase in operating expenses partially
offset by decreases in interest and general and administrative expenses.
Operating expenses increased during the three and six months ended June 30, 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 Sterling Apartment Homes, The Knolls Apartments and Indian Creek
Apartments, an increase in salaries and other related benefits at The Knolls
Apartments partially offset by a decrease in salaries and other related benefits
at The Sterling Apartment Homes. Property tax expense increased during the six
months ended June 30, 2004 primarily due to the timing of the receipt of the tax
bills at Indian Creek Village Apartments. Interest expense decreased due to
principal payments made on the mortgage notes encumbering the Partnership's
properties. Depreciation expense decreased during the six months ended June 30,
2004 primarily due to assets becoming fully depreciated at The Sterling
Apartment Homes.
General and administrative expenses decreased for the three and six months
periods ended June 30, 2004 and 2003 primarily due to the timing of the payment
of a business privilege tax paid to the city of Philadelphia during the six
months ended June 30, 2003 and reduced legal fees associated with the
foreclosures of the properties held by CCEP during 2003 partially offset by
increases in the costs of services included in the management reimbursements to
the General Partner as allowed under the Partnership Agreement. Also included in
general and administrative expenses for the three and six month periods ended
June 30, 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 properties foreclosed in 2003,
during the six months ended June 30, 2004 as compared to the six months ended
June 30, 2003 is primarily due to an increase in rental income partially offset
by a casualty gain at The Sterling Apartment Homes during the six months ended
June 30, 2003. Rental income increased primarily due to increases in occupancy
at The Sterling Apartment Homes and Commerce Center, and The Loft Apartments, an
increase in rental rates at The Sterling Apartment Homes, and a decrease in bad
debt expense at The Sterling Commerce Center and Indian Creek Village Apartments
partially offset by a decrease in rental rates at The Sterling Commerce Center,
Indian Creek Village, The Loft and The Knolls Apartments and a decrease in
occupancy at Indian Creek Village, and The Knolls Apartments.
During the six months ended June 30, 2004, there was a casualty loss of
approximately $26,000 recorded at Regency Oaks Apartments related to a fire that
damaged four apartment units. The loss was the result of the write off of net
fixed assets of approximately $79,000, net of the receipt of insurance proceeds
of approximately $42,000 and a receivable for an additional $11,000 of insurance
proceeds.
During the six months ended June 30, 2003, there was a casualty gain of
approximately $25,000 recorded at The Sterling Apartment Homes related to an
electrical fire that damaged two units. This gain was the result of the receipt
of insurance proceeds of approximately $73,000, net of the write off of net
fixed assets of approximately $48,000.
Liquidity and Capital Resources
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$3,665,000 compared to approximately $602,000 at June 30, 2003. Cash and cash
equivalents increased approximately $1,248,000 since December 31, 2003 due to
approximately $11,432,000 and $1,119,000 of cash provided by investing and
operating activities, respectively, partially offset by approximately
$11,303,000 of cash used in financing activities. Cash provided by investing
activities consisted of proceeds from the sale of Silverado and Tates Creek
Village Apartments, insurance proceeds received, receipts on the Master Loan and
withdrawals from escrow accounts maintained by the mortgage lenders, partially
offset by property improvements and replacements. Cash used in financing
activities consisted of principal payments made on the mortgages encumbering the
Partnership's properties, repayment of the mortgage notes payable as a result of
the sale of Silverado and Tates Creek Village Apartments, prepayment penalties
paid, distributions to partners 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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance. For example, 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 six months ended June 30, 2004, the Partnership completed
approximately $60,000 of capital improvements at The Loft Apartments, consisting
primarily of floor covering replacements and fitness equipment 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 $41,000 in capital improvements during the remainder
of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $898,000 of capital improvements at The Sterling Apartment Homes
and Commerce Center, consisting primarily of tenant improvements, floor covering
replacements, interior decorating and heating upgrades. These improvements were
funded from operating cash flow and replacement reserves. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $2,263,000 in capital improvements
during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $132,000 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 $12,000 in capital
improvements during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $90,000 of capital improvements at Indian Creek Village Apartments
consisting primarily of floor covering replacements and parking lot resurfacing.
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 $61,000 in capital improvements
during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $93,000 of capital improvements at Plantation Gardens Apartments
consisting primarily of floor covering and appliance replacements and parking
area resurfacing. 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 $112,000 in capital
improvements during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $77,000 of capital improvements at Palm Lake Apartments consisting
primarily of roof replacement, 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 $214,000 in capital
improvements during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $59,000 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
$51,000 in capital improvements during the remainder of 2004. 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 six months ended June 30, 2004, the Partnership completed
approximately $238,000 of capital improvements at Regency Oaks Apartments
consisting primarily of floor covering, air conditioning unit and appliance
replacements, structural improvements and reconstruction of damages caused by a
fire at the property. These improvements were funded from operating cash flow
and insurance proceeds. The Partnership evaluates the capital improvement needs
of the property during the year and currently expects to complete an additional
$290,000 in capital improvements during the remainder of 2004. 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 six months ended June 30, 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 a third party on March 31, 2004.
Tates Creek Village Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $28,000 of capital improvements at Tates Creek Village Apartments
consisting primarily of floor covering replacements. These improvements were
funded from operating cash flow. The property was sold to a third party on June
28, 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
$66,669,000 requires monthly payments of principal and interest and balloon
payments of approximately $3,903,000, $19,975,000 and $31,040,000 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 six months ended
June 30, 2004 and 2003 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2004 Unit June 30, 2003 Unit
Operations $ -- $ -- $ 712 $ 3.55
Sale (1) -- -- 1,631 8.19
Sale (2) 1,817 9.13 -- --
$1,817 $ 9.13 $2,343 $11.74
(1) From the sale of Society Park Apartments owned by CCEP and received as a
principal payment on the Master Loan.
(2) From the sale of Silverado Apartments
Subsequent to June 30, 2004, the Partnership declared and paid a distribution to
the limited partners of approximately $2,315,000 (approximately $11.63 per
limited partnership unit). Approximately $2,276,000 (approximately $11.43 per
limited partnership unit) related to the sale of Tates Creek Village Apartments
on June 28, 2004 and the sale of Silverado Apartments on March 31, 2004 and
approximately $39,000, (approximately $0.20 per limited partnership unit)
related to operations.
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 further 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 138,183.20 limited partnership units
(the "Units") in the Partnership representing 69.42% of the outstanding Units at
June 30, 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. 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 69.42% 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 June 30, 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 June 30,
2004. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of June 30, 2004.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 8.06%
(in thousands)
2004 $ 777
2005 5,604
2006 1,750
2007 1,887
2008 21,900
Thereafter 32,984
Total $ 64,902
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 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. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
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.
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 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. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its 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 financial condition or results of operations taken
as a whole.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
See Exhibit Index Attached.
b) Reports on Form 8-K filed during the quarter ended June 30,
2004:
None.
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/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 16, 2004
EXHIBIT INDEX
S-K Reference Document Description
3 Certificates of Limited Partnership, as amended to date.
(Incorporated by reference to the Annual Report on Form
10-K for the year ended December 31, 1991 ("1991 Annual
Report")).
10.1 Amended Loan Agreement dated November 15, 1990 (the "Effective
Date"), by and between the Partnership and EP (Incorporated by
reference to the Annual Report of Form 10-K for the year ended
December 31, 1990 ("1990 Annual Report")).
10.2 Assumption Agreement as of the Effective Date, by and between
EP and CCEP (Incorporated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective Date, by and between
the Partnership and EP (Incorporated by reference to the 1990
Annual Report).
10.5 Bill of Sale and Assignment dated October 23, 1990, by and
between CCEP and ConCap Services Company (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990).
10.20 Mortgage and Security Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.21 Repair Escrow Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.22 Replacement Reserve and Security Agreement between Kennedy
Boulevard Associates I, L.P., and Lehman Brothers Holdings,
Inc., dated August 25, 1998, securing The Sterling
Apartment Home and Commerce Center filed in Form 10-Q for
the quarter ended September 30, 1998.
10.23 Third Amendment to the Limited Partnership Agreement filed as
Exhibit 10.23 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001 and incorporated herein
by reference.
10.24 Fourth Amendment to the Limited Partnership Agreement filed as
Exhibit 10.24 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001 and incorporated herein
by reference.
10.28 Form of Amended Order Setting Foreclosure Sale Date pursuant
to amending the foreclosure date filed on September 25, 2003
(Schedules and supplemental materials to this exhibit filed
herewith have been omitted but will be provided to the
Securities and Exchange Commission upon request).*
10.29 Form of Certificate of Sale as to Property "1" pursuant to
sale of Palm Lake Apartments to CCIP Palm Lake, L.L.C.
filed October 28, 2003.*
10.30 Form of Certificate of Sale as to Property "2" pursuant to
sale of Regency Oaks Apartments to CCIP Regency Oaks,
L.L.C. filed October 28, 2003.*
10.31 Form of Certificate of Sale as to Property "3" pursuant to
sale of The Dunes Apartments (formerly known as Society Park
East Apartments) to CCIP Society Park East, L.L.C.
filed October 28, 2003.*
10.32 Form of Certificate of Sale as to Property "4" pursuant to
sale of Plantation Gardens Apartments to CCIP Plantation
Gardens, L.L.C. filed October 28, 2003.
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.
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.
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.
10.36** Purchase and Sale contract between CCIP Tates Creek Village,
LLC, a Delaware limited liability company and Tates Creek
Investments, LLC, a Michigan limited liability company dated
April 13, 2004 for the sale of Tates Creek Village Apartments.
10.37** Amendment of purchase and sale contract between CCIP Tates
Creek Village, LLC and Tates Creek Investments, LLC, dated May
27, 2004.
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.
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.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
*Filed as exhibits 10.28 through 10.31 in the Registrant's
Quarterly Form 10-Q for the quarter ended September 30, 2003
incorporated herein by reference.
**Schedules and supplemental materials to the exhibit filed
herewith have been omitted but will be provided to the
Securities and Exchange Commission upon request.
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: August 16, 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, Stephen B. Waters, 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: August 16, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President 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
June 30, 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 Stephen B. Waters, 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: August 16, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 16, 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 10.36
PURCHASE AND SALE CONTRACT
BETWEEN
CCIP TATES CREEK VILLAGE, L.L.C.,
a Delaware limited liability company
AS SELLER
AND
TATES CREEK INVESTMENTS, LLC, a Michigan limited liability company
AS PURCHASER
TATES CREEK VILLAGE
Page(s)
TABLE OF CONTENTS
Page
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.............................7
ARTICLE 3 FEASIBILITY PERIOD..............................................8
3.1 Feasibility Period..............................................8
3.2 Expiration of Feasibility Period................................9
3.3 Conduct of Investigation........................................9
3.4 Purchaser Indemnification......................................10
3.5 Property Materials.............................................10
3.6 Property Contracts.............................................12
ARTICLE 4 TITLE..........................................................12
4.1 Title Documents................................................12
4.2 Survey.........................................................13
4.3 Objection and Response Process.................................13
4.4 Permitted Exceptions...........................................13
4.5 Existing Deed of Trust.........................................14
ARTICLE 5 CLOSING........................................................14
5.1 Closing Date...................................................14
5.2 Seller Closing Deliveries......................................15
5.3 Purchaser Closing Deliveries...................................15
5.4 Closing Prorations and Adjustments.............................16
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER.........20
6.1 Seller's Representations.......................................20
6.2 AS-IS..........................................................21
6.3 Survival of Seller's Representations...........................22
6.4 Definition of Seller's Knowledge...............................22
6.5 Representations And Warranties Of Purchaser....................23
6.6 Survival of Purchaser's Representations........................24
6.7 Definition of Purchaser's Knowledge............................24
ARTICLE 7 OPERATION OF THE PROPERTY......................................24
7.1 Leases and Property Contracts..................................24
7.2 General Operation of Property..................................25
7.3 Liens..........................................................25
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING................................25
8.1 Purchaser's Conditions to Closing..............................25
8.2 Seller's Conditions to Closing.................................26
ARTICLE 9 BROKERAGE......................................................26
9.1 Indemnity......................................................26
9.2 Broker Commission..............................................27
9.3 Broker Page....................................................27
ARTICLE 10 DEFAULTS AND REMEDIES..........................................27
10.1 Purchaser Default..............................................27
10.2 Seller Default.................................................28
ARTICLE 11 RISK OF LOSS OR CASUALTY.......................................28
11.1 Major Damage...................................................28
11.2 Minor Damage...................................................29
11.3 Repairs........................................................29
ARTICLE 12 EMINENT DOMAIN.................................................29
12.1 Eminent Domain.................................................29
ARTICLE 13 MISCELLANEOUS..................................................30
13.1 Binding Effect of Contract.....................................30
13.2 Exhibits And Schedules.........................................30
13.3 Assignability..................................................30
13.4 Binding Effect.................................................30
13.5 Captions.......................................................30
13.6 Number And Gender Of Words.....................................30
13.7 Notices........................................................30
13.8 Governing Law And Venue........................................32
13.9 Entire Agreement...............................................32
13.10 Amendments.....................................................32
13.11 Severability...................................................33
13.12 Multiple Counterparts/Facsimile Signatures.....................33
13.13 Construction...................................................33
13.14 Confidentiality................................................33
13.15 Time Of The Essence............................................33
13.16 Waiver.........................................................33
13.17 Attorneys Fees.................................................33
13.18 Time Periods...................................................34
13.19 1031 Exchange..................................................34
13.20 No Personal Liability of Officers, Trustees or Directors
of Seller's Partners...........................................34
13.21 No Exclusive Negotiations......................................34
13.22 ADA Disclosure.................................................35
13.23 No Recording...................................................35
13.24 Relationship of Parties........................................35
13.25 Dispute Resolution.............................................35
13.26 AIMCO Marks....................................................36
13.27 Non-Solicitation of Employees..................................36
13.28 Survival.......................................................36
13.29 Multiple Purchasers............................................36
ARTICLE 14 LEAD-BASED PAINT DISCLOSURE....................................37
14.1 Disclosure.....................................................37
14.2 Consent Agreement..............................................37
PURCHASE AND SALE CONTRACT
THIS PURCHASE AND SALE CONTRACT (this "Contract") is entered into as of
the 13th day of April, 2004 (the "Effective Date") by and between CCIP TATES
CREEK VILLAGE, L.L.C., a Delaware limited liability company, having an address
at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237
("Seller") and TATES CREEK INVESTMENTS, LLC, a Michigan limited liability
company, having a principal address at 1025 East Maple Road, Suite 230,
Birmingham, Michigan 48009 ("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 Fayette County, Kentucky, as
more particularly described in Exhibit A attached hereto and made a part hereof,
and the improvements thereon, commonly known as "Tates Creek Village".
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
1.1 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
and used 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),
subject to the terms set forth in Section 3.5.4 and Section 13.26.
1.1.5 "Broker" shall have the meaning set forth in Section 9.1.
1.1.6 "Business Day" means any day other than a Saturday or Sunday or Federal
holiday or legal holiday in the States of Colorado, Texas, or Kentucky, or any
day on which Lender is not open for business.
1.1.7 "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.
1.1.8 "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.
1.1.9 "Code" shall have the meaning set forth in Section 2.3.6.
1.1.10......"Consent Contract" shall have the meaning set forth in
Section 14.2.
1.1.11......"Consultants" shall have the meaning set forth in Section 3.1.
1.1.12......"Damage Notice" shall have the meaning set forth in Section 11.1.
1.1.13......"Deed" shall have the meaning set forth in Section 5.2.1.
1.1.14......"Deed of Trust" shall have the meaning set forth in Section 4.5.
1.1.15......"Deposit" means, to the extent actually deposited by Purchaser with
Escrow Agent, the Initial Deposit and the Additional Deposit.
1.1.16......"Escrow Agent" shall have the meaning set forth in Section 2.2.1.
1.1.17......"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 1.1.17.
1.1.18......"Existing Survey" shall have the meaning set forth in Section 4.2.
1.1.19......"Feasibility Period" shall have the meaning set forth in
Section 3.1.
1.1.20......"FHA" shall have the meaning set forth in Section 13.22.
1.1.21......"Final Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.22......"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,
unless the equipment is covered by a Property Contract which is assigned to
Purchaser at Closing, 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 1.1.22. During the Feasibility Period, Seller shall
assemble a schedule of Fixtures and Tangible Personal Property, excluding unit
interior fixtures and appliances, certified to Seller's knowledge to be the list
of such Fixtures and Tangible Personal Property to be transferred to Purchaser
at the Closing.
1.1.23......"General Assignment" shall have the meaning set forth in
Section 5.2.3.
1.1.24......"Good Funds" shall have the meaning set forth in Section 2.2.1.
1.1.25......"Improvements" means all buildings and improvements located on
the Land taken "as is."
1.1.26......"Initial Deposit" shall have the meaning set forth in
Section 2.2.1.
1.1.27......"Land" means all of those certain tracts of land located in the
State of Kentucky described on Exhibit A, and all rights, privileges and
appurtenances pertaining thereto.
1.1.28......"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.
1.1.29......"Leases Assignment" shall have the meaning set forth in
Section 5.2.4.
1.1.30......"Lender" means Federal Home Loan Mortgage Corporation, assignee
of GMAC Commercial Mortgage Corporation.
1.1.31......"Lender Fees" shall mean all fees and expenses (including, without
limitation, all prepayment penalties and pay-off fees) imposed or charged by
Lender or its counsel in connection with the Loan Payoff, and, to the extent
that the Loan Payoff occurs on a date other than as permitted under the Note and
Deed of Trust, any amounts of interest charged by Lender for the period from the
Closing Date to the permitted prepayment date, the amount of the Lender Fees to
be determined as of the Closing Date.
1.1.32......"Loan" means the indebtedness owing to Lender evidenced by the Note.
1.1.33......"Loan Payoff" shall have the meaning set forth in Section 5.4.7.
1.1.34......"Losses" shall have the meaning set forth in Section 3.4.1.
1.1.35......"Materials" shall have the meaning set forth in Section 3.5.
1.1.36......"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, exclu