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EX-31.2 - EXHIBIT 31.2 - CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 2ccip2_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 - CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 2ccip2_ex31z1.htm
EX-32.1 - EXHIBIT 32.1 - CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES 2ccip2_ex32z1.htm

                                                  

UNITED STATES

                            SECURITIES AND EXCHANGE COMMISSION

                                  WASHINGTON, D.C. 20549

 

                                         Form 10-K

 

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                            

                     For the fiscal year ended December 31, 2009

 

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 0-11723

 

                  CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

                 (Exact name of registrant as specified in its charter)

 

Delaware

94-2883067

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

                               55 Beattie Place, PO Box 1089

                             Greenville, South Carolina  29602

                         (Address of principal executive offices)

 

             Registrant's telephone number, including area code (864) 239-1000

 

                Securities registered pursuant to Section 12(b) of the Act:

 

                                           None

 

                Securities registered pursuant to Section 12(g) of the Act:

 

                                 Limited Partnership Units

                                     (Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

 

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes  [ ] No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £(Do not check if a smaller reporting company)

Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

 

State the aggregate market value of the voting and non-voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were last sold, or the average bid and asked price of such partnership interests as of the last business day of the registrant’s most recently completed second fiscal quarter. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined.

 

DOCUMENTS INCORPORATED BY REFERENCE

None

 


PART I

 

FORWARD-LOOKING STATEMENTS

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s properties and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; insurance risk, including the cost of insurance; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

 

Item 1.     Business

 

Consolidated Capital Institutional Properties/2, LP (the "Partnership" or "Registrant") was organized on April 12, 1983, as a limited partnership under the California Uniform Limited Partnership Act. On July 22, 1983, the Partnership registered with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (File No. 2-83540) and commenced a public offering for the sale of limited partnership units (“Units”). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units terminated on July 21, 1985, with 912,182 Units sold at $250 each, or gross proceeds of approximately $227.8 million to the Partnership. As permitted under its Partnership Agreement (the original partnership agreement of the Partnership with all amendments shall be referred to as the "Partnership Agreement"), the Partnership has repurchased and retired a total of 3,048 Units for a total of $611,000. A total of 471.80 Units were abandoned and accordingly retired by the Partnership. The Partnership may, at its absolute discretion, repurchase Units, but is under no obligation to do so. Since its initial offering, the Partnership has not received, nor are limited partners required to make, additional capital contributions.

 

The general partner of the Partnership is ConCap Equities, Inc. ("CEI" or the "General Partner") The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership currently owns and operates two residential investment properties. The Partnership sold two investment properties, Canyon Crest Apartments and Windemere Apartments, to third parties on August 1, 2008 and August 6, 2009, respectively. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2013 unless terminated prior to such date. The Partnership Agreement also provides that the term of the Partnership cannot be extended beyond the termination date.

 

On April 25, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Consolidated Capital Institutional Properties/2, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of March 19, 2008, by and between the California partnership and the Delaware partnership. All references herein to the Partnership shall mean Consolidated Capital Institutions Properties/2, a California limited partnership, for all periods prior to March 19, 2008 and Consolidated Capital Institutions Properties/2, LP, a Delaware limited partnership, for all periods from and after March 19, 2008.

 

Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.

 

The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Consolidated Capital Institutional Properties/2, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.

 

On April 30, 2008, the General Partner amended the Partnership Agreement to establish, and convert existing limited partnership interests into, different designated series of limited partnership interests that have separate rights with respect to specified partnership property. Effective as of the close of business on April 30, 2008 (the “Establishment Date”), each then outstanding Unit of limited partnership interest in the Partnership was converted into one Series A Unit and one Series B Unit. Except as described below, the Series A Units and Series B Units entitle the holders thereof to the same rights as the holders of Units of limited partnership interests prior to the Establishment Date.

 

From and after the Establishment Date, the Series A Units will be entitled to all of the Partnership’s interests in any entity in which the Partnership owns an interest, other than the Series B Subsidiary (as defined below), including, but not limited to, all profits, losses and distributions from such entities.

 

From and after the Establishment Date, the Series B Units will be entitled to all of the Partnership’s membership interest in Canyon Crest, L.L.C., a Delaware limited liability company (the “Series B Subsidiary”), including, but not limited to, all profits, losses and distributions from Canyon Crest Apartments. The Series B Units were dissolved during December 2008, upon the dissolution of the remaining assets and liabilities of Canyon Crest Apartments.

 

The Partnership has no employees. Management and administrative services are performed by the General Partner and by agents retained by the General Partner. An affiliate of the General Partner has been providing such property management services.

 

A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.

 


Item 2.     Properties

 

The following table sets forth the Partnership's investment in properties:

 

 

Date of

 

 

Properties

Acquisition

Type of Ownership

Use

 

 

 

 

Highcrest Townhomes

08/22/02

Fee ownership, subject to

Apartment

Wood Ridge, Illinois

 

first mortgage

176 units

 

 

 

 

Glenbridge Manor Apartments

09/01/03

Fee ownership, subject to

Apartment

Cincinnati, Ohio

 

first mortgage

290 units

 

During 2008, Glenbridge Manor Apartments experienced significant ground movement causing damage to two buildings, water pipes and sewer lines. These two buildings, containing 17 units, the office, clubhouse and fitness center, were evacuated. One of the buildings containing 12 units was demolished, and another building was partially demolished. The Partnership is in the process of rebuilding these units.

 

On August 6, 2009, the Partnership sold Windemere Apartments to a third party for a gross sale price of approximately $8,077,000. The net proceeds realized by the Partnership were approximately $7,882,000 after payment of closing costs. The Partnership used approximately $4,514,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership recorded a loss of approximately $227,000. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $173,000 due to a prepayment penalty of approximately $242,000, partially offset by the write off of the unamortized mortgage premium of approximately $69,000.

 

On August 1, 2008, the Partnership sold Canyon Crest Apartments to a third party for a gross sale price of approximately $4,100,000. The net proceeds realized by the Partnership were approximately $4,013,000 after payment of closing costs. The Partnership used approximately $2,822,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership recorded a loss of approximately $69,000. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $111,000 due to a prepayment penalty of approximately $131,000, partially offset by the write off of the unamortized mortgage premium.

 

Schedule of Properties

 

Set forth below for each of the Partnership's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation, and Federal tax basis.

 

 

Gross

 

 

Method

 

 

Carrying

Accumulated

Depreciable

of

Federal

Properties

Value

Depreciation

Life

Depreciation

Tax Basis

 

(in thousands)

 

 

(in thousands)

 

 

 

 

 

 

Highcrest

 

 

 

 

 

Townhomes

$13,687

$ 4,380

5-30 yrs

S/L

   $ 9,913

Glenbridge Manor

 

 

 

 

 

Apartments

 33,292

  6,699

5-30 yrs

S/L

    23,121

Totals

$46,979

$11,079

 

 

   $33,034

 

See "Note A – Organization and Summary of Significant Accounting Policies" to the financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's depreciation and capitalization policies.

 


Schedule of Property Indebtedness

 

The following table sets forth certain information relating to the loans encumbering the Partnership's properties.

 

 

Principal

 

 

 

Principal

 

Balance At

Stated

 

 

Balance

 

December 31,

Interest

Period

Maturity

Due at

Property

2009

Rate(1)

Amortized

Date

Maturity (2)

 

(in thousands)

 

 

 

(in thousands)

 

 

 

 

 

 

Highcrest Townhomes

$10,876

6.17%

30 yrs

10/01/17

$ 9,414

Glenbridge Manor

 

 

 

 

 

  Apartments

 16,820

5.65%

30 yrs

12/15/13

 14,835

Total

$27,696

 

 

 

$24,249

 

(1)   Fixed rate mortgages.

 

(2)   See “Note B – Mortgage Notes Payable" to the financial statements included in "Item 8. Financial Statements and Supplementary Data” for information with respect to the Partnership's ability to prepay these loans and other specific details about these loans.

 

On April 7, 2009, the Partnership amended the mortgage note encumbering Glenbridge Manor Apartments, as a result of a principal payment of approximately $2,000,000, which was funded with an advance from AIMCO Properties, L.P. The amendment to the mortgage note requires monthly payments of principal and interest of approximately $117,000 beginning on May 15, 2009 until the December 2013 maturity, at which time a balloon payment of approximately $14,835,000 is due. The previous terms consisted of monthly payments of principal and interest of approximately $131,000 with a balloon payment of approximately $16,566,000 due at the December 2013 maturity date.

 

Rental Rates and Occupancy

 

Average annual rental rate per unit and occupancy for 2009 and 2008 for each property are as follows:

 

 

Average Annual

Average

 

Rental Rate

Occupancy

 

(per unit)

 

 

Properties

2009

2008

2009

2008

 

 

 

 

 

Highcrest Townhomes (1)

$12,658

$12,452

93%

97%

Glenbridge Manor Apartments (2)

 12,767

 13,139

94%

90%

 

(1)   The General Partner attributes the decrease in occupancy at Highcrest Townhomes to poor economic conditions in the local area.

 

(2)   The General Partner attributes the increase in occupancy at Glenbridge Manor Apartments to competitive pricing efforts and the substantial completion of construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” which resulted in more units available for lease.

 

The real estate industry is highly competitive. Both of the Partnership’s properties are subject to competition from other residential apartment complexes in the area. The General Partner believes that both of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% or more of the available rental space. Highcrest Townhomes is in good physical condition, subject to normal depreciation and deterioration as is typical for an asset of this type and age.

 

Real Estate Taxes and Rates

 

Real estate taxes and rates in 2009 for each property were as follows:

 

 

2009

2009

 

Billing

Rate

 

(in thousands)

 

 

 

 

Highcrest Townhomes

$274

6.78%

Glenbridge Manor Apartments

 502

6.69%

 

Capital Improvements

 

Highcrest Townhomes

 

During the year ended December 31, 2009 the Partnership completed approximately $243,000 of capital improvements at Highcrest Townhomes, consisting primarily of floor covering replacement and construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from operations and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property.  While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010.  Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.

 

Windemere Apartments

 

During the year ended December 31, 2009, the Partnership completed approximately $304,000 of capital improvements at Windemere Apartments, consisting primarily of roof replacement, exterior improvements, sidewalk and air conditioning upgrades, appliance and floor covering replacements and construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from operations, replacement reserves, insurance proceeds and advances from AIMCO Properties, L.P. The Partnership sold Windemere Apartments to a third party on August 6, 2009.

 

Glenbridge Manor Apartments

 

During the year ended December 31, 2009, the Partnership completed approximately $1,294,000 of capital improvements at Glenbridge Manor Apartments, consisting primarily of construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from operations, insurance proceeds and advances from AIMCO Properties, L.P. The Partnership regularly evaluates the capital improvement needs of the property. In addition to expenditures related to the casualty at the property, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as insurance proceeds and anticipated cash flow generated by the property.

 

Capital expenditures will be incurred only if cash is available from operations, insurance proceeds, Partnership reserves or advances from AIMCO Properties, L.P., an affiliate of the General Partner, although AIMCO Properties, L.P. is not obligated to provide such advances.  To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.

 

Item 3.     Legal Proceedings

 

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”).  The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”).  In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $3,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property.  At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants, and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010.  The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership.  Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.


PART II

 

Item 5.     Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

 

The Partnership, a publicly-held limited partnership, offered and sold 912,182 limited partnership units (the "Units") aggregating $227,800,000. The Partnership currently has 14,996 holders of record owning an aggregate of 908,661.80 Units. Affiliates of the General Partner owned 574,447.25 Units or approximately 63.22% of the outstanding Units at December 31, 2009. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future.

 

The Partnership distributed the following amounts to the unit holders during the years ended December 30, 2009 and 2008 (in thousands, except per unit data):

 

 

 

Per

 

Per

 

Year ended

Series A

Year ended

Series B

 

December 31, 2009

Unit

December 31, 2008

Unit

 

 

 

 

 

Sale(1)

      $   --

  $   --

      $  802

    $ 0.88

 

(1)   Proceeds from the August 2008 sale of Canyon Crest Apartments.

 

Future cash distributions will depend on the levels of cash generated from operations, and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. In light of the amounts accrued and payable to affiliates of the General Partner at December 31, 2009, there can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners in 2010 or subsequent periods. See “Item 2. Properties – Capital Improvements” for information relating to anticipated capital expenditures at the properties.

 

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,447.25 Units in the Partnership representing 63.22% of the outstanding Units at December 31, 2009. 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, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that 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 63.22% 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 as its sole stockholder.

 

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations

 

This item should be read in conjunction with the financial statements and other items contained elsewhere in this report.

 

The Partnership’s financial results depend 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 plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. 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 that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.

 

Results of Operations

 

The Partnership’s net loss for the years ended December 31, 2009 and 2008 was approximately $574,000 and $4,055,000, respectively.  The statement of operations included in “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2008 reflects the operations of Canyon Crest Apartments as loss from discontinued operations due to its sale on August 1, 2008.  In addition, the statement of operations for the year ended December 31, 2008 has been restated to reflect the operations of Windemere Apartments as loss from discontinued operations and the balance sheet as of December 31, 2008 has been restated to reflect the assets and liabilities of Windemere Apartments as held for sale due to its sale on August 6, 2009.

 

The following table presents summarized results of operations related to the Partnership’s discontinued operations for the years ended December 31, 2009 and 2008 (in thousands):

 

 

Year Ended

 

 

December 31, 2009

 

 

Windemere

 

 

Apartments

 

 

 

 

Revenues

$ 1,107

 

Expenses

  (1,127)

 

Casualty gain

    220

 

Impairment loss

    (950)

 

Loss on early extinguishment of debt

    (173)

 

Loss from discontinued operations

 $  (923)

 

 

 

 

 

 

 

Year Ended

 

 

 

December 31, 2008

 

 

 

 

 

 

Canyon Crest

Windemere

 

 

Apartments

Apartments

 Total

 

 

 

 

Revenues

  $   547

$ 1,792

$ 2,339

Expenses

     (770)

  (2,780)

 (3,550)

Impairment loss

   (1,215)

     --

 (1,215)

Loss on early extinguishment of debt

     (111)

     --

   (111)

 Loss from discontinued operations

  $(1,549)

 $  (988)

$(2,537)

 

On August 6, 2009, the Partnership sold Windemere Apartments to a third party for a gross sale price of approximately $8,077,000. The net proceeds realized by the Partnership were approximately $7,882,000 after payment of closing costs. The Partnership used approximately $4,514,000 of the net proceeds to repay the mortgage encumbering the property. In accordance with the Partnership’s impairment policy and FASB ASC Topic 360-10, “Property, Plant, and Equipment”, the Partnership recorded an impairment loss of approximately $950,000 to write the property value down to the sale price during the year ended December 31, 2009. This amount is included in loss from discontinued operations. As a result of the sale, the Partnership recorded an additional loss of approximately $227,000, which is included in loss from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $173,000 due to a prepayment penalty of approximately $242,000, partially offset by the write off of the unamortized mortgage premium of approximately $69,000, which is included in loss from discontinued operations for the year ended December 31, 2009.

 

On August 1, 2008, the Partnership sold Canyon Crest Apartments to a third party for a gross sale price of approximately $4,100,000. The net proceeds realized by the Partnership were approximately $4,013,000 after payment of closing costs. The Partnership used approximately $2,822,000 of the net proceeds to repay the mortgage encumbering the property. In accordance with the Partnership’s impairment policy and FASB ASC Topic 360-10, the Partnership recorded an impairment loss of approximately $1,215,000 to write the property value down to the sale price during the year ended December 31, 2008. This amount is included in loss from discontinued operations. As a result of the sale, the Partnership recorded a loss of approximately $69,000, which is included in loss from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $111,000 due to a prepayment penalty of approximately $131,000, partially offset by the write off of the unamortized mortgage premium of approximately $20,000, which is included in loss from discontinued operations for the year ended December 31, 2008.

 

The Partnership’s income before discontinued operations for the year ended December 31, 2009 was approximately $576,000 compared to loss before discontinued operations of approximately $1,449,000 for the year ended December 31, 2008.  The increase in income before discontinued operations is due to the recognition of a casualty gain, increases in distributions in excess of investments in affiliated partnerships and total revenues, partially offset by an increase in total expenses.

 

During 2008, Glenbridge Manor Apartments experienced significant ground movement causing damage to two buildings, water pipes and sewer lines. These two buildings, containing 17 units, the office, clubhouse and fitness center, were evacuated. One of the buildings containing 12 units was demolished, and another building was partially demolished. The Partnership is in the process of rebuilding these units. A third building experienced minor ground movement, which required approximately $60,000 to repair. The property is currently undergoing testing to determine whether additional buildings will be affected.  The total estimated loss is approximately $7,456,000, of which approximately $2,904,000 relates to buildings, approximately $4,353,000 relates to demolition, land improvements and reconstruction, and approximately $199,000 relates to lost rents. During the year ended December 31, 2008, the Partnership entered into contracts for approximately $3,400,000 to begin reconstruction, all of which has been spent as of December 31, 2009, including approximately $1,300,000 in 2009. However the reconstruction completed to date involved repairs to damaged buildings and common areas and ground preparation. No reconstruction has begun on the demolished buildings. During the year ended December 31, 2009, the Partnership received approximately $4,932,000 of insurance proceeds to cover the damages, and approximately $199,000 to cover lost rents. During the year ended December 31, 2009, the Partnership recognized a casualty gain of approximately $2,686,000 due to the receipt of insurance proceeds, partially offset by the net write off of undepreciated damaged assets of approximately $2,246,000.

 

In September 2008, Windemere Apartments sustained damage from Hurricane Ike.  The damages were approximately $1,284,000, including clean up costs of approximately $634,000. During the fourth quarter of 2008, the Partnership removed approximately $435,000 of undepreciated damaged assets and recorded a corresponding receivable for the estimated insurance proceeds. For the year ended December 31, 2008, the estimated clean up costs were included in operating expenses, including approximately $125,000 incurred during the year ended December 31, 2008. This amount is included in loss from discontinued operations. During the year ended December 31, 2009, the Partnership received insurance proceeds of approximately $650,000 to cover the damages and approximately $259,000 for clean up costs. The Partnership recognized a casualty gain of approximately $220,000 due to receipt of insurance proceeds, offset by the net write off of undepreciated damaged assets of approximately $430,000, which is a change of approximately $5,000 from the estimate removed as of December 31, 2008. For the year ended December 31, 2009, the casualty gain and proceeds received to cover clean up costs are included in loss from discontinued operations. Subsequent to December 31, 2009, the Partnership received additional proceeds of approximately $99,000, which is expected to be recognized as income from discontinued operations during 2010.

 

In July 2008, Highcrest Townhomes experienced damages of approximately $23,000 from a broken water pipe, which were included in operating expenses for the year ended December 31, 2008, causing damage to 3 units. The Partnership received insurance proceeds of approximately $13,000 to cover the damages during the year ended December 31, 2009, which are reflected as a reduction of operating expenses.

 

In October 2007, Canyon Crest Apartments experienced damages as a result of a kitchen fire. During the year ended December 31, 2007, the Partnership recorded a casualty loss of approximately $2,000 as a result of the expected receipt of insurance proceeds of approximately $21,000, of which approximately $12,000 was received during the year ended December 31, 2007, net of the write-off of undepreciated damaged assets of approximately $23,000.  During the year ended December 31, 2008, the Partnership received additional insurance proceeds related to this casualty of approximately $3,000 and approximately $2,000 to cover lost rents.  The Partnership recognized a casualty gain of approximately $6,000 for the year ended December 31, 2008, which is included in loss from discontinued operations, as a result of a change in the previous write-off of undepreciated damaged assets of approximately $12,000, net of the write-off of the remaining receivable of approximately $6,000.

 

In February 2009, Highcrest Townhomes experienced damages of approximately $19,000 as a result of a fire. During the year ended December 31, 2009, the Partnership recognized a casualty gain of approximately $2,000, which is reflected as a reduction of operating expenses, as a result of the receipt of insurance proceeds of approximately $9,000, partially offset by the write-off of undepreciated damaged assets of approximately $7,000.

 

Total revenues increased due to an increase in rental income, partially offset by a decrease in other income. Rental income increased due to the receipt of insurance proceeds to cover lost rents, an increase in occupancy at Glenbridge Manor Apartments and an increase in the average rental rate at Highcrest Townhomes, partially offset by decreases in occupancy at Highcrest Townhomes and the average rental rate at Glenbridge Manor Apartments. Other income decreased primarily due to a decrease in lease cancellation fees at Glenbridge Manor Apartments.

 

Total expenses increased due to increases in operating, interest and property tax expenses, partially offset by decreases in depreciation and general and administrative expenses. Operating expenses increased primarily due to increases in legal fees associated with the casualty at Glenbridge Manor Apartments and the hazard insurance premium at Glenbridge Manor Apartments, partially offset by a decrease in clean up costs associated with the casualty at Glenbridge Manor ApartmentsInterest expense increased primarily due to an increase in interest expense on advances from an affiliate of the General Partner as a result of a higher average outstanding advance balance in 2009. The increase in property tax expense is primarily due to increases in the assessed value of Highcrest Townhomes and the tax rate at Glenbridge Manor Apartments. The decrease in depreciation expense is primarily due to the removal of damaged assets during 2009 related to the casualty at Glenbridge Manor Apartments.

 

General and administrative expenses decreased primarily due to a decrease in management reimbursements charged by the General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses for the years ended December 31, 2009 and 2008 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

 

The equity in loss from investments for the years ended December 31, 2009 and 2008 is due to the recognition of the Partnership’s share of loss on its investments in affiliated partnerships. These investments are accounted for under 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 statements of operations. During the years ended December 31, 2009 and 2008, the Partnership received approximately $481,000 and $33,000, respectively, from two of its affiliated partnerships, of which approximately $461,000 and $33,000, respectively, was recognized as income on the statements of operations.

 

Liquidity and Capital Resources

 

At December 31, 2009, the Partnership had cash and cash equivalents of approximately $377,000, compared to approximately $1,021,000 at December 31, 2008. The decrease in cash and cash equivalents of approximately $644,000 is due to approximately $10,769,000 and $1,384,000 of cash used in financing and operating activities, respectively, partially offset by approximately $11,509,000 of cash provided by investing activities.   Cash used in financing activities consisted of repayment of the mortgage encumbering Windemere Apartments, principal payments made on the mortgages encumbering the Partnership’s investment properties, repayment of advances from AIMCO Properties, L.P., and a prepayment penalty, partially offset by advances from AIMCO Properties, L.P. Cash provided by investing activities consisted of net proceeds from the sale of Windemere Apartments, net withdrawals from restricted escrows, distributions received from affiliated partnerships and insurance proceeds received, partially offset by property improvements and replacements.

 

Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the General Partner, advanced the Partnership approximately $3,014,000 and $5,683,000 during the years ended December 31, 2009 and 2008, respectively, to fund a partial repayment of the mortgage encumbering Glenbridge Manor Apartments, reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments and operations and real estate taxes at two of the investment properties.  AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the General Partner review the market rate adjustment quarterly. The interest rates on outstanding advances at December 31, 2009 ranged from 5.25% to 10.81%. Interest expense was approximately $471,000 and $276,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Partnership repaid approximately $6,898,000 and $102,000, respectively, of principal and interest from the receipt of insurance proceeds, sale proceeds and cash from operations. At December 31, 2009 and 2008, approximately $2,444,000 and $5,857,000, respectively, of advances and accrued interest remain unpaid and are included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. Subsequent to December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $787,000 to fund operations at Glenbridge Manor Apartments.

 

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. The Partnership regularly evaluates the capital improvement needs of the properties. The Partnership expects to continue reconstruction resulting from the casualty at Glenbridge Manor Apartments. While the Partnership has no other material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010.  Such capital expenditures will depend on the physical condition of the properties as well as anticipated insurance proceeds and anticipated cash flow generated by the properties. Capital expenditures will be incurred only if cash is available from operations, Partnership reserves, anticipated insurance proceeds or advances from AIMCO Properties, L.P., an affiliate of the General Partner, although AIMCO Properties, L.P. is not required to provide such advances. To the extent that 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 generally sufficient for any near-term needs (exclusive of capital improvements and repayment of amounts due to affiliates) of the Partnership. The mortgage indebtedness encumbering Highcrest Townhomes of approximately $10,876,000 is being amortized over 360 months and requires a balloon payment of approximately $9,414,000 in 2017.

 

The mortgage indebtedness encumbering Glenbridge Manor Apartments of approximately $16,820,000 is being amortized over 360 months and requires a balloon payment in 2013. On April 7, 2009, the Partnership amended the mortgage note encumbering Glenbridge Manor Apartments, as a result of a principal payment of approximately $2,000,000, which was funded with an advance from AIMCO Properties, L.P. The amendment to the mortgage note requires monthly payments of principal and interest of approximately $117,000 beginning on May 15, 2009 until the December 2013 maturity, at which time a balloon payment of $14,835,000 is due. The previous terms consisted of monthly payments of principal and interest of approximately $131,000 with a balloon payment of approximately $16,566,000 due at the December 2013 maturity date. The General Partner will attempt to refinance the indebtedness encumbering Glenbridge Manor Apartments and/or sell the property prior to its December 2013 maturity date. If Glenbridge Manor Apartments cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing the property through foreclosure.

 

The Partnership distributed the following amounts to the unit holders during the years ended December 31, 2009 and 2008 (in thousands, except per unit data):

 

 

 

Per

 

Per

 

Year ended

Series A

Year ended

Series B

 

December 31, 2009

Unit

December 31, 2008

Unit

 

 

 

 

 

Sale(1)

     $    --

 $   --

     $  802

     $ 0.88

 

(1)   Proceeds from the August 2008 sale of Canyon Crest Apartments.

 

Future cash distributions will depend on the levels of cash generated from operations, and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. In light of the amounts accrued and payable to affiliates of the General Partner at December 31, 2009, there can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners in 2010 or subsequent periods.

 

Other

 

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,447.25 Units in the Partnership representing 63.22% of the outstanding Units at December 31, 2009. 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, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that 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 63.22% 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 as its sole stockholder.

 

Critical Accounting Policies and Estimates

 

A summary of the Partnership’s significant accounting policies is included in "Note A – Organization and Summary of Significant Accounting Policies" which is included in the financial statements in "Item 8. Financial Statements and Supplementary Data”. The General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas.  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 stated at their fair market value at the time of foreclosure, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

 

Real property investment is 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, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could cause an impairment of the Partnership’s assets.

 

Capitalized Costs Related to Redevelopment and Construction Projects

 

The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.

 

Revenue Recognition

 

The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  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. 


Item 8.     Financial Statements and Supplementary Data

 

CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

LIST OF FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm

 

Balance Sheets - December 31, 2009 and 2008

 

Statements of Operations - Years ended December 31, 2009 and 2008

 

Statements of Changes in Partners' (Deficiency) Capital - Years ended December 31, 2009 and 2008

 

Statements of Cash Flows - Years ended December 31, 2009 and 2008

 

Notes to Financial Statements


Report of Independent Registered Public Accounting Firm

 

 

 

The Partners

Consolidated Capital Institutional Properties/2, LP

 

 

We have audited the accompanying balance sheets of Consolidated Capital Institutional Properties/2, LP as of December 31, 2009 and 2008, and the related statements of operations, changes in partners' (deficiency) capital, and cash flows for each of the two years in the period ended December 31, 2009. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Partnership’s internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Capital Institutional Properties/2, LP at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

 

 

/s/ERNST & YOUNG LLP

 

 

 

Greenville, South Carolina

April 9, 2010


      CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

BALANCE SHEETS

 (in thousands, except unit data)

 

 

 

December 31,

 

 

2009

2008

 

Assets

 

 

Cash and cash equivalents

 $    377

 $  1,021

Receivables and deposits

      161

      590

Other assets

      382

      464

Restricted escrow (Note A)

       --

       10

Investment in affiliated partnerships (Note E)

      479

      566

Investment properties (Notes B and D)

 

 

Land

    7,957

    7,957

Buildings and related personal property

   39,022

   40,208

 

   46,979

   48,165

Less accumulated depreciation

  (11,079)

  (10,114)

 

   35,900

   38,051

Assets held for sale (Notes A and H)

       --

    9,020

 

 $ 37,299

 $ 49,722

 

 

 

Liabilities and Partners' (Deficiency) Capital

 

 

Liabilities

 

 

Accounts payable

 $    479

 $  1,012

Tenant security deposit liabilities

      131

      117

Distributions payable

      141

      141

Due to affiliates (Note C)

    2,844

    6,680

Accrued property taxes

      844

      806

Other liabilities

      330

      246

Mortgage notes payable (Note B)

   27,696

   30,290

Liabilities related to assets held for sale

 

 

  (Notes A and H)

       --

    5,022

 

   32,465

   44,314

 

 

 

Partners' (Deficiency) Capital

 

 

General partner

     (466)

     (460)

Limited partners (908,661.8 Series A units issued

 

 

and outstanding)

    5,300

    5,868

 

    4,834

    5,408

 

 $ 37,299

 $ 49,722

 

See Accompanying Notes to the Financial Statements


                 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

                              STATEMENTS OF OPERATIONS

                        (in thousands, except per unit data)

 

 

Years Ended

 

December 31,

 

2009

2008

Revenues:

 

 

Rental income

  $ 5,660

   $ 5,533

Other income

      663

       687

Total revenues

    6,323

     6,220

 

 

 

Expenses:

 

 

Operating

    3,876

     2,506

General and administrative

      457

       711

Depreciation

    1,435

     1,695

Interest

    2,216

     1,960

Property taxes

      843

       769

Total expenses

    8,827

     7,641

 

 

 

Loss before discontinued operations, casualty gain,

 

 

  equity in loss from investments and distributions

 

 

  in excess of investment

   (2,504)

    (1,421)

Casualty gain (Note G)

    2,686

        --

Equity in loss from investments (Note E)

      (67)

       (61)

Distributions received in excess of investment (Note E)

      461

        33

Loss from discontinued operations (Note A)

     (923)

    (2,537)

Loss from sale of discontinued operations (Note H)

     (227)

       (69)

Net loss (Note F)

  $  (574)

   $(4,055)

 

 

 

Net loss allocated to general partner

  $    (6)

   $   (40)

Net loss allocated to limited partners

       --

      (628)

Net loss allocated to Series A unit holders

     (568)

    (1,867)

Net loss allocated to Series B unit holders

       --

    (1,520)

 

 

 

 

  $  (574)

   $(4,055)

 

 

 

Per limited partnership unit:

 

 

Income (loss) before discontinued operations

  $  0.64

   $ (0.45)

(Series A) (Note A)

       --

     (1.09)

(Series B) (Note A)

       --

     (0.04)

Loss from discontinued operations

       --

     (0.24)

Loss from discontinued operations (Series A)

    (1.01)

     (0.97)

Loss from discontinued operations (Series B)

       --

     (1.56)

Loss from sale of discontinued operations (Series A)

    (0.25)

        --

Loss from sale of discontinued operations (Series B)

       --

     (0.07)

Net loss

  $ (0.62)

   $ (4.42)

Distributions per Series B unit

  $    --

   $  0.88

 

See Accompanying Notes to the Financial Statements


                 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

               STATEMENTS OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL

                          (in thousands, except unit data)

 

 

Limited

 

 

Series A

Series B

Subtotal

 

 

Partnership

General

Limited

Unit

Unit

Limited

 

 

Units

Partner

Partners

Holders

Holders

Partners

Total

 

 

 

 

 

 

 

 

Partners’

 

 

 

 

 

 

 

 (deficiency)

 

 

 

 

 

 

 

 capital at

 

 

 

 

 

 

 

 December 31, 2007

  909,030.2

$(420)

$10,685

$    --

 $    --

 $10,685

$10,265

 

 

 

 

 

 

 

 

Net loss for the

 

 

 

 

 

 

 

 period January 1,

 

 

 

 

 

 

 

 2008 through

 

 

 

 

 

 

 

 April 30, 2008

         --

     (6)

    (628)

     --

      --

    (628)

   (634)

 

 

 

 

 

 

 

 

Partners’

 

 

 

 

 

 

 

 (deficiency)

 

 

 

 

 

 

 

 capital at

 

 

 

 

 

 

 

 April 30, 2008

 909,030.2

   (426)

  10,057

     --

      --

   10,057

  9,631

 

 

 

 

 

 

 

 

Allocation of Units

 

 

 

 

 

 

 

  (Note A)

      --

     --

 (10,057)

  7,735

   2,322

       --

     --

 

 

 

 

 

 

 

 

Distributions to

 

 

 

 

 

 

 

 partners

      --

     --

      --

     --

   (802)

    (802)

   (802)

 

 

 

 

 

 

 

 

Abandonment of Units

 

 

 

 

 

 

 

  (Note A)

     (32)

     --

      --

     --

      --

       --

     --

 

 

 

 

 

 

 

 

Net loss for the

 

 

 

 

 

 

 

 period May 1,

 

 

 

 

 

 

 

 2008 through

 

 

 

 

 

 

 

 December 31, 2008

        --

    (34)

      --

 (1,867)

 (1,520)

   (3,387)

 (3,421)

 

 

 

 

 

 

 

 

Partners’

 

 

 

 

 

 

 

 (deficiency)

 

 

 

 

 

 

 

 capital at

 

 

 

 

 

 

 

 December 31, 2008

908,998.20

   (460)

      --

 5,868

      --

    5,868

   5,408

 

 

 

 

 

 

 

 

Abandonment of Units

 

 

 

 

 

 

 

  (Note A)

   (336.40)

     --

      --

    --

      --

      --

    --

 

 

 

 

 

 

 

 

Net loss for the

 

 

 

 

 

 

 

 year ended

 

 

 

 

 

 

 

 December 31, 2009

        --

     (6)

      --

   (568)

      --

     (568)

    (574)

 

 

 

 

 

 

 

 

Partners’

 

 

 

 

 

 

 

 (deficiency)

 

 

 

 

 

 

 

 capital at

 

 

 

 

 

 

 

 December 31, 2009

908,661.80

  $(466)

$     --

$ 5,300

 $    --

  $ 5,300

 $ 4,834

 

 

 

 

 

 

 

 

 

See Accompanying Notes to the Financial Statements


                 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

                              STATEMENTS OF CASH FLOWS

                                   (in thousands)

 

Years Ended December 31,

 

 

 

2009

2008

 

 

 

Cash flows from operating activities:

 

 

Net loss

 $   (574)

  $(4,055)

Adjustments to reconcile net loss to net cash (used in)

 

 

provided by operating activities:

 

 

Depreciation

    1,703

    2,292

Amortization of mortgage premiums

      (31)

      (57)

Amortization of loan costs

       53

       56

Casualty gain

   (2,908)

       (6)

Loss on early extinguishment of debt

      173

      111

Distributions in excess of investment

     (461)

      (33)

Impairment loss

      950

    1,215

Loss from sale of discontinued operations

      227

       69

Equity in loss from investments

       67

       61

Change in accounts:

 

 

Other assets

       29

       55

Receivables and deposits

       (6)

       38

Accounts payable

      107

      168

Accrued property taxes

     (163)

      (57)

Due to affiliates

     (559)

      687

Tenant security deposit liabilities

      (21)

      (28)

Other liabilities

       30

     (133)

Net cash (used in) provided by operating activities

   (1,384)

      383 

 

 

 

Cash flows from investing activities:

 

 

Net proceeds from sale of discontinued operations

    7,882

    4,013

Property improvements and replacements

   (2,481)

   (4,801)

Insurance proceeds received

    5,591

        3

Distributions from affiliated partnerships

      481

       33

Net withdrawals from restricted escrows

       36

       43

Net cash provided by (used in) investing activities

   11,509

     (709)

 

 

 

Cash flows from financing activities:

 

 

Principal payments on mortgage notes payable

   (2,736)

     (920)

Repayment of mortgage notes payable

   (4,514)

   (2,822)

Prepayment penalties

     (242)

     (131)

Loan costs paid

       --

      (15)

Distributions to partners

       --

     (802)

Advances from affiliate

    3,014

    5,683

Repayment of advances from affiliate

   (6,291)

     (100)

Net cash (used in) provided by financing activities

  (10,769)

      893

 

 

 

Net (decrease) increase in cash and cash equivalents

     (644)

      567

Cash and cash equivalents at beginning of year

    1,021

      454

Cash and cash equivalents at end of year

 $    377

  $ 1,021

Supplemental disclosure of cash flow information:

 

 

Cash paid for interest, net of capitalized interest

 $  2,494

  $ 2,188

Supplemental disclosure of non-cash activity:

 

 

Property improvements and replacements included in

 

 

  accounts payable

 $     26

  $   666

 

Included in property improvements and replacements for the year ended December 31, 2008 are approximately $43,000 of property improvements and replacements which were included in accounts payable at December 31, 2007.

 

See Accompanying Notes to the Financial Statements


                 CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

                            NOTES TO FINANCIAL STATEMENTS

 

                                  DECEMBER 31, 2009

 

 

Note A - Organization and Summary of Significant Accounting Policies

 

Organization: Consolidated Capital Institutional Properties/2, LP (the "Partnership" or "Registrant"), a California Limited Partnership, was formed on April 12, 1983. ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI") is the general partner of the Partnership.  The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2013 unless terminated prior to such date. The Partnership Agreement also provides that the term of the Partnership cannot be extended beyond the termination date. The Partnership commenced operations on July 22, 1983.  The Partnership currently owns and operates two residential investment properties, one each located in Illinois and Ohio.

 

On April 25, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Consolidated Capital Institutional Properties/2, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of March 19, 2008, by and between the California partnership and the Delaware partnership. All references herein to the Partnership shall mean Consolidated Capital Institutions Properties/2, a California limited partnership, for all periods prior to March 19, 2008 and Consolidated Capital Institutions Properties/2, LP, a Delaware limited partnership, for all periods from and after March 19, 2008.

 

Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.

 

The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Consolidated Capital Institutional Properties/2, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.

 

On April 30, 2008, the General Partner amended the Partnership Agreement to establish, and convert existing limited partnership interests into, different designated series of limited partnership interests that have separate rights with respect to specified partnership property. Effective as of the close of business on April 30, 2008 (the “Establishment Date”), each then outstanding Unit of limited partnership interest in the Partnership was converted into one Series A Unit and one Series B Unit. Except as described below, the Series A Units and Series B Units entitle the holders thereof to the same rights as the holders of Units of limited partnership interests prior to the Establishment Date.

 

From and after the Establishment Date, the Series A Units will be entitled to all of the Partnership’s interests in any entity in which the Partnership owns an interest, other than the Series B Subsidiary (as defined below), including, but not limited to, all profits, losses and distributions from such entities.

 

From and after the Establishment Date, the Series B Units will be entitled to all of the Partnership’s membership interest in Canyon Crest, L.L.C., a Delaware limited liability company (the “Series B Subsidiary”), including, but not limited to, all profits, losses and distributions from Canyon Crest Apartments. The Series B Units were dissolved during December 2008, upon the dissolution of the remaining assets and liabilities of Canyon Crest Apartments.

 

Recent Accounting Pronouncement: In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162, or SFAS No. 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  Upon the effective date of SFAS No. 168, the FASB Accounting Standards Codification, or the FASB ASC, became the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB ASC superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered non-SEC accounting literature not included in the FASB ASC is now non-authoritative.  Subsequent to the effective date of SFAS No. 168, the FASB will issue Accounting Standards Updates that serve to update the FASB ASC.

 

Subsequent Events:  The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.

 

Basis of Presentation:  The statement of operations for the year ended December 31, 2008 reflect the operations of Canyon Crest Apartments as loss from discontinued operations due to its sale on August 1, 2008.  In addition, the statement of operations for the year ended December 31, 2008 has been restated as of January 1, 2008 to reflects the operations of Windemere Apartments as loss from discontinued operations and the balance sheet as of December 31, 2008 has been restated to reflect the assets and liabilities of Windemere Apartments as held for sale due to its sale on August 6, 2009 (see Note H).

 

The following table presents summarized results of operations related to the Partnership’s discontinued operations for the years ended December 31, 2009 and 2008 (in thousands):

 

 

Year Ended

 

 

December 31, 2009

 

 

Windemere

 

 

Apartments

 

 

 

 

Revenues

$ 1,107

 

Expenses

  (1,127)

 

Casualty gain

    220

 

Impairment loss

    (950)

 

Loss on early extinguishment of debt

    (173)

 

Loss from discontinued operations

 $  (923)

 

 

 

 


 

 

 

Year Ended

 

 

 

December 31, 2008

 

 

 

 

 

 

Canyon Crest

Windemere

 

 

 

Apartments

Apartments

 Total

 

 

 

 

Revenues

  $   547

$ 1,792

$ 2,339

Expenses

     (770)

  (2,780)

 (3,550)

Impairment loss

   (1,215)

     --

 (1,215)

Loss on early extinguishment of debt

     (111)

     --

   (111)

 Loss from discontinued operations

  $(1,549)

 $  (988)

$(2,537)

 

Certain reclassifications have been made to the 2008 balances to conform to the 2009 presentation.

 

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $248,000 and $905,000 at December 31, 2009 and 2008, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.

 

Restricted Escrows: At December 31, 2008, approximately $26,000 of replacement reserves was on deposit with the mortgage holder of Windemere Apartments, which is included in assets held for sale, and approximately $10,000 of renovation funds was on deposit with the mortgage holder of Glenbridge Manor Apartments. At December 31, 2009, there were no replacement reserves on deposit with the mortgage holders of Highcrest Townhomes and Glenbridge Manor Apartments.

 

Income Taxes: No provision has been made in the financial statements for Federal income taxes because, under current law, no Federal income taxes are paid directly by the Partnership.  The Unit holders are responsible for their respective shares of Partnership net income or loss. The Partnership reports certain transactions differently for tax than for financial statement purposes.

 

Partners' (Deficiency) Capital: The Partnership Agreement provides for net income and net losses for both financial and tax reporting purposes to be allocated 99% to the Limited Partners and 1% to the General Partner. "Distributable Cash from Operations", as defined in the Partnership Agreement, is to be allocated 99% to the Limited Partners and 1% to the General Partner.  Distributions of surplus funds are to be allocated 100% to the Limited Partners.

 

Abandoned Units: During 2009 and 2008, the number of limited partnership units (the “Units”) decreased by 336.40 and 32.0 Units, respectively, due to limited partners abandoning their Units.  In abandoning his or her Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of the abandonment.

 

Net Loss Per Limited Partnership Unit: Net loss per Unit is computed by dividing net loss allocated to the Limited Partners by the number of Units outstanding at the beginning of the fiscal year. Per Unit information has been computed based on 908,998.2 and 909,030.2 units outstanding for 2009 and 2008, respectively.

 

Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the investment properties and related personal property.  For Federal income tax purposes, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27½ years and (2) personal property additions over 5 years. 

 

Investment properties:Investment properties consist of two apartment complexes and are stated at fair market value at the time of the foreclosure, less accumulated depreciation, unless the carrying amount of the asset is not recoverable.  The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components.  Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress.  Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250.  Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level. During the years ended December 31, 2009 and 2008, the Partnership capitalized approximately $2,000 and $170,000, respectively, of interest, approximately $1,000 and $28,000, respectively, of real estate taxes, and less than $1,000 and approximately $4,000, respectively, of operating costs. Capitalized costs are depreciated over the useful life of the asset.  Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.

 

If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. As discussed in “Note H – Sale of Investment Properties”, the Partnership recorded impairment losses of approximately $950,000 and $1,215,000 related to its investments in Windemere Apartments and Canyon Crest Apartments, respectively, during the years ended December 31, 2009 and 2008, respectively. These amounts are included in loss from discontinued operations.

 

Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits.  The security deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.

 

Leases:  The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  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.

 

Advertising Costs: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $142,000 and $194,000 for the years ended December 31, 2009 and 2008, respectively, were charged to expense as incurred and are included in operating expenses and loss from discontinued operations.

 

Deferred Costs: Loan costs of approximately $521,000 at both December 31, 2009 and 2008, less accumulated amortization of approximately $230,000 and $177,000, respectively, are included in other assets. Prior to October 1, 2009, the loan costs were amortized over the terms of the related loan agreements.  As of October 1, 2009, the Partnership changed its estimate of the useful life of the loan costs to better reflect the remaining useful life of these assets.  The Partnership term expires December 31, 2013, which is prior to the maturity of the mortgage note payable encumbering Highcrest Townhomes.  The General Partner unsuccessfully pursued extending the Partnership term.  Therefore, the Partnership determined that the loan costs encumbering Highcrest Townhomes should be amortized over the remaining life of the Partnership.   Prior to the change in estimate, the loan costs would have been fully amortized in 2017, the date the mortgage note payable encumbering Highcrest Townhomes matures.  The effect of this change did not have a material effect on the Partnership’s financial condition or results of operations. Amortization expense was approximately $53,000 and $56,000 for the years ended December 31, 2009 and 2008, respectively, and is included in interest expense.  Amortization expense is expected to be approximately $75,000 for 2010 and approximately $72,000 each of the years 2011 through 2013.

 

Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases.  Amortization of these costs is included in operating expenses and loss from discontinued operations.

 

Fair Value of Financial Instruments: FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its long-term debt by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, long-term debt.  At December 31, 2009, the fair value of the Partnership's long-term debt at the Partnership's incremental borrowing rate approximated its carrying value.

 

Segment Reporting: FASB ASC Topic 280-10, “Segment Reporting”, 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. FASB ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in FASB ASC Topic 280-10, the Partnership has only one reportable segment.

 

Note B – Mortgage Notes Payable

 

The principal terms of mortgage notes payable are as follows:

 

 

Principal

Balance At

December 31,

Monthly

 

 

Principal

 

Payment

Stated

 

Balance

 

Including

Interest

Maturity

Due at

 

2009

2008

Interest

Rate

Date (1)

Maturity

 

(in thousands)

 

 

 

(in thousands)

Properties

 

 

 

 

 

 

Highcrest Townhomes

$10,876

$11,007

$   68

6.17%

10/01/17

$ 9,414

Glenbridge Manor

 

 

 

 

 

 

  Apartments

 16,820

 19,283

   117

5.65%

12/15/13

 14,835

Total

$27,696

$30,290

$  185

 

 

$24,249

 

(1)   Maturity date of the mortgage note payable encumbering Highcrest Townhomes extends beyond the termination date of the Partnership, which is December 13, 2013.

 

On April 7, 2009, the Partnership amended the mortgage note encumbering Glenbridge Manor Apartments, as a result of a principal payment of approximately $2,000,000, which was funded with an advance from AIMCO Properties, L.P. The amendment to the mortgage note requires monthly payments of principal and interest of approximately $117,000 beginning on May 15, 2009 until the December 2013 maturity, at which time a balloon payment of approximately $14,835,000 is due. The previous terms consisted of monthly payments of principal and interest of approximately $131,000 with a balloon payment of approximately $16,566,000 due at the December 2013 maturity date.

 

The mortgage notes payable are fixed rate mortgages that are nonrecourse and are secured by a pledge of the Partnership’s investment properties and by pledge of revenues from the respective investment properties. The mortgage notes impose prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness.

 

While the Partnership termination date is December 31, 2013, scheduled principal payments of the mortgage notes payable subsequent to December 31, 2009 are as follows (in thousands):

 

 

Mortgage

 

Notes

 

 

2010

$   619

2011

    656

2012

    695

2013

 15,518

2014

    194

Thereafter

 10,014

 

$27,696

 

Note C - Transactions with Affiliated Parties

 

The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities.  The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

 

Affiliates of the General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $364,000 and $427,000, for the years ended December 31, 2009 and 2008, respectively, which are included in operating expenses and loss from discontinued operations.

 

An affiliate of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $370,000 and $651,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses, investment properties, assets held for sale and loss from sale of discontinued operations. The portion of these reimbursements included in investment properties, assets held for sale and loss from sale of discontinued operations for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the General Partner of approximately $121,000 and $138,000, respectively. At December 31, 2009 and 2008, the Partnership owed approximately $400,000 and $823,000, respectively, for accountable administrative expenses, which is included in due to affiliates.

 

Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the General Partner, advanced the Partnership approximately $3,014,000 and $5,683,000 during the years ended December 31, 2009 and 2008, respectively, to fund a partial repayment of the mortgage encumbering Glenbridge Manor Apartments, reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments and operations and real estate taxes at two of the investment properties. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the General Partner review the market rate adjustment quarterly. The interest rates on outstanding advances at December 31, 2009 ranged from 5.25% to 10.81%. Interest expense was approximately $471,000 and $276,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Partnership repaid approximately $6,898,000 and $102,000, respectively, of principal and interest from the receipt of insurance proceeds, sale proceeds and cash from operations. At December 31, 2009 and 2008, approximately $2,444,000 and $5,857,000, respectively, of advances and accrued interest remain unpaid and are included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. Subsequent to December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $787,000 to fund operations at Glenbridge Manor Apartments.

 

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, general liability 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 years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $226,000 and $181,000, respectively, for insurance coverage and fees associated with policy claims administration.

 

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,447.25 Units in the Partnership representing 63.22% of the outstanding Units at December 31, 2009. 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, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that 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 63.22% 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 as its sole stockholder.

 

Note D – Investment Properties and Accumulated Depreciation

 

 

 

Initial Cost

 

 

 

To Partnership

 

 

 

(in thousands)

 

 

 

 

Buildings

Net Cost

 

 

 

and Related

Capitalized

 

 

 

Personal

Subsequent to

Description

Encumbrances

Land

Property

Acquisition

 

 

 

 

 

Highcrest Townhomes

$10,876

$ 3,660

$ 8,540

$ 1,487

Glenbridge Manor Apartments

 16,820

  4,335

 24,269

  4,688

Totals

$27,696

$ 7,995

$32,809

$ 6,175


 

 

Gross Amount At Which Carried

 

 

 

 

 

At December 31, 2009

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buildings

 

 

 

 

 

 

 

And Related

 

 

 

 

 

 

 

Personal

 

Accumulated

Date of

Date

Depreciable

Description

Land

Properties

Total

Depreciation

Construction

Acquired

Life

 

 

 

 

 

 

 

 

Highcrest

 

 

 

 

 

 

 

 Townhomes

$ 3,660

$10,027

$13,687

$ 4,380

1968

08/22/02

5-30 yrs

Glenbridge

 Manor

 

 

 

 

 

 

 

 Apartments

  4,297

 28,995

 33,292

  6,699

2003

09/01/03

5-30 yrs

 

 

 

 

 

 

 

 

Totals

$ 7,957

$39,022

$46,979

$11,079

 

 

 

 

Reconciliation of "Investment Properties and Accumulated Depreciation":

 

 

Years Ended December 31,

 

2009

2008

 

(in thousands)

Investment Properties

 

 

Balance at beginning of year

$ 59,348

$61,163

Property improvements

   1,841

  5,424

Saleof investment property

  (10,543)

  (5,493)

Impairment loss

     (950)

  (1,215)

Disposal of assets

   (2,717)

    (531)

Balance at end of year

$ 46,979

$59,348

 

 

 

Accumulated Depreciation

 

 

Balance at beginning of year

$ 12,303

$11,540

Additions charged to expense

   1,703

  2,292

Saleof investment property

   (2,458)

  (1,421)

Disposal of assets

     (469)

    (108)

Balance at end of year

$ 11,079

$12,303

 

The aggregate cost of the investment properties for Federal income tax purposes at December 31, 2009 and 2008 is approximately $44,589,000 and $59,558,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2009 and 2008 is approximately $11,555,000 and $12,604,000, respectively.

 


Note E - Investment in Affiliated Partnerships

 

The Partnership has investments in the following affiliated partnerships:

 

 

 

 

Investment Balance At

December 31,

 

 

Ownership

Partnership

Type of Ownership

Percentage

2009

2008

 

 

 

(in thousands)

Consolidated Capital

Special Limited

 

 

 

  Growth Fund

Partner

0.40%

$   --

$   --

Consolidated Capital

Special Limited

 

 

 

  Properties III

Partner

1.86%

    --

     3

Consolidated Capital

Special Limited

 

 

 

  Properties IV

Partner

1.86%

   479

   563

 

 

 

$  479

$  566

 

These investments are accounted for using 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 years ended December 31, 2009 and 2008, the Partnership received approximately $481,000 and $33,000, respectively, of distributions from two of its affiliated partnerships, of which approximately $461,000 and $33,000, respectively, was recognized as income on the statements of operations. During the years ended December 31, 2009 and 2008, the Partnership recognized equity in loss from the operating results of the investments of approximately $67,000 and $61,000, respectively. As of December 31, 2009, Consolidated Capital Growth Fund has been liquidated.


Note F - Income Taxes

 

The Partnership is classified as a partnership for Federal income tax purposes.  Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners.

 

The following is a reconciliation of reported net loss and Federal taxable loss for the years ended December 31, 2009 and 2008 (in thousands, except per unit data):

 

 

2009

2008

 

 

 

Net loss as reported

$    (574)

 $(4,055)

(Deduct) Add:

 

 

  Depreciation differences

     (233)

      6

  Change in prepaid rental

      (14)

      1

  Casualty gain

   (2,688)

      (5)

  Loss on sale of investment property

     (848)

     --

  Other

     732

  1,323

 

 

 

Federal taxable loss

   $  (3,625)

    $(2,730)

 

 

 

Federal taxable loss allocated to

 

 

  Series A unit holders

   $  (3,625)

    $(1,512)

Federal taxable loss allocated to

 

 

  Series B unit holders

      --

     (1,218)

 

   $  (3,625)

    $(2,730)

 

 

 

Per limited partnership unit:

 

 

  Federal taxable loss allocated to

 

 

    Series A unit holders

   $   (3.95)

    $ (1.65)

  Federal taxable loss allocated to

 

 

    Series B unit holders

      --

      (1.33)

  Federal taxable loss

   $   (3.95)

    $ (2.98)

 

The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets (in thousands):

 

 

2009

2008

Net assets as reported

     $ 4,834

     $ 5,408

Building and land

      (2,390)

         210

  Accumulated depreciation

        (476)

        (301)

  Syndication fees

      25,796  

      25,796  

  Other

       3,267

       3,541

Net assets - tax basis

     $31,031

     $34,654

 

For 2009 and 2008, the net assets are allocated to the Series A unit holders, as the Series B units were dissolved during 2008.

 

Note G - Casualty Events

 

During 2008, Glenbridge Manor Apartments experienced significant ground movement causing damage to two buildings, water pipes and sewer lines. These two buildings, containing 17 units, the office, clubhouse and fitness center, were evacuated. One of the buildings containing 12 units was demolished, and another building was partially demolished. The Partnership is in the process of rebuilding these units. A third building experienced minor ground movement, which required approximately $60,000 to repair. The property is currently undergoing testing to determine whether additional buildings will be affected.  The total estimated loss is approximately $7,456,000, of which approximately $2,904,000 relates to buildings, approximately $4,353,000 relates to demolition, land improvements and reconstruction, and approximately $199,000 relates to lost rents. During the year ended December 31, 2008, the Partnership entered into contracts for approximately $3,400,000 to begin reconstruction, all of which has been spent as of December 31, 2009, including approximately $1,300,000 in 2009. However the reconstruction completed to date involved repairs to damaged buildings and common areas and ground preparation. No reconstruction has begun on the demolished buildings. During the year ended December 31, 2009, the Partnership received approximately $4,932,000 of insurance proceeds to cover the damages, and approximately $199,000 to cover lost rents. During the year ended December 31, 2009, the Partnership recognized a casualty gain of approximately $2,686,000 due to the receipt of insurance proceeds, partially offset by the net write off of undepreciated damaged assets of approximately $2,246,000.

 

In September 2008, Windemere Apartments sustained damage from Hurricane Ike.  The damages were approximately $1,284,000, including clean up costs of approximately $634,000. During the fourth quarter of 2008, the Partnership removed approximately $435,000 of undepreciated damaged assets and recorded a corresponding receivable for the estimated insurance proceeds. For the year ended December 31, 2008, the estimated clean up costs were included in operating expenses, including approximately $125,000 incurred during the year ended December 31, 2008. This amount is included in loss from discontinued operations. During the year ended December 31, 2009, the Partnership received insurance proceeds of approximately $650,000 to cover the damages and approximately $259,000 for clean up costs. The Partnership recognized a casualty gain of approximately $220,000 due to receipt of insurance proceeds, offset by the net write off of undepreciated damaged assets of approximately $430,000, which is a change of approximately $5,000 from the estimate removed as of December 31, 2008. For the year ended December 31, 2009, the casualty gain and proceeds received to cover clean up costs are included in loss from discontinued operations. Subsequent to December 31, 2009, the Partnership received additional proceeds of approximately $99,000, which is expected to be recognized as income from discontinued operations during 2010.

 

In July 2008, Highcrest Townhomes experienced damages of approximately $23,000 from a broken water pipe, which were included in operating expenses for the year ended December 31, 2008, causing damage to 3 units. The Partnership received insurance proceeds of approximately $13,000 to cover the damages during the year ended December 31, 2009, which are reflected as a reduction of operating expenses.

 

In October 2007, Canyon Crest Apartments experienced damages as a result of a kitchen fire. During the year ended December 31, 2007, the Partnership recorded a casualty loss of approximately $2,000 as a result of the expected receipt of insurance proceeds of approximately $21,000, of which approximately $12,000 was received during the year ended December 31, 2007, net of the write-off of undepreciated damaged assets of approximately $23,000.  During the year ended December 31, 2008, the Partnership received additional insurance proceeds related to this casualty of approximately $3,000 and approximately $2,000 to cover lost rents.  The Partnership recognized a casualty gain of approximately $6,000 for the year ended December 31, 2008, which is included in loss from discontinued operations, as a result of a change in the previous write-off of undepreciated damaged assets of approximately $12,000, net of the write-off of the remaining receivable of approximately $6,000.

 

In February 2009, Highcrest Townhomes experienced damages of approximately $19,000 as a result of a fire. During the year ended December 31, 2009, the Partnership recognized a casualty gain of approximately $2,000, which is reflected as a reduction of operating expenses, as a result of the receipt of insurance proceeds of approximately $9,000, partially offset by the write-off of undepreciated damaged assets of approximately $7,000.

 

Note H - Sale of Investment Properties

 

On August 6, 2009, the Partnership sold Windemere Apartments to a third party for a gross sale price of approximately $8,077,000. The net proceeds realized by the Partnership were approximately $7,882,000 after payment of closing costs. The Partnership used approximately $4,514,000 of the net proceeds to repay the mortgage encumbering the property. In accordance with the Partnership’s impairment policy and FASB ASC Topic 360-10, “Property, Plant, and Equipment”, the Partnership recorded an impairment loss of approximately $950,000 to write the property value down to the sale price during the year ended December 31, 2009. This amount is included in loss from discontinued operations. As a result of the sale, the Partnership recorded a loss of approximately $227,000, which is included in loss from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $173,000 due to a prepayment penalty of approximately $242,000, partially offset by the write off of the unamortized mortgage premium of approximately $69,000, which is included in loss from discontinued operations for the year ended December 31, 2009.

 

On August 1, 2008, the Partnership sold Canyon Crest Apartments to a third party for a gross sale price of approximately $4,100,000. The net proceeds realized by the Partnership were approximately $4,013,000 after payment of closing costs. The Partnership used approximately $2,822,000 of the net proceeds to repay the mortgage encumbering the property. In accordance with the Partnership’s impairment policy and FASB ASC Topic 360-10, the Partnership recorded an impairment loss of approximately $1,215,000 to write the property value down to the sale price during the year ended December 31, 2008. This amount is included in loss from discontinued operations.  As a result of the sale, the Partnership recorded a loss of approximately $69,000. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $111,000 due to a prepayment penalty of approximately $131,000, partially offset by the write off of the unamortized mortgage premium of approximately $20,000, which is included in loss from discontinued operations for the year ended December 31, 2008.

 

Note I - Contingencies

 

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”).  The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”).  In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $3,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property.  At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants, and plaintiffs dismissed the claims of the next two claimants.  The remaining two arbitrations will take place in April 2010.  The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership.  Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

 

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.

 


Environmental

 

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.

 

Mold

 

The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements.  The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure.  Affiliates of the General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents.  To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions.  Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.


Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A(T). 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 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. 

 

Management’s Report on Internal Control Over Financial Reporting

 

The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

·         pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

 

·         provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and

 

·         provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2009.  In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

 

Based on their assessment, the Partnership’s management concluded that, as of December 31, 2009, the Partnership’s internal control over financial reporting is effective.

 

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to the attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

 

(b)            Changes in Internal Control Over Financial Reporting.

 

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

Item 9B.    Other Information

 

None.


 PART III

 

Item 10.    Directors, Executive Officers and Corporate Governance

 

The Registrant has no directors or officers. The General Partner is ConCap Equities, Inc. (“CEI”). The names and ages of, as well as the position and offices held by the present directors and officers of the General Partner are set forth below. There are no family relationships between or among any directors or officers.

 

Name

Age

Position

 

 

 

Steven D. Cordes

38

Director and Senior Vice President

John Bezzant

47

Director and Senior Vice President

Timothy J. Beaudin

51

President and Chief Operating Officer

Ernest M. Freedman

39

Executive Vice President and Chief Financial Officer

Lisa R. Cohn

41

Executive Vice President, General Counsel and Secretary

Paul Beldin

36

Senior Vice President and Chief Accounting Officer

Stephen B. Waters

48

Senior Director of Partnership Accounting

 

Steven D. Cordes was appointed as a Director of the General Partner effective March 2, 2009.  Mr. Cordes has been a Senior Vice President of the General Partner and AIMCO since May 2007.  Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity.  Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers.  Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership.  Mr. Cordes brings particular expertise to the Board in the areas of asset management as well as finance and accounting.

 

John Bezzant was appointed as a Director of the General Partner effective December 16, 2009.  Mr. Bezzant has been a Senior Vice President of the General Partner and AIMCO since joining AIMCO in June 2006.   Prior to joining AIMCO, from 2005 to June 2006, Mr. Bezzant was a First Vice President at Prologis, a Denver, Colorado-based real estate investment trust, and from 1986 to 2005, Mr. Bezzant served as Vice President, Asset Management at Catellus Development Corporation, a San Francisco, California-based real estate investment trust.  Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.

 

Timothy J. Beaudin was appointed President and Chief Operating Officer of AIMCO and the General Partner in February 2009.  He joined AIMCO and the General Partner as Executive Vice President and Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer of the General Partner and AIMCO in October 2008.  Mr. Beaudin oversees conventional and affordable property operations, transactions, asset management, and redevelopment and construction services for AIMCO and the General Partner.  Prior to joining AIMCO and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation.  During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.

 

Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of the General Partner and AIMCO in November 2009.   Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas.  Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts.

 

Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the General Partner and AIMCO in December 2007.  From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO.  Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel.  Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.

 

Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the General Partner since that time.  Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation.  Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.

 

Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the General Partner in June 2009.  Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the General Partner.  Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the General Partner and AIMCO in April 2004.  Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.

 

The Registrant is not aware of the involvement in any legal proceedings with respect to the directors and executive officers listed in this Item 10.

 

One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.

 

The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an "audit committee financial expert".

 

The directors and officers of the General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.

 

Item 11.    Executive Compensation

 

None of the directors and officers of the General Partner received any remuneration from the Partnership during the year ended December 31, 2009.

 


Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

Except as noted below, no person was known by the Partnership to be the beneficial owner of more than 5% of the Limited Partnership Units (the “Units”) of the Partnership as of December 31, 2009:

 

Entity

Number of Units

Percentage

Reedy River Properties

 

 

  (an affiliate of AIMCO)

 168,736.50

18.57%

AIMCO IPLP, L.P.

 

 

  (an affiliate of AIMCO)

  17,240.60

 1.90%

AIMCO Properties, L.P.

 

 

  (an affiliate of AIMCO)

 320,951.45

35.32%

Cooper River Properties, LLC

 

 

  (an affiliate of AIMCO)

  67,518.70

 7.43%

 

Reedy River Properties, AIMCO IPLP, L.P. and Cooper River Properties, LLC are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29601.

 

AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237.

 

No directors or officers of the General Partner owns any Units of the Partnership of record or beneficially.

 

Item 13.    Certain Relationships and Related Transactions, and Director Independence

 

The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities.  The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

 

Affiliates of the General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $364,000 and $427,000, for the years ended December 31, 2009 and 2008, respectively, which are included in operating expenses and loss from discontinued operations on the statements of operations included in “Item 8. Financial Statements and Supplementary Data”.

 

An affiliate of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $370,000 and $651,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses, investment properties, assets held for sale and loss from sale of discontinued operations on the financial statements included in “Item 8. Financial Statements and Supplementary Data”. The portion of these reimbursements included in investment properties, assets held for sale and loss from sale of discontinued operations for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the General Partner of approximately $121,000 and $138,000, respectively. At December 31, 2009 and 2008, the Partnership owed approximately $400,000 and $823,000, respectively, for accountable administrative expenses, which is included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”.

 

Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the General Partner, advanced the Partnership approximately $3,014,000 and $5,683,000 during the years ended December 31, 2009 and 2008, respectively, to fund a partial repayment of the mortgage encumbering Glenbridge Manor Apartments, reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments and operations and real estate taxes at two of the investment properties.AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the General Partner review the market rate adjustment quarterly. The interest rates on outstanding advances at December 31, 2009 ranged from 5.25% to 10.81%. Interest expense was approximately $471,000 and $276,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Partnership repaid approximately $6,898,000 and $102,000 of principal and interest from the receipt of insurance proceeds, sale proceeds and cash from operations. At December 31, 2009 and 2008, approximately $2,444,000 and $5,857,000, respectively, of advances and accrued interest remain unpaid and are included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. Subsequent to December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $787,000 to fund operations at Glenbridge Manor Apartments.

 

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, general liability 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 years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $226,000 and $181,000, respectively, for insurance coverage and fees associated with policy claims administration.

 

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,447.25 Units in the Partnership representing 63.22% of the outstanding Units at December 31, 2009. 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 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 63.22% 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 as its sole stockholder.

 

Neither of the General Partner's directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the General Partner.

 


Item 14.    Principal Accounting Fees and Services

 

The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2010.  The aggregate fees billed for services rendered by Ernst & Young LLP for 2009 and 2008 are described below.

 

Audit Fees.  Fees for audit services totaled approximately $50,000 and $67,000 for 2009 and 2008, respectively.  Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.

 

Tax Fees.  Fees for tax services totaled approximately $17,000 and $23,000 for 2009 and 2008, respectively.


PART IV

 

Item 15.    Exhibits, Financial Statement Schedules

 

(a)   The following financial statements of the Registrant are included in Item 8:

 

Balance Sheets at December 31, 2009 and 2008.

 

Statements of Operations for the years ended December 31, 2009 and 2008.

 

Statements of Changes in Partners' (Deficiency) Capital for the years ended December 31, 2009 and 2008.

 

Statements of Cash Flows for the years ended December 31, 2009 and 2008.

 

Notes to Financial Statements.

 

Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.

 

b)    Exhibits:

 

See Exhibit Index.

 

The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

 

  • should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

  • have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

  • may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

 

  • were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.


SIGNATURES

 

 

 

Pursuant to the requirements of Section 13 or 15(d) 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/2, LP

 

 

 

By:   ConCap Equities, Inc.

 

      General Partner

 

 

 

By:   /s/Steven D. Cordes

 

      Steven D. Cordes

 

      Senior Vice President

 

 

 

By:   /s/Stephen B. Waters

 

      Stephen B. Waters

 

      Senior Director of Partnership Accounting

 

 

 

Date: April 9, 2010

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and the in the capacities and on the dates indicated.

 

/s/John Bezzant

Director and Senior

Date: April 9, 2010

John Bezzant

Vice President

 

 

 

 

/s/Steven D. Cordes

Director and Senior

Date: April 9, 2010

Steven D. Cordes

Vice President

 

 

 

 

/s/Stephen B. Waters

Senior Director of Partnership

Date: April 9, 2010

Stephen B. Waters

Accounting

 


CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

 

EXHIBIT INDEX

 

 

Exhibit           Description of Exhibit

 

3.1           Certificates of Limited Partnership, as amended to date.

 

3.2           Fourth Amendment to the amended and restated limited partnership agreement of CCIP/2 dated January 8, 2002 (Incorporated by reference to the annual report on Form 10-KSB for the year ended December 31, 2004).

 

3.3           Fifth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated March 19, 2008. Incorporated by reference to the Registrant's Current Report on Form 8-K dated April 30, 2008.

 

3.4           Sixth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated April 30, 2008. Incorporated by reference to the Registrant's Current Report on Form 8-K dated April 30, 2008.

 

3.5           Seventh Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated May 8, 2008, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009.

 

3.6           Eighth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated December 30, 2008. (Incorporated by reference to the Registrant’s Annual Report on Form 10K for the year ended December 31, 2008).

 

10.33         Assignment of Partnership Rights and Distributions between Consolidated Capital Equity Partners/Two, L.P., a California limited partnership and Consolidated Capital Institutional Properties/2, a California limited partnership (Incorporated by reference to the Registrant's Current Report on Form 8-K dated August 22, 2002).

 

10.34         Agreement for Conveyance of Real Property, including exhibits thereto, between Consolidated Capital Equity Partners/Two, L.P., a California limited partnership and Consolidated Capital Institutional Properties/2, a California limited partnership (Incorporated by reference to the Registrant's Current Report on Form 8-K dated August 22, 2002).

 

10.35         Promissory Note dated December 17, 2003 between CCIP/2 Village Brook, LLC, a Delaware limited partnership, and Northwestern Mutual Life Insurance Company, a Wisconsin corporation (Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 19, 2003).

 

10.36         Mortgage and Security Agreement dated December 17, 2003 between CCIP/2 Village Brook, LLC, a Delaware limited partnership, and Northwestern Mutual Life Insurance Company, a Wisconsin corporation (Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 19, 2003).

 

10.37         Multifamily Note, dated September 28, 2007 between CCIP/2 Highcrest L.L.C., a Delaware limited liability company, and Capmark Bank, a Utah industrial bank. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 28, 2007).

 

10.38         Multifamily Mortgage, Assignment of Rents and Security Agreement, dated September 28, 2007 between CCIP/2 Highcrest, L.L.C., a Delaware limited liability company, and Capmark Bank, a Utah industrial bank. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 28, 2007).

 

10.39         Purchase and Sale Contract between CCIP/2 Canyon Crest, L.L.C., a Delaware limited liability company, and Bellaire Holdings, LLC, a Colorado limited liability company, and FW Madison Marketing Group LLC, a Colorado limited liability company, dated June 27, 2008 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated June 27, 2008).

 

10.40         First Amendment to Purchase and Sale Contract between CCIP/2 Canyon Crest, L.L.C., a Delaware limited liability company, and Bellaire Holdings, LLC, a Colorado limited liability company, and FW Madison Marketing Group LLC, a Colorado limited liability company, dated July 21, 2008 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 21, 2008).

 

10.41         Purchase and Sale Contract between CCIP/2 Windemere, L.P., a Delaware limited partnership, and Derbyshire Investments Windemere, LLC, a Texas limited liability company, dated May 8, 2009 (incorporated by reference to the Registrant’s Current Report on Form 8-K dated May 8, 2009).

 

10.42         First Amendment to Promissory Note between CCIP/2 Village Brooke, L.L.C., a Delaware limited liability company, and The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, dated April 7, 2009 (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q dated March 31, 2009).

 

10.43         First Amendment to Purchase and Sale Contract between CCIP/2 Windemere, L.P., a Delaware limited partnership, and Derbyshire Investments Windemere, LLC, a Texas limited liability company, dated July 7, 2009 (incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 7, 2009).

 

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 of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.