ITEM 1.     FINANCIAL STATEMENTS

CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

BALANCE SHEETS

(Unaudited)

 (in thousands)

STATEMENTS OF DISCONTINUED OPERATIONS

(Unaudited)

(in thousands, except per unit data)

CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP

STATEMENT OF CHANGES IN PARTNERS' DEFICIT

(Unaudited)

(in thousands)

STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note A – Basis of Presentation

The accompanying unaudited financial statements of Consolidated Capital Institutional Properties/2, LP (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The General Partner is a subsidiary of Apartment Investment and Management Company ("Aimco"), a publicly traded real estate investment trust. Operating results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2013. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

At September 30, 2013 and December 31, 2012, the Partnership had outstanding 907,143.60 limited partnership units.

Certain reclassifications have been made to the 2012 balances to conform to the 2013 presentation.

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Partnership Termination

The Partnership Agreement provides that the Partnership is to terminate on December 31, 2013 unless terminated prior to such date. Since the Partnership’s term will expire on December 31, 2013 and the term cannot be extended, the General Partner began marketing the Partnership’s investment property for sale in 2013.

The respective assets and liabilities of Highcrest Townhomes met all criteria to be classified as held for sale as of September 30, 2013 and December 31, 2012.  Those respective assets and liabilities are measured at their carrying value as the carrying value is lower than the fair value less costs to sell. The accompanying statements of discontinued operations for the three and nine months ended September 30, 2013 and 2012 are presented to reflect the operations of Highcrest Townhomes as discontinued operations. On October 30, 2013, the Partnership sold Highcrest Townhomes to a third party for a total sales price of $20,175,000. Subsequent to the sale, the Partnership commenced the liquidation process and plans to have that process completed no later than June 2014.

Note B – 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 property as compensation for providing property management services. The Partnership paid to such affiliates approximately $99,000 and $93,000 for the nine months ended September 30, 2013 and 2012, respectively, which are included in operating expenses.

Note C – Investment in Affiliated Partnership

The Partnership had an investment as a special limited partner in an affiliated partnership, Consolidated Capital Properties IV.  This investment was accounted for using the equity method of accounting. Distributions from the affiliated partnership were accounted for as a reduction of the investment balance. When the investment balance had been reduced to zero, subsequent distributions received would be recognized as income.

During the nine months ended September 30, 2012, the affiliated partnership merged with affiliates of the General Partner.  As a result of the completion of the merger, the Partnership received approximately $24,000 as consideration for its special limited partnership interest, which is reflected as income from merger of affiliated partnership for the nine months ended September 30, 2012, as the Partnership’s investment in the affiliated partnership was zero at the time of the merger.

Note D – Fair Value of Financial Instruments

Financial Accounting Standards Board Accounting Standards Codification 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 is required to classify these fair value measurements into one of three categories, based on the nature of the inputs used in the fair value measurement.  Level 1 of the hierarchy includes fair value measurements based on unadjusted quoted prices in active markets for identical assets or liabilities the Partnership can access at the measurement date.  Level 2 includes fair value measurements based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 3 includes fair value measurements based on unobservable inputs.  The classification of fair value measurements is subjective and generally accepted accounting principles requires the Partnership to disclose more detailed information regarding those fair value measurements classified within the lower levels of the hierarchy.  The Partnership believes that the carrying amount of its financial instruments (except for the mortgage note payable) approximates its fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its mortgage note payable by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, mortgage notes payable. The Partnership has classified this fair value measurement within Level 2 of the fair value hierarchy. At September 30, 2013, the fair value of the Partnership's mortgage note payable at the Partnership's incremental borrowing rate was approximately $11,091,000.

Note E – Contingencies

The Partnership is unaware of any pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials present on a property, including lead-based paint, asbestos, polychlorinated biphenyls, petroleum-based fuels, and other miscellaneous materials. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such materials. The presence of, or the failure to manage or remedy properly, these materials 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 improper management of these materials 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 these materials through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of these materials is potentially liable under such laws for the proper operation of the disposal facility. 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 property, the Partnership could potentially be responsible for environmental liabilities or costs associated with its property.

Note F – Investment Property

During the nine months ended September 30, 2013, the Partnership retired and wrote-off property improvements and replacements no longer being used that had a cost basis of approximately $112,000 and accumulated depreciation of approximately $112,000.

Note G – Subsequent Event

On October 30, 2013, the Partnership sold Highcrest Townhomes, its sole investment property, to a third party for a total sales price of $20,175,000.  The net proceeds realized by the Partnership were approximately $19,878,000 after payment of closing costs of approximately $297,000.  The Partnership used approximately $10,240,000 to repay the mortgage encumbering the property.  The Partnership anticipates recognizing a gain, during the fourth quarter of 2013, of approximately $11,441,000 as a result of the sale.  In addition, the Partnership anticipates recognizing a loss on extinguishment of debt, during the fourth quarter of 2013, of approximately $2,000,000 as a result of the write off of unamortized loan costs and payment of a prepayment penalty of approximately $1,993,000.  Due to the sale of its sole investment property, the Partnership expects to liquidate by June 30, 2014.  Subsequent to September 30, 2013, the Partnership distributed approximately $6,275,000 of proceeds from the sale to its partners (approximately $6.92 per Series A limited partnership unit).

The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the nine months ended September 30, 2013 and 2012:

Results of Operations

The statements of discontinued operations for both the three and nine months ended September 30, 2013 and 2012 are presented to reflect the operations of Highcrest Townhomes as discontinued operations.  The assets and liabilities of Highcrest Townhomes are classified as held for sale as of September 30, 2013 and December 31, 2012. On October 30, 2013, the Partnership sold Highcrest Townhomes to a third party for a total sales price of $20,175,000.

The Partnership recognized net losses of approximately $85,000 and $311,000 for the three and nine months ended September 30, 2013, respectively, compared to net losses of approximately $90,000 and $336,000 for the three and nine months ended September 30, 2012, respectively.  The decrease in net loss for both the three and nine months ended September 30, 2013 is due to an increase in total revenues, partially offset by an increase in total expenses. The decrease in net loss for the nine months ended September 30, 2013 is also partially offset by a decrease in income from the merger of an affiliated partnership.

Total expenses increased for both the three and nine months ended September 30, 2013 due to increases in operating and property tax expenses, partially offset by a decrease in general and administrative expense. Both depreciation and interest expenses remained relatively constant for both periods. The increase in operating expenses for the three months ended September 30, 2013 is primarily due to increases in repair and maintenance costs and contract services at the property. The increase in operating expenses for the nine months ended September 30, 2013 is primarily due to increases in salaries and related benefits, utility expenses and repair and maintenance costs at the property.  The increase in property tax expense for both periods is primarily due to an increase in the tax rate at Highcrest Townhomes.

The decrease in general and administrative expenses for both periods is 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 three and nine months ended September 30, 2013 and 2012 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

The Partnership had an investment as a special limited partner in an affiliated partnership.  During the nine months ended September 30, 2012, the affiliated partnership merged with affiliates of the General Partner. As a result of the completion of the merger, the Partnership received approximately $24,000 as consideration for its special limited partnership interest, which is reflected as income from merger of affiliated partnership for the nine months ended September 30, 2012 as the Partnership’s investment in the affiliated partnership was zero at the time of the merger.

Liquidity and Capital Resources

At September 30, 2013, the Partnership had cash and cash equivalents of approximately $157,000, compared with approximately $143,000 at December 31, 2012.  The increase in cash and cash equivalents of approximately $14,000 is due to approximately $173,000 of cash provided by operating activities, partially offset by approximately $96,000 and $63,000 of cash used in investing and financing activities, respectively. Cash used in investing activities consisted of property improvements and replacements.  Cash used in financing activities consisted of principal payments made on the mortgage note payable encumbering the Partnership’s investment property and repayment of advances from AIMCO Properties, L.P., partially offset by an advance received from AIMCO Properties, L.P.

During the nine months ended September 30, 2013, the Partnership completed approximately $83,000 of capital improvements at Highcrest Townhomes, consisting primarily of air conditioning and water heater upgrades and appliance and floor covering replacement. These improvements were funded from operations. On October 30, 2013, the Partnership sold Highcrest Townhomes to a third party.

The Partnership's assets are thought to be generally sufficient for any near-term needs of the Partnership. The mortgage indebtedness encumbering Highcrest Townhomes of approximately $10,255,000 required monthly payments of principal and interest and a balloon payment of approximately $9,414,000 in 2017. In connection with the sale of the property on October 30, 2013, the mortgage was repaid with sale proceeds.

There were no distributions made to the partners during the nine months ended September 30, 2013 or 2012.  Subsequent to September 30, 2013, the Partnership distributed approximately $6,275,000 of proceeds from the sale of Highcrest Townhomes to its partners (approximately $6.92 per Series A limited partnership unit).

The Partnership’s cash available for distribution will be reviewed on a quarterly basis.  Future cash distributions will depend on the amount of cash remaining after fully liquidating the Partnership.

Other

In addition to its indirect ownership of the general partner interest in the Partnership, Aimco and its affiliates owned 574,447.25 limited partnership units (the "Units") in the Partnership representing 63.32% of the outstanding Units at September 30, 2013. A number of these Units were acquired pursuant to tender offers made by Aimco or its affiliates.  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 63.32% 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.

The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Impairment of Long-Lived Asset

Investment property is stated at its fair market value at the time of foreclosure in 2002, less accumulated depreciation, unless the carrying amount of the asset is not recoverable.  If events or circumstances indicate that the carrying amount of the 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 property.  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 asset.

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 residents and all receivables due from former resdients.

Assets Held for Sale

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.     CONTROLS AND PROCEDURES

(a)   Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b)   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 fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

ITEM 6.     EXHIBITS

See Exhibit Index.

The agreements included as exhibits to this Form 10-Q 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-Q not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit Number    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 Registrant's 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).

10.37         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).

10.47         Purchase and Sale Contract between CCIP/2 Highcrest, L.L.C., a Delaware limited liability company, and Laramar Kona Real Estate Associates LLC, a Delaware limited liability company  (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated August 15, 2013).

10.48         First Amendment to Purchase and Sale Contract between CCIP/2 Highcrest, L.L.C., a Delaware limited liability company, and Laramar Kona Real Estate Associates LLC, a Delaware limited liability company (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 16, 2013).

10.49         Second Amendment to Purchase and Sale Contract between CCIP/2 Highcrest, L.L.C., a Delaware limited liability company, and Highcrest Townhomes Apartments, LLC, a Delaware limited liability company (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated October 18, 2013).

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.

101           XBRL (Extensible Business Reporting Language). The following materials from Consolidated Capital Institutional Properties/2, LP’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, formatted in XBRL: (i) balance sheets, (ii) statements of discontinued operations, (iii) statement of changes in partners’ deficit, (iv) statements of cash flows, and (v) notes to financial statements (1).