UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
[] 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 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant as specified in its charter)
California 94-2768742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
June 30, December 31,
2002 2001
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 1,135 $ 2,729
Receivables and deposits 1,312 1,186
Restricted escrows 564 644
Other assets 1,838 1,628
Investment properties:
Land 10,907 10,907
Buildings and related personal property 125,341 124,301
136,248 135,208
Less accumulated depreciation (109,160) (107,215)
27,088 27,993
$ 31,937 $ 34,180
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 367 $ 204
Tenant security deposit liabilities 503 497
Accrued property taxes 1,101 1,189
Other liabilities 1,426 947
Distribution payable 571 568
Mortgage notes payable 73,065 73,475
77,033 76,880
Partners' Deficit
General partners (7,184) (7,064)
Limited partners (342,773 units issued and
outstanding) (37,912) (35,636)
(45,096) (42,700)
$ 31,937 $ 34,180
Note: The balance sheet at December 31, 2001, has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Revenues:
Rental income $ 6,425 $ 6,564 $12,944 $13,144
Other income 598 515 1,300 1,060
Casualty gains -- 145 97 145
Total revenues 7,023 7,224 14,341 14,349
Expenses:
Operating 2,702 2,876 5,250 5,589
General and administrative 649 707 1,016 1,106
Depreciation 954 1,040 2,012 2,060
Interest 1,432 1,391 2,823 2,795
Property taxes 553 453 1,079 891
Total expenses 6,290 6,467 12,180 12,441
Net income $ 733 $ 757 $ 2,161 $ 1,908
Net income allocated to general partners (4%) $ 29 $ 30 $ 86 $ 76
Net income allocated to limited partners (96%) 704 727 2,075 1,832
$ 733 $ 757 $ 2,161 $ 1,908
Net income per limited partnership unit $ 2.05 $ 2.12 $ 6.05 $ 5.34
Distributions per limited partnership unit $ 12.69 $ 5.63 $ 12.69 $ 16.27
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partners Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 2000 342,773 $ (6,798) $(30,855) $(37,653)
Distributions to partners -- (284) (5,578) (5,862)
Net income for the six months
ended June 30, 2001 -- 76 1,832 1,908
Partners' deficit at
June 30, 2001 342,773 $ (7,006) $(34,601) $(41,607)
Partners' deficit at
December 31, 2001 342,773 $ (7,064) $(35,636) $(42,700)
Distributions to partners -- (206) (4,351) (4,557)
Net income for the six months
ended June 30, 2002 -- 86 2,075 2,161
Partners' deficit at
June 30, 2002 342,773 $ (7,184) $(37,912) $(45,096)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2002 2001
Cash flows from operating activities:
Net income $ 2,161 $ 1,908
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,012 2,060
Amortization of loan costs 109 116
Casualty gain (97) (145)
Change in accounts:
Receivables and deposits (126) 666
Other assets (319) (149)
Accounts payable 163 (547)
Tenant security deposit liabilities 6 42
Accrued property taxes (88) (248)
Other liabilities 479 (49)
Net cash provided by operating activities 4,300 3,654
Cash flows from investing activities:
Property improvements and replacements (1,155) (1,554)
Net withdrawals from restricted escrows 80 271
Insurance proceeds from casualties 145 208
Net cash used in investing activities (930) (1,075)
Cash flows from financing activities:
Payments on mortgage notes payable (410) (265)
Distributions to partners (4,554) (5,758)
Net cash used in financing activities (4,964) (6,023)
Net decrease in cash and cash equivalents (1,594) (3,444)
Cash and cash equivalents at beginning of period 2,729 6,377
Cash and cash equivalents at end of period $ 1,135 $ 2,933
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $2,692,000 and $2,682,000 for the six
months ended June 30, 2002 and 2001, respectively.
Distribution payable and distributions to partners were each adjusted by
approximately $3,000 and $104,000 for non-cash activity for the six months ended
June 30, 2002 and 2001, respectively.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of ConCap Equities, Inc. ("CEI" or the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 2002, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2002. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001. The General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"), a publicly traded real
estate investment trust.
Note B - Transactions with Affiliated Partners
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership.
During the six months ended June 30, 2002 and 2001, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all the Partnership's
properties as compensation for providing property management services. The
Partnership paid to such affiliates approximately $730,000 and $731,000 for the
six months ended June 30, 2002 and 2001, respectively, which is included in
operating expenses.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $547,000 and $567,000 for the
six months ended June 30, 2002 and 2001, respectively, which is included in
general and administrative expenses and investment properties. Included in these
amounts are fees related to construction management services provided by an
affiliate of the General Partner of approximately $34,000 and $52,000 for the
six months ended June 30, 2002 and 2001, respectively. The construction
management service fees are calculated based on a percentage of current year
additions to investment properties.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. The Partnership paid approximately $385,000 and $276,000
under this provision of the Partnership Agreement to the General Partner during
the six months ended June 30, 2002 and 2001, respectively, which is included in
general and administrative expenses.
For acting as real estate broker in connection with the sale of Stratford Place
Apartments, the General Partner was paid a real estate commission of
approximately $228,000 during the six months ended June 30, 2001. When the
Partnership terminates, the General Partner will have to return this commission
if the limited partners do not receive their original invested capital plus a 6%
per annum cumulative return.
Beginning in 2001, the Partnership began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the six months ended June 30, 2002
and 2001, the Partnership was charged by AIMCO and its affiliates approximately
$296,000 and $313,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note C - Casualty Gains
In March 2000, South Port Apartments had wind and hail damage, which damaged the
majority of the 240 rental units. The repairs included roof replacements to the
majority of units. Insurance proceeds of approximately $145,000 and $182,000
were received during the six months ended June 30, 2002 and 2001, respectively.
The Partnership recognized casualty gains of approximately $97,000 and $128,000
during the six months ended June 30, 2002 and 2001, which represents the excess
of the proceeds received as of June 30, 2002 and 2001 over the write-off of the
undepreciated damaged assets.
In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment
units. Insurance proceeds of approximately $26,000 were received during the six
months ended June 30, 2001. The Partnership recognized a casualty gain of
approximately $17,000 for the six months ended June 30, 2001 which represents
the excess of the proceeds received as of June 30, 2001 over the write-off of
the undepreciated damaged assets.
Note D - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purports to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) which are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the General Partner filed a
motion seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs filed an amended complaint. The General Partner filed demurrers to
the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which was heard on December 11, 2001. On February 2, 2002, the Court
served its order granting in part the demurrer. The Court has dismissed without
leave to amend certain of the plaintiffs' claims. On February 11, 2002,
plaintiffs filed a motion seeking to certify a putative class comprised of all
non-affiliated persons who own or have owned units in the partnerships. The
General Partner and affiliated defendants oppose the motion. On April 29, 2002,
the Court held a hearing on plaintiffs' motion for class certification and took
the matter under submission after further briefing, as order by the court, was
submitted by the parties. On July 10, 2002, the Court entered an order vacating
the current trial date of January 13, 2003 (as well as the pre-trial and
discovery cut-off dates) and stayed the case in its entirety through November 7,
2002 so that the parties can have an opportunity to discuss settlement.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. On December 11, 2001, the court heard argument on the
motions and took the matters under submission. On February 4, 2002, the Court
served notice of its order granting defendants' motion to strike the Heller
complaint as a violation of its July 10, 2001 order in the Nuanes action. On
March 27, 2002, the plaintiffs filed a notice appealing the order striking the
complaint. The parties are currently in the midst of briefing that appeal.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Partnership's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Partnership's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of fifteen apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 2002 and 2001:
Average Occupancy
Property 2002 2001
The Apartments 91% 90%
Omaha, NE
Arbours of Hermitage Apartments 92% 92%
Nashville, TN
Briar Bay Racquet Club Apartments 96% 95%
Miami, FL
Chimney Hill Apartments 86% 94%
Marietta, GA
Citadel Apartments 93% 89%
El Paso, TX
Citadel Village Apartments 89% 94%
Colorado Springs, CO
Foothill Place Apartments 91% 96%
Salt Lake City, UT
Knollwood Apartments 92% 91%
Nashville, TN
Lake Forest Apartments 95% 87%
Omaha, NE
Nob Hill Villa Apartments 90% 90%
Nashville, TN
Point West Apartments 94% 96%
Charleston, SC
Post Ridge Apartments 89% 90%
Nashville, TN
Rivers Edge Apartments 94% 97%
Auburn, WA
South Port Apartments 93% 94%
Tulsa, OK
Village East Apartments 84% 94%
Cimarron Hills, CO
The decrease in occupancy at Chimney Hill Apartments, Citadel Village
Apartments, Foothill Place Apartments, and River's Edge Apartments is due to
increased competition and changing economic conditions in their respective local
markets. The decrease in occupancy at Village East Apartments is due to problems
with the water lines at the property. The water lines have recently been
repaired. The increase in occupancy at the Citadel Apartments and Lake Forest
Apartments is attributable to more aggressive marketing campaigns at both
properties.
Results of Operations
The Partnership's net income for the three and six months ended June 30, 2002,
was approximately $733,000 and $2,161,000 as compared to net income of
approximately $757,000 and $1,908,000 for the three and six months ended June
30, 2001. The increase in net income for the six months ended June 30, 2002, is
due to a decrease in total expenses partially offset by a decrease in total
revenues. The decrease in net income for the three months ended June 30, 2002 is
due to a decrease in total revenues offset by a decrease in total expenses.
Total expenses for the three and six months ended June 30, 2002 decreased due to
decreases in operating, general and administrative and depreciation expenses
partially offset by an increase in property tax and interest expenses. Operating
expense decreased due to a decrease in property expense partially offset by an
increase in insurance expense. Property expense decreased due to decreased
utility bills primarily due to the milder winter nation-wide experienced this
year as compared to last year and payroll expenses at many of the Partnership's
properties. Insurance expense increased due to an increase in insurance premiums
at many of the Partnership's investment properties. General and administrative
expense decreased primarily due to a decrease in state operating taxes partially
offset by an increase in the 9% management fee on distributions from operating
cash flows. Also included in general and administrative expenses for the three
and six months ended June 30, 2002 and 2001 are cost of services included in
management reimbursements to the General Partner as allowed under the
Partnership Agreement and costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement. Depreciation expense on the investment
properties decreased due to some assets being fully depreciated during the three
and six months ended June 30, 2002. The increase in property tax expense is due
to an increase in the assessed values of the Partnership's properties. The
increase in interest expense is due to the refinancing of the mortgages
encumbering Lake Forest Apartments and Post Ridge Apartments during the latter
half of 2001 which increased their debt balance.
The decrease in total revenues for the three and six months ended June 30, 2002,
is attributable to a decrease in rental income and casualty gains partially
offset by an increase in other income. The decrease in rental income is due to
decreased average occupancy at eight of the Partnership's fifteen properties as
well as an increase in bad debt expense at Nob Hill Apartments partially offset
by a decrease in concessions at several of the investment properties. In March
2000, South Port Apartments had wind and hail damage, which damaged the majority
of the 240 rental units. The repairs included roof replacements to the majority
of units. Insurance proceeds of approximately $145,000 and $182,000 were
received during the six months ended June 30, 2002 and 2001, respectively. The
Partnership recognized casualty gains of approximately $97,000 and $128,000
during the six months ended June 30, 2002 and 2001, which represents the excess
of the proceeds received as of June 30, 2002 and 2001 over the write-off of the
undepreciated damaged assets. In May 2000, Nob Hill Villa Apartments had a fire,
which damaged two apartment units. Insurance proceeds of approximately $26,000
were received during the six months ended June 30, 2001. The Partnership
recognized a casualty gain of approximately $17,000 for the six months ended
June 30, 2001 which represents the excess of the proceeds received as of June
30, 2001 over the write-off of the undepreciated damaged assets.
The increase in other income is primarily attributable to an increase in utility
reimbursements partially offset by a decrease in interest income as a result of
lower average cash balances maintained in interest bearing accounts.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30,2002 the Partnership held cash and cash equivalents of approximately
$1,135,000 as compared to approximately $2,933,000 at June 30, 2001. The
decrease in cash and cash equivalents of approximately $1,594,000 from
Partnership's year ended December 31, 2001 is due to approximately $4,964,000 of
cash used in financing activities and approximately $930,000 of cash used in
investing activities partially offset by approximately $4,300,000 of cash
provided by operating activities. Cash used in financing activities consisted
primarily of the distributions to the partners and principal payments on the
mortgages encumbering the Partnership's properties. Cash used in investing
activities consisted primarily of property improvements and replacements
partially offset by insurance proceeds received from the South Port Apartments
casualty (see discussion in "Results of Operations") and net withdrawals from
restricted escrows. The Partnership invests its working capital reserves in
interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
The Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $26,000 of capital improvements at the property, consisting
primarily of floor covering and appliance replacements and HVAC upgrades. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $69,000 for 2002 at
this property, which consist primarily of HVAC, parking area improvements,
structural improvements and flooring covering replacements. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as the anticipated cash flow generated by the property.
Arbours of Hermitage Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $104,000 of capital improvements at the property, consisting
primarily of office computers, plumbing improvements, floor covering
replacements and structural enhancements. These improvements were funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $205,000 for 2002 at this property, which
consist primarily of flooring covering replacements, water and sewer upgrades,
structural upgrades and roof replacement. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
the anticipated cash flow generated by the property.
Briar Bay Racquet Club Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $26,000 of capital improvements at the property, consisting
primarily of appliance and floor covering replacements and roof replacements.
These improvements were funded from operating cash flow and Partnership
reserves. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $59,000 for 2002 at this property, which consist
primarily of flooring covering replacements, swimming pool upgrades and
appliance replacements. Additional capital improvements may be considered and
will depend on the physical condition of the property as well as the anticipated
cash flow generated by the property and replacement reserves.
Chimney Hill Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $128,000 of capital improvements at the property, consisting
primarily of parking lot resurfacing, appliance and floor covering replacements,
water heater replacements, roof replacements, structural upgrades and clubhouse
renovations. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $130,000 for 2002 at this property, which
consist primarily of flooring covering replacements, parking lot resurfacing and
structural upgrades. Additional capital improvements may be considered and will
depend on the physical condition of the property as well as the anticipated cash
flow generated by the property and replacement reserves.
Citadel Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $53,000 of capital improvements at the property, consisting
primarily of furniture and fixtures, appliance and floor covering replacements,
swimming pool upgrades and water heater replacements. These improvements were
funded from operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $101,000 for 2002 at this
property, which consist primarily of swimming pool improvements and flooring
covering replacements and appliance replacements. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as the anticipated cash flow generated by the property.
Citadel Village Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $34,000 of capital improvements at the property, consisting
primarily of appliance and floor covering replacements, major landscaping and
plumbing fixture replacements. These improvements were funded from operating
cash flow. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $48,000 for 2002 at this property, which consist
primarily of flooring covering and appliance replacements. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as the anticipated cash flow generated by the property.
Foothill Place Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $64,000 of capital improvements at the property, consisting
primarily of plumbing fixture replacements, roof replacements, major landscaping
and appliance and floor covering replacements. These improvements were funded
from operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $148,000 for 2002 at this property which
consist primarily of appliance and flooring covering replacements, plumbing
fixture replacements, hot water heater replacements and interior decoration.
Additional capital improvements may be considered and will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property.
Knollwood Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $154,000 of capital improvements at the property, consisting
primarily of structural improvements, appliance and floor covering replacements,
air conditioning, office computers, water heater replacements and roof
replacements. These improvements were funded from operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $205,000 for 2002 at this property, which consist primarily of
water and sewer upgrades, flooring covering replacements and appliance
replacements. Additional capital improvements may be considered and will depend
on the physical condition of the property as well as the anticipated cash flow
generated by the property.
Lake Forest Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $74,000 of capital improvements at the property, consisting
primarily of appliance and floor covering replacements, water heater
replacements and furniture and fixtures. These improvements were funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $115,000 for 2002 at this property which
consist primarily of appliance and flooring covering replacements, parking lot
resurfacing and swimming pool upgrades. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
the anticipated cash flow generated by the property and replacement reserves.
Nob Hill Villa Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $148,000 of capital improvements at the property, consisting
primarily of office computers, water submetering, appliance and floor covering
replacements and water heater replacements. These improvements were funded from
operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $247,000 for 2002 at this property, which
consist primarily of water submetering, appliance and flooring covering
replacements and water heater replacements. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as the anticipated cash flow generated by the property and replacement reserves.
Point West Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $30,000 of capital improvements at the property, consisting
primarily of floor covering replacements and appliance replacements. These
improvements were funded from operating cash flow. The Partnership has budgeted,
but is not limited to, capital improvements of approximately $44,000 for 2002 at
this property, which consist primarily of flooring covering, air conditioning
and appliance replacements. Additional capital improvements may be considered
and will depend on the physical condition of the property as well as the
anticipated cash flow generated by the property.
Post Ridge Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $85,000 of capital improvements at the property, consisting
primarily of water submetering, roof replacements and appliance and floor
covering replacements. These improvements were funded from Partnership reserves
and operating cash flow. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $124,000 for 2002 at this property, which
consist primarily of water submetering, structural upgrades, flooring covering
replacements and roofing replacements. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
the anticipated cash flow generated by the property.
Rivers Edge Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $29,000 of capital improvements at the property, consisting
primarily of floor covering replacements, major landscaping and appliance
replacements. These improvements were funded from operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $42,000 for 2002 at this property, which consist primarily of
appliance and flooring covering replacements. Additional capital improvements
may be considered and will depend on the physical condition of the property as
well as the anticipated cash flow generated by the property.
South Port Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $43,000 of capital improvements at the property, consisting
primarily of floor covering and appliance replacements. These improvements were
funded from operating cash flow. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $80,000 for 2002 at this
property, which consist primarily of appliance and flooring covering
replacements, structural upgrades and window replacements. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as the anticipated cash flow generated by the property and
replacement reserves.
Village East Apartments
During the six months ended June 30, 2002, the Partnership completed
approximately $157,000 of budgeted and unbudgeted capital improvements at the
property, consisting primarily of plumbing fixture replacements and appliance
and floor covering replacements. These improvements were funded from operating
cash flow. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $150,000 for 2002 at this property which consist
primarily of plumbing fixture upgrades and appliance and flooring covering
replacements. Additional capital improvements may be considered and will depend
on the physical condition of the property as well as the anticipated cash flow
generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. The
mortgage indebtedness of approximately $73,065,000 matures at various dates
between 2004 and 2022. The General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2011. Accordingly, prior to such date the Partnership
will need to either sell its investment properties or extend the term of the
Partnership.
The Partnership distributed the following amounts during the six months ended
June 30, 2002 and 2001 (in thousands except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2002 Unit June 30, 2001 Unit
Operations $4,481 $12.48 $3,252 $ 8.96
Refinance (1) 76 .21 -- --
Sale (2) -- -- 2,610 7.31
$4,557 $12.69 $5,862 $16.27
(1) From refinance proceeds of Post Ridge Apartments.
(2) From sale proceeds of Stratford Place Apartments.
In conjunction with the transfer of funds from their certain majority-owned
sub-tier limited partnerships to the Partnership, approximately $25,000 and
$51,000 was distributed to the general partner of the majority owned sub-tier
limited partnerships during the six months ended June 30, 2002 and 2001,
respectively.
The Partnership's cash available for distribution is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations,
after planned capital improvement expenditures, to permit further distributions
to its partners during the remainder of 2002 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 193,380.50 limited partnership units
in the Partnership representing 56.42% of the outstanding units at June 30,
2002. 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 of limited partnership interest in the Partnership in
exchange for cash or a combination of cash and units in the operating
partnership of AIMCO either through private purchases or tender offers. In this
regard, on June 25, 2002, a tender offer by AIMCO Properties, L.P., to acquire
any and all of the Units not owned by affiliates of AIMCO for a purchase price
of $128.00 per Unit expired. Pursuant to this offer, AIMCO acquired 5,698.00
Units during the quarter ended June 30, 2002. Under the Partnership Agreement,
unitholders holding a majority of the Units are entitled to take action with
respect to a variety of matters, which would include voting on certain
amendments to the Partnership Agreement and voting to remove the General
Partner. As a result of its ownership of 56.42% of the outstanding units, AIMCO
is in a position to control all such voting decisions with respect to the
Registrant. Although the General Partner owes fiduciary duties to the limited
partners of the Partnership, the General Partner also owed fiduciary duties to
AIMCO as its sole stockholder. As a result, the duties of the General Partner,
as general partner, to the Partnerships 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
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include changes in the
national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area.
Concessions are charged to income as incurred.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. Based on interest rates at June 30, 2002, a 100
basis point increase or decrease in market interest rates would not have a
material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at June 30,
2002. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of June 30, 2002.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2002 $ 435 7.81%
2003 923 7.81%
2004 5,112 7.81%
2005 43,138 7.42%
2006 875 7.68%
Thereafter 22,582 7.68%
Total $73,065
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purports to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) which are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the General Partner filed a
motion seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs filed an amended complaint. The General Partner filed demurrers to
the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which was heard on December 11, 2001. On February 2, 2002, the Court
served its order granting in part the demurrer. The Court has dismissed without
leave to amend certain of the plaintiffs' claims. On February 11, 2002,
plaintiffs filed a motion seeking to certify a putative class comprised of all
non-affiliated persons who own or have owned units in the partnerships. The
General Partner and affiliated defendants oppose the motion. On April 29, 2002,
the Court held a hearing on plaintiffs' motion for class certification and took
the matter under submission after further briefing, as order by the court, was
submitted by the parties. On July 10, 2002, the Court entered an order vacating
the current trial date of January 13, 2003 (as well as the pre-trial and
discovery cut-off dates) and stayed the case in its entirety through November 7,
2002 so that the parties can have an opportunity to discuss settlement.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. On December 11, 2001, the court heard argument on the
motions and took the matters under submission. On February 4, 2002, the Court
served notice of its order granting defendants' motion to strike the Heller
complaint as a violation of its July 10, 2001 order in the Nuanes action. On
March 27, 2002, the plaintiffs filed a notice appealing the order striking the
complaint. The parties are currently in the midst of briefing that appeal.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases will be material to the
Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
3.1 Certificate of Limited Partnership, (incorporated by reference to the
Registration statement of the Partnership (file No. 2-74353), filed October
9, 1981, as amended to date).
3.2 Limited Partnership Agreement (Exhibit to the Prospectus of the
Partnership, filed October 12, 1981).
99 Certification of Chief Executive Officer and Chief Financial Officer.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED CAPITAL PROPERTIES IV
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President and
Chief Accounting Officer
Date: August 14, 2002
Exhibit 99
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Consolidated Capital
Properties IV (the "Partnership"), for the quarterly period ended June 30, 2002
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Patrick J. Foye, as the equivalent of the Chief Executive Officer of
the Partnership, and Paul J. McAuliffe, as the equivalent of the Chief Financial
Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: August 14, 2002
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: August 14, 2002
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.