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FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-31905, eff 10/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of 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] (Amended by Exch Act Rel No.
28869, eff. 5/1/91.)
State the aggregate Market Value of the Limited Partnership Units ("Units") held
by non-affiliates of the Registrant. 45,756 of Partnership's 199,052 Units are
held by non-affiliates. The aggregate market value of Units held by non-
affiliates is not determinable since there is no public trading market for Units
and transfers of Units are not subject to certain restrictions.
PART I
Item 1. Business
General
Consolidated Capital Institutional Properties (the "Partnership" or the
"Registrant") was organized on April 28, 1981, as a limited partnership under
the California Uniform Limited Partnership Act. On July 23, 1981, the
Partnership registered with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933 (File No. 2-72384) and commenced a public offering
for the sale of $200 million of Units. The Units represent equity interests in
the Partnership and entitled the holders thereof (the "Limited Partners") to
participate in certain allocations and distributions of the Partnership. The
sale of Units terminated on July 21, 1983, with 200,342 Units sold for $1,000
each, or gross proceeds of approximately $200 million to the Partnership. The
Partnership subsequently filed a Form 8-A Registration Statement with the SEC
and registered its Units under the Securities Exchange Act of 1934 (File No. 0-
10831) on January 3, 1982. In accordance with its partnership agreement (the
original partnership agreement of the Partnership together with all amendments
thereto shall be referred to as the "Agreement"), the Partnership has
repurchased and retired a total of 1,297 Units for a total purchase price of $1
million. The Partnership may repurchase any Units, in its absolute discretion,
but is under no obligation to do so.
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC") was the corporate general partner. In 1988, through a
series of transactions Southmark Corporation ("Southmark") acquired control of
CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the
United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan,
ConCap Equities, Inc. ("CEI or the General Partner") acquired CCEC's general
partner interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing
general partner in all 16 partnerships. The selection of CEI as the General
Partner was approved by a majority of the Limited Partners in the Partnership
and in each of the Affiliated Partnerships pursuant to a solicitation of the
Limited Partners dated August 10, 1990. As part of this solicitation, the
Limited Partners also approved an amendment to the Agreement to limit changes of
control of the Partnership. All of CEI's outstanding stock is owned by an
affiliate of Insignia Financial Group, Inc. ("Insignia"), which was acquired
through two transactions in December 1994, and October 1995.
The Partnership's primary business and only industry segment is real estate
related operations. The Partnership was formed for the benefit of its Limited
Partners (herein so called and together with the General Partner shall be called
the "Partners"), to lend funds to Consolidated Capital Equity Partners ("EP"), a
California general partnership in which certain of the partners were former
shareholders and former management of CCEC, the former corporate general partner
of the Partnership. See "Status of the Master Loan" for a description of the
loan and settlement of EP's bankruptcy.
Through December 31, 1996, the Partnership had advanced a total of approximately
$180.5 million to EP and its successor under the Master Loan (as defined in
"Status of the Master Loan"). As of December 31, 1996, the balance of the
Master Loan, net of the allowance for possible losses, was approximately $52.7
million. EP used the proceeds from these loans to acquire eighteen (18)
apartment buildings and four (4) office complexes, which served as collateral
for the Master Loan. EP's successor in bankruptcy (as more fully described in
"Status of the Master Loan") currently has twelve (12) apartment buildings, and
two (2) office complexes. The Partnership acquired The Loft Apartments through
foreclosure in November 1990. Prior to that time, The Loft Apartments had been
collateral on the Master Loan. The Partnership acquired a multiple-use
building, The Sterling Apartment Homes and Commerce Center ("The Sterling")
(formerly known as The Carlton House Apartment and Office Building) through a
deed-in-lieu of foreclosure transaction on November 30, 1995. The Sterling had
been collateral on the Master Loan. For a brief description of the properties
refer to "Item 2 - Description of Property."
The Registrant has no employees. Management and administrative services are
performed by CEI, the General Partner, and by an affiliate of Insignia, an
affiliate of the General Partner.
The real estate business in which the Partnership is engaged is highly
competitive and the Partnership is not a significant factor in this industry.
The Registrant's properties are subject to competition from similar properties
in the vicinity in which the properties are located. In addition, various
limited partnerships have been formed by the General Partner and/or its
affiliates to engage in business which may be competitive with the Registrant.
Status of the Master Loan
Prior to 1989, the Partnership had loaned funds totaling $170.4 million to EP
subject to a nonrecourse note with a participation interest (the "Master Loan"),
pursuant to the Master Loan Agreement dated July 22, 1981, between the
Partnership and EP. The Partnership secured the Master Loan with deeds of trust
or mortgages on real property purchased with the funds advanced, as well as by
the assignment and pledge of promissory notes from the partners of EP.
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the bankruptcy court approved EP's consensual
plan of reorganization (the "Plan"). In November 1990, EP and the Partnership
consummated a closing under the Plan pursuant to which, among other things, the
Partnership and EP executed an amended and restated loan agreement (the "New
Master Loan Agreement"), EP was converted from a California general partnership
to a California limited partnership, Consolidated Capital Equity Partners, L.P.
("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure
the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole general partner of CCEP and an affiliate of the Partnership.
The general partners of EP became limited partners in CCEP. CHI has full
discretion with respect to conducting CCEP's business, including managing CCEP's
properties and initiating and approving capital expenditures and asset
dispositions and refinancings.
Under the terms of the New Master Loan Agreement (as adopted in November 1990),
interest accrues at a fluctuating rate per annum adjusted annually on July 15 by
the percentage change in the U.S. Department of Commerce Implicit Price Deflator
for the Gross National Product subject to an interest rate ceiling of 12.5%.
Interest payments are currently payable quarterly in an amount equal to "Excess
Cash Flow." If such Excess Cash Flow payments are less than the current accrued
interest during the quarterly period, the unpaid interest is added to principal,
compounded annually, and is payable at the loan's maturity. If such Excess Cash
Flow payments are greater than the current accrued interest, the excess amount
is applied to the principal balance of the loan. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to the Partnership under the
terms of the New Master Loan Agreement. The New Master Loan Agreement matures
in November 2000.
For 1992, Excess Cash Flow was generally defined in the New Master Loan
Agreement as net cash flow from operations after third-party debt service.
Effective January 1, 1993, the Partnership and CCEP amended the New Master Loan
Agreement to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the Master
Loan from the Partnership to CCEP. This amendment and change in the definition
of Excess Cash Flow will have the effect of reducing income on the investment in
the Master Loan by the amount of CCEP's capital expenditures since such amounts
were previously excluded from Excess Cash Flow.
Item 2. Description of Property
The following table sets forth the Registrant's investment in real estate as of
December 31, 1996:
Date of
Property Purchase Type of Ownership Use
The Loft Apartments 11/19/90 Fee ownership. Apartment
Raleigh, NC 188 units
The Sterling Apartment 12/01/95 Fee ownership. Apartment
Homes and Commerce 537 units
Center Commercial
Philadelphia, PA 101,418 sq.ft.
Schedule of Properties:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
The Loft Apartments $ 6,741 $2,353 5-20 S/L $ 5,665
The Sterling Apartment
Homes and Commerce
Center 21,841 864 5-25 S/L 21,827
$28,582 $3,217
See "Note A" of the financial statements included in "Item 8." for a description
of the Partnership's depreciation policy.
Schedule of Mortgages:
(dollar amounts in thousands)
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
The Loft Apartments
1st mortgage $4,498 6.95% (1) 12/2005 $3,903
(1) Payments of approximately $30,000 consisting of principal and interest.
Average Annual Rental Rate and Occupancy:
Average Annual Average
Rental Rates Occupancy
Property 1996 1995 1996 1995
The Loft Apartments $ 8,093/unit $ 7,806/unit 95% 91%
The Sterling Apartment 10,886/unit 10,185/unit (a) 84% 86% (a)
Homes (residential)
The Sterling Commerce $7.34/s.f. $6.76/s.f. (a) 68% 64% (a)
Center (commercial)
(a) Occupancy and rental rates for The Sterling represent December 1995 only
as the property was acquired by the Registrant on November 30, 1995.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial buildings
in the area. The General Partner believes that the properties are adequately
insured. The multi-family residential properties' lease terms are for one year
or less. One commercial tenant, an employment agency, leases greater than 10%
of the available space. As of January 1, 1997, this tenant is leasing month-to-
month while negotiating a new lease.
The following is a schedule of the lease expirations of the commercial space in
The Sterling for the years beginning 1997 through the maturities of current
leases:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
1997 7 11,998 $214,359 3.68%
1998 2 1,586 23,137 0.40%
1999 2 5,644 65,588 1.12%
2000 1 2,882 37,005 0.63%
2001 1 1,372 35,672 0.61%
2002 0 0 0 0%
2003 0 0 0 0%
2004 0 0 0 0%
2005 2 3,159 60,444 1.04%
2006 1 3,838 65,000 1.11%
Real estate taxes and rates in 1996 for each property were (in thousands):
1996 1996
Billing Rate
The Loft $ 62 1.22%
The Sterling 589 8.18%
Item 3. Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Registrant believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial conditions, results of operations,
or liquidity of the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended December 31, 1996, no matter
was submitted to a vote of the Unit holders through the solicitation of proxies
or otherwise.
PART II
Item 5. Market for the Registrant's Units of Limited Partnership and Related
Partner Matters
There is no established market for the Units and it is not anticipated that any
will occur in the foreseeable future. As of December 31, 1996, there were
24,208 holders of record owning an aggregate of 199,052 Units. Distributions of
approximately $16,986,000 and approximately $3,007,000 were made to the limited
partners in 1996 and 1995, respectively. Additionally, distributions of
approximately $30,000 were made to the General Partner in 1996 and 1995.
Future distributions will depend on the levels of cash generated from
operations, refinancings, property sales, and the availability of cash reserves.
Such cash reserves are subject to the requirements of the Agreement which
requires that the Partnership have reserves equal to 5% of Net Invested Capital.
Item 6. Selected Financial Data
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in "Item 8 - Financial
Statements and Supplementary Data."
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Revenues $ 9,414 $ 5,265 $ 4,490 $ 6,180 $ 8,189
Costs and expenses (8,586) (3,078) (1,496) (1,849) ( 1,892)
Provision for impairment loss -- (5,578) -- (11,100) (9,000)
Income (loss) from operations 828 (3,391) 2,994 (6,769) (2,703)
Gain on sale of securities
available for sale -- -- -- 20 --
Net income (loss) $ 828 $ (3,391) $ 2,994 $ (6,749) $ (2,703)
Net income (loss) per
Limited Partnership Unit:
Income (loss) from operations $ 4.12 $ (16.87) $ 14.90 $ (33.67) $ (13.44)
Gain on sale of securities
available for sale -- -- -- .10 --
Net income (loss) $ 4.12 $ (16.87) $ 14.90 $ (33.57) $ (13.44)
Distributions per
Limited Partnership Unit $ 85.33 $ 15.10 $ 18.52 $ 28.50 $ 26.25
Limited Partnership
Units outstanding 199,052 199,052 199,045 199,046 199,051
AS OF DECEMBER 31,
BALANCE SHEETS 1996 1995 1994 1993 1992
(in thousands)
Total assets $ 91,657 $106,351 $107,630 $108,442 $120,876
Mortgage notes and interest payable $ 4,525 $ 4,560 $ -- $ -- $ --
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
The Sterling is a multiple-use facility which consists of an apartment complex
and commercial space. This property was transferred from Consolidated Capital
Equity Partners, L.P. ("CCEP") to a wholly owned subsidiary of the Partnership
on November 30, 1995. The operations of The Sterling had a significant impact
on the results of operations of the Partnership for the year ended December 31,
1996, with revenues of approximately $6,291,000 and expenses of approximately
$6,356,000. The operations of The Sterling had an immaterial impact on the
results of operations of the Partnership for the year ended December 31, 1995,
as the Partnership owned The Sterling for only one month of 1995. Included in
the 1995 statement of operations were revenues of approximately $594,000 and
expenses of approximately $444,000.
Results of Operations
1996 Compared With 1995
The Partnership's net income for the year ended December 31, 1996, was
approximately $828,000 compared to a net loss of approximately $3,391,000 for
the year ended December 31, 1995. The increase in net income is primarily due
to a decrease in the provision for impairment loss on the Master Loan in 1996.
The Partnership recorded a $5,578,000 provision for impairment loss on the
Master Loan for the year ended December 31, 1995. The primary cause for this
impairment loss in 1995 was a reduction in the estimated fair value of the
underlying collateral properties in that year. Approximately $5,000,000 of the
provision for impairment loss related to The Sterling before it was transferred
to the Partnership. Also contributing to the increase in net income was the
recognition of a $792,000 increase in the reduction of the provision for
impairment losses of the Master Loan due to an increase in fair market value of
the underlying assets that collateralize the Master Loan in 1996. In addition,
general and administrative expenses decreased for the year ended December 31,
1996, compared to the corresponding period of 1995. This decrease was the
result of increased printing costs incurred in 1995, related to the printing of
additional 10-K's for investors. Also, there were additional costs associated
with the combined efforts of the Dallas and Greenville offices during the
transition period that ended June 30, 1995. The increased costs related to the
transition efforts were incurred to minimize any disruption in the 1994 year-end
reporting function including K-1 preparation and distribution. Additionally,
the Partnership incurred approximately $772,000 in transfer fees related to the
transfer of The Sterling from CCEP to the Partnership during the year ended
December 31, 1995. Offsetting these decreases in general and administrative
costs were increases in professional fees incurred for a valuation of The
Sterling and a successful tax appeal at The Sterling. Other income increased
during the year ended December 31, 1996, due to increased interest income
resulting from higher cash balances due to the proceeds received from the
December 1995 financing of The Loft, and also from the principal payments
received on the Master Loan in December 1995.
Offsetting the increases in net income noted above for the year ended December
31, 1996, compared to the corresponding period in 1995, was a decrease in
interest income recorded on the investment in Master Loan to affiliate, the
transfer of The Sterling from CCEP, which resulted in significant increases in
rental income, operating expenses and depreciation expense for the year ended
December 31, 1996, and an increase in interest expense. The decrease in
interest income on the investment in Master Loan is the result of a decrease in
interest payments as required by the loan agreement. The Sterling reported a
net loss of approximately $65,000 during the year ended December 31, 1996. The
transfer of The Sterling from CCEP resulted in significant increases in rental
income, which were more than offset by significant increases in operating
expenses, and depreciation expense. Operating expenses at The Sterling were
significantly higher during 1996 due to the major ongoing renovation project.
The Loft was also a contributing factor in offsetting the increase in net income
due to an increase in interest expense. The increase in interest expense
resulted from the financing of The Lofts in December 1995. Because this
property did not have a mortgage balance prior to December 1995, interest
expense during the year ended December 31, 1995 was minimal. Included in
maintenance expense for the year ended December 31, 1996, is approximately
$534,000 of major repairs and maintenance comprised primarily of major
landscaping, exterior painting, and interior and exterior building improvements.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in 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, 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.
1995 Compared With 1994
The Partnership's net loss for the year ended December 31, 1995, was
approximately $3,391,000 compared to net income of approximately $2,994,000 for
the year ended December 31, 1994. The increase in net loss is primarily due to
the $5,578,000 increase in the provision for impairment loss on the Master Loan.
The primary cause of the increase in the provision for impairment loss on the
Master Loan was a reduction in the estimated fair value of the underlying
collateral properties. Also contributing to the increased net loss was an
increase in operating expenses at The Loft as a result of higher maintenance
expenses and an increase in general and administrative expenses. The increase in
maintenance expense is the result of interior and exterior painting projects,
patio fencing, exterior lighting, window renovations, curb and sidewalk repair,
and major landscaping. General and administrative expenses increased due to
increased insurance costs along with the additional costs involved in printing
the 1994 10-K's for investors. There were also additional costs associated with
the combined efforts of the Dallas and Greenville offices during the transition
period that ended June 30, 1995. The increased costs related to the transition
efforts were incurred to minimize any disruption in the year-end reporting
function including K-1 preparation and distribution. Additionally, the
Partnership incurred approximately $772,000 in transfer fees related to the
transfer of The Sterling from CCEP to the Partnership. Depreciation expense
increased during 1995 due to the purchase of additional fixed assets in 1995.
Interest expense increased as a result of the financing of The Lofts in December
1995. This property did not have a mortgage balance prior to December 1995 and
as a result had no interest expense. Also, other income decreased due to a
settlement of suits against Southmark in 1994 resulting in the Partnership
receiving its pro rata share of the claims filed in Southmark's bankruptcy
proceeding. No such event occurred in 1995. Partially offsetting these
decreases in net income is an increase in rental income due to higher rental
rates which more than offset the decrease in occupancy at The Lofts.
In connection with the transfer of The Sterling to Kennedy Boulevard Associates,
L.P. ("KBA-I"), a wholly owned subsidiary of the Partnership, the General
Partner had a valuation performed on the property to determine its estimated
fair value. The asset had previously been recorded on the books of CCEP and for
valuation for the Master Loan based upon appraisals performed by a third party.
The last appraisal valued the property as of May 12, 1995. Based on its ongoing
evaluation of the condition of the property, the General Partner concluded that
additional information received during the fourth quarter of 1995 regarding the
extent of deferred maintenance and improvements needed to the property indicated
that a $5,000,000 write-down was needed to reduce the property to its estimated
net realizable value.
CCEP recorded this write-down during the fourth quarter before the property was
transferred to KBA-I. As this property was collateral for the Master Loan and
the value of the Master Loan is recorded based upon the estimated fair value of
the underlying collateral, the Partnership recorded an increase in the Provision
for Impairment Loss on the Master Loan to affiliate due to this impairment.
Liquidity and Capital Resources
At December 31, 1996, the Partnership had unrestricted cash of approximately
$12,348,000 versus approximately $26,122,000 at December 31, 1995. Net cash
provided by operating activities decreased primarily due to the increase in net
income after adjustment for the provision for impairment loss on investment in
Master Loan to affiliates in 1995 as described above. Also, due from
affiliates decreased during the year ended December 31, 1995. No such activity
occurred during the year ended December 31, 1996. Net cash provided by investing
activities decreased as a result of a decrease in principal receipts on the
Master Loan. These principal receipts on the Master Loan in 1995 were due
primarily to the refinancing proceeds received from CCEP. The decrease in cash
provided by investing activities also resulted from an increase in property
improvements and replacement due to the capital improvements at The Sterling as
noted above. Partially offsetting the decrease in cash provided by investing
activities was a decrease in advances on the Master Loan. Cash used in
financing activities increased due to an increase in distributions to partners
which was partially offset by a decrease in proceeds from long-term borrowings,
which resulted from the financing of The Loft in December 1995.
At December 31, 1995, the Partnership had unrestricted cash of approximately
$26,122,000 versus approximately $1,520,000 at December 31, 1994. Net cash
provided by operating activities decreased primarily due to a decrease in net
income as noted above and due to an increase in others assets. These changes
were partially offset by a decrease in due from affiliate and an increase in
accounts payable. Cash provided by investing activities increased as a result
of principal receipts on the Master Loan, which was partially offset by an
increase in property improvements an replacements and an increase in advances on
the Master Loan. Principal receipts on the Master Loan in 1995 were due
primarily to the refinancing proceeds received from CCEP. Net cash provided by
financing activities increased due to the financing of The Loft.
The Partnership has budgeted approximately $7.9 million for deferred maintenance
and capital improvements to be made to The Sterling during 1997. These programs
will be paid by existing cash and from cash generated by property operations and
debt service on the Master Loan. The major capital improvements are for
exterior renovation, elevator rehabilitation, residential, and commercial common
area renovations. As of December 31, 1996, approximately $6.1 million had been
spent on these programs.
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 property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of approximately $4,498,000 requires monthly principal and interest
payments and requires a balloon payment on December 1, 2005, at which time the
property will either be refinanced or sold. Distributions of approximately
$16,986,000 were made to the limited partners during the year ended December 31,
1996. A matching distribution of approximately $30,000 was made to the General
Partner. Included in these amounts are payments to the North Carolina
Department of Revenue for withholding taxes related to income generated by the
Partnership's investment property located in that state. Distributions of
approximately $3 million were made to the limited partners during the year ended
December 31, 1995. Approximately $30,000 was distributed to the General Partner
during that same period. Included in these amounts are payments to the North
Carolina Department of Revenue for withholding taxes related to income generated
by the Partnership's investment property located in that state. Future cash
distributions will depend on the levels of cash generated from operations,
Master Loan interest income, capital expenditure requirements, property sales,
and the availability of cash reserves.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for the contingencies of not less than 5% of Net Invested
Capital, as defined by the Partnership Agreement. Reserves, including cash and
cash equivalents and securities available for sale totaling approximately $12.7
million, were greater than the reserve requirement of approximately $7.3 million
at December 31, 1996.
CCEP Property Operations
The Partnership invested approximately $367,000 in CCEP during the year ended
December 31, 1996, as additional advances under the Master Loan. CCEP used the
funds to pay for deferred maintenance and capital improvements on certain
properties which collateralize the Master Loan. A portion of the advance was
used to pay additional expenses related to the December 1995 financing of six of
CCEP's investment properties. Also, a portion of the advance was used to pay
taxes on behalf of a wholly owned subsidiary of CCEP.
For the year ended December 31, 1996, CCEP's net loss totaled approximately $29
million on total revenues of approximately $20 million. CCEP recognizes
interest expense on the New Master Loan Agreement obligation according to the
note terms, although payments to the Partnership are required only to the extent
of Excess Cash Flow, as defined therein. During the year ended December 31,
1996, CCEP's statement of operations includes total interest expense
attributable to the Master Loan of approximately $29.5 million, all of which
represents interest accrued in excess of required payments. During the year
ended December 31, 1996, CCEP made an "Excess Cash Flow" principal payment of
approximately $1.4 million to the Partnership. CCEP is expected to continue to
generate operating losses as a result of such interest accruals and noncash
charges for depreciation.
During the year ended December 31, 1996, the Partnership received approximately
$2,243,000 as principal payments on the Master Loan. Approximately $101,000 was
due to the return of a real estate tax escrow set up at the time of the December
1995 financing of a certain CCEP investment property. This escrow was held
until CCEP was able to provide proof of payment to the mortgage lender. Cash
received on certain investments by CCEP, which are required to be transferred to
the Partnership per the Master Loan Agreement, accounted for approximately
$123,000. Approximately $1,432,000 received was due to an "Excess Cash Flow"
payment from CCEP as described above. CCEP remitted approximately $587,000 of
net cash proceeds from the sale of Lakeview Office Tower to the Partnership to
pay down the Master Loan.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
LIST OF FINANCIAL STATEMENTS
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Partners' Capital (Deficit) for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Consolidated Capital Institutional Properties
We have audited the accompanying consolidated balance sheets of Consolidated
Capital Institutional Properties as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for the years then ended. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Consolidated Capital Institutional Properties as of December 31, 1996 and 1995,
and the consolidated results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 4, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Consolidated Capital Institutional Properties:
We have audited the accompanying statements of operations, partners' capital
(deficit) and cash flows of Consolidated Capital Institutional Properties (a
California limited partnership) for the year ended December 31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, changes in partners' capital
(deficit) and cash flows of Consolidated Capital Institutional Properties for
the year ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/Arthur Andersen, LLP
Dallas, Texas
March 23, 1995
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
DECEMBER 31,
Assets 1996 1995
Cash and cash equivalents:
Unrestricted $ 12,348 $ 26,122
Restricted-tenant security deposits 318 335
Securities available for sale 7 5,264
Other assets 935 1,444
Net investment in Master Loan 93,370 95,246
Less: Allowance for impairment loss (40,686) (41,478)
52,684 53,768
Investment properties:
Land 3,620 3,620
Buildings and related personal property 24,962 17,756
28,582 21,376
Less: accumulated depreciation (3,217) (1,958)
25,365 19,418
$ 91,657 $106,351
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 1,903 $ 368
Tenant security deposits 317 323
Distributions payable 324 324
Mortgage note and interest payable 4,525 4,560
7,069 5,575
Partners' Capital (Deficit)
General Partner (380) (358)
Limited Partners - 199,052 units
outstanding in 1996 and 1995 84,968 101,134
84,588 100,776
$ 91,657 $106,351
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
FOR THE YEARS ENDED
December 31,
1996 1995 1994
Revenues:
Rental income $ 7,686 $ 2,069 $ 1,312
Interest income on investment in
Master Loan to affiliate -- 2,502 2,448
Reduction in provision for impairment loss
on investment in Master Loan to affiliate 792 -- --
Other income 936 694 730
Total revenues 9,414 5,265 4,490
Costs and expenses:
Operating 6,305 1,154 599
General and administrative 690 1,456 480
Depreciation and amortization 1,265 453 417
Interest 326 15 --
Provision for impairment loss on
Master Loan to affiliate -- 5,578 --
Total expenses 8,586 8,656 1,496
Net income (loss) $ 828 $(3,391) $ 2,994
Net income (loss) allocated to general partner $ 8 $ (34) $ 30
Net income (loss) allocated to limited partners 820 (3,357) 2,964
$ 828 $(3,391) $ 2,994
Income (loss) per Limited Partnership Unit $ 4.12 $(16.87) $ 14.90
Distributions per Limited Partnership Unit $ 85.33 $ 15.10 $ 18.52
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342 $ 1 $200,342 $200,343
Partners' capital (deficit) at
December 31, 1993 199,046 (287) 108,220 107,933
Distributions (37) (3,686) (3,723)
Net income for the year ended
December 31, 1994 30 2,964 2,994
Partners' capital (deficit) at
December 31, 1994 199,045 (294) 107,498 107,204
Distributions (30) (3,007) (3,037)
Net loss for the year ended
December 31, 1995 (34) (3,357) (3,391)
Partners' capital (deficit) at
December 31, 1995 199,052 (358) 101,134 100,776
Distributions (30) (16,986) (17,016)
Net income for the year ended
December 31, 1996 8 820 828
Partners' capital (deficit) at
December 31, 1996 199,052 $ (380) $ 84,968 $ 84,588
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
FOR THE YEARS ENDED
December 31,
1996 1995 1994
Cash flows from operating activities:
Net income (loss) $ 828 $(3,391)$ 2,994
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization of lease
commissions and loan costs 1,277 453 417
Amortization of discount on securities
available for sale -- -- 2
Reduction in provision for impairment loss
on investment in Master Loan to affiliates (792) -- --
Provision for impairment loss on investment
in Master Loan to affiliates -- 5,578 --
Receipt of Southmark stock -- -- (7)
Changes in accounts:
Restricted cash 18 (301) (26)
Due from affiliates -- 935 (376)
Other assets 490 (1,243) 99
Accounts payable 86 337 (68)
Interest payable 12 -- --
Distributions payable -- -- (8)
Tenant security deposit liabilities (6) 276 --
Net cash provided by operating activities 1,913 2,644 3,027
Cash flows from investing activities:
Property improvements and replacements (5,757) (274) (27)
Proceeds from sale of securities
available for sale 5,257 5,180 5,461
Purchase of securities available for sale -- (2,115) (3,392)
Principal receipts on Master Loan 2,243 21,661 --
Advances on Master Loan (367) (4,002) (40)
Net cash provided by investing activities 1,376 20,450 2,002
Cash flows from financing activities:
Distributions to partners (17,016) (3,037) (3,723)
Payments on notes payable (47) -- --
Proceeds from long-term borrowings -- 4,545 --
Net cash (used in) provided by financing
activities (17,063) 1,508 (3,723)
Net (decrease) increase in cash and
cash equivalents (13,774) 24,602 1,306
Cash and cash equivalents, at beginning
of year 26,122 1,520 214
Cash and cash equivalents, at end of year $ 12,348 $26,122 $ 1,520
Supplemental disclosure of cash flow information:
Cash paid for interest $ 302 $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Property Improvements and Replacements
Accounts payable was adjusted approximately $1,449,000 at December 31, 1996, for
non-cash amounts in connection with property improvements and replacements.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Organization and Summary of Significant Accounting Policies
Organization: Consolidated Capital Institutional Properties (the
"Partnership"), a California limited partnership, was formed on April 28, 1981,
to lend funds through nonrecourse notes with participation interests (the
"Master Loan"). The loans were made to, and the real properties that secure the
Master Loan were purchased and owned by, Consolidated Capital Equity Partners,
("EP"), a California general partnership in which certain of the partners were
former shareholders and former management of Consolidated Capital Equities
Corporation ("CCEC"), the former corporate general partner. Through December
31, 1996, the Partnership had advanced a total of approximately $180.5 million
to EP and its successor under the Master Loan.
Upon the Partnership's formation in 1981, CCEC, a Colorado corporation, was the
corporate general partner. In December 1988, CCEC filed for reorganization
under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of
CCEC's reorganization plan, ConCap Equities, Inc., a Delaware corporation (the
"General Partner" or "CEI") acquired CCEC's general partner interests in the
Partnership and in 15 other affiliated public limited partnerships (the
"Affiliated Partnerships") and replaced CCEC as managing general partner in all
16 partnerships.
During 1989, EP defaulted on certain interest payments that were due under the
Master Loan. Before the Partnership could exercise its remedies for such
defaults, EP filed for bankruptcy protection in a Chapter 11 reorganization
proceeding. On October 18, 1990, the Bankruptcy Court approved EP's consensual
plan of reorganization (the "Plan"). In November 1990, EP and the Partnership
consummated a closing under the Plan pursuant to which, among other things, the
Partnership and EP executed an amended and restated loan agreement (the "New
Master Loan Agreement"). EP was converted from a California general partnership
to a California limited partnership, Consolidated Capital Equity Partners, L.P.
("CCEP"), and CCEP renewed the deeds of trust on all the collateral to secure
the New Master Loan Agreement.
ConCap Holdings, Inc. ("CHI"), a Texas corporation and wholly-owned subsidiary
of CEI, is the sole general partner of CCEP and an affiliate of the Partnership.
The general partners of EP became limited partners in CCEP. CHI has full
discretion with respect to conducting CCEP's business, including managing CCEP's
properties and initiating and approving capital expenditures and asset
dispositions and refinancings. All of CEI's outstanding stock is owned by an
affiliate of Insignia Financial Group, Inc. ("Insignia"), which was acquired
through two transactions in December 1994 and October 1995. At December 31,
1996, Insignia and affiliates own a total of 45,756 Units of the Partnership.
The Partnership owns and operates one apartment property and one multiple-use
building in North Carolina and Pennsylvania, respectively. Also, the
Partnership is the holder of a note receivable which is collateralized by
apartment and commercial properties located throughout the United States.
Principles of Consolidation: The Partnership's financial statements for the
year ended December 31, 1996, include the accounts of Kennedy Boulevard
Associates I, L.P., a Pennsylvania limited partnership ("KBA-1, L.P."), which is
98% owned by the Partnership and three other affiliated limited and general
partnerships all of which are 99% owned by the Partnership. The Partnership's
financial statements for the year ended December 31, 1995, include the accounts
of KBA-I, L.P. and four other affiliated limited and general partnerships and
three affiliated corporations, all of which were ultimately wholly-owned by the
Partnership. KBA-I, L.P. holds title to The Sterling Apartment Home and Commerce
Center ("Sterling"). All intercompany transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.
Restricted Escrows:
Replacement Reserve Account: At the time of the December 15, 1995,
refinancing, approximately $60,000 of the proceeds were designated for a
"replacement reserve fund" for certain capital replacements (as defined in the
Replacement Reserve Agreement) at The Lofts. At December 31, 1996, the balance
remaining was approximately $53,000 and is included in other assets.
Repair Escrow Account: In addition to the Replacement Reserve Account,
approximately $269,000 of the refinancing proceeds were designated for a "repair
escrow" to cover necessary repairs and replacements to be completed at The Lofts
within one year of closing. At December 31, 1996, the balance was approximately
$10,000 and is included in other assets. All excess funds will be transferred
into the Replacement Reserve Account.
Escrows for Taxes: These funds are held by the Partnership and are designated
for the payment of real estate taxes and are included in other assets.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment and commercial properties and related personal
property. For Federal income tax purposes, the modified accelerated cost
recovery method is used. As a result of the Tax Reform Act of 1986, for
additions after December 31, 1986, the modified accelerated cost recovery method
is used for depreciation of (1) real property additions over 27 1/2 years and
(2) personal property additions over 5 to 15 years.
Loan Costs: Loan costs of approximately $124,000, less accumulated amortization
of approximately $13,000, are included in other assets and are being amortized
on a straight-line basis over the life of the loan.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks,
certificates of deposit, and money market funds with original maturities less
than 90 days. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Restricted cash - tenant security deposits - The Partnership requires
security deposits from lessees for the duration of the lease and such deposits
are considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $265,000
and $40,000 for the years ended December 31, 1996 and 1995, respectively.
Investment Properties: Prior to 1995, investment properties were carried at the
lower of cost or estimated fair value, which was determined using the higher of
the property's non-recourse debt amount, when applicable, or the net operating
income of the investment property capitalized at a rate deemed reasonable for
the type of property. During 1995, the Partnership adopted "FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The effect of
adoption was not material.
Investment in Master Loan: Beginning in 1995, the Partnership adopted "FASB
Statement No. 114, Accounting by Creditors for Impairment of a Loan." Under the
new standard, the allowance for credit losses related to loans that are
identified for evaluation in accordance with "Statement 114" is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. The effect
of adoption was not material. Prior to 1995, the allowance for credit losses
related to these loans was based on undiscounted cash flows or the fair value of
the collateral for collateral dependent loans.
Investments: The General Partner determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Presently, all of the Partnership's investments are
classified as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, reported in a separate
component of partner's capital. The amortized cost of debt securities in this
category is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in investment income. Realized gains
and losses and declines in value judged to be other-than-temporary on available-
for-sale securities are included in investment income. The cost of securities
sold is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in investment income.
Leases: The Partnership leases certain commercial space to tenants under
various lease terms. The leases are accounted for as operating leases in
accordance with "FASB Statement No. 13, Accounting for Leases." Some of the
leases contain stated rental increases during their term. For leases with fixed
rental increases, rents are recognized on a straight-line basis over the terms
of the lease. For all other leases, minimum rents are recognized over the terms
of the leases.
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on these leases. In addition,
management finds it necessary to offer rental concessions during particularly
slow months or in responseto heavy competition from other similar complexes in
the area. Concessions are charged to expenses as incurred.
Lease Commissions: Lease commissions are capitalized and amortized using the
straight-line method over the life of the applicable lease. At December 31,
1996 and 1995, lease commissions totaled approximately $38,000, with accumulated
amortization of approximately $16,000 and $10,000, respectively. Lease
commissions are included in other assets.
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.
The tax basis of the Partnership's assets and liabilities is approximately $80.6
million greater than the assets and liabilities as reported in the financial
statements.
Partners' Capital (Deficit): The Partnership Agreement ("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.
Net Income (Loss) Per Limited Partnership Unit: Net income (loss) per Limited
Partnership Unit ("Unit") is computed by dividing net income (loss) allocated to
the Limited Partners by the number of Units outstanding. Per Unit information
has been computed based on 199,052, 199,052 and 199,045 Units outstanding in
1996, 1995 and 1994, respectively.
Fair Value: In 1995, the Partnership implemented "FASB Standard No. 107,
Disclosure about Fair Value of Financial Instruments," which requires disclosure
of fair value information about financial instruments for which it is
practicable to estimate that value. The carrying amount of the Partnership's
cash and cash equivalents approximates fair value due to short-term maturities.
The Partnership estimates the fair value of its fixed rate mortgages by
discounted cash flow analysis, based on estimated borrowing rates currently
available to the Partnership. The carrying amount of the Partnership's net
investment in the Master Loan approximated fair value due to the fact that it
has been valued based on the fair value of the underlying collateral.
Reclassifications: Certain reclassifications have been made to the 1995 and
1994 information to conform to the 1996 presentation.
Note B - Securities Available for Sale
Investments, stated at cost, consist of the following at December 31, 1996 (in
thousands):
Interest Face Maturity
Rate Amount Cost Date
Southmark Corporation
Redeemable Series A
Preferred Stock N/A $ 7 $ 7 N/A
Investments stated at cost consist of the following at December 31, 1995 (in
thousands):
Interest Face Maturity
Rate Amount Cost Date
U.S. Treasury Note 7.38% $2,600 $2,591 May 15, 1996
U.S. Treasury Note 7.88% 2,647 2,660 July 15, 1996
Southmark Corporation
Redeemable Series A
Preferred Stock N/A 7 7 N/A
Accrued interest 6
$5,264
The Partnership's investments are classified as available-for-sale. The General
Partner believes that the market value of the investments is approximately the
same as the cost.
Note C - Net Investment in Master Loan
At December 31, 1996, the recorded investment in Master Loan is considered to be
impaired under "Statement 114." The Partnership measures the impairment of the
loan based upon the estimated fair value of the collateral due to the fact
repayment of the loan is expected to be provided solely by the collateral. For
the year ended December 31, 1995, the Partnership recorded approximately
$5,578,000 in expense based upon a decrease in the fair value of the collateral.
For the year ended December 31, 1996, the Partnership recorded approximately
$792,000 in income based upon an increase in the fair value of the collateral.
In connection with the transfer of The Sterling to Kennedy Boulevard Associates,
L.P. ("KBA-I"), a 98% owned subsidiary of the Partnership, the General Partner
had a valuation performed on the property to determine its estimated fair value.
The asset had previously been recorded on the books of CCEP and for valuation
for the Master Loan based upon appraisals performed by a third party. The last
appraisal valued the property as of May 12, 1995. Based on its ongoing
evaluation of the condition of the property, the General Partner concluded that
additional information received during the fourth quarter of 1995 regarding the
extent of deferred maintenance and improvements needed to the property indicated
that a $5,000,000 write-down was needed to reduce the property to its estimated
net realizable value.
CCEP recorded this write-down during the fourth quarter of 1995, before the
property was transferred to KBA-I. As this property was collateral for the
Master Loan and the value of the Master Loan is recorded based upon the
estimated fair value of the underlying collateral, the Partnership recorded an
increase in the Provision for Impairment Loss on the Master Loan to affiliate
due to this impairment.
Interest due to the Partnership pursuant to the terms of the Master Loan
Agreement, but not recognized in the income statements, totaled approximately
$29.5 million, $27.4 million and $24.6 million for the years ended December 31,
1996, 1995 and 1994, respectively. At December 31, 1996 and 1995, such
cumulative unrecognized interest totaling approximately $167.7 million and
$138.2 million was not included in the balance of the investment in Master Loan.
In addition, six of the properties are collateralized by first mortgages
totaling approximately $23,393,000 which are superior to the Master Loan.
During 1995, the Partnership advanced approximately $4 million to CCEP as an
advance on the Master Loan. CCEP used the advances to pay for deferred
maintenance and capital improvements on the properties which collateralize the
Master Loan. A portion of the advance was used to pay off third party debt on
certain of the properties which collateralize the Master Loan.
During 1996, the Partnership advanced approximately $367,000 to CCEP as an
advance on the Master Loan. CCEP used the advances to pay for deferred
maintenance and capital improvements on the properties which collateralize the
Master Loan.
Terms of the New Master Loan Agreement
Under the terms of the New Master Loan Agreement (as adopted in November 1990),
interest accrues at a fluctuating rate per annum adjusted annually on July 15 by
the percentage change in the U.S. Department of Commerce Implicit Price Deflator
for the Gross National Product subject to an interest rate ceiling of 12.5%.
The interest rates for each of the years ended December 31, 1996, 1995, and
1994, was 12.5%. These payments are currently payable quarterly in an amount
equal to "Excess Cash Flow." Unpaid interest is added to principal, compounded
annually, and is payable at the loan's maturity. Any net proceeds from the sale
or refinancing of any of CCEP's properties are paid to the Partnership under the
terms of the New Master Loan Agreement. The New Master Loan Agreement matures
in November 2000.
Effective January 1, 1993, the Partnership and CCEP amended the New Master Loan
Agreement to stipulate that Excess Cash Flow would be computed net of capital
improvements. Such expenditures were formerly funded from advances on the
Master Loan from the Partnership to CCEP. This amendment and change in the
definition of Excess Cash Flow will have the effect of reducing income on the
investment in Master Loan by the amount of CCEP's capital expenditures, since
such amounts were previously excluded from Excess Cash Flow.
On November 30, 1995, New Carlton House Partners, Ltd., a Pennsylvania limited
partnership ("NCHP"), owner of a multi-use apartment/commercial building known
as The Sterling, the Partnership, Philly Associates Inc., a Texas Corporation
("Philly"), and Kennedy Boulevard Associates, L.P., a Pennsylvania limited
partnership ("KBA-I, L.P.") (an affiliate of CCIP) entered into a consensual
Transfer Agreement whereby certain mortgage notes held by CCEP and Philly that
are secured by The Sterling were assigned to KBA-I, L.P. As NCHP is unable to
repay the debt, the parties agreed that in order to avoid the additional costs
and expenses of litigation or a judicial foreclosure, that NCHP transfer The
Sterling to KBA-I, L.P. by a deed-in-lieu of foreclosure in full satisfaction of
its obligations on the mortgages assigned to KBA-I, L.P. As an additional
matter, the transfer of The Sterling to KBA-I, L.P. shall be in satisfaction of
a portion of the amounts owed by CCEP to the Partnership under the Master Loan
Agreement. NCHP transferred The Sterling to KBA-I, L.P. and the Partnership
recorded the transfer on November 30, 1995.
The investment in Master Loan consists of the following:
AS OF DECEMBER 31,
1996 1995
(in thousands)
Master Loan funds advanced, at
beginning of year $95,246 $127,686
Master Loan funds advanced 367 4,002
Principal receipts on Master Loan (2,243) (20,905)
Principal reduction due to The
Sterling acquisition, including
cash received of $756,000 in 1995 -- (15,537)
Master Loan funds advanced, at
end of year $93,370 $ 95,246
The allowance for impairment loss on Master Loan to affiliates consists of the
following:
AS OF DECEMBER 31,
1996 1995 1994
(in thousands)
Allowance for impairment loss on Master
Loan to affiliates, beginning of year $41,478 $35,900 $35,900
(Reduction) provision for impairment loss (792) 5,578 --
Allowance for impairment loss on Master
Loan to affiliates, end of year $40,686 $41,478 $35,900
Note D - Mortgage Note Payable
On December 15, 1995, the Partnership financed The Lofts. The principal terms
of mortgage note payable are as follows (in thousands):
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1996 Interest Rate Date Maturity
The Lofts $ 4,498 $ 30 6.95% 12/1/05 $ 3,903
The estimated fair value of the Partnership's aggregate debt approximates its
carrying value. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996, are as follows (in thousands):
YEAR ENDED NOTES
DECEMBER 31, PAYABLE
1997 $ 50
1998 53
1999 57
2000 62
2001 66
Thereafter 4,210
Total $4,498
Note E - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for management and administration of all Partnership activities. The
Partnership paid property management fees based upon collected gross rental
revenues for property management services as noted below for the years ended
December 31, 1996, 1995 and 1994. For the year ended December 31, 1994, a
portion of such property management fees were paid to Coventry Properties, Inc.
("Coventry"), an affiliate of the General Partner, for day-to-day property
management services and a portion was paid to Partnership Services, Inc. ("PSI")
for advisory services related to day-to-day property operations. In late
December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia")
assumed day-to-day property management responsibilities for all of the
Partnership's properties. Fees paid to affiliates of Insignia during the years
ended December 31, 1996 and 1995, and fees paid to Coventry and PSI for the year
ended December 31, 1994, are reflected in the following table. The Partnership
Agreement ("Agreement") also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with the administration of
Partnership activities. In 1996 and 1995, the General Partner and its current
and former affiliates, which includes Coventry for the year ended December 31,
1994, received reimbursements as reflected in the following table:
For the Year Ended
December 31,
1996 1995 1994
(in thousands)
Property management fees $409 $120 $ 65
Reimbursement for services
of affiliates (1) 485 305 226
(1) Included in "reimbursement for services of affiliates" for 1996 is
approximately $219,000 in reimbursements for construction oversight costs.
As of December 31, 1995, the Partnership had paid approximately $15,000 and had
accrued approximately $13,000 of reimbursements to an affiliate of the General
Partner related to the refinancing of The Lofts, which is included in
Reimbursement for services of affiliates above.
On July 1, 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payments on these obligations from the agent. The amount of the partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
At December 31, 1996, Insignia was the beneficial owner of 45,756 of the
Partnership's limited partnership units.
Note F - Commitments, Contingencies and Subsequent Events
The Partnership is required by the Agreement to maintain working capital
reserves for contingencies of not less than 5% of Net Invested Capital, as
defined in the Agreement. In the event expenditures are made from this reserve,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, including cash and cash equivalents and
securities available for sale, totaling approximately $12.7 million, were
greater than the reserve requirement of approximately $7.3 million at December
31, 1996.
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner believes that all such matters are
adequately covered by insurance and will be resolved without a material adverse
effect upon the business, financial condition, results of operations, or
liquidity of the Partnership.
Note G - Real Estate and Accumulated Depreciation
(dollar amounts in thousands)
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
The Lofts Apartments $ 4,498 $ 1,053 $ 4,147 $1,541
Raleigh, NC
The Sterling Apartment Homes -- 2,567 12,341 6,933
and Commerce Center
Philadelphia, PA $ 4,498 $ 3,620 $16,488 $8,474
Gross Amount At Which Carried
at December 31, 1996
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
The Lofts $ 1,053 $ 5,688 $ 6,741 $2,353 1975 11/19/90 5-20
The Sterling 2,567 19,274 21,841 864 1961 12/01/95 5-25
Total $ 3,620 $24,962 $28,582 $3,217
Reconciliation of real estate and accumulated depreciation:
Years Ended December 31,
1996 1995 1994
(in thousands)
REAL ESTATE:
Balance, real estate at beginning of year $21,376 $ 6,255 $ 6,228
Additions 7,206 15,121 27
Balance, real estate at end of year 28,582 $ 21,376 $ 6,255
ACCUMULATED DEPRECIATION:
Balance, depreciation of real estate at
beginning of year $ 1,958 $ 1,505 $ 1,088
Depreciation of real estate 1,259 453 417
Balance, depreciation of real estate at
at end of year $ 3,217 $ 1,958 $ 1,505
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, is approximately $29,491,000 and approximately
$26,404,000, respectively. The accumulated depreciation taken for Federal
income tax purposes at December 31, 1996 and 1995, is approximately $1,999,000
and approximately $1,012,000 respectively.
Note I - Revenues
Rental income on the commercial property leases is recognized on a straight-line
basis over the life of the applicable leases. Minimum future rental income for
the commercial properties subject to noncancellable operating leases is as
follows (in thousands):
YEAR ENDING
DECEMBER 31,
1997 $ 412
1998 270
1999 248
2000 177
2001 166
Thereafter 572
$ 1,845
There is no assurance that this rental income will continue at the same level
when the current leases expire.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
As of May 3, 1995, Arthur Andersen LLP, the independent accountant previously
engaged as the principal accountant to audit the financial statements of the
Registrant, was dismissed. As of the same date, the firm of Ernst & Young LLP
was engaged to provide that service for the Registrant.
During the Partnership's two most recent fiscal years and any subsequent interim
period preceding the change, there were no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the former accountant, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report.
PART III
Item 10. Directors and Executive Officers of the General Partner of the
Partnership
The names of the directors and executive officers of ConCap Equities, Inc.
("CEI"), the Partnership's General Partner as of December 31, 1996, their ages
and the nature of all positions with CEI presently held by them are as follows:
NAME OF INDIVIDUAL POSITION IN CEI AGE
William H. Jarrard, Jr. President 50
Ronald Uretta Vice President/Treasurer 41
John K. Lines Vice President/Secretary 37
Kelley M. Buechler Assistant Secretary 39
Martha L. Long Controller 37
William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1991. Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.
Ronald Uretta has been Vice President/Treasurer of CEI since December 1996 and
Insignia's Treasurer since January 1992. Since August 1996, he has also served
as Insignia's Chief Operating Officer. He also served as Secretary from January
1992 to 1994 and as Insignia's Chief Financial Officer from January 1992 to
August 1996. Since September 1990, Mr. Uretta has also served as the Chief
Financial Officer and Controller of Metropolitan Asset Group.
John K. Lines has been Vice President and Secretary of CEI since December of
1994, Secretary of the MAE subsidiaries since August 1994, General Counsel of
Insignia since June 1994, and General Counsel and Secretary of Insignia since
July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General
Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach,
Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney
with Banc One Corporation in Columbus, Ohio. From May 1984 until October 1991,
Mr. Lines was employed as an associate with Squire Sanders & Dempsey in
Columbus, Ohio.
Kelley M. Buechler has been Assistant Secretary of CEI since December 1994,
Assistant Secretary of the MAE subsidiaries since January 1992, and Assistant
Secretary of Insignia since January 1991. During the five years prior to
joining Insignia in 1991, she served in a similar capacity for U.S. Shelter.
Martha L. Long has been Controller of CEI since December 1996 and Senior Vice
President - Finance and Controller of Insignia since January 1997. In June
1994, Ms. Long joined Insignia as its Controller and was promoted to Senior Vice
President - Finance in January 1997. Prior to that time, she was Senior Vice
President and Controller of The First Savings Bank, FSB in Greenville, South
Carolina.
Market Ventures, L.L.C. ("Ventures") and Liquidity Assistance, L.L.C.
("Liquidity") delinquently reported 118 and 113 transactions, respectively as of
December 31, 1996 on a Form 5 filed in January 1997, with respect to the
entities' purchases of Units of Limited Partner Interest of the Partnership.
Each of Insignia Financial Group, Inc., Insignia Commercial Group, Inc. and
Andrew L. Farkas also delinquently reported the same transactions on a Form 5 by
virtue of their status as affiliates of Ventures and Liquidity, through which
they may be deemed to be beneficial owners of the securities owned by such
entities.
Item 11. Executive Compensation
No remuneration was paid to the General Partner nor any of its directors and
officers during the year ended December 31, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Except as provided below, as of March 1997, no person was known to CEI to own of
record or beneficially more than 5 percent (5%) of the Units of the Partnership:
NUMBER OF PERCENT
NAME AND ADDRESS UNITS OF TOTAL
Insignia affiliates 46,848.90 23.54%
One Insignia Financial Plaza
P. O. Box 1089
Greenville, SC 29602
The units above are held by Insignia Properties, L.P. who owns 46,517.40
units (23.37% of outstanding units) and other affiliated entities who hold
nominal amounts of units.
(b) Beneficial Owners of Management
Except as described in "Item 12(a)" above, neither CEI nor any of the
directors, officers or associates of CEI own any Units of the Partnership
of record or beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of December 31, 1996, the following persons were known to CEI to be the
beneficial owners of more than 5 percent (5%) of its common stock:
NUMBER OF PERCENT
NAME AND ADDRESS CEI SHARES OF TOTAL
GII Realty, Inc. 100,000 100%
One Insignia Financial Plaza
P. O. Box 1089
Greenville, SC 29602
GII Realty, Inc. is an affiliate of Insignia. (See "Item 1")>
Item 13. Certain Relationships and Related Transactions
Transactions with Current Management and Others
The Registrant has a property management agreement with Insignia Residential
Group, L.P. pursuant to which Insignia Residential Group, L.P., has assumed
direct responsibility for day-to-day management of the Partnership's properties.
This service includes the supervision of leasing, rent collection, maintenance,
budgeting, employment of personnel, payment of operating expenses, etc.
Insignia Residential Group, L.P. receives a property management fee equal to 5%
of apartment revenues. During the fiscal year ended December 31, 1996, Insignia
Residential Group, L.P. received approximately $409,000 in fees for property
management.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994
Consolidated Statements of Partners' Capital (Deficit) for the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Schedules
All schedules are omitted because they are not required, are not
applicable or the financial information is included in the financial
statements or notes thereto
3. Exhibits
S-K REFERENCE SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
3 Certificates of Limited Partnership, as N/A
amended to date. (Incorporated by refer-
ence to the Annual Report on Form 10-K
for the year ended December 31, 1991
("1991 Annual Report").
10.1 Amended Loan Agreement dated November N/A
15, 1990 (the "Effective Date"), by and
between the Partnership and EP (Incorpora-
ted by reference to the Annual Report on
Form 10-K for the year ended December 31,
1990 ("1990 Annual Report").
10.2 Assumption Agreement as of the Effective N/A
Date, by and between EP and CCEP (Incor-
porated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective N/A
Effective Date, by and between the Partner-
ship and EP (Incorporated by reference to
the 1990 Annual Report).
10.4 Assignment of Partnership Interests in N/A
Western Can, Ltd., by and between EP and
CCEP (Incorporated by reference to the
1990 Annual Report).
10.5 Bill of Sale and Assignment dated October 23, N/A
1990, by and between CCEC and ConCap
Services Company (Incorporated by reference
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990).
10.6 Assignment and Assumption Agreement dated N/A
dated October 23, 1990, by and between CCMLP
and Metro ConCap, Inc. (300 series of Property
Management contracts). (Incorporated by
reference to the 1990 Annual Report).
10.7 Construction Management Cost Reimbursement N/A
Agreement dated January 1, 1991, by and
between the Partnership and Metro ConCap, Inc.
(Incorporated by reference to the 1991 Annual
Report).
10.8 Investor Services Agreement dated October 23, N/A
1990, by and between the Partnership and CCEC
(Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1990).
10.9 Assignment and Assumption Agreement (Investor N/A
Services Agreement) dated October 23, 1990 by
and between CCEC and ConCap Services
Company (Incorporated by reference to the
1990 Annual Report).
10.10 Letter of Notice dated December 20,1991, from N/A
Partnership Services, Inc. ("PSI") to the Partner-
ship regarding the change in ownership and
dissolution of ConCap Services Company whereby
PSI assumed the Investor Services Agreement.
(Incorporated by reference to the 1991 Annual
Report).
10.11 Financial Services Agreement dated October 23, N/A
1990, by and between the Partnership and CCEC
(Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended September 30,
1990).
10.12 Assignment and Assumption Agreement (Financial N/A
Services Agreement) dated October 23, 1990, by
and between CCEC and ConCap Capital Company
(Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended September 30,
1990).
10.13 Letter of Notice dated December 20, 1991, from N/A
PSI to the Partnership regarding the change in
ownership and dissolution of ConCap Capital
Company whereby PSI assumed the Financial
Services Agreement. (Incorporated by reference
to the 1991 Annual Report).
10.14 Property Management Agreement No. 503 N/A
dated February 16, 1993, by and between the
Partnership, New Carlton House Partners, Ltd.
and Coventry Properties, Inc. (Incorporated
by reference to the Annual Report on Form 10-K
for the year ended December 31, 1992).
10.15 Property Management Agreement No. 508 dated N/A
June 1, 1993, by and between the Partnership
and Coventry Properties, Inc.
10.16 Assignment and Assumption Agreement as to N/A
Certain Property Management Services dated
November 17, 1993, by and between Coventry
Properties, Inc. and Partnership Services, Inc.
10.17 Multifamily Note dated November 30, 1995
between Consolidated Capital Institutional
Properties, a California limited partnership,
and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holding Inc.
11 Statement regarding computation of Net Income 22
per Limited Partnership Unit (Incorporated by
reference to Note 1 of Item 8 - Financial State-
ments of this Form 10-K).
16 Letter, dated August 12, 1992, from Ernst & Young N/A
to the Securities and Exchange Commission regard-
ing change in certifying accountant. (Incorporated
by reference to Form 8-K dated August 6, 1992).
27 Financial Data Schedule containing summary N/A
financial information extracted from the balance
sheet and statement of operations which is qualified
in its entirety by reference to such financial
statements.
28.1 Fee Owner's Limited Partnership Agreement dated N/A
November 14, 1990 (Incorporated by reference to
the 1990 Annual Report).
99.1 Audited Financial Statements of Consolidated
Capital Equity Partners, L.P. for the years
ended December 31, 1996 and 1995.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1996:
None.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
SIGNATURE PAGE
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
By: CONCAP EQUITIES, INC.
Its General Partner,
March 27, 1997 By: /s/ William H. Jarrard, Jr.
Date William H. Jarrard, Jr.
President
March 27, 1997 By: /s/ Ronald Uretta
Date Ronald Uretta
Vice President/Treasurer
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
in the capacities and on the dates indicated.
March 27, 1997 By: William H. Jarrard, Jr.
Date William H. Jarrard
President
March 27, 1997 By: /s/Ronald Uretta
Date Ronald Uretta
Vice President/Treasurer