Item 1. Business
Consolidated Capital Institutional Properties/2, LP (the "Partnership" or "Registrant") was organized on April 12, 1983, as a limited partnership under the California Uniform Limited Partnership Act. On July 22, 1983, the Partnership registered with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (File No. 2-83540) and commenced a public offering for the sale of limited partnership units (“Units”). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units terminated on July 21, 1985, with 912,182 Units sold at $250 each, or gross proceeds of approximately $227.8 million to the Partnership. As permitted under its Partnership Agreement (the original partnership agreement of the Partnership with all amendments shall be referred to as the "Partnership Agreement"), the Partnership has repurchased and retired a total of 3,048 Units for a total of $611,000. A total of 135.40 Units were abandoned and accordingly retired by the Partnership. The Partnership may, at its absolute discretion, repurchase Units, but is under no obligation to do so. Since its initial offering, the Partnership has not received, nor are limited partners required to make, additional capital contributions.
Upon the Partnership's formation in 1983, Consolidated Capital Equities Corporation (“CCEC”), a Colorado corporation, was the corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). 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 Partnership Agreement to limit changes of control of the Partnership. The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership currently owns and operates three residential investment properties. The Partnership sold one investment property, Canyon Crest Apartments, to a third party on August 1, 2008. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2013 unless terminated prior to such date.
On April 25, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Consolidated Capital Institutional Properties/2, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of March 19, 2008, by and between the California partnership and the Delaware partnership.
Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.
The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Consolidated Capital Institutional Properties/2, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.
On April 30, 2008, the General Partner amended the Partnership Agreement to establish, and convert existing limited partnership interests into, different designated series of limited partnership interests that have separate rights with respect to specified partnership property. Effective as of the close of business on April 30, 2008 (the “Establishment Date”), each then outstanding Unit of limited partnership interest in the Partnership was converted into one Series A Unit and one Series B Unit. Except as described below, the Series A Units and Series B Units entitle the holders thereof to the same rights as the holders of Units of limited partnership interests prior to the Establishment Date.
From and after the Establishment Date, the Series A Units will be entitled to all of the Partnership’s interests in any entity in which the Partnership owns an interest, other than the Series B Subsidiary (as defined below), including, but not limited to, all profits, losses and distributions from such entities.
From and after the Establishment Date, the Series B Units will be entitled to all of the Partnership’s membership interest in Canyon Crest, L.L.C., a Delaware limited liability company (the “Series B Subsidiary”), including, but not limited to, all profits, losses and distributions from Canyon Crest Apartments. The Series B Units were dissolved during December 2008, upon the dissolution of the remaining assets and liabilities of Canyon Crest Apartments.
The Partnership has no employees. Management and administrative services are performed by the General Partner and by agents retained by the General Partner. An affiliate of the General Partner has been providing such property management services.
Item 1A.
Item 1A. Risk Factors
The risk factors noted in this section and other factors noted throughout this Annual Report describe certain risks and uncertainties that could cause the Partnership’s actual results to differ materially from those contained in any forward-looking statement.
The Partnership’s existing and future debt financing could render it unable to operate, result in foreclosure on its properties, prevent it from making distributions on its equity or otherwise adversely affect its liquidity.
The Partnership is subject to the risk that its cash flow from operations will be insufficient to make required payments of principal and interest, and the risk that existing indebtedness may not be refinanced or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness. If the Partnership fails to make required payments of principal and interest on secured debt, its lender could foreclose on the properties securing such debt, which would result in loss of income and asset value to the Partnership. Payments of principal and interest may leave the Partnership with insufficient cash resources to operate its properties or pay distributions.
Disruptions in the financial markets could affect the Partnership’s ability to obtain financing and the cost of available financing and could adversely affect the Partnership’s liquidity.
The Partnership’s ability to obtain financing and the cost of such financing depends on the overall condition of the United States credit markets and the level of involvement of certain government sponsored entities, specifically, Federal Home Loan Mortgage Corporation, or Freddie Mac, and Federal National Mortgage Association, or Fannie Mae, in secondary credit markets. Recently the United States credit markets have experienced significant liquidity disruptions, which have caused the spreads on debt financings to widen considerably and have made obtaining financing more difficult. Further or prolonged disruptions in the credit markets could result in Freddie Mac or Fannie Mae reducing their level of involvement in secondary credit markets which would adversely affect the Partnership’s ability to obtain non-recourse property debt financing.
Failure to generate sufficient net operating income may limit the Partnership’s ability to fund necessary capital expenditures or the Partnership’s ability to repay advances from affiliates.
The Partnership’s ability to fund necessary capital expenditures on its properties depends on its ability to generate net operating income in excess of required debt payments. If the Partnership is unable to fund capital expenditures on its properties, the Partnership may not be able to preserve the competitiveness of its properties, which could adversely affect the Partnership’s net operating income.
The Partnership’s ability to repay advances from affiliates depends on its ability to generate net operating income in excess of required debt payments and capital expenditure requirements. Net operating income and liquidity may be adversely affected by events or conditions beyond the Partnership’s control, including:
the general economic climate;
competition from other apartment communities and other housing options;
local conditions, such as loss of jobs or an increase in the supply of apartments, that might adversely affect apartment occupancy or rental rates;
changes in governmental regulations and the related cost of compliance;
increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents;
changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing; and
changes in interest rates and the availability of financing.
Competition could limit the Partnership’s ability to lease apartments or increase or maintain rents.
The Partnership’s apartment properties compete for residents with other housing alternatives, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing in a particular area could adversely affect the Partnership’s ability to lease apartments and to increase or maintain rental rates. The current challenges in the credit and housing markets have increased housing inventory that competes with the Partnership’s properties.
Laws benefiting disabled persons may result in the Partnership’s incurrence of unanticipated expenses.
Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. Likewise, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990, to be accessible to the handicapped. These and other Federal, state and local laws may require modifications to the Partnership’s properties, or affect renovations of the properties. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although the Partnership believes that its properties are substantially in compliance with present requirements, the Partnership may incur unanticipated expenses to comply with the ADA and the FHAA in connection with the ongoing operation of its properties.
Potential liability or other expenditures associated with potential environmental contamination may be costly.
Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.
Moisture infiltration and resulting mold remediation may be costly.
The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.
A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.
Item 2.
Item 2. Properties
The following table sets forth the Partnership's investment in properties:
Date of
Properties
Acquisition
Type of Ownership
Use
Highcrest Townhomes
08/22/02
Fee ownership, subject to
Apartment
Wood Ridge, Illinois
first mortgage
units
Windemere Apartments
08/28/02
Fee ownership, subject to
Apartment
Houston, Texas
first mortgage
units
Glenbridge Manor Apartments
09/01/03
Fee ownership, subject to
Apartment
Cincinnati, Ohio
first mortgage
units
During 2008, Glenbridge Manor Apartments experienced significant ground movement causing damage to two buildings, water pipes and sewer lines. These two buildings, containing 17 units, the office, clubhouse and fitness center, have been evacuated. One building containing 12 units has been demolished, and another building was partially demolished. The Partnership currently plans to reconstruct these units.
On August 1, 2008, the Partnership sold Canyon Crest Apartments to a third party for a gross sale price of approximately $4,100,000. The net proceeds realized by the Partnership were approximately $4,013,000 after payment of closing costs. The Partnership used approximately $2,822,000 of the net proceeds to repay the mortgage encumbering the property. As a result of the sale, the Partnership recorded a loss of approximately $69,000. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $111,000 due to a prepayment penalty of approximately $131,000, partially offset by the write off of the unamortized mortgage premium.
Schedule of Properties
Set forth below for each of the Partnership's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation, and Federal tax basis.
See "Note A - Organization and Summary of Significant Accounting Policies" to the financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's depreciation and capitalization policies.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans encumbering the Partnership's properties.
Principal
Principal
Balance At
Stated
Balance
December 31,
Interest
Period
Maturity
Due at
Property
Rate(1)
Amortized
Date
Maturity (2)
(in thousands)
(in thousands)
Highcrest Townhomes
$11,007
6.17%
yrs
10/01/17
$ 9,414
Windemere Apartments
4,656
7.83%
yrs
11/01/10
4,189
Glenbridge Manor
Apartments
19,283
5.65%
yrs
12/15/13
16,566
34,946
Mortgage premium, net
Total
$35,046
$30,169
(1) Fixed rate mortgages.
(2) See “Note B - Mortgage Notes Payable" to the financial statements included in "Item 8. Financial Statements and Supplementary Data” for information with respect to the Partnership's ability to prepay these loans and other specific details about these loans.
On September 28, 2007, the Partnership refinanced the mortgage debt encumbering Highcrest Townhomes. The refinancing replaced the existing mortgage debt, which at the time of refinancing had a principal balance of approximately $5,482,000, with a new mortgage loan in the principal amount of $11,175,000.
The new mortgage loan bears interest at 6.17% per annum and requires monthly payments of principal and interest of approximately $68,000 beginning on November 1, 2007 through the October 1, 2017 maturity date, with a balloon payment of approximately $9,414,000 due at maturity. If no event of default exists at maturity, the maturity date will automatically be extended for one additional year, to October 1, 2018. Total capitalized loan costs associated with the new mortgage were approximately $213,000. As a condition of the loan, the lender required AIMCO Properties, L.P., an affiliate of the General Partner, to guarantee certain obligations and liabilities of the Partnership with respect to the new mortgage financing.
Rental Rates and Occupancy
Average annual rental rate per unit and occupancy for 2008 and 2007 for each property are as follows:
(1) The General Partner attributes the increase in occupancy at Windemere Apartments to competitive pricing and increased resident retention efforts.
(2) The General Partner attributes the decrease in occupancy at Glenbridge Manor Apartments to 17 units unavailable for lease as a result of the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
As noted under "Item 1. Business", the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other residential apartment complexes in the area. The General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% or more of the available rental space. Both Highcrest Townhomes and Windemere Apartments are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age.
Real Estate Taxes and Rates
Real estate taxes and rates in 2008 for each property were as follows:
Billing
Rate
(in thousands)
Highcrest Townhomes
$279
6.97%
Windemere Apartments
2.70%
Glenbridge Manor Apartments
6.58%
Capital Improvements
Canyon Crest Apartments
During the year ended December 31, 2008, the Partnership completed approximately $168,000 of capital improvements at Canyon Crest Apartments, consisting primarily of interior improvements, recreational facility upgrades, floor covering replacement and construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from replacement reserves, operations and insurance proceeds. The Partnership sold Canyon Crest Apartments to a third party on August 1, 2008.
Highcrest Townhomes
During the year ended December 31, 2008 the Partnership completed approximately $186,000 of capital improvements at Highcrest Townhomes, consisting primarily of water and sewer upgrades, structural upgrades, and HVAC and floor covering replacements. These improvements were funded from operations. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2009. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property
Windemere Apartments
During the year ended December 31, 2008, the Partnership completed approximately $1,348,000 of capital improvements at Windemere Apartments, consisting primarily of structural upgrades, sidewalk resurfacing, kitchen and bath upgrades, hand rails, exterior improvements, floor covering replacement and construction related to the casualty discussed in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from operations and advances from AIMCO Properties, L.P. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2009. Such capital expenditures will depend on the physical condition of the property as well as replacement reserves, anticipated insurance proceeds and anticipated cash flow generated by the property.
Glenbridge Manor Apartments
During the year ended December 31, 2008, the Partnership completed approximately $3,722,000 of capital improvements at Glenbridge Manor Apartments, consisting primarily of structural improvements, appliance and floor covering replacements, construction related to the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the capitalization of construction period interest of approximately $158,000, property taxes of approximately $26,000 and operating costs of approximately $4,000. These improvements were funded from operations and advances from AIMCO Properties, L.P. The Partnership regularly evaluates the capital improvement needs of the property. The Partnership expects to continue reconstruction resulting from the casualty discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. While the Partnership has no other material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2009. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations, insurance proceeds, Partnership reserves or advances from AIMCO Properties, L.P., an affiliate of the General Partner, although AIMCO Properties, L.P. is not obligated to provide such advances. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.
Item 3.
Item 3. Legal Proceedings
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the Partnership paid approximately $3,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnership did not vote on any matter through the solicitation of proxies or otherwise during the quarter ended December 31, 2008.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
The Partnership, a publicly-held limited partnership, offered and sold 912,182 limited partnership units (the "Units") aggregating $227,800,000. The Partnership currently has 15,221 holders of record owning an aggregate of 908,998.20 Units. Affiliates of the General Partner owned 574,430.95 Units or approximately 63.19% of the outstanding Units at December 31, 2008. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future.
The Partnership distributed the following amounts to the Series B unit holders during the years ended December 30, 2008 and 2007 (in thousands, except per unit data):
Per
Per Limited
Year ended
Series B
Year ended
Partnership
December 31,
Unit
December 31,
Unit
Sale(1)
$ 802
$ 0.88
$ --
$ --
(1) Proceeds from the August 2008 sale of Canyon Crest Apartments.
Future cash distributions will depend on the levels of cash generated from operations, and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. In light of the significant amounts accrued and payable to affiliates of the General Partner at December 31, 2008, there can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners in 2009 or subsequent periods. See “Item 2. Properties - Capital Improvements” for information relating to anticipated capital expenditures at the properties.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,430.95 Units in the Partnership representing 63.19% of the outstanding Units at December 31, 2008. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.19% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This item should be read in conjunction with the financial statements and other items contained elsewhere in this report.
The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.
Results of Operations
The Partnership’s net loss for the year ended December 31, 2008 was approximately $4,055,000, compared to a net loss of approximately $1,599,000 for the year ended December 31, 2007. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the statement of operations included in “Item 8.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
LIST OF FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheets - December 31, 2008 and 2007
Statements of Operations - Years ended December 31, 2008 and 2007
Statements of Changes in Partners' (Deficiency) Capital - Years ended December 31, 2008 and
Statements of Cash Flows - Years ended December 31, 2008 and 2007
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
The Partners
Consolidated Capital Institutional Properties/2, LP
We have audited the accompanying balance sheets of Consolidated Capital Institutional Properties/2, LP as of December 31, 2008 and 2007, and the related statements of operations, changes in partners' (deficiency) capital, and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Capital Institutional Properties/2, LP at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
March 30,
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
BALANCE SHEETS
(in thousands, except unit data)
See Accompanying Notes to the Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
See Accompanying Notes to the Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(in thousands, except unit data)
Limited
Series A
Series B
Subtotal
Partnership
General
Limited
Unit
Unit
Limited
Units
Partner
Partners
Holders
Holders
Partners
Total
Partners’ (deficiency)
capital at
December 31,
909,053.3
$(404)
$12,268
$ --
$ --
$12,268
$11,864
Abandonment of Units
(Note A)
(23.1)
--
--
--
--
--
--
Net loss for the year
ended December 31,
--
(16)
(1,583)
--
--
(1,583)
(1,599)
Partners’ (deficiency)
capital at
December 31,
909,030.2
(420)
10,685
--
--
10,685
10,265
Net loss for the
period
January 1,
through
April 30,
--
(6)
(628)
--
--
(628)
(634)
Partners’ (deficiency)
capital at
April 30,
909,030.2
(426)
10,057
--
--
10,057
9,631
Allocation of Units
(Note A)
--
--
(10,057)
7,735
2,322
--
--
Distributions to
partners
--
--
--
--
(802)
(802)
(802)
Abandonment of Units
(Note A)
(32)
--
--
--
--
--
--
Net loss for the
period
May 1, 2008 through
December 31,
--
(34)
--
(1,867)
(1,520)
(3,387)
(3,421)
Partners’ (deficiency)
capital at
December 31,
908,998.20
$(460)
$ --
$ 5,868
$ --
$ 5,868
$ 5,408
See Accompanying Notes to the Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
STATEMENTS OF CASH FLOWS
(in thousands)
Included in property improvements and replacements for the year ended December 31, 2007 are approximately $11,000 of improvements which were included in accounts payable at December 31, 2006.
See Accompanying Notes to the Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note A - Organization and Summary of Significant Accounting Policies
Organization: Consolidated Capital Institutional Properties/2, LP (the "Partnership" or "Registrant"), a California Limited Partnership, was formed on April 12, 1983. Upon the Partnership's formation in 1983, Consolidated Capital Equities Corporation, (“CCEC”), a Colorado corporation, was the corporate general partner. In December 1988, CCEC filed for reorganization under Chapter 11. 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 and replaced CCEC as managing general partner in all 16 partnerships. The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2013 unless terminated prior to such date. The Partnership commenced operations on July 22, 1983. The Partnership currently owns and operates three residential investment properties, one each located in Illinois, Texas and Ohio.
On April 25, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Consolidated Capital Institutional Properties/2, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of March 19, 2008, by and between the California partnership and the Delaware partnership.
Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.
The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Consolidated Capital Institutional Properties/2, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.
On April 30, 2008, the General Partner amended the Partnership Agreement to establish, and convert existing limited partnership interests into, different designated series of limited partnership interests that have separate rights with respect to specified partnership property. Effective as of the close of business on April 30, 2008 (the “Establishment Date”), each then outstanding Unit of limited partnership interest in the Partnership was converted into one Series A Unit and one Series B Unit. Except as described below, the Series A Units and Series B Units entitle the holders thereof to the same rights as the holders of Units of limited partnership interests prior to the Establishment Date.
From and after the Establishment Date, the Series A Units will be entitled to all of the Partnership’s interests in any entity in which the Partnership owns an interest, other than the Series B Subsidiary (as defined below), including, but not limited to, all profits, losses and distributions from such entities.
From and after the Establishment Date, the Series B Units will be entitled to all of the Partnership’s membership interest in Canyon Crest, L.L.C., a Delaware limited liability company (the “Series B Subsidiary”), including, but not limited to, all profits, losses and distributions from Canyon Crest Apartments. The Series B Units were dissolved during December 2008, upon the dissolution of the remaining assets and liabilities of Canyon Crest Apartments.
Basis of Presentation: In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets”, the statement of operations for the year ended December 31, 2007 has been restated to reflect the operations of Canyon Crest Apartments as loss from discontinued operations and the assets and liabilities of Canyon Crest Apartments as of December 31, 2007 are reflected as held for sale due to its sale on August 1, 2008 (see Note H).
The following table presents summarized results of operations related to the Partnership’s discontinued operations for the years ended December 31, 2008 and 2007 (in thousands):
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $905,000 and $339,000 at December 31, 2008 and 2007, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.
Restricted Escrows: At December 31, 2008, approximately $26,000 of replacement reserves is on deposit with the mortgage holder of Windemere Apartments and approximately $10,000 of renovation funds is on deposit with the mortgage holder of Glenbridge Manor Apartments. At December 31, 2007, approximately $79,000 of replacement reserves was on deposit with the mortgage holder of Canyon Crest Apartments, which is included in assets held for sale.
Income Taxes: No provision has been made in the financial statements for Federal income taxes because, under current law, no Federal income taxes are paid directly by the Partnership. The Unit holders are responsible for their respective shares of Partnership net income or loss. The Partnership reports certain transactions differently for tax than for financial statement purposes.
Partners' (Deficiency) Capital: The Partnership Agreement provides for net income and net losses for both financial and tax reporting purposes to be allocated 99% to the Limited Partners and 1% to the General Partner. "Distributable Cash from Operations", as defined in the Partnership Agreement, is to be allocated 99% to the Limited Partners and 1% to the General Partner. Distributions of surplus funds are to be allocated 100% to the Limited Partners.
Abandoned Units: During 2008 and 2007, the number of limited partnership units (the “Units”) decreased by 32.0 and 23.1 Units, respectively, due to limited partners abandoning their Units. In abandoning his or her Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of the abandonment.
Net Loss Per Limited Partnership Unit: Net loss per Unit is computed by dividing net loss allocated to the Limited Partners by the number of Units outstanding at the beginning of the fiscal year. Per Unit information has been computed based on 909,030.2 and 909,053.3 units outstanding for 2008 and 2007, respectively.
Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the investment properties and related personal property. For Federal income tax purposes, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27½ years and (2) personal property additions over 5 years.
Investment properties:Investment properties consist of three apartment complexes and are stated at fair market value at the time of the foreclosure. The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress in accordance with SFAS No. 34, “Capitalization of Interest Costs”, and SFAS No. 67, “Accounting for Costs and the Initial Rental Operations of Real Estate Properties”. Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level. During the years ended December 31, 2008 and 2007, the Partnership capitalized approximately $170,000 and $15,000, respectively, of interest, approximately $28,000 and $5,000, respectively, of real estate taxes, and approximately $4,000 and $2,000, respectively, of operating costs. Capitalized costs are depreciated over the useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.
In accordance with SFAS No. 144, the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. As discussed in “Note H - Sale of Investment Property”, the Partnership recorded an impairment loss of approximately $1,215,000 related to its investment in Canyon Crest Apartments during the year ended December 31, 2008. This amount is included in loss from discontinued operations. No adjustments for impairment of value were necessary for the year ended December 31, 2007.
Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.
Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.
Advertising Costs: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $194,000 and $209,000 for the years ended December 31, 2008 and 2007, respectively, were charged to expense as incurred and are included in operating expenses and loss from discontinued operations.
Deferred Costs: Loan costs of approximately $521,000 and $506,000 at December 31, 2008 and 2007, respectively, less accumulated amortization of approximately $177,000 and $121,000, respectively, are included in other assets and assets held for sale. The loan costs are amortized over the terms of the related loan agreements. Amortization expense was approximately$56,000 and $35,000 for the years ended December 31, 2008 and 2007, respectively, and is included in interest expense. Amortization expense is expected to be approximately $56,000 for each of the years 2009 through 2012 and approximately $42,000 for 2013.
Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases. Amortization of these costs is included in operating expenses and loss from discontinued operations.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair value due to the short term maturity of these instruments. The Partnership estimates the fair value of its long-term debt by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term long-term debt. The fair value of the Partnership's long term debt approximates its carrying value.
Segment Reporting: SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment.
Recent Accounting Pronouncements: In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value and does not expand the use of fair value in any new circumstances. SFAS No. 157 establishes a hierarchy that prioritizes the information used in developing fair value estimates. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, such as the reporting entity’s own data. SFAS No. 157 requires fair value measurements to be disclosed by level within the fair value hierarchy. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157”, which deferred the effective date of SFAS No. 157 for all nonrecurring fair value measurements of non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008. The provisions of SFAS No. 157 are applicable to recurring fair value measurements of financial assets and liabilities for fiscal years beginning after November 15, 2007, which for the Partnership is generally limited to annual disclosures required by SFAS No. 107. The Partnership adopted the provisions of SFAS No. 157 effective January 1, 2008, and at that time determined no transition adjustment was required.
Note B - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
On September 28, 2007, the Partnership refinanced the mortgage debt encumbering Highcrest Townhomes. The refinancing replaced the existing mortgage debt, which at the time of refinancing had a principal balance of approximately $5,482,000, with a new mortgage loan in the principal amount of $11,175,000. The new mortgage loan bears interest at 6.17% per annum and requires monthly payments of principal and interest of approximately $68,000 beginning on November 1, 2007 through the October 1, 2017 maturity date, with a balloon payment of approximately $9,414,000 due at maturity. If no event of default exists at maturity, the maturity date will automatically be extended for one additional year, to October 1, 2018. Total capitalized loan costs associated with the new mortgage were approximately $213,000 and are included in other assets. During the year ended December 31, 2007, the Partnership recorded a loss on early extinguishment of debt of approximately $18,000, which is included in interest expense on the accompanying statements of operations, as a result of a prepayment penalty paid, partially offset by the write off of the unamortized mortgage premium. As a condition of the loan, the lender required AIMCO Properties, L.P., an affiliate of the General Partner, to guarantee certain obligations and liabilities of the Partnership with respect to the new mortgage financing.
The mortgage notes payable are fixed rate mortgages that are nonrecourse and are secured by a pledge of the Partnership’s investment properties and by pledge of revenues from the respective investment properties. The mortgage notes impose prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness.
The mortgage premiums of approximately $100,000 and $177,000 at December 31, 2008 and 2007, respectively, are net of accumulated amortization of approximately $262,000 and $265,000, respectively. The mortgage premium is being amortized over the remaining life of the loan. Amortization of the mortgage premium is included in interest expense and loss from discontinued operations in the statements of operations.
Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2008 are as follows (in thousands):
Mortgage
Notes
Premiums
Total
$
$
$
5,083
5,130
--
--
17,314
--
17,314
Thereafter
10,208
--
10,208
$34,946
$
$35,046
Note C - Transactions with Affiliated Parties
The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $427,000 and $445,000, for the years ended December 31, 2008 and 2007, respectively, which are included in operating expenses and loss from discontinued operations.
An affiliate of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $651,000 and $525,000 for the years ended December 31, 2008 and 2007, respectively, which is included in general and administrative expenses, investment properties and loss from sale of discontinued operations. The portion of these reimbursements included in investment properties and loss from sale of discontinued operations for the years ended December 31, 2008 and 2007 are construction management services provided by an affiliate of the General Partner of approximately $138,000 and $75,000, respectively. At December 31, 2008 and 2007, the Partnership owed approximately $823,000 and $410,000, respectively, for accountable administrative expenses, which is included in due to affiliates.
Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the General Partner, advanced the Partnership approximately $5,683,000 and $421,000 during the years ended December 31, 2008 and 2007, respectively, to fund reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments and operations, capital improvements, and real estate taxes at two of the investment properties. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the General Partner review the market rate adjustment quarterly. The interest rates on outstanding advances at December 31, 2008 ranged from 6.00% to 11.56%. Interest expense was approximately $276,000 and $199,000 for the years ended December 31, 2008 and 2007, respectively. During the years ended December 31, 2008 and 2007, the Partnership repaid approximately $102,000 and $4,192,000 of principal and interest from proceeds from the sale of Canyon Crest Apartments and the refinancing of the mortgage encumbering Highcrest Townhomes, respectively. At December 31, 2008, approximately $5,857,000 of advances and accrued interest remain unpaid and are included in due to affiliates. There were no outstanding advances or associated accrued interest at December 31, 2007. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. Subsequent to December 31, 2008, AIMCO Properties, L.P. advanced the Partnership approximately $314,000 to fund reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments.
In connection with the September 2007 refinancing of the mortgage encumbering Highcrest Townhomes, the Partnership paid the General Partner a fee of approximately $112,000 pursuant to the Partnership Agreement. This fee was capitalized, is included in other assets and is being amortized over the life of the loan.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the years ended December 31, 2008 and 2007, the Partnership was charged by AIMCO and its affiliates approximately $181,000 and $225,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,430.95 Units in the Partnership representing 63.19% of the outstanding Units at December 31, 2008. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.19% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.
Note D - Investment Properties and Accumulated Depreciation
Reconciliation of "Investment Properties and Accumulated Depreciation":
The aggregate cost of the investment properties for Federal income tax purposes at December 31, 2008 and 2007 is approximately $59,558,000 and $61,176,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2008 and 2007 is approximately $12,604,000 and $12,005,000, respectively.
Note E - Investment in Affiliated Partnerships
The Partnership has investments in the following affiliated partnerships:
These investments are accounted for using the equity method of accounting. Distributions from the affiliated partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. During the year ended December 31, 2008, the Partnership received approximately $33,000 of distributions from one of its affiliated partnerships, Consolidated Capital Growth Fund, all of which was recognized as income on the accompanying statements of operations. During the year ended December 31, 2007 the Partnership received approximately $106,000 of distributions from refinancing of one of its affiliated partnerships, Consolidated Capital Growth Fund, approximately $98,000 of which was recognized as income on the accompanying statements of operations. During the years ended December 31, 2008 and 2007, the Partnership recognized approximately $61,000 and $5,000, respectively, in equity in loss from investments related to its allocated share of the loss from two of the affiliated partnerships. Subsequent to December 31, 2008, one of its affiliated partnerships, Consolidated Capital Growth Fund, declared a distribution of approximately $8,100,000 from sale proceeds, of which the Partnership’s share is approximately $452,000.
Note F - Income Taxes
The Partnership is classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners.
The following is a reconciliation of reported net loss and Federal taxable loss for the years ended December 31, 2008 and 2007 (in thousands, except per unit data):
Net loss as reported
$(4,055)
$(1,599)
(Deduct) Add:
Depreciation differences
(7)
Change in prepaid rental
Casualty gain
(5)
Other
1,323
Federal taxable loss
$(2,730)
$(1,437)
Federal taxable loss
$ --
Federal taxable loss allocated to
Series A unit holders
(1,512)
Federal taxable loss allocated to
Series B unit holders
(1,218)
$(2,730)
Per limited partnership unit:
Federal taxable loss
$ --
$ (1.56)
Federal taxable loss allocated to
Series A unit holders
(1.65)
--
Federal taxable loss allocated to
Series B unit holders
(1.33)
--
Federal taxable loss
$ (2.98)
$ (1.56)
The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets (in thousands):
Net assets as reported
$ 5,408
$10,265
Building and land
Accumulated depreciation
(301)
(465)
Syndication fees
25,796
25,796
Other
3,541
2,578
Net assets - tax basis
$34,654
$38,187
For 2008, the net assets are allocated to the Series A unit holders, as the Series B units were dissolved during 2008.
Note G - Casualty Events
During 2008, Glenbridge Manor Apartments experienced significant ground movement causing damage to two buildings, water pipes and sewer lines. These two buildings, containing 17 units, the office, clubhouse and fitness center, have been evacuated.
One building containing 12 units has been demolished, and another building was partially demolished. The Partnership plans to rebuild these units. A third building has experienced minor ground movement, which is estimated to require approximately $60,000 to reconstruct. The property is currently undergoing testing to determine whether additional buildings will be affected. The total extent of the damages has not presently been determined; however, the Partnership intends to seek recovery of damages through insurance proceeds and/or recovery from responsible third parties, and at this time does not expect to record a loss from this event. During the year ended December 31, 2008, the Partnership entered into contracts for approximately $3,400,000 to begin reconstruction, of which approximately $2,789,000 has been spent as of December 31, 2008. As a result of this project, construction period interest expense of approximately $158,000, construction period property tax expense of approximately $26,000 and construction period operating costs of approximately $4,000 have been capitalized during the year ended December 31, 2008. In addition, the Partnership received an advance of approximately $3,650,000 from AIMCO Properties, L.P. in order to expedite clean up and reconstruction of the property.
In September 2008, Windemere Apartments sustained damage from Hurricane Ike. The damages are estimated to be approximately $1,292,000, including clean up costs of approximately $634,000. During the year ended December 31, 2008, the Partnership removed approximately $435,000 of undepreciated damaged assets and recorded a corresponding receivable for the estimated insurance proceeds. The Partnership does not expect to recognize a loss as insurance proceeds are anticipated to be sufficient to cover the cost of any damages. For the year ended December 31, 2008, the estimated clean up costs are included in operating expenses. Subsequent to December 31, 2008, the Partnership received insurance proceeds of approximately $772,000 to cover the damages and clean up costs.
In July 2008, Highcrest Townhomes experienced damages of approximately $23,000 from a broken water pipe which are included in operating expenses, causing damage to 3 units. Subsequent to December 31, 2008, the Partnership received insurance proceeds of approximately $13,000 to cover the damages. The Partnership does not expect to recognize a loss from this event.
In February 2007, Glenbridge Manor Apartments experienced damages of approximately $35,000 as a result of frozen pipes. During the year ended December 31, 2007, the Partnership recognized a casualty loss of approximately $3,000, which is included in operating expenses, as a result of the receipt of insurance proceeds of approximately $25,000, net of the write-off of undepreciated damaged assets of approximately $28,000.
In October 2007, Canyon Crest Apartments experienced damages as a result of a kitchen fire. During the year ended December 31, 2007, the Partnership recorded a casualty loss of approximately $2,000 as a result of the expected receipt of insurance proceeds of approximately $21,000, of which approximately $12,000 was received during the year ended December 31, 2007, net of the write-off of undepreciated damaged assets of approximately $23,000. During the year ended December 31, 2008, the Partnership received insurance proceeds related to this casualty of approximately $3,000 and approximately $2,000 to cover lost rents. The Partnership recognized a casualty gain of approximately $6,000 for the year ended December 31, 2008, which is included in loss from discontinued operations, as a result of a change in the previous write-off of undepreciated damaged assets of approximately $12,000, net of the write-off of the remaining receivable of approximately $6,000.
Note H - Sale of Investment Property
On August 1, 2008, the Partnership sold Canyon Crest Apartments to a third party for a gross sale price of approximately $4,100,000. The net proceeds realized by the Partnership were approximately $4,013,000 after payment of closing costs. The Partnership used approximately $2,822,000 of the net proceeds to repay the mortgage encumbering the property. In accordance with the Partnership’s impairment policy and SFAS No. 144, the Partnership recorded an impairment loss of approximately $1,215,000 to write the property value down to the sale price during the year ended December 31, 2008. This amount is included in loss from discontinued operations. As a result of the sale, the Partnership recorded a loss of approximately $69,000, which is included in loss from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $111,000 due to a prepayment penalty of approximately $131,000, partially offset by the write off of the unamortized mortgage premium, which is included in loss from discontinued operations for the year ended December 31, 2008. The results of the property’s operations were losses of approximately $223,000 and $238,000 for the years ended December 31, 2008 and 2007, respectively. Also included in loss from discontinued operations are revenues of approximately $547,000 and $879,000 for the years ended December 31, 2008 and 2007, respectively.
Note I - Contingencies
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the Partnership paid approximately $3,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T). Controls and Procedures
(a) Disclosure Controls and Procedures
The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;
· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and
· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on their assessment, the Partnership’s management concluded that, as of December 31, 2008, the Partnership’s internal control over financial reporting is effective.
This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.
(b) Changes in Internal Control Over Financial Reporting.
There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2008 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The Registrant has no directors or officers. The General Partner is ConCap Equities, Inc. (“CEI”). The names and ages of, as well as the position and offices held by the present directors and officers of the General Partner are set forth below. There are no family relationships between or among any directors or officers.
Name
Age
Position
Steven D. Cordes
Director and Senior Vice President
Harry G. Alcock
Director and Executive Vice President
Timothy J. Beaudin
President and Chief Operating Officer
David R. Robertson
President and Chief Financial Officer
Lisa R. Cohn
Executive Vice President, General Counsel and Secretary
Patti K. Fielding
Executive Vice President - Securities and Debt; Treasurer
Paul Beldin
Senior Vice President and Chief Accounting Officer
Stephen B. Waters
Vice President
Steven D. Cordes was appointed as a Director of the General Partner effective March 2, 2009. Mr. Cordes has been a Senior Vice President of the General Partner and AIMCO since May 2007. Mr. Cordes was appointed Senior Vice President - Structured Equity in May 2007. Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity. Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership.
Harry G. Alcock was appointed as a Director of the General Partner in October 2004 and was appointed Executive Vice President of the General Partner in February 2004 and has been Executive Vice President of AIMCO since October 1999. Mr. Alcock has had responsibility for acquisition and financing activities of AIMCO since July 1994, serving as Vice President from July 1996 to October 1997 and as Senior Vice President from October 1997 to October 1999. Mr. Alcock focuses on transactions related to AIMCO’s portfolio of properties in the western portion of the United States.
Timothy J. Beaudin was appointed Executive Vice President and Chief Development Officer of the General Partner and AIMCO in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer of the General Partner and AIMCO in October 2008. Mr. Beaudin was promoted to President and Chief Operating Officer of AIMCO in February 2009. Mr. Beaudin oversees conventional and affordable property operations and information technology, in addition to redevelopment and construction services. He is also responsible for asset management for conventional properties. Prior to joining AIMCO and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation, a San Francisco, California-based real estate investment trust. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.
Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the General Partner and AIMCO in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO. Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel. Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.
Patti K. Fielding was appointed Executive Vice President - Securities and Debt of the General Partner in February 2004 and of AIMCO in February 2003. Ms. Fielding was appointed Treasurer of AIMCO and the General Partner in January 2005. Ms. Fielding is responsible for debt financing and the treasury department. Ms. Fielding previously served as Senior Vice President - Securities and Debt of AIMCO from January 2000 to February 2003. Ms. Fielding joined AIMCO in February 1997 as a Vice President.
David R. Robertson was appointed President and Chief Investment Officer of AIMCO in February 2009, and on March 1, 2009, he also became Chief Financial Officer of AIMCO and the General Partner. Mr. Robertson joined AIMCO as Executive Vice President in February 2002 and has served as Chief Investment Officer since March 2007. In addition to serving as AIMCO’s chief financial officer, Mr. Robertson is responsible for portfolio strategy, capital allocation, investments, joint ventures, asset management and transaction activities. Since February 1996, Mr. Robertson has served as Chairman of Robeks Corporation, a 150-unit privately held chain of specialty food stores that he founded.
Paul Beldin was appointed Senior Vice President and Chief Accounting Officer of AIMCO and the General Partner in May 2008. Mr. Beldin joined AIMCO in May 2008. Prior to that, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.
Stephen B. Waters was appointed Vice President of the General Partner and AIMCO in April 2004. Mr. Waters previously served as a Director of Real Estate Accounting since joining AIMCO in September 1999. Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the General Partner.
One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.
The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an "audit committee financial expert".
The directors and officers of the General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.
Item 11.
Item 11. Executive Compensation
None of the directors and officers of the General Partner received any remuneration from the Partnership during the year ended December 31, 2008.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as noted below, no person was known by the Partnership to be the beneficial owner of more than 5% of the Limited Partnership Units (the “Units”) of the Partnership as of December 31, 2008:
Entity
Number of Units
Percentage
Reedy River Properties
(an affiliate of AIMCO)
168,736.50
18.56%
AIMCO IPLP, L.P.
(an affiliate of AIMCO)
17,240.60
1.90%
AIMCO Properties, L.P.
(an affiliate of AIMCO)
320,935.15
35.30%
CooperRiverProperties, LLC
(an affiliate of AIMCO)
67,518.70
7.43%
Reedy River Properties, AIMCO IPLP, L.P. and Cooper River Properties, LLC are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29602.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237.
No directors or officers of the General Partner owns any Units of the Partnership of record or beneficially.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $427,000 and $445,000, for the years ended December 31, 2008 and 2007, respectively, which are included in operating expenses and loss from discontinued operations on the statements of operations included in “Item 8. Financial Statements and Supplementary Data”.
An affiliate of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $651,000 and $525,000 for the years ended December 31, 2008 and 2007, respectively, which is included in general and administrative expenses, investment properties and loss from sale of discontinued operations on the financial statements included in “Item 8. Financial Statements and Supplementary Data”. The portion of these reimbursements included in investment properties and loss from sale of discontinued operations for the years ended December 31, 2008 and 2007 are construction management services provided by an affiliate of the General Partner of approximately $138,000 and $75,000, respectively. At December 31, 2008 and 2007, the Partnership owed approximately $823,000 and $410,000, respectively, for accountable administrative expenses, which is included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”.
Pursuant to the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the General Partner, advanced the Partnership approximately $5,683,000 and $421,000 during the years ended December 31, 2008 and 2007, respectively, to fund reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments and operations, capital improvements, and real estate taxes at two of the investment properties. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from the prime rate plus 2% to a variable rate based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the General Partner review the market rate adjustment quarterly. The interest rates on outstanding advances at December 31, 2008 ranged from 6.00% to 11.56%. Interest expense was approximately $276,000 and $199,000 for the years ended December 31, 2008 and 2007, respectively. During the year ended December 31, 2008 and 2007, the Partnership repaid approximately $102,000 and $4,192,000 of principal and interest from proceeds from the sale of Canyon Crest Apartments and the refinancing of the mortgage encumbering Highcrest Townhomes, respectively. At December 31, 2008, approximately $5,857,000 of advances and accrued interest remain unpaid and are included in due to affiliates on the balance sheet included in “Item 8. Financial Statements and Supplementary Data”. There were no outstanding advances or associated accrued interest at December 31, 2007. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. Subsequent to December 31, 2008, AIMCO Properties, L.P. advanced the Partnership approximately $314,000 to fund reconstruction related to the casualties at Windemere Apartments and Glenbridge Manor Apartments.
In connection with the September 2007 refinancing of the mortgage encumbering Highcrest Townhomes, the Partnership paid the General Partner a fee of approximately $112,000 pursuant to the Partnership Agreement. This fee was capitalized, is included in other assets on the balance sheets included in “Item 8. Financial Statements and Supplementary Data” and is being amortized over the life of the loan.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the years ended December 31, 2008 and 2007, the Partnership was charged by AIMCO and its affiliates approximately $181,000 and $225,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 574,430.95 Units in the Partnership representing 63.19% of the outstanding Units at December 31, 2008. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 63.19% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.
Neither of the General Partner's directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the General Partner.
Item 14.
Item 14. Principal Accounting Fees and Services
The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2009. The aggregate fees billed for services rendered by Ernst & Young LLP for 2008 and 2007 are described below.
Audit Fees. Fees for audit services totaled approximately $67,000 and $58,000 for 2008 and 2007, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.
Tax Fees. Fees for tax services totaled approximately $23,000 and $18,000 for 2008 and 2007, respectively.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a) The following financial statements of the Registrant are included in Item 8:
Balance Sheets at December 31, 2008 and 2007.
Statements of Operations for the years ended December 31, 2008 and 2007.
Statements of Changes in Partners' (Deficiency) Capital for the years ended December 31, 2008 and 2007.
Statements of Cash Flows for the years ended December 31, 2008 and 2007.
Notes to Financial Statements.
Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
b) Exhibits:
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
By: ConCap Equities, Inc.
General Partner
By: /s/Steven D. Cordes
Steven D. Cordes
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: March 31,
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and the in the capacities and on the dates indicated.
/s/Harry G. Alcock
Director and Executive
Date: March 31,
Harry G. Alcock
Vice President
/s/Steven D. Cordes
Director and Senior
Date: March 31,
Steven D. Cordes
Vice President
/s/Stephen B. Waters
Vice President
Date: March 31,
Stephen B. Waters
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2, LP
EXHIBIT INDEX
Exhibit Description of Exhibit
3.1 Certificates of Limited Partnership, as amended to date.
3.2 Fourth Amendment to the amended and restated limited partnership agreement of CCIP/2 dated January 8, 2002 (Incorporated by reference to the annual report on Form 10-KSB for the fiscal year ended December 31, 2004).
3.3 Fifth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated March 19, 2008. Incorporated by reference to the Registrant's Current Report on Form 8-K dated April 30, 2008.
3.4 Sixth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated April 30, 2008. Incorporated by reference to the Registrant's Current Report on Form 8-K dated April 30, 2008.
3.5 Eighth Amendment to the amended and restated limited partnership agreement of Consolidated Capital Institutional Properties/2, LP, dated December 30, 2008.
10.30 Multifamily Note dated October 2, 2000 between Consolidated Capital Equity Partners/Two L.P., a California limited partnership, and GMAC Commercial Mortgage Corporation for refinance of Windemere Apartments (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed November 17, 2000).
10.33 Assignment of Partnership Rights and Distributions between Consolidated Capital Equity Partners/Two, L.P., a California limited partnership and Consolidated Capital Institutional Properties/2, a California limited partnership (Incorporated by reference to the Registrant's Current Report on Form 8-K dated August 22, 2002).
10.34 Agreement for Conveyance of Real Property, including exhibits thereto, between Consolidated Capital Equity Partners/Two, L.P., a California limited partnership and Consolidated Capital Institutional Properties/2, a California limited partnership (Incorporated by reference to the Registrant's Current Report on Form 8-K dated August 22, 2002).
10.35 Promissory Note dated December 17, 2003 between CCIP/2 Village Brook, LLC, a Delaware limited partnership, and Northwestern Mutual Life Insurance Company, a Wisconsin corporation (Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 19, 2003).
10.36 Mortgage and Security Agreement dated December 17, 2003 between CCIP/2 Village Brook, LLC, a Delaware limited partnership, and Northwestern Mutual Life Insurance Company, a Wisconsin corporation (Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 19, 2003).
10.37 Multifamily Note, dated September 28, 2007 between CCIP/2 Highcrest L.L.C., a Delaware limited liability company, and Capmark Bank, a Utah industrial bank. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 28, 2007).
10.38 Multifamily Mortgage, Assignment of Rents and Security Agreement, dated September 28, 2007 between CCIP/2 Highcrest, L.L.C., a Delaware limited liability company, and Capmark Bank, a Utah industrial bank. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 28, 2007).
10.39 Purchase and Sale Contract between CCIP/2 Canyon Crest, L.L.C., a Delaware limited liability company, and Bellaire Holdings, LLC, a Colorado limited liability company, and FW Madison Marketing Group LLC, a Colorado limited liability company, dated June 27, 2008 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated June 27, 2008).
10.40 First Amendment to Purchase and Sale Contract between CCIP/2 Canyon Crest, L.L.C., a Delaware limited liability company, and Bellaire Holdings, LLC, a Colorado limited liability company, and FW Madison Marketing Group LLC, a Colorado limited liability company, dated July 21, 2008 (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 21, 2008).
31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.