FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from_________to_________
Commission file number 0-9242
CENTURY PROPERTIES FUND XIV
(Exact name of small business issuer as specified in its charter)
California 94-2535195
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P. O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1999
Assets
Cash and cash equivalents $ 937
Receivables and deposits 522
Restricted escrows 223
Other assets 174
Investment properties:
Land $ 2,288
Buildings and related personal property 25,131
27,419
Less accumulated depreciation (15,420) 11,999
$13,855
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 43
Tenant security deposit liabilities 153
Accrued property taxes 132
Other liabilities 241
Mortgage notes payable 15,868
Partners' Deficit
General partners' $ (52)
Limited partners' (64,806 units issued and
outstanding) (2,530) (2,582)
$13,855
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Rental income $1,380 $1,379 $2,775 $2,734
Other income 95 92 169 194
Total revenues 1,475 1,471 2,944 2,928
Expenses:
Operating 481 591 983 1,164
General and administrative 60 63 123 157
Depreciation 236 222 455 440
Interest 408 412 817 824
Property taxes 78 76 161 155
Total expenses 1,263 1,364 2,539 2,740
Net income $ 212 $ 107 $ 405 $ 188
Net income allocated
to general partners (2%) $ 4 $ 2 $ 8 $ 4
Net income allocated
to limited partners (98%) 208 105 397 184
$ 212 $ 107 $ 405 $ 188
Net income per limited
partnership unit $ 3.21 $ 1.62 $ 6.13 $ 2.84
Distributions per limited
partnership unit $ -- $ -- $ -- $26.28
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners' Partners' Total
Original capital contributions 64,806 $ -- $64,806 $64,806
Partners' deficit at
December 31, 1998 64,806 $ (60) $(2,927) $(2,987)
Net income for the six months
ended June 30, 1999 -- 8 397 405
Partners' deficit at
June 30, 1999 64,806 $ (52) $(2,530) $(2,582)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net income $ 405 $ 188
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 455 440
Amortization of loan costs 31 31
Change in accounts:
Receivables and deposits (24) (102)
Other assets (19) 85
Accounts payable (138) (70)
Tenant security deposit liabilities 5 7
Accrued property taxes 41 2
Other liabilities (48) 4
Net cash provided by operating activities 708 585
Cash flows from investing activities:
Property improvements and replacements (339) (285)
Net (deposits to) receipts from restricted escrows (79) 115
Net cash used in investing activities (418) (170)
Cash flows from financing activities:
Payments on mortgage notes payable (69) (63)
Distributions to partners -- (1,738)
Net cash used in financing activities (69) (1,801)
Net increase (decrease) in cash and cash equivalents 221 (1,386)
Cash and cash equivalents at beginning of period 716 3,524
Cash and cash equivalents at end of period $ 937 $ 2,138
Supplemental disclosure of cash flow information:
Cash paid for interest $ 786 $ 792
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XIV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XIV (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Fox Capital Management Corporation ("FCMC" or the "Managing
General Partner"), a California corporation, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1999, are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1998.
Principles of Consolidation:
The Partnership's financial statements include the accounts of Century St.
Charleston, LP, Century Sun River LP, and Century Torrey Pines, LP. The
Partnership owns a 99% interest in each of the partnerships and has the ability
to control the major operating and financial policies of these partnerships.
All interpartnership transactions have been eliminated.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe
that this transaction will have a material effect on the affairs and operations
of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The general partners of the Partnership are FCMC, a California corporation, and
Fox Realty Investors ("FRI"), a California general partnership. NPI Equity
Investments II, Inc., a Florida corporation and a wholly owned subsidiary of
AIMCO, is the general partner of FRI.
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following transactions with affiliates of the Managing General Partner were
incurred during the six months ended June 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $150 $146
Reimbursement for services of affiliates,
(included in general and administrative expenses) 59 69
Partnership management fee (included in general
and administrative expenses) -- 26
During the six months ended June 30, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $150,000 and
$146,000 for the six months ended June 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $59,000 and
$69,000 for the six months ended June 30, 1999 and 1998, respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the
Partnership, the general partners are entitled to receive a Partnership
management fee equal to 10% of the Partnership's adjusted cash from operations
as distributed. Approximately $26,000 in Partnership management fees are
included in general and administrative expenses for the six months ended June
30, 1998. No such fees were paid during the six months ended June 30, 1999.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit.
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 16,124.06 (24.88% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $150.00 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 824.50 units.
As a result, AIMCO and its affiliates currently own 30,391.13 units of limited
partnership interest in the Partnership representing 46.90% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO.
NOTE D - DISTRIBUTIONS
No distributions were paid or declared during the six months ended June 30,
1999. During the six months ended June 30, 1998, the Partnership distributed
approximately $1,738,000 (approximately $1,703,000 to the limited partners,
$26.28 per limited partnership unit) to the partners from proceeds collected
from the payoff of the Waverley Apartments note and from operations. When the
Partnership sold the Waverley Apartments in 1987 it received a note for
$1,500,000 with a July 1997 maturity date. The note was collected in September
1997 and the total proceeds were subsequently distributed to the partners in
1998.
NOTE E - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of three apartment complexes
in Nevada and Arizona. The Partnership rents apartment units to tenants for
terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those of the Partnership as
described in the Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
Factors management used to identify the Partnership's reportable segments:
The Partnership's reportable segment consist of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the six months ended June 30, 1999 and 1998, is shown in
the tables below (in thousands). The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999
Residential Other Totals
Rental income $ 2,775 $ -- $ 2,775
Other income 168 1 169
Interest expense 817 -- 817
Depreciation 455 -- 455
General and administrative expense -- 123 123
Segment profit (loss) 527 (122) 405
Total assets 13,710 145 13,855
Capital expenditures for investment
properties 339 -- 339
1998
Residential Other Totals
Rental income $ 2,734 $ -- $ 2,734
Other income 161 33 194
Interest expense 824 -- 824
Depreciation 440 -- 440
General and administrative expense -- 157 157
Segment profit (loss) 312 (124) 188
Total assets 14,344 982 15,326
Capital expenditures for investment
properties 285 -- 285
NOTE F - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates to acquire
limited partnership units, the management of partnerships by Insignia
Affiliates, as well as a recently announced agreement between Insignia and
AIMCO. The complaint seeks monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the Managing General
Partner filed a motion seeking dismissal of the action. In lieu of responding
to the motion, the plaintiffs filed an amended complaint. The Managing General
Partner filed demurrers to the amended complaint which were heard during
February 1999. No ruling on such demurrers has been received. The Managing
General Partner does not anticipate that costs associated with this case, if
any, will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment properties consist of three residential apartment
complexes. The following table sets forth the average occupancy of the
properties for the six months ended June 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
St. Charleston Village Apartments 94% 93%
Las Vegas, Nevada
Sun River Apartments 92% 96%
Tempe, Arizona
Torrey Pines Village Apartments 95% 91%
Las Vegas, Nevada
The Managing General Partner attributes the increase in occupancy at Torrey
Pines to an aggressive marketing campaign during the six months ended June 30,
1999. The Managing General Partner attributes the decrease in occupancy at Sun
River Apartments to increased move-outs over the last six months. The
Partnership has implemented a more aggressive marketing campaign, as well as
focusing on lease renewals, in an attempt to increase occupancy.
Results of Operations
The Partnership's net income was approximately $212,000 and $107,000 for the
three months ended June 30, 1999 and 1998, respectively, and approximately
$405,000 and $188,000 for the six months ended June 30, 1999 and 1998,
respectively. This increase in net income is due to an increase in total
revenues as well as a decrease in total expenses. The increase in total
revenues is due to an increase in rental income primarily attributable to
increased average rental rates at each of the Partnership's investment
properties combined with improved average occupancy rates at St. Charleston
Village and Torrey Pines Village. Partially offsetting the increase in rental
income for the six months ended June 30, 1999, is a decrease in other income due
to lower cash balances maintained in interest-bearing accounts over the last
twelve months.
Total expenses decreased for the comparable periods primarily as a result of
decreases in both operating and general and administrative expenses. The
decrease in operating expense is primarily attributable to a decrease in
property, insurance, and maintenance expenses. The decrease in property expense
is primarily due to the timing of sewer invoices at St. Charleston Village. The
decrease in maintenance expense is primarily due to a decrease in contract yards
and grounds work and exterior building improvements at Sun River, a decrease in
roof repairs at St. Charleston Village and Torrey Pines Village and a decrease
in landscaping costs at all of the investment properties. The decrease in
insurance expense is due to a change in insurance carrier for all of the
investment properties. The decrease in general and administrative expense is
primarily due to the payment of a Partnership management fee associated with a
distribution from operations during the six months ended June 30, 1998. Included
in general and administrative expenses at both June 30, 1999 and 1998 are
reimbursements to the Managing General Partner allowed under the Partnership
Agreement. In addition, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 1999, the Partnership had cash and cash equivalents of approximately
$937,000 as compared to approximately $2,138,000 at June 30, 1998. For the six
months ended June 30, 1999, cash and cash equivalents increased by approximately
$221,000 from the Partnership's year ended December 31, 1998. The increase in
cash and cash equivalents is due to approximately $708,000 of cash provided by
operating activities which was partially offset by approximately $418,000 of
cash used in investing activities and approximately $69,000 of cash used in
financing activities. Cash used in investing activities consisted of net
deposits to restricted escrows held by the mortgage lender and property
improvements and replacements. Cash used in financing activities consisted of
payments made on the mortgages encumbering the Partnership's investment
properties. The Partnership invests its working capital reserves in money
market accounts.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit. Based on present plans, the Managing General Partner does not
anticipate the need to borrow in the near future. Other than cash and cash
equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
Sun River
During the six months ended June 30, 1999, the Partnership completed
approximately $160,000 of capital improvements at Sun River, consisting
primarily of parking lot improvements, floor covering replacements, and
landscaping improvements. These improvements were funded from operating cash
flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the Managing
General Partner on interior improvements, it is estimated that the property
requires approximately $343,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to, capital improvements for
1999 of approximately $419,000 at its property which include certain of the
required improvements and consists of, roof replacement, repairs to the air
conditioning system, structural improvements, carpet replacement and water
heater replacement.
Torrey Pines
During the six months ended June 30, 1999, the Partnership completed
approximately $65,000 of capital improvements at Torrey Pines, consisting
primarily of floor covering replacements, structural upgrades, and roof
replacements. These improvements were funded from operating cash flow. Based
on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $196,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements for 1999
of approximately $211,000 at its property which include certain of the required
improvements and consists of carpet replacement, roof replacement and structural
improvements.
St. Charleston
During the six months ended June 30, 1999, the Partnership completed
approximately $114,000 of capital improvements at St. Charleston, consisting
primarily of floor covering replacements, structural upgrades, and roof
replacements. These improvements were funded from operating cash flow. Based
on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $282,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements for 1999of
approximately $341,000 at its property which include certain of the required
improvements and consist of interior and exterior building improvements.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any near-
term needs (exclusive of capital improvements) of the Partnership. The
remaining mortgage indebtedness of approximately $15,868,000 matures in July
2001, with balloon payments totaling approximately $15,551,000 due at maturity.
The Managing General Partner will attempt to refinance such indebtedness and/or
sell the properties prior to such maturity date. If the properties cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure.
No distributions were paid or declared during the six months ended June 30,
1999. During the six months ended June 30, 1998, the Partnership distributed
approximately $1,738,000 (approximately $1,703,000 to the limited partners,
$26.28 per limited partnership unit) to the partners from proceeds from the
Waverley Apartments note and from operations. When the Partnership sold the
Waverley Apartments in 1987, it received a note for $1,500,000 with a July 1997
maturity date. The note was collected in September 1997, and the total proceeds
were subsequently distributed to the partners in 1998. The Partnership's
distribution policy is reviewed on a semi-annual basis. Future cash
distributions will depend on the levels of net cash generated from operations,
the availability of cash reserves and the timing of debt maturities,
refinancings and/or property sales. There can be no assurance, however, that
the Partnership will generate sufficient funds from operations, after required
capital expenditures, to permit further distributions to its partners in 1999 or
subsequent periods.
Tender Offer
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 16,124.06 (24.88% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $150.00 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 824.50 units.
As a result, AIMCO and its affiliates currently own 30,391.13 units of limited
partnership interest in the Partnership representing 46.90% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Corporate General Partner and its affiliates for
management and administrative services ("Managing Agent"). Any of the computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of June 30, 1999, had completed approximately 90% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system. The estimated completion date for this project is October, 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 1999. Any
operating equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
June 30, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999. The Managing Agent has updated data transmission standards with all of the
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by September 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates to acquire
limited partnership units, the management of partnerships by Insignia
Affiliates, as well as a recently announced agreement between Insignia and
AIMCO. The complaint seeks monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the Managing General
Partner filed a motion seeking dismissal of the action. In lieu of responding
to the motion, the plaintiffs filed an amended complaint. The Managing General
Partner filed demurrers to the amended complaint which were heard during
February 1999. No ruling on such demurrers has been received. The Managing
General Partner does not anticipate that costs associated with this case, if
any, will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XIV
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XIV 1999 Second Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000278128
<NAME> CENTURY PROPERTIES FUND XIV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 937
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,419
<DEPRECIATION> (15,420)
<TOTAL-ASSETS> 13,855
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 15,868
0
0
<COMMON> 0
<OTHER-SE> 2,582
<TOTAL-LIABILITY-AND-EQUITY> 13,855
<SALES> 0
<TOTAL-REVENUES> 2,944
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 817
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405
<EPS-BASIC> 6.13<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
