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 September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-9242
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, PO 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 preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1999
Assets
Cash and cash equivalents $ 740
Receivables and deposits 586
Restricted escrows 261
Other assets 164
Investment properties:
Land $ 2,288
Buildings and related personal property 25,530
27,818
Less accumulated depreciation (15,649) 12,169
$ 13,920
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 36
Tenant security deposit liabilities 159
Accrued property taxes 198
Other liabilities 253
Mortgage notes payable 15,831
Partners' Deficit
General partners $ (51)
Limited partners (64,806 units issued and
outstanding) (2,506) (2,557)
$ 13,920
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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 1,328 $ 1,408 $ 4,103 $ 4,142
Other income 90 84 259 278
Total revenues 1,418 1,492 4,362 4,420
Expenses:
Operating 610 608 1,593 1,772
General and administrative 54 55 177 212
Depreciation 229 227 684 667
Interest 408 410 1,225 1,234
Property taxes 92 75 253 230
Total expenses 1,393 1,375 3,932 4,115
Net income $ 25 $ 117 $ 430 $ 305
Net income allocated
to general partners (2%) $ -- $ 2 $ 9 $ 6
Net income allocated
to limited partners (98%) 25 115 421 299
$ 25 $ 117 $ 430 $ 305
Net income per limited
partnership unit $ 0.39 $ 1.77 $ 6.50 $ 4.61
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 nine months
ended September 30, 1999 -- 9 421 430
Partners' deficit
at September 30, 1999 64,806 $ (51) $(2,506) $(2,557)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income $ 430 $ 305
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 684 667
Amortization of loan costs 47 47
Change in accounts:
Receivables and deposits (88) (82)
Other assets (25) 22
Accounts payable (145) (76)
Tenant security deposit liabilities 11 10
Accrued property taxes 107 28
Other liabilities (36) (11)
Net cash provided by operating activities 985 910
Cash flows from investing activities:
Property improvements and replacements (738) (360)
Net (deposits to) withdrawals from restricted escrows (117) 127
Net cash used in investing activities (855) (233)
Cash flows from financing activities:
Payments on mortgage notes payable (106) (96)
Distributions to partners -- (1,738)
Net cash used in financing activities (106) (1,834)
Net increase (decrease) in cash and cash equivalents 24 (1,157)
Cash and cash equivalents at beginning of period 716 3,524
Cash and cash equivalents at end of period $ 740 $ 2,367
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,178 $ 1,848
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 the Century
Properties Fund XIV (the "Partnership" or the "Registrant") 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 nine
month periods ended September 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 fiscal 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 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 nine months ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $223 $221
Reimbursement for services of affiliates (included in
operating and general and administrative expenses
and investment properties) 101 102
Partnership management fee (included in general and
administrative and expenses) -- 26
During the nine months ended September 30, 1999 and 1998, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
the Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $223,000 and
$221,000 for the nine months ended September 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $101,000 and
$102,000 for the nine months ended September 30, 1999 and 1998, respectively.
Included in this amount is approximately $8,000 of construction oversight costs
for the nine months ended September 30, 1999. No such amounts were incurred for
the nine months ended September 30, 1998.
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 nine months ended
September 30, 1998. No such fees were paid during the nine months ended
September 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 30,588.13 units of limited
partnership interest in the Partnership representing 47.20% of the total
outstanding units. It is possible that AIMCO or its affiliates 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 (see "Note F - Legal Proceedings").
NOTE D - DISTRIBUTIONS
No distributions were paid or declared during the nine months ended September
30, 1999. During the nine months ended September 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 Waverly Apartments note and from operations.
When the Partnership sold the Waverly 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, two of which are located in Nevada and the other located in 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 enterprise'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 nine months ended September 30, 1999 and 1998, is
shown in the tables below. The "Other" column represents partnership
administration related items and income and expense not allocated to the
reportable segments.
1999 Residential Other Totals
(in thousands)
Rental income $ 4,103 $ -- $ 4,103
Other income 258 1 259
Interest expense 1,225 -- 1,225
Depreciation 684 -- 684
General and administrative expense -- 177 177
Segment profit (loss) 606 (176) 430
Total assets 13,820 100 13,920
Capital expenditures for
investment properties 738 -- 738
1998 Residential Other Totals
(in thousands)
Rental income $ 4,142 $ -- $ 4,142
Other income 235 43 278
Interest expense 1,234 -- 1,234
Depreciation 667 -- 667
General and administrative expense -- 212 212
Segment profit (loss) 474 (169) 305
Total assets 14,472 946 15,418
Capital expenditures for
investment properties 360 -- 360
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 Financial Group, Inc.
("Insignia") and entities which were, at one 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 and the Insignia Merger (see
"Note B - Transfer of Control"). 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 have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed
and filed a Stipulation of Settlement ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing General Partner does not anticipate that
costs associated with this case 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 operations. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment properties consist of three residential apartment
complexes. The following table sets forth the average occupancy of the
properties for the nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
St. Charleston Village Apartments 94% 93%
Las Vegas, Nevada
Sun River Apartments 90% 96%
Tempe, Arizona
Torrey Pines Village Apartments 94% 93%
Las Vegas, Nevada
The Managing General Partner attributes the decrease in occupancy at Sun River
Apartments to a change in demographics in the area. The Managing General
Partner has increased its marketing efforts and has increased concessions to
tenants in an attempt to increase occupancy.
Results of Operations
Net income of approximately $25,000 and $117,000 was realized by the Partnership
for the three months ended September 30, 1999 and 1998, respectively. The
Partnership realized net income of approximately $430,000 and $305,000 for the
nine months ended September 30, 1999 and 1998, respectively. The increase in
net income for the comparable nine month period is due to a decrease in total
expenses which more than partially offset a decrease in total revenues. The
decrease in total expenses is primarily due to decreases in operating and
general and administrative expenses which were partially offset by an increase
in property tax expense. The decrease in operating expense is due to a decrease
in property, insurance, and maintenance expenses. The decrease in property
expenses is due to declines in insurance premiums, payroll and related expenses.
The decrease in insurance premiums is due to a change in the insurance carrier
late in 1998 for all of the investment properties. The decrease in maintenance
expense is primarily due to a decrease in contract yards and grounds work at St.
Charleston Apartments and decreases in interior building improvements, pool
repairs, and contract air conditioning work at all of the Partnership's
investment properties. The decrease in general and administrative expense is
primarily due to the payment of the Partnership management fee associated with a
distribution from operations during the nine months ended September 30, 1998.
The increase in property tax expense is due to the timing of the receipt of the
property tax bills for 1999 and 1998 which affected the accruals as of September
30, 1999 and 1998. The decrease in total revenue is primarily due to a decrease
in rental income. The decrease in rental income is due to the decline in
occupancy at Sun River discussed above.
The decrease in net income for the three month period ended September 30, 1999,
is attributable to the increase in property tax expense mentioned above and the
decline in occupancy at Sun River.
Included in general and administrative expenses at both September 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 September 30, 1999, the Partnership had cash and cash equivalents of
approximately $740,000 as compared to approximately $2,367,000 at September 30,
1998. For the nine months ended September 30, 1999, cash and cash equivalents
increased by approximately $24,000 from the Partnership's year ended December
31, 1998. The increase in cash and cash equivalents is due to
approximately $985,000 of cash provided by operating activities which was
largely offset by approximately $855,000 of cash used in investing activities
and approximately $106,000 of cash used in financing activities. Cash used in
investing activities consisted of property improvements and replacements and net
deposits to restricted escrows held by the mortgage lender. 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 the Partnership's properties are detailed below.
Sun River
During the nine month period ended September 30, 1999, the Partnership completed
approximately $344,000 of capital improvements at Sun River, consisting
primarily of roof replacements, floor covering replacements, and parking lot
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 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 this property which include certain of the required improvements and
consist of, roof replacement, upgrades to the parking lot, air conditioning
system, structural improvements, carpet replacement and water heater
replacement.
Torrey Pines
During the nine month period ended September 30, 1999, the Partnership completed
approximately $139,000 of capital improvements at Torrey Pines, consisting
primarily of roof replacements, structural upgrades, and floor covering
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 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 this property which include certain of the required improvements and
consists of carpet replacement, roof replacement and structural improvements.
St. Charleston
During the nine month period ended September 30, 1999, the Partnership completed
approximately $255,000 of capital improvements at St. Charleston, consisting
primarily of roof replacements, structural upgrades, and floor covering
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 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 1999 of approximately
$341,000 at this 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 $15,831,000, which bears
interest at 9.88% per annum, matures in July 2001, with balloon payments
totaling approximately $15,551,000 due at maturity. The Managing General
Partner is currently attempting to refinance the indebtedness on more
favorable terms than the existing loan terms. If the properties cannot be
refinanced or sold for a sufficient amount prior to maturity, the Partnership
will risk losing such properties through foreclosure.
No distributions were paid or declared during the nine months ended September
30, 1999. During the nine months ended September 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 Waverly Apartments note and from operations. When the Partnership sold
the Waverly 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 distributions to its partners during the
remainder of 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 30,588.13 units of limited
partnership interest in the Partnership representing 47.20% of the total
outstanding units. It is possible that AIMCO or its affiliates 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 (see "Item 1. Financial Statements, Note F - Legal Proceedings").
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 Managing 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 September 30, 1999, had virtually completed 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.
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 virtually all of the server operating systems.
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 virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 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
September 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 has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
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 expenses
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 Financial Group, Inc.
("Insignia") and entities which were, at one 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 and the Insignia Merger (see
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). 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 have filed an amended
complaint. The Managing General Partner filed demurrers to the amended complaint
which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed
and filed a Stipulation of Settlement ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing General Partner does not anticipate that
costs associated with this case 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 September 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/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XIV 1999 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 740
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 27,818
<DEPRECIATION> (15,649)
<TOTAL-ASSETS> 13,920
<CURRENT-LIABILITIES> 0
<BONDS> 15,831
0
0
<COMMON> 0
<OTHER-SE> (2,557)
<TOTAL-LIABILITY-AND-EQUITY> 13,920
<SALES> 0
<TOTAL-REVENUES> 4,362
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,225
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 430
<EPS-BASIC> 6.50<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
