FORM 10-KSB - ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-9680
CENTURY PROPERTIES FUND XV
(Name of small business issuer in its charter)
California 94-2625577
(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) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year. $7,934,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market exists for the limited
partnership interests of the Registrant, and therefore, no aggregate market
value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Century Properties Fund XV (the "Partnership" or the "Registrant") was organized
in May 1980 as a California limited partnership under the Uniform Limited
Partnership Act of the California Corporations Code. The general partners are
Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a
California corporation, and Fox Realty Investors ("FRI"), a California general
partnership. The partnership agreement provides that the Partnership is to
terminate on December 31, 2020, unless terminated prior to such date.
The Partnership's Registration Statement, filed pursuant to the Securities Act
of 1933 (No. 2-66459), was declared effective by the Securities and Exchange
Commission on May 1, 1980. The Partnership marketed its securities pursuant to
its Prospectus dated May 1, 1980, as revised on May 29, 1980, and thereafter
supplemented (hereinafter the "Prospectus"). This Prospectus was filed with the
Securities and Exchange Commission pursuant to Rule 424 (b) of the Securities
Act of 1933. Beginning in July 1980 through April 1981, the Partnership offered
$90,000,000 in Limited Partnership units and sold units having an initial cost
of $89,980,000. The General Partner purchased 100 limited partnership units for
a 4% interest in the Partnership. Since its initial offering, the Partnership
has not received, nor are limited partners required to make, additional capital
contributions.
The net proceeds of this offering were used to acquire seventeen income-
producing real properties. The Partnership's original property portfolio was
geographically diversified with properties acquired in eight states. The
Partnership's acquisition activities were completed in June 1982, and since then
the principal activity of the Partnership has been holding for investment and
ultimately selling its income-producing real property. In the period from 1986
through January 1992, six office buildings, three apartment buildings, and one
shopping center were sold or otherwise disposed. The Partnership sold two of
its properties in 1995 and an office building in the first quarter of 1996. The
remaining commercial property was sold in January 1997 and an apartment building
was sold in the third quarter of 1997. As a result of these sales, the
Partnership currently retains an ownership in two properties. See "Item 2.
Description of Properties" for a description of the Partnership's remaining
properties.
The Managing General Partner of the Partnership intends to maximize the
operating results and, ultimately, the net realizable value of each of the
Partnership's properties in order to achieve the best possible return for the
investors. Such results may best be achieved through property sales,
refinancing, debt restructuring or relinquishment of the assets. The
Partnership intends to evaluate each of its holdings periodically to determine
the most appropriate strategy for each of the assets.
The Partnership has no full time employees. The Managing General Partner is
vested with full authority as to the general management and supervision of the
business and affairs of the Partnership. The limited partners have no right to
participate in the management or conduct of such business and affairs. An
affiliate of the Managing General Partner, provided day-to-day management
services to the Partnership's investment properties for the years ended December
31, 1998 and 1997.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Partnership's properties and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates are a significant factor in the United States in the apartment
industry, competition for apartments is local. In addition, various limited
partnerships have been formed by the Managing General Partner and/or affiliates
to engage in business which may be competitive with the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside of the control of the Partnership.
Transfer of Control
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of FCMC and NPI Equity Investment II, Inc. ("NPI
Equity"), the managing general partner of FRI. On December 31, 1996, the stock
of NPI Equity was acquired by Insignia Properties Trust ("IPT"), an affiliate of
the Managing General Partner.
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia and IPT 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 ultimately acquired a 100% ownership interest in IPT, the entity
which controls 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.
Tender Offers
On January 19, 1996, DeForest Ventures I L.P., the entity which tendered for
units of the Partnership in 1994 and 1995, and certain of its affiliates sold
the units then held by them (35,473.17 units representing approximately 39% of
the total outstanding units at such time) to Riverside Drive L.L.C.
("Riverside"), an affiliate of the Managing General Partner. As a result,
Riverside could be in a position to significantly influence all voting decisions
with respect to the Partnership. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, Riverside would in all likelihood
votes the Units it acquired in a manner favorable to the interest of the
Managing General Partner because of its affiliation with the Managing General
Partner. However, Riverside has agreed for the benefit of non-tendering
unitholders, that it will vote its Units: (i) against any proposal to increase
the fees and other compensation payable by the Partnership to the Managing
General Partner and any of its affiliates; and (ii) with respect to any proposal
made by the Managing General Partner or any of its affiliates, in proportion to
votes cast by other unitholders. Except for the foregoing, no other limitations
are imposed on Riverside's right to vote each Unit acquired. In addition to the
foregoing units, an affiliate of Insignia Properties L.P. ("IPLP"), acquired
4,222 units pursuant to its December 17, 1997, tender offer. See "Item 11.
Security Ownership of Certain Beneficial Owners and Management" for additional
information with respect to this tender offer.
ITEM 2. DESCRIPTION OF PROPERTIES:
The following table sets forth the Partnership's investments in properties:
Date of
Property Purchase Type of Ownership Use
Lakeside Place Apartments 12/80 Fee ownership subject to Apartment-
Houston, Texas first mortgage (1) 734 units
Preston Creek Apartments 08/81 Fee ownership subject to Apartment-
Dallas, Texas first mortgage 228 units
(1) Property is held by a Limited Partnership in which the Partnership owns a
99% interest.
SCHEDULE OF PROPERTIES:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
Lakeside Place
Apartments $31,080 $15,851 5-30 yrs. SL $16,099
Preston Creek
Apartments 9,386 4,007 5-30 yrs. SL 2,700
$40,466 $19,858 $18,799
See "Note A" of the consolidated financial statements included in "Item 7.
Financial Statements" for a description of the Partnership's depreciation
policy.
SCHEDULE OF PROPERTY INDEBTEDNESS:
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1998 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)
Lakeside Place
Apartments $14,398 9.60% 30 yrs. 07/01/01 $14,029
Preston Creek
Apartments 4,500 7.33% (1) 11/01/03 4,500
$18,898 $18,529
(1) Monthly payments are interest only.
(2) See "Item 7. Financial Statements _ Note C" for information with respect to
the Partnership's ability to prepay these loans and other specific details
about these loans.
RENTAL RATES AND OCCUPANCY:
Average annual rental rate and occupancy for 1998 and 1997 for each property:
Average Annual Average
Rental Rates Occupancy
Property 1998 1997 1998 1997
Lakeside Place $8,248/unit $7,909/unit 98% 95%
Preston Creek 8,153/unit 7,865/unit 92% 93%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other apartment complexes in the area. The Managing 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. All of the properties 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 1998 for each property were:
1998 1998
Billing Rate
(in thousands)
Lakeside Place Apartments $544 2.84%
Preston Creek Apartments 212 2.54%
CAPITAL IMPROVEMENTS:
Lakeside Place Apartments
During the year ended December 31, 1998, the Partnership completed approximately
$541,000 of capital improvement projects at Lakeside Place Apartments consisting
primarily of roof repairs, carpet replacement, air conditioning units, signage,
appliances and floor coverings. These improvements were funded from replacement
reserves and 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 $335,000 of capital
improvements over the near-term. Capital improvement projects planned for 1999
consist of, but are not limited to, roof repairs, carpet and vinyl replacement,
landscaping, electrical upgrades, parking lot repairs, air conditioning, and
appliances. These improvements are budgeted for approximately $677,000.
Preston Creek Apartments
During the year ended December 31, 1998 the Partnership completed approximately
$104,000 of capital improvement projects at Preston Creek Apartments consisting
of carpet replacement and air conditioning units. These improvements were funded
from replacement reserves and 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 $229,000
of capital improvements over the near-term. Capital improvement projects
planned for 1999 consist of, but are not limited to, structural upgrades,
landscaping and carpet and vinyl replacements. These improvements are budgeted
for approximately $218,000.
The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.
ITEM 3. 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 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 have filed an amended complaint. The Managing General Partner has
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrer has been received. The Managing General Partner does
not anticipate that costs associated with this case, if any, to be material to
the Partnership's overall operations.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties, LLC, et.
al. v. Insignia Financial Group, Inc., et. al. in the Superior Court of the
State of California, County of Los Angeles. The action involves 44 real estate
limited partnerships (including the Partnership) in which the plaintiff's
allegedly own interests and which Insignia affiliates allegedly manage or
controls (the "Subject Partnerships"). This case was settled on March 3, 1999.
The Partnership is responsible for a portion of the settlement costs. The
expense will not have a material effect on 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The unit holders of the Partnership did not vote on any matter during the fiscal
quarter ended December 31, 1998.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
The Partnership, a publicly-held limited partnership, originally sold 89,980
Limited Partnership Units aggregating $89,980,000. As of December 31, 1998, the
Partnership had 89,980 units outstanding held by 4,962 limited partners of
record. Affiliates of the Managing General Partner owned 39,787.17 units or
44.217% at December 31, 1998. No public trading market has developed for the
Units, and it is not anticipated that such a market will develop in the future.
During the years ended December 31, 1998 and 1997, distributions of $1,890,000
($20.58 per limited partnership unit) and $26,000 ($0.28 per limited partnership
unit) were paid from operations, respectively. Distributions from property
sales were $2,996,000 ($32.63 per limited partnership unit) and $2,877,000
($31.34 per limited partnership unit) for 1998 and 1997, respectively. Pursuant
to the Partnership Agreement, for managing the affairs of the Partnership, the
Managing General Partner is entitled to receive a Partnership Management fee
equal to 10% of the Partnership's adjusted cash from operations as distributed.
Approximately $210,000 and $3,000 in Partnership Management fees were paid
during the years ended December 31, 1998 and 1997, respectively. Future cash
distributions will depend on the levels of net cash generated from operations,
refinancing, property sales and the availability of cash reserves. The
Partnership's distribution policy will be reviewed on a quarterly basis.
Subsequent to the Partnership's year-end, a distribution from operations of
$450,000 ($4.90 per limited partnership unit) was paid during January 1999.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations after required capital expenditures to permit
further additional distributions to its partners in 1999 or subsequent periods.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant'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 Registrant'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.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Registrant's net income for the year ended December 31, 1998, was
approximately $905,000, versus a net income of approximately $1,551,000 for the
year ended December 31, 1997. Included in net income for the year ended
December 31, 1997, is approximately $1,844,000 in gains from the sale of the
Registrant's Phoenix Business Park and Summerhill Apartments in 1997. Also
included in the consolidated statement of operations for 1997 was an
extraordinary loss on early extinguishment of debt in connection with the payoff
of the mortgages encumbering Phoenix Business Park and Summerhill Apartments in
1997, of approximately $493,000. Overall, the decrease in rental income and
total expenses is directly attributable to the sale of Phoenix Business Park in
January 1997 and Summerhill Apartments in September 1997.
At the Registrant's two remaining properties, rental revenue increased by
approximately $450,000 and operating expenses decreased by approximately
$340,000, primarily at Lakeside Place Apartments. Rental income at Lakeside
Place Apartments increased by approximately $418,000 due to increases in rental
rates and occupancy at the property. The decrease in operating expenses is
primarily due to a decrease at Lakeside Place Apartments as the result of
maintenance projects completed in 1997 to enhance the curbside appeal.
Depreciation expense and interest expense decreased as a result of the sale of
Summerhill Apartments and Phoenix Business Park in 1997.
General and administrative expenses increased for the period ended December 31,
1998, compared to the same period in 1997, as a result of an increase in
Partnership management fees collected on the distribution of cash flows from
operations during 1998 as compared to 1997. Included in general and
administrative expenses at both December 31, 1998 and 1997 are reimbursements to
the Managing General Partner allowed under the Partnership Agreement associated
with its management of the Partnership. 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.
On September 24, 1997, the Partnership sold Summerhill Apartments, located in
Dallas, Texas, to an unrelated third party for a contract price of $6,150,000.
After payment of the mortgage note payable, closing costs and related expenses,
the Partnership received proceeds of approximately $2,996,000. The carrying
value of the investment property at the time of the sale was approximately
$4,148,000. For financial statement purposes, the sale resulted in a gain of
approximately $1,843,000, and the payment of the mortgage note payable resulted
in an extraordinary loss on early extinguishment of debt of approximately
$260,000.
On January 15, 1997, the Partnership sold Phoenix Business Park, located in
Atlanta, Georgia, to an unrelated third party for a contract price of
$5,600,000. After payment of the mortgage note payable, closing costs and
related expenses, the Partnership received proceeds of approximately $2,414,000.
The carrying value of the investment property at the time of the sale was
approximately $5,031,000. For financial statement purposes, the sale resulted
in a gain of approximately $1,000. For financial statement purposes, the payment
of the mortgage note payable resulted in an extraordinary loss on early
extinguishment of debt of approximately $233,000.
As part of the ongoing business plan of the Registrant, 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 Registrant 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 December 31, 1998, the Registrant had cash and cash equivalents of
approximately $1,143,000, compared to approximately $4,612,000 at December 31,
1997. The decrease in cash and cash equivalents is due to approximately $612,000
of cash used in investing activities and approximately $5,011,000 of cash used
in financing activities which was partially offset by approximately $2,154,000
of cash provided by operating activities. Cash used in investing activities
consisted of capital improvements partially offset by receipts from escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering the
Registrant's properties and partner distributions. The Registrant invests its
working capital reserves in a money market account.
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 Registrant and to comply with Federal,
state and local legal and regulatory requirements. The Registrant has budgeted,
but not limited to, approximately $895,000 in capital improvements for all of
the Registrant's properties in 1999. Budgeted capital improvements include
parking lot repairs, major landscaping, roof replacement, major building
repairs, electrical upgrades, carpet and vinyl replacement, appliances
replacements, air conditioning replacements and structural upgrades. The
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 Registrant's distributable cash flow, if any,
may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $18,898,000 is amortized over varying periods with
maturity dates of July 2001 and November 2003. The Managing General Partner will
attempt to refinance such indebtedness or sell the properties prior to such
maturity date. If the properties cannot be refinanced or sold for a sufficient
amount, the Registrant will risk losing such properties through foreclosure.
Cash distributions from operations of approximately $1,890,000 and $26,000 was
made during the year ended December 31, 1998 and 1997, respectively. Cash
distributions from property sales of approximately $2,996,000 and $2,877,000 was
made in 1998 and 1997, respectively. During the first quarter of 1999, the
Registrant made a distribution in the aggregate amount of $450,000 from
operations. The Registrant's distribution policy is reviewed on a quarterly
basis. There can be no assurance, however, that the Registrant will generate
sufficient funds from operations after required capital expenditures to permit
further distributions to its partners in 1999 or subsequent periods.
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 mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and 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
December 31, 1998, had completed approximately 75% 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 March
31, 1999.
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.
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 the testing process is
expected to be completed by March 31, 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 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.
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. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.
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 our 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 May 1999.
The Managing Agent has updated data transmission standards with two of the three
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 June 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 $2.8 million ($0.6 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.
ITEM 7. FINANCIAL STATEMENTS
CENTURY PROPERTIES FUND XV
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports
Consolidated Balance Sheet - December 31, 1998
Consolidated Statements of Operations - Years ended December 31, 1998 and
1997
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years ended December 31, 1998 and
1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
To The Partners
Century Properties Fund XV
We have audited the accompanying consolidated balance sheet of Century
Properties Fund XV as of December 31, 1998, and the related consolidated
statements of operations, changes in partners' capital (deficit) and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Century Properties
Fund XV at December 31, 1998, and the consolidated results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 3, 1999
Independent Auditors' Report
To The Partners
Century Properties Fund XV
Greenville, South Carolina
We have audited the accompanying consolidated statements of operations,
changes in partners' capital and cash flows of Century Properties Fund XV
(a limited partnership)(the "Partnership") and its subsidiary
for the year ended December 31, 1997. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by the Partnership's management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Century Properties Fund XV and its subsidiary for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/Imowitz Koenig & Co., LLP
Certified Public Accountants
New York, New York
January 16, 1998
CENTURY PROPERTIES FUND XV
CONSOLIDATED BALANCE SHEET
December 31, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,143
Receivables and deposits 1,073
Restricted escrows 152
Other assets 241
Investment properties (Notes C and F):
Land $ 5,766
Buildings and related personal property 34,700
40,466
Less accumulated depreciation (19,858) 20,608
$ 23,217
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 22
Tenant security deposits payable 72
Accrued property taxes 771
Other liabilities 251
Mortgage notes payable (Notes C and F) 18,898
Partners' Capital (Deficit):
General partners' $ (1,172)
Limited partners' (89,980 units issued and
outstanding) 4,375 3,203
$ 23,217
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1998 1997
Revenues:
Rental income $ 7,555 $ 8,029
Other income 379 415
Gain on sale of properties (Note G) -- 1,844
Total revenues 7,934 10,288
Expenses:
Operating 2,728 3,599
General and administrative 460 280
Depreciation 1,336 1,496
Interest 1,775 2,008
Property taxes 730 861
Total expenses 7,029 8,244
Income before extraordinary item 905 2,044
Extraordinary loss on early extinguishment
of debt (Note G) -- (493)
Net income $ 905 $ 1,551
Net income allocated to general partners $ 18 $ 91
Net income allocated to limited partners 887 1,460
$ 905 $ 1,551
Net income per limited partnership unit:
Income before extraordinary item $ 9.86 $ 21.60
Extraordinary item -- (5.37)
Net income $ 9.86 $ 16.23
Distribution per limited partnership unit $ 53.21 $ 31.62
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners' Partners' Total
Original Capital contributions 89,980 $ -- $89,980 $89,980
Partners' (deficit) capital at
December 31, 1996 89,980 $ (1,125) $ 9,661 $ 8,536
Distribution to partners -- (58) (2,845) (2,903)
Net income for the year
ended December 31,1997 -- 91 1,460 1,551
Partners' (deficit) capital
at December 31, 1997 89,980 (1,092) 8,276 7,184
Distributions to partners -- (98) (4,788) (4,886)
Net income for the year
ended December 31, 1998 -- 18 887 905
Partners' (deficit) capital
at December 31, 1998 89,980 $ (1,172) $ 4,375 $ 3,203
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1998 1997
Cash flows from operating activities:
Net income $ 905 $ 1,551
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,336 1,496
Amortization of loan costs and leasing commissions 56 85
Gain on sale of properties -- (1,844)
Loss on disposal of property 26 18
Extraordinary loss on early extinguishment
of debt -- 493
Change in accounts:
Receivables and deposits (386) 280
Other assets 60 3
Accounts payable (79) (209)
Tenant security deposits payable (20) (74)
Accrued property taxes 261 (45)
Other liabilities (5) 21
Net cash provided by operating activities 2,154 1,775
Cash flows from investing activities:
Property improvements and replacements (645) (658)
Net withdrawals from restricted escrows 33 230
Net proceeds from property sales -- 11,194
Net cash (used in) provided by investing
activities (612) 10,766
Cash flows from financing activities:
Mortgage principal payments (125) (219)
Repayment of mortgage notes payable -- (5,402)
Debt extinguishment costs -- (382)
Loan costs -- (22)
Distributions to partners (4,886) (2,903)
Net cash used in financing activities (5,011) (8,928)
Net (decrease) increase in cash and
cash equivalents (3,469) 3,613
Cash and cash equivalents at beginning of year 4,612 999
Cash and cash equivalents at end of year $ 1,143 $ 4,612
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,719 $ 1,963
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XV
Notes to Consolidated Financial Statements
December 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization:
Century Properties Fund XV (the "Partnership" or the "Registrant") is a limited
partnership organized under the laws of the State of California to hold for
investment, and ultimately sell income-producing real estate. The general
partners are Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner") and Fox Realty Investors ("FRI"), a California general partnership.
The Managing General Partner is a subsidiary of Apartment Investment and
Management Company ("AIMCO") (See "Note B - Transfer of Control"). The
directors and officers of the Managing General Partner also serve as executive
officers of AIMCO. The Partnership Agreement provides that the Partnership is
to terminate on December 31, 2020 unless terminated prior to such date. The
Partnership operates two apartment properties located in Texas. The Partnership
was organized in May 1980. Capital contributions of $89,980,000 ($1,000 per
unit) were made by the limited partners.
Principles of Consolidation:
The Partnership's financial statements include the accounts of Century Lakeside
Place, LP and Summerhill Properties, LP (which was dissolved in 1997). The
Partnership owns a 99% interest in each of the partnerships and it has the
ability to control the major operating and financial policies of these
partnerships. All intercompany transactions have been eliminated.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Allocation of Profits, Gains and Losses:
Profits, gains and losses of the Partnership are allocated between general and
limited partners in accordance with the provisions of the Partnership Agreement.
Fair Value of Financial Instruments:
Statement of Financial Accounting Standards ("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 disclosures 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 amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
amount. Due to significant prepayment penalties associated with the debt, it
would not be beneficial to the Partnership to refinance this obligation.
Cash and Cash Equivalents:
Includes cash on hand and in banks, money market funds and certificates of
deposit with original maturities of less than 90 days. At certain times, the
amount of cash deposited at a bank may exceed the limit on insured deposits.
Depreciation:
Depreciation is provided by the straight-line method over the estimated lives of
the apartment properties and related personal property. For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 15 years for additions prior to March 16, 1984, 18 years for additions
after March 15, 1984 and before May 9, 1985, and 19 years for additions after
May 8, 1985, and before January 1, 1987, and (2) for personal property over 5
years for additions prior to January 1, 1987. As a result of the Tax Reform Act
of 1986, for additions after December 31, 1986, the modified accelerated cost
recovery method is used for depreciation of (1) real property over 27 1/2 years
and (2) personal property additions over 7 years.
Loan Costs:
Loan costs of approximately $540,000, less accumulated amortization of
approximately $308,000, are included in other assets and are being amortized on
a straight-line basis over the life of the loans.
Security Deposits:
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space,
and is current on its rental payments.
Leases:
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on its leases. In addition, the
Managing General Partner's policy is to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Investment Properties:
Investment properties consist of two apartment complexes and are stated at cost.
Acquisition fees are capitalized as a cost of real estate. In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
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.
Costs of apartment properties that have been permanently impaired have been
written down to appraised value. No adjustments for impairment of value were
recorded in the years ended December 31, 1998 or 1997.
Segment Reporting:
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("Statement
131"), which is effective for years beginning after December 15, 1997. Statement
131 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. See "Note I" for required disclosure.
Advertising:
The Partnership expenses the costs of advertising as incurred. Advertising costs
of approximately $200,000 and $204,000 for the years ended December 31, 1998 and
1997, respectively, were charged to expense as incurred.
Reclassifications:
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia and IPT 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 ultimately acquired a 100% ownership interest in IPT, the entity
which controls 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 - MORTGAGE NOTES PAYABLE
The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1998 Interest Rate Date Maturity
(in thousands) (in thousands)
Lakeside Place $14,398 $ 126 9.60% 07/01/01 $14,029
Preston Creek 4,500 27 7.33% 11/01/03 4,500
Total $18,898 $ 153 $18,529
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's rental properties and by pledge of revenues from the respective
apartment properties. The mortgage notes payable includes prepayment penalties
if repaid prior to maturity. Further the properties may not be sold subject to
existing indebtedness.
Scheduled principal payments of the mortgage notes payable subsequent to
December 31, 1998, are as follows (in thousands):
1999 $ 138
2000 152
2001 14,108
2002 --
2003 4,500
$18,898
Amortization of deferred financing costs totaled approximately $56,000 and
$83,000 for 1998 and 1997, respectively.
NOTE D - INCOME TAXES
The Partnership has received a ruling from the Internal Revenue Service that it
will be 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 income and Federal taxable
income (in thousands, except per unit data):
For the years ended
December 31,
1998 1997
Net income as reported $ 905 $1,551
Add (deduct):
Depreciation differences 12 161
Gain on property dispositions, net -- 4,488
Unearned revenue 170 (2)
Other 40 50
Federal taxable income $1,127 $6,248
Federal taxable income per limited
partnership unit $12.27 $67.00
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
1998
Net assets as reported $ 3,203
Land and buildings 6,254
Accumulated depreciation (8,063)
Deferred sales commission 8,008
Syndication fees 2,314
Other 229
Net assets - income tax method $11,945
NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES
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 payments were made to the Managing General Partner and affiliates
during the twelve month periods ended December 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating expenses) $391 $422
Reimbursement for services of affiliates, including
approximately $19,000 and $23,000 of construction
services reimbursement in 1998 and 1997, respectively
(included in investment properties, operating expenses
and general and administrative expenses) 147 186
Partnership management fee (included in general and
administrative expenses) 210 3
During the years ended December 31, 1998 and 1997, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates $391,000 and $422,000 for the years ended
December 31, 1998 and 1997, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $147,000 and
$186,000 for the years ended December 31, 1998 and 1997, respectively.
Pursuant to the Partnership Agreement for managing the affairs of the
Partnership, the Managing General Partner is entitled to receive a Partnership
management fee equal to 10% of the Partnership's adjusted cash from operations
as distributed. Approximately $210,000 and $3,000 in Partnership management
fees was paid during the years ended December 31, 1998 and 1997, respectively.
In addition, in connection with the sale of Summerhill, an affiliate of the
Managing General Partner received approximately $70,000 as a sales commission in
1997.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partners with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner who received payments on these obligations from the agent. The amount of
the Partnership's insurance premiums accruing to the benefit of the affiliate of
the Managing General Partner by virtue of the agent's obligations is not
significant.
In December 1997, an affiliate of the Managing General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 36,000 of the outstanding units of
limited partnership interest in the Partnership, at $120.00 per Unit, net to
the seller in cash. As a result of the tender offer, the Purchaser acquired
4,222 of the outstanding limited partnership units of the Partnership.
AIMCO currently owns, through affiliates, a total of 39,787.17 limited
partnership units or 44.217%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
NOTE F - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
To Partnership
(in thousands)
Buildings Net Costs
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Lakeside Place $14,398 $ 3,659 $21,481 $ 5,940
Preston Creek 4,500 2,118 5,793 1,475
Total $18,898 $ 5,777 $27,274 $ 7,415
<TABLE>
<CAPTION>
Gross Amount at Which Carried
at December 31, 1998
(in thousands)
Buildings
and
Personal Accumulated Year of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Lakeside Place $ 3,659 $27,421 $31,080 $15,851 10/76 12/80 5-30 yrs.
Preston Creek 2,107 7,279 9,386 4,007 10/79 8/80 5-30 yrs.
Total $ 5,766 $34,700 $40,466 $19,858
</TABLE>
Reconciliation of Real Estate and Accumulated Depreciation:
December 31,
1998 1997
(in thousands)
Investment Properties
Balance at beginning of year $39,884 $55,523
Property improvements 645 658
Dispositions of property (63) (16,297)
Balance at end of year $40,466 $39,884
Accumulated Depreciation
Balance at beginning of year $18,559 $24,163
Additions charged to expense 1,336 1,496
Dispositions of property (37) (7,100)
Balance at end of year $19,858 $18,559
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1998 and 1997, is $46,720,000 and $46,077,000, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1998 and 1997, is $27,921,000 and $26,597,000, respectively.
NOTE G - DISPOSITION OF RENTAL PROPERTIES
On September 24, 1997, the Partnership sold Summerhill Apartments, located in
Dallas, Texas, to an unrelated third party for a contract price of $6,150,000.
After payment of the mortgage note payable, closing costs and related expenses,
the Partnership received proceeds of approximately $2,996,000. The carrying
value of the investment property at the time of the sale was approximately
$4,148,000. For financial statement purposes, the sale resulted in a gain of
approximately $1,843,000, and the payment of the mortgage note payable resulted
in an extraordinary loss on early extinguishment of debt of approximately
$260,000.
On January 15, 1997, the Partnership sold Phoenix Business Park, located in
Atlanta, Georgia, to an unrelated third party for a contract price of
$5,600,000. After payment of the mortgage note payable, closing costs and
related expenses, the Partnership received proceeds of approximately $2,414,000.
The carrying value of the investment property at the time of the sale was
approximately $5,031,000. For financial statement purposes, the sale resulted
in a gain of approximately $1,000. For financial statement purposes, the payment
of the mortgage note payable resulted in an extraordinary loss on early
extinguishment of debt of approximately $233,000.
NOTE H - DISTRIBUTIONS
Cash distributions from operations of approximately $1,890,000 and $26,000 were
made during the years ended December 31, 1998 and 1997, respectively. Cash
distributions from property sales of approximately $2,996,000 and $2,877,000
were made in 1998 and 1997, respectively. During the first quarter of 1999, the
Registrant made a distribution in the aggregate amount of $450,000 from
operations.
NOTE I - SEGMENT REPORTING
Description of the types of products and services from which each reportable
segment derives its revenues
As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" the Partnership for the year ended December 31, 1998 has
one reportable segment: residential properties. The Partnership, for the year
ended December 31, 1997, had two reportable segments: residential properties
and a commercial property. The Partnership's residential property segment
consists of two apartment complexes in Texas. The Partnership rents apartment
units to people for terms that are typically twelve months or less. The
commercial property segment consisted of one office building located in Atlanta,
Georgia. This property leased space to various professional enterprises and was
sold to an unaffiliated third party on January 15, 1997.
Measurement of segment profit or loss
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those described in the
summary of significant accounting policies.
Factors management used to identify the enterprise's reportable segments
The Partnership's reportable segment consists 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 years 1998 and 1997 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.
1998
Residential Commercial Other Totals
Rental income $ 7,555 $ -- $ -- $ 7,555
Other income 255 -- 124 379
Interest expense 1,775 -- -- 1,775
Depreciation 1,336 -- -- 1,336
General and administrative expense -- -- 460 460
Segment profit (loss) 1,241 -- (336) 905
Total assets 22,665 -- 552 23,217
Capital expenditures for investment
properties 645 -- -- 645
1997
Residential Commercial Other Totals
Rental income $ 7,970 $ 59 $ -- $ 8,029
Other income 311 5 99 415
Interest expense 2,000 8 -- 2,008
Depreciation 1,480 16 -- 1,496
General and administrative expense -- -- 280 280
Gain on disposal of assets 1,843 1 -- 1,844
Loss on extraordinary item (260) (233) -- (493)
Segment profit (loss) 1,950 (218) (181) 1,551
Total assets 22,673 -- 4,493 27,166
Capital expenditures for investment
properties 658 -- -- 658
NOTE J - 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 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 have filed an amended complaint. The Managing General Partner has
filed demurrers to the amended complaint were heard during February 1999. No
ruling on such demurrer has been received. The Managing General Partner does
not anticipate that costs associated with this case, if any, to be material to
the Partnership's overall operations.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties, LLC, et.
al. v. Insignia Financial Group, Inc., et. al. in the Superior Court of the
State of California, County of Los Angeles. The action involves 44 real estate
limited partnerships (including the Partnership) in which the plaintiff's
allegedly own interests and which Insignia affiliates allegedly manage or
controls (the "Subject Partnerships"). This case was settled on March 3, 1999.
The Partnership is responsible for a portion of the settlement costs. The
expense will not have a material effect on 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 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURES
Effective November 10, 1998, the Registrant dismissed its prior Independent
Auditors Imowitz Koenig and Company LLP ("Imowitz"). Imowitz' Independent
Auditor's Report on Registrant's financial statements for calendar year ended
December 31, 1997 did not contain any adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. The decision to change Independent Auditors was approved
by the Managing General Partner's directors. During the calendar year ended
1997 and through November 10, 1998, there were no disagreements between the
Registrant and Imowitz on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope of procedure which
disagreements if not resolved to the satisfaction of Imowitz, would have caused
it to make references to the subject matter of the disagreements in connection
with its reports.
Effective November 24, 1998, Registrant engaged Ernst & Young LLP as its
Independent Auditors. During the last two calendar years and through November
10, 1998, the Registrant did not consult Ernst and Young LLP regarding any of
the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B.
PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Century Properties Fund XV (the "Partnership" or the "Registrant") has no
officers or directors. Fox Capital Management Corporation ("FCMC" or the
"Managing General Partner"), manages and controls substantially all of the
Partnership's affairs and has general responsibility in all matters affecting
its business.
The names and ages of, as well as the positions and offices held by, the present
executive officers and director of the Managing General Partner are set forth
below. There are no family relationships between or among any officers or
directors.
Name Age Position
Patrick J. Foye 41 Executive Vice President and Director
Timothy R. Garrick 42 Vice President_Accounting and Director
Patrick J. Foye has been Executive Vice President and Director of the Managing
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President_Accounting and Director of the Managing General Partner since October
1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting
Services of Insignia Financial Group since June of 1997. From 1992 until June
of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from
1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to
1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney.
Mr. Garrick received his B.S. Degree from the University of South Carolina and
is a Certified Public Accountant.
ITEM 10. EXECUTIVE COMPENSATION
Neither the directors nor officers of the Managing General Partner received any
remuneration from the Registrant.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1998.
Name and address of Amount and nature of
Beneficial Owner Beneficial Ownership % of Class
Insignia Properties, LP 92.00 .102
(an affiliate of AIMCO)
Riverside Drive, LLC 35,473.17 39.423
(an affiliate of AIMCO)
Madison River Properties, LLC 4,222.00 4.692
(an affiliate of AIMCO)
All directors and executive
Insignia Properties LP, Riverside Drive, LLC and Madison River Properties, LLC
are indirectly ultimately owned by AIMCO. Their business address is 55 Beattie
Place, Greenville, SC 29602.
No director or officer of the Managing General Partner owns any Units. The
Managing General Partner owns 100 Units as required by the terms of the
Partnership Agreement governing the Partnership.
In December 1997, affiliates of the Managing General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 36,000 of the outstanding units of
limited partnership interest in the Partnership, at $120.00 per Unit, net to the
seller in cash. As a result of the tender offer, the Purchaser acquired 4,222
units of limited partnership interest in the Partnership.
As a result of its ownership of approximately 39,787.17 (44.22%) limited
partnership units through its affiliates, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Partnership.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of its
affiliation with the Managing General Partner. However, Riverside is required
to vote its Units: (i) against any proposal to increase the fees and other
compensation payable by the Partnership to the Managing General Partner and any
of its affiliates; and (ii) with respect to any proposal made by the Managing
General Partner or any of its affiliates, in proportion to votes cast by other
unitholders. Except for the foregoing, no other limitations are imposed on
Riverside's right to vote each Unit acquired.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partners received cash distributions of $38,000 and $1,000 from
operations during the fiscal year ended December 31, 1998 and 1997,
respectively. The General Partners received distributions from property sales of
approximately $60,000 and $57,000 for the years ended December 31, 1998 and
1997, respectively.
The Partnership has no employees and is dependent upon 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 payments were made to the Managing General Partner and affiliates
during the twelve month periods ended December 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees $ 391 $ 422
Reimbursement for services of affiliates, including
Approximately $19,000 and $23,000 of construction
services reimbursement in 1998 and 1997, respectively 147 186
Partnership management fee 210 3
During the years ended December 31, 1998 and 1997, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates $391,000 and $422,000 for the years ended
December 31, 1998 and 1997, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $147,000 and
$186,000 for the years ended December 31, 1998 and 1997, respectively.
Pursuant to the Partnership Agreement for managing the affairs of the
Partnership, the Managing General Partner is entitled to receive a Partnership
management fee equal to 10% of the Partnership's adjusted cash from operations
as distributed. Approximately $210,000 and $3,000 in Partnership management
fees was paid during the years ended December 31, 1998 and 1997, respectively.
In addition, in connection with the sale of Summerhill, an affiliate of the
Managing General Partner received approximately $70,000 as a sales commission in
1997.
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency, which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner who received payments on these obligations from the agent. The amount of
the Partnership's insurance premiums accruing to the benefit of the affiliate of
the Managing General Partner by virtue of the agent's obligations is not
significant.
In December 1997, an affiliate of the Managing General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests the Partnership. The
Purchaser offered to purchase up to 36,000 of the outstanding units of limited
partnership interest in the Partnership, at $120.00 per Unit, net to the seller
in cash. As a result of the tender offer, the Purchaser acquired 4,222 of the
outstanding limited partnership units of the Partnership.
AIMCO currently owns, through affiliates, a total of 39,787.17 limited
partnership units or 44.217%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index contained herein.
(b) Reports on Form 8-K filed during the fourth quarter of 1998:
Current Report on Form 8-K dated October 1, 1998 and filed on
October 16, 1998 disclosing change in control of Registrant from
Insignia Financial Group, Inc. to AIMCO.
Current Report on Form 8-K dated November 10, 1998, disclosing the
dismissal of Imowitz Koenig & Co., LLP as the registrant's
Independent accountant.
Current Report on Form 8-K dated December 9, 1998 disclosing the
engagement of Ernst & Young, LLP as the registrant's Independent
Accountant.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XV
By: FOX CAPITAL MANAGEMENT CORPORATION,
Managing General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
Date: March 31, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Patrick J. Foye Executive Vice President Date: March 31, 1999
Patrick J. Foye and Director
/s/ Timothy R. Garrick Vice President - Accounting Date: March 31, 1999
Timothy R. Garrick and Director
CENTURY PROPERTIES INCOME FUND XV
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 NPI, Inc. Stock Purchase Agreement, dated as of August 17,
1996, incorporated by reference to the Partnership's Current
Report on Form 8-K dated August 17, 1996.
2.2 Partnership Units Purchase Agreement dated as of August 17,
1996 incorporated by reference to Exhibit 2.1 to Form 8-K filed
by Insignia Financial Group, Inc. ("Insignia") with the
Securities and Exchange Commission on September 1, 1996.
2.3 Management Purchase Agreement dated as of August 17, 1996
incorporated by reference to Exhibit 2.2 to Form 8-K filed by
Insignia with the Securities and Exchange Commission on
September 1, 1996.
2.4 Limited Liability Company Agreement of Riverside Drive L.L.C.,
dated as of August 17, 1996 incorporated by reference to
Exhibit 2.4 to Form 8-K filed by Insignia with the Securities
and Exchange Commission on September 1, 1995.
2.5 Master Indemnity Agreement dated as of August 17, 1996
incorporated by reference to Exhibit 2.5 to Form 8-K filed by
Insignia with the Securities and Exchange Commission on
September 1, 1996.
2.6 Agreement and Plan of Merger, dated as of October 1, 1998, by
and between AIMCO and IPT; incorporated by reference to Exhibit
2.1 of IPT's Current Report on Form 8-K dated October 1, 1998.
3.4 Agreement of Limited Partnership, incorporated by reference to
Exhibit A to the Prospectus of the Partnership dated September
20, 1983, as amended on June 13, 1989, and as thereafter
supplemented contained in the Partnership's Registration
Statement on Form S-11 (Reg. No. 2-79007).
10.1 Deed of Trust Note dated June 1, 1994, made by Century Lakeside
Place, L.P. in favor of Value Line Mortgage Corporation,
incorporated by reference to the Partnership's Form 10-Q for
the quarter ended June 30, 1994.
10.2 Deed of Trust, Security Agreement and Assignment of Leases and
Rents dated June 1, 1994, from Lakeside Place, L.P. to Jeffrey
H. Gelman for the benefit of Value Line Mortgage Corporation,
incorporated by reference to the Partnership's Form 10-Q for
the quarter ended September 30, 1994.
10.3 Multifamily Note dated November 1, 1997, by and between the
Partnership and Lehman Brothers Holdings, Inc. for Preston
Creek Apartments incorporated by reference to Exhibit 10.6 to
the Partnership's Form 10-KSB for the fiscal year ended
December 31, 1996.
10.7 Contract of Sale of Summerhill Apartments between Registrant
and McNeil Capital L.L.C. dated July 31, 1997 incorporated by
reference to Current Report on Form 8-K dated September 24,
1997.
16 Letter dated November 11, 1998 from the Registrant's former
independent accountant regarding its concurrence with the
statements made by the Registrant in Current Report on Form 8-K
dated November 10, 1998.
27 Financial Data Schedule.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XV 1998 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000314690
<NAME> CENTURY PROPERTIES FUND XV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,143
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 40,466
<DEPRECIATION> 19,858
<TOTAL-ASSETS> 23,217
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 18,898
0
0
<COMMON> 0
<OTHER-SE> 3,203
<TOTAL-LIABILITY-AND-EQUITY> 23,217
<SALES> 0
<TOTAL-REVENUES> 7,934
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,775
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 905
<EPS-PRIMARY> 9.86<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
