FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-9680
CENTURY PROPERTIES FUND XV
(Exact name of small business issuer as specified in its charter)
California 94-2625577
(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 past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1999
Assets
Cash and cash equivalents $ 1,795
Receivables and deposits 487
Restricted escrows 117
Other assets 264
Investment properties:
Land $ 5,766
Buildings and related personal property 35,128
40,894
Less accumulated depreciation (20,547) 20,347
$ 23,010
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 32
Tenant security deposit liabilities 73
Accrued property taxes 373
Other liabilities 259
Mortgage notes payable 18,831
Partners' Capital (Deficit):
Limited partners' (89,980 units issued and
outstanding) $ 4,609
General partners' (1,167) 3,442
$ 23,010
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Rental income $ 1,937 $ 1,882 $ 3,850 $ 3,712
Other income 81 107 152 201
Total revenues 2,018 1,989 4,002 3,913
Expenses:
Operating 547 711 1,158 1,361
General and administrative 93 65 212 140
Depreciation 350 329 689 653
Interest 447 449 894 878
Property taxes 207 193 360 345
Total expenses 1,644 1,747 3,313 3,377
Net income $ 374 $ 242 $ 689 $ 536
Net income allocated
to general partners $ 7 $ 5 $ 14 $ 11
Net income allocated
to limited partners 367 237 675 525
$ 374 $ 242 $ 689 $ 536
Net income per limited
partnership unit $ 4.08 $ 2.63 $ 7.50 $ 5.83
Distributions per limited
partnership unit $ -- $ 16.29 $ 4.90 $ 32.63
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited Total
Units Partners Partners Capital
Original capital contributions 89,980 $ -- $89,980 $89,980
Partners' (deficit) capital at
December 31, 1998 89,980 $(1,172) $ 4,375 $ 3,203
Distribution to partners -- (9) (441) (450)
Net income for the six months
ended June 30, 1999 -- 14 675 689
Partners' (deficit) capital at
June 30, 1999 89,980 $(1,167) $ 4,609 $ 3,442
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net income $ 689 $ 536
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 689 653
Amortization of loan costs and leasing commissions 39 17
Change in accounts:
Receivables and deposits 586 14
Other assets (62) 55
Accounts payable 10 15
Tenant security deposit liabilities 1 (10)
Accrued property taxes (398) (125)
Other liabilities 8 26
Net cash provided by operating activities 1,562 1,181
Cash flows from investing activities:
Net withdrawals from (deposits to) restricted escrows 35 (7)
Property improvements and replacements (428) (222)
Net cash used in investing activities (393) (229)
Cash flows from financing activities:
Payments on mortgage notes payable (67) (61)
Distributions to partners (450) (2,996)
Net cash used in financing activities (517) (3,057)
Net increase (decrease) in cash and cash equivalents 652 (2,105)
Cash and cash equivalents at beginning of period 1,143 4,612
Cash and cash equivalents at end of period $ 1,795 $ 2,507
Supplemental disclosure of cash flow information:
Cash paid for interest $ 855 $ 861
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XV (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 six
month periods ended June 30, 1999, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
Principles of Consolidation
The Partnership's financial statements include the accounts of Century Lakeside
Place, L.P., a limited partnership in which the Partnership owns a 99% limited
partnership interest. The Partnership has the ability to control the major
operating and financial policies of the partnership. All intercompany
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. ("Insignia") and Insignia
Properties Trust ("IPT") merged into Apartment Investment and Management
Company, a publicly traded real estate investment trust ("AIMCO"), 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 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 certain 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 six month periods ended June 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $200 $192
Reimbursement for services of affiliates
(included in operating and general
and administrative expenses). 90 77
Partnership management fee 50 --
During the six month periods ended June 30, 1999 and 1998, 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 approximately $200,000 and $192,000 for the
six month periods ended June 30, 1999 and 1998, respectively, including
approximately $19,000 and $9,000 in construction services reimbursements in 1999
and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $90,000 and
$77,000 for the six month periods ended June 30, 1999 and 1998, 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 $50,000 in Partnership management fees was paid
during the six month period ended June 30, 1999. No such fee was paid during
the six month period ended June 30, 1998.
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 22,938.15 (25.49%% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $162 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,037.17
units. As a result, AIMCO and its affiliates currently own 41,839.34 units of
limited partnership interest in the, Partnership representing 46.50% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO.
NOTE D - DISTRIBUTIONS
A cash distribution from operations of approximately $450,000 ($4.90 per Limited
Partnership unit) was made during the six months ended June 30, 1999.
Distributions totaling approximately $2,996,000 ($32.63 per Limited Partnership
unit) from the sale of Summerhill Apartments in 1997 was made during the six
months ended June 30, 1998.
NOTE E - SEGMENT REPORTING
Description of the types of products and services from which each reportable
segment derives its revenues:
The Partnership for the six month periods ended June 30, 1999 and 1998 had one
reportable segment: residential properties. The Partnership's residential
property segment consists of two apartment complexes in Texas. 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 segment are the same as those of the Partnership as
described in the Partnership's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
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 six month periods ended June 30, 1999 and 1998, is
shown in the tables below (in thousands). The "Other" column includes
partnership administration related items and income and expense not allocated to
the reportable segment.
1999
Residential Other Totals
Rental income $ 3,850 $ -- $ 3,850
Other income 138 14 152
Interest expense 894 -- 894
Depreciation 689 -- 689
General and administrative expense -- 212 212
Segment profit (loss) 887 (198) 689
Total assets 27,277 733 23,010
Capital expenditures for investment
properties 428 -- 428
1998
Residential Other Totals
Rental income $ 3,712 $ -- $ 3,712
Other income 125 76 201
Interest expense 878 -- 878
Depreciation 653 -- 653
General and administrative expense -- 140 140
Segment profit (loss) 600 (64) 536
Total assets 22,130 2,421 24,551
Capital expenditures for investment
properties 222 -- 222
NOTE F - LEGAL PROCEEDING
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 Financial Group, Inc. ("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.
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 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.
The Partnership's investment properties consist of two residential apartment
complexes. The following table sets forth the average occupancy of the
properties for each of the six month periods ended June 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Lakeside Place Apartments (1) 95% 98%
Houston, Texas
Preston Creek Apartments (2) 94% 90%
Dallas, Texas
(1) The Managing General Partner attributes the decrease in occupancy to
increased competition in the local market and new home purchases due to
lower interest rates.
(2) The Managing General attributes the increase in occupancy to an increase in
advertising and marketing.
Results of Operations
The Registrant's net income for the three and six month periods ended June 30,
1999, was approximately $374,000 and $689,000, respectfully, a compared to net
income of approximately $242,000 and $536,000 for the corresponding periods in
1998. The increase in net income is attributable to an increase in total
revenues and a decrease in total expenses.
Total revenues increased due to an increase in rental income which was partially
offset by a decrease in other income. Rental income increased as a result of
increased rental rates at both properties and improved occupancy at Preston
Creek. Other income decreased as a result of a decrease in cash held in interest
bearing accounts due to cash distributions made to the partners during the six
month period ended June 30, 1999.
Total expenses decreased due to a decrease in operating expenses, which was
partially offset by increases in depreciation expense, property tax expense, and
general and administrative expenses. The decrease in operating expenses is
primarily due to a decrease in maintenance expenses and insurance expense at
both properties. Maintenance expense decreased as a result of completion of
parking lot improvements and major landscaping projects in 1998 at Lakeside,
while an interior building improvement project was completed at Preston Creek
during 1998. Depreciation expense increased as a result of additional
depreciable assets recently placed into service at both properties during the
last 12 months. Property tax expense increased due to a timing difference in
the receipt of tax bills which effected the accruals recorded. General and
administrative expenses increased as a result of an increase in Partnership
management fees collected on the distribution of cash flows from operations
during 1999. Included in general and administrative expenses at both June 30,
1999 and 1998, are reimbursements to the Managing General Partner allowed under
the Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 1999, the Registrant had cash and cash equivalents of approximately
$1,795,000 compared to approximately $2,507,000 at June 30, 1998. For the six
months ended June 30, 1999, cash and cash equivalents increased approximately
$652,000 from the Partnership's year ended December 31, 1998. The increase in
cash and cash equivalents is due to approximately $1,562,000 of cash provided by
operating activities which was offset by approximately $517,000 of cash used in
financing activities and approximately $393,000 of cash used in investing
activities. Cash used in financing activities consisted of distributions to
partners and payments of principal made on the mortgages encumbering the
Registrant's properties. Cash used in investing activities consisted of capital
improvements and replacements and net withdrawals from escrow accounts
maintained by the mortgage lender. The Registrant 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 Registrant and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
Lakeside Place Apartments
During the six month period ended June 30, 1999, the Partnership completed
approximately $396,000 of capital improvement projects at Lakeside Place
Apartments consisting primarily of roof repairs, carpet and vinyl replacement,
appliance replacement, parking lot improvements, and structural improvements.
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 next few years.
Capital improvement projects planned for 1999 which include certain of the
required improvements and 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 six month period ended June 30, 1999 the Partnership completed
approximately $32,000 of capital improvement projects at Preston Creek
Apartments consisting of primarily carpet replacement, interior building
improvements, and structural upgrades. These improvements were funded from
operating cash flow and replacement reserves. 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 next few years. Capital improvement projects planned for
1999 which include certain of the required improvements and consist of, but are
not limited to, structural upgrades, landscaping and carpet and vinyl
replacements. These improvements are budgeted for approximately $218,000.
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 Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $18,831,000 is amortized over varying periods with
maturity dates of July 2001 and November 2003. The Managing General Partner will
attempt to refinance such indebtedness and/or sell the properties prior to such
maturity dates. If the properties cannot be refinanced or sold for a sufficient
amount, the Registrant will risk losing such properties through foreclosure.
A cash distribution from operations of approximately $450,000 (approximately
$441,000 to the Limited Partners, $4.90 per Limited Partnership Unit) was made
during the six months ended June 30, 1999. Distributions totaling approximately
$2,996,000 (approximately $2,936,000 to the Limited Partners, $32.63 per Limited
Partnership Unit) from the sale of Summerhill Apartments in 1997 was made during
the six months ended June 30, 1998. The Registrant'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 Registrant will generate sufficient funds
from operations after required capital expenditures to permit further
distributions to its partners in 1999 or subsequent periods.
Tender Offer
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 22,938.15 (25.49%% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $162 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,037.17
units. As a result, AIMCO and its affiliates currently own 41,839.34 units of
limited partnership interest in the ,Partnership representing 46.50% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the 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 June 30, 1999, had completed approximately 90% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system. The estimated completion date for this project is October, 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 1999. Any
operating equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
June 30, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999. The Managing Agent has updated data transmission standards with all of the
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by September 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia Financial Group, Inc. ("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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XV
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Carla R. Stoner
Carla R. Stoner
Senior Vice President
Finance and Administration
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Centtury
Properties Fund XV 1999 Second Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000314690
<NAME> CENTURY PROPERTIES FUND XV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,795
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 40,894
<DEPRECIATION> 20,547
<TOTAL-ASSETS> 23,010
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 18,831
0
0
<COMMON> 0
<OTHER-SE> 3,442
<TOTAL-LIABILITY-AND-EQUITY> 23,010
<SALES> 0
<TOTAL-REVENUES> 4,002
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 894
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689
<EPS-BASIC> 7.50<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
