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 13 or 15(d) of The Securities Exchange Act of
1934
For the quarterly period ended September 30, 1998
[ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period.........to.........
Commission file number 0-10435
CENTURY PROPERTIES FUND XVI
(Exact name of small business issuer as specified in its charter)
California 94-2704651
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XVI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1998
Assets
Cash and cash equivalents $ 365
Receivables and deposits 312
Other assets 255
Restricted escrows 61
Investment properties:
Land $ 1,409
Buildings and related
personal property 14,027
15,436
Less accumulated depreciation (7,672) 7,764
$ 8,757
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 59
Accrued property taxes 175
Tenant security deposit liabilities 55
Other liabilities 105
Mortgage notes payable 7,366
Partners' (Deficit) Capital
General partners $(3,836)
Limited partners (130,000 units issued
and outstanding) 4,833 997
$ 8,757
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XVI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 714 $ 685 $ 2,135 $ 2,009
Other income 33 27 94 82
Total revenues 747 712 2,229 2,091
Expenses:
Operating 335 368 999 988
General and administrative 39 50 138 152
Depreciation 127 122 369 358
Interest 153 155 460 466
Property tax 59 58 160 162
Loss on disposal of property -- -- -- 56
Total expenses 713 753 2,126 2,182
Net income (loss) $ 34 $ (41) $ 103 $ (91)
Net income (loss) allocated to
general partners (6.9%) $ 2 $ (3) $ 7 $ (6)
Net income (loss) allocated to
limited partners (93.1%) 32 (38) 96 (85)
Net income (loss) $ 34 $ (41) $ 103 $ (91)
Net income (loss) per limited
partnership unit $ .25 $ (.29) $ .74 $ (.65)
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XVI
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 130,000 $ -- $65,000 $65,000
Partners' (deficit) capital at
December 31, 1997 130,000 $(3,843) $ 4,737 $ 894
Net income for the nine months
ended September 30, 1998 -- 7 96 103
Partners' (deficit) capital at
September 30, 1998 130,000 $(3,836) $ 4,833 $ 997
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XVI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 103 $ (91)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 369 358
Amortization 24 24
Loss on disposal of property -- 56
Change in accounts:
Receivables and deposits (5) (7)
Other assets (11) (13)
Accounts payable (29) (18)
Accrued property taxes (62) (10)
Tenant security deposit liabilities 5 (4)
Other liabilities 9 26
Net cash provided by operating activities 403 321
Cash flows used in investing activities:
Property improvements and replacements (489) (312)
Net withdrawals from (deposits to) restricted escrows 48 (74)
Net cash used in investing activities (441) (386)
Cash flows used in financing activities:
Payments on mortgage notes payable (56) (47)
Loan costs paid -- (1)
Net cash used in financing activities (56) (48)
Net decrease in cash and cash equivalents (94) (113)
Cash and cash equivalents at beginning of period 459 535
Cash and cash equivalents at end of period $ 365 $ 422
Supplemental disclosure of cash flow information:
Cash paid for interest $ 436 $ 408
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XVI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XVI (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The Partnership's general partners are Fox Capital Management Corporation (the
"Managing General Partner" or "FCMC") and Fox Realty Investors ("FRI"). In the
opinion of the Managing General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine month periods ended September
30, 1998, are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
PRINCIPLES OF CONSOLIDATION
The Partnership's financial statements include the accounts of the Partnership
and its wholly-owned subsidiaries.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
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 transactions with
affiliates of the Managing General Partner were charged to expense in 1998 and
1997:
For the Nine Months Ended
September 30,
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $ 111 $ 106
Reimbursement for services of affiliates (included
in general and administrative and operating expenses) 100 97
Included in "Reimbursement services of affiliates" for the periods ended
September 30, 1998 and 1997 were approximately $21,000 and $18,000,
respectively, of reimbursements for construction oversight costs.
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 which receives payment on these obligations from the agent. The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.
NOTE C - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
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 of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of Insignia
Properties Trust ("IPT"), the entity which controls both the Managing General
Partner and FRI. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares. AIMCO has
agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and
has granted an irrevocable limited proxy to unaffiliated representatives of IPT
to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the
IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no
other holder of IPT is required to approve the merger. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
The Landings Apartments
Tampa, Florida 95% 94%
Woods of Inverness Apartments
Houston, Texas 97% 96%
The Partnership recognized net income of approximately $34,000 and $103,000 for
the three and nine months ended September 30, 1998 versus net losses of
approximately $41,000 and $91,000 for the same periods in 1997. The increase in
net income is primarily attributable to an increase in rental income and a
decrease in general and administrative expense. The increase in rental income is
due to increases in occupancy at both The Landings Apartments and Woods of
Inverness Apartments, along with an increase in the average annual rental rate
in 1998 at Woods of Inverness Apartments. In addition, a loss on disposal of
property was recognized in 1997 for approximately $56,000 resulting from a
reroofing project at Woods of Inverness Apartments. The decrease in general and
administrative expense is due to a reduction in legal and audit fees.
Included in operating expense for the nine months ended September 30, 1998, is
approximately $62,000 of major repairs and maintenance mainly comprised of
tennis court repairs, parking lot repairs, major landscaping, and exterior
building repairs. Included in operating expense for the nine months ended
September 30, 1997, is approximately $51,000 of major repairs and maintenance
mainly comprised of exterior painting, building improvements, parking lot
repairs, major landscaping, and window covering replacements.
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 conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At September 30, 1998, the Partnership had cash and cash equivalents of
approximately $365,000, versus approximately $422,000 at September 30, 1997.
Cash and cash equivalents decreased approximately $94,000 for the period ended
September 30, 1998, and decreased approximately $113,000 for the period ended
September 30, 1997. Net cash provided by operating activities increased
primarily due to an increase in net income, as previously explained, partially
offset by a decrease in accrued taxes. The decrease in accrued taxes is due to
the timing of the payment of property taxes. The Partnership experienced an
increase in cash used in investing activities due to an increase in property
improvements and replacements offset by increased withdrawals from restricted
escrows. For the nine months ended September 30, 1998, withdrawals were made
from restricted escrows to fund major rehabilitation work at Woods of Inverness
Apartments. Foundation work, replacement of rotten wood, power washing, painting
and some fencing replacement, all anticipated to cost approximately $300,000, is
now underway at this property. Cash used in financing activities results from
payments on mortgage notes payable.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit. Based on present plans, the Managing General Partner does not
anticipate the need to borrow in the near future. Other than cash and cash
equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with federal,
state and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
Managing General Partner is currently assessing the need for capital
improvements at each of the Partnership's properties. To the extent that
additional capital improvements are required, the Partnership's distributable
cash flow, if any, may be adversely affected. The mortgage indebtedness of
approximately $7,366,000 is based on a fixed interest rate, amortized over a
thirty-year period, with a balloon payment of approximately $6,618,000 due
January 1, 2006. 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 Partnership
will risk losing such properties through foreclosure. No cash distributions were
paid in 1997 or during the first nine months of 1998. Future cash distributions
will depend on the levels of net cash generated from operations, refinancings,
property sales and the availability of cash reserves. The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations to permit distributions to its partners in 1998 or subsequent
periods.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
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 of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of Insignia
Properties Trust ("IPT"), the entity which controls both the Managing General
Partner and FRI. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares. AIMCO has
agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and
has granted an irrevocable limited proxy to unaffiliated representatives of IPT
to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the
IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no
other holder of IPT is required to approve the merger. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Partnership.
Year 2000
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 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 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.
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 are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the Managing General Partner was to the security
systems, elevators, heating-ventilation-air-conditioning systems, telephone
systems and switches, and sprinkler systems. The Managing General Partner is
currently engaged in the identification of all non-compliant operational
systems, and is in the process of estimating the costs associated with any
potential modifications or replacements needed to such systems in order for them
to be Year 2000 compliant. It is not expected that such costs would have a
material adverse affect upon the operations of the Partnership.
Risk Associated with the Year 2000
The Managing General Partner believes that the Managing Agent has an effective
program in place to resolve the Year 2000 issue in a timely manner and has
appropriate contingency plans in place for critical applications that could
affect the Partnership's operations. To date, the Managing General Partner is
not aware of any external agent with a Year 2000 issue that would materially
impact the Partnership's results of operations, liquidity or capital resources.
However, the Managing General Partner has no means of ensuring that external
agents will be Year 2000 compliant. The Managing General Partner does not
believe that the inability of external agents to complete their Year 2000
resolution 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.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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 Superior Court of the State of California for
the County of San Mateo. The Plaintiffs named as defendants, among others, the
Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates to acquire
limited partnership units, the management of partnerships by Insignia Affiliates
as well as a recently announced agreement between Insignia and Apartment
Investment and Management Company. 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 are scheduled to be heard on January 8, 1999. The
Managing General Partner believes the action to be without merit, and intends to
vigorously defend it.
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. 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 plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). The complaint names as defendants Insignia, several
Insignia Affiliates alleged to be managing partners of the defendant limited
partnerships, the Partnership and the Managing General Partner. Plaintiffs
allege that they have requested from, but have been denied by each of the
Subject Partnerships, lists of their respective limited partners for the purpose
of making tender offers to purchase up to 4.9% of the limited partner units of
each of the Subject Partnerships. The complaint also alleges that certain of the
defendants made tender offers to purchase limited partner units in many of the
Subject Partnerships, with the alleged result that plaintiffs have been deprived
of the benefits they would have realized from ownership of the additional units.
The plaintiffs assert eleven causes of action, including breach of contract,
unfair business practices, and violations of the partnership statutes of the
states in which the Subject Partnerships are organized. Plaintiffs seek
compensatory, punitive and treble damages. The Managing General Partner filed
an answer to the complaint on September 15, 1998. The Managing General Partner
believes the claims to be without merit and intends to defend the action
vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner believes all such
pending or outstanding litigation will be resolved without a material adverse
effect upon the business, financial condition or operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None.
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 XVI
By: Fox Capital Management Corporation,
Managing General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Century Properties Fund XVI 1998 Third Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000351931
<NAME> CENTURY PROPERTIES FUND XVI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 365
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,436
<DEPRECIATION> (7,672)
<TOTAL-ASSETS> 8,757
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,366
0
0
<COMMON> 0
<OTHER-SE> 997
<TOTAL-LIABILITY-AND-EQUITY> 8,757
<SALES> 0
<TOTAL-REVENUES> 2,229
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 103
<EPS-PRIMARY> .74<F2>
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<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
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