FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11137
CENTURY PROPERTIES FUND XVII
(Exact name of small business issuer as specified in its charter)
California 94-2782037
(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 XVII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1999
Assets
Cash and cash equivalents $ 3,405
Receivables and deposits 1,037
Restricted escrows 677
Other assets 355
Investment properties:
Land $ 7,078
Buildings and related personal property 62,800
69,878
Less accumulated depreciation (34,587) 35,291
$ 40,765
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 84
Tenant security deposit liabilities 312
Accrued property taxes 598
Other liabilities 354
Mortgage notes payable 42,456
Partners' (Deficit) Capital:
General partner $ (7,826)
Limited partners (75,000 units issued and
outstanding) 4,787 (3,039)
$ 40,765
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XVII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(As Restated) (As Restated)
Revenues:
Rental income $ 3,425 $ 3,308 $10,190 $ 9,723
Other income 198 199 559 593
Total revenues 3,623 3,507 10,749 10,316
Expenses:
Operating 1,293 1,531 3,593 4,113
General and administrative 87 69 261 213
Depreciation 646 631 1,878 1,784
Interest 890 808 2,674 2,531
Property taxes 200 194 603 583
Total expenses 3,116 3,233 9,009 9,224
Net income before extraordinary
loss 507 274 1,740 1,092
Extraordinary loss on early
extinguishment of debt -- (96) -- (96)
Net income $ 507 $ 178 $ 1,740 $ 996
Net income allocated to
general partner $ 60 $ 21 $ 205 $ 118
Net income allocated
to limited partners 447 157 1,535 878
$ 507 $ 178 $ 1,740 $ 996
Net income before extraordinary
loss per limited partnership
unit $ 5.96 $ 3.21 $ 20.47 $ 12.83
Extraordinary loss per limited
partnership unit -- (1.12) -- (1.12)
Net income per limited
partnership unit $ 5.96 $ 2.09 $ 20.47 $ 11.71
Distributions per limited
partnership unit $ 13.76 $ 39.15 $ 44.07 $ 39.15
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XVII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 75,000 $ -- $75,000 $75,000
Partners' (deficit) capital
at December 31, 1998 75,000 $(7,666) $ 6,557 $(1,109)
Distributions to partners -- (365) (3,305) (3,670)
Net income for the nine months
ended September 30, 1999 -- 205 1,535 1,740
Partners' (deficit) capital
at September 30, 1999 75,000 $(7,826) $ 4,787 $(3,039)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XVII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities: (As Restated)
Net income $ 1,740 $ 996
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,878 1,784
Amortization of loan costs and debt discounts 1,065 980
Extraordinary loss on debt refinancing -- 96
Loss on disposal of property -- 36
Change in accounts:
Receivables and deposits (5) 145
Other assets (116) --
Accounts payable (58) (62)
Tenant security deposit liabilities 38 14
Accrued property taxes (80) 7
Other liabilities (27) (31)
Net cash provided by operating activities 4,435 3,965
Cash flows from investing activities:
Net withdrawals from (deposits to) restricted escrows 604 (332)
Property improvements and replacements (1,694) (1,673)
Net cash used in investing activities (1,090) (2,005)
Cash flows from financing activities:
Payments on mortgage notes payable (301) (313)
Payoff of mortgage notes payable -- (10,684)
Proceeds from debt refinancing -- 13,700
Loan costs -- (327)
Distributions to partners (3,670) (3,329)
Net cash used in financing activities (3,971) (953)
Net (decrease) increase in cash and cash equivalents (626) 1,007
Cash and cash equivalents at beginning of period 4,031 4,011
Cash and cash equivalents at end of period $ 3,405 $ 5,018
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,609 $ 1,585
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XVII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XVII (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"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998.
Certain reclassifications have been made to the 1998 balances to conform to the
1999 presentation.
Principles of Consolidation
The financial statements include all the accounts of the Partnership and
Apartment CCG 17, L.P., which owns Cherry Creek Apartments, Apartment Creek 17,
LLC, which owns Creekside Apartments and Apartment Lodge 17, LLC, which owns The
Lodge Apartments. The Partnership ultimately holds a 100% interest in
each of the entities. All intra-entity balances 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 merged into Apartment Investment and Management company
("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100%
ownership interest in the Managing General Partner. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The 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 its
affiliates during the nine months ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $537 $507
Reimbursement for services of affiliates (included in
investment properties, general and administrative
expense and operating expense) 166 160
Partnership management fee 298 333
During the nine months ended September 30, 1999 and 1998, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $537,000 and $507,000 for the
nine months ended September 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $166,000 and
$160,000 for the nine months ended September 30, 1999 and 1998, respectively.
Included in this expense is approximately $45,000 and $43,000 in construction
oversight costs for the nine months ended September 30, 1999 and 1998,
respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the
Partnership, the general partner is entitled to receive a Partnership management
fee equal to 10% of the Partnership's adjusted cash from operations as
distributed. Approximately $298,000 and $333,000 in Partnership management fees
were paid along with the distributions from operations made during the nine
months ended September 30, 1999 and 1998, respectively.
In addition, the Partnership paid to an affiliate approximately $27,000 in loan
costs related to the refinancing of mortgages at Creekside Apartments and The
Lodge Apartments during the nine months ended September 30, 1998. These loan
costs are included in other assets and are amortized as interest expense over
the terms of the loan agreements.
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.
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner, commenced a tender offer to purchase up to 20,860.54 (approximately
27.81% of the total outstanding units) units of limited partnership interest in
the Partnership for a purchase price of $448 per unit. The offer expired on
July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,864.00
units. As a result, AIMCO and its affiliates currently own 31,445.00 units of
limited partnership interest in the Partnership representing approximately
41.93% of the total outstanding units. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO (see "Note G - Legal Proceedings").
NOTE D - DISTRIBUTION
During the nine months ended September 30, 1999, the Partnership paid
distributions of approximately $3,670,000 (approximately $3,305,000 to the
limited partners or $44.07 per limited partnership unit) to its partners. The
distribution consisted of approximately $2,981,000 (approximately $2,630,000 to
the limited partners or $35.07 per limited partnership unit) from operations and
approximately $689,000 (approximately $675,000 to the limited partners or $9.00
per limited partnership unit) from the proceeds of the refinancing of the
mortgage loans encumbering Creekside Apartments and the Lodge Apartments in
August 1998. A cash distribution from operations of approximately $3,329,000
was paid during the nine months ended September 30, 1998. Of this amount,
approximately $393,000 was paid to the general partners and approximately
$2,936,000 ($39.15 per unit) was paid to the limited partners.
NOTE E - REFINANCING AND EXTRAORDINARY LOSS
On August 24, 1998, the Partnership refinanced the mortgages encumbering
Creekside Apartments and The Lodge Apartments. The refinancing of Creekside
Apartments replaced indebtedness of approximately $5,091,000 with a new mortgage
in the amount of $6,500,000. The refinancing of The Lodge Apartments replaced
indebtedness of approximately $5,593,000 with a new mortgage in the amount of
$7,200,000. Both of the new mortgages carry a stated interest rate of 6.43%.
Interest on both of the refinanced mortgages was 7.875%. Payments on both
mortgage loans are due on the first day of each month until the loans mature on
September 1, 2008. The Partnership received net proceeds from these
refinancings in the aggregate amount of $2,689,000 of which $2,000,000 was paid
as a distribution to the partners during October 1998 and the remainder was
distributed during 1999. In addition, the Partnership was required to establish
escrows with the lender for repairs, insurance, and tax costs. Total
capitalized loan costs were approximately $327,000 at September 30, 1998. The
Partnership recognized an extraordinary loss on the early extinguishment of debt
of approximately $96,000 due to the write-off of unamortized loan costs.
NOTE F - SEGMENT REPORTING
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of five apartment complexes,
three of which are located in Colorado and one each in Texas and Florida. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less.
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those described in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1998.
The Partnership's reportable segment consist of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the nine month periods ended September 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 $10,190 $ -- $10,190
Other income 530 29 559
Interest expense 2,674 -- 2,674
Depreciation 1,878 -- 1,878
General and administrative expense -- 261 261
Segment profit (loss) 1,972 (232) 1,740
Total assets 40,503 262 40,765
Capital expenditures for investment
properties 1,694 -- 1,694
1998 Residential Other Totals
Rental income $ 9,723 $ -- $ 9,723
Other income 487 106 593
Interest expense 2,531 -- 2,531
Depreciation 1,784 -- 1,784
General and administrative expense -- 213 213
Extraordinary loss on early
extinguishment of debt (96) -- (96)
Segment profit (loss) 1,103 (107) 996
Total assets 40,816 2,531 43,347
Capital expenditures for investment
properties 1,673 -- 1,673
NOTE G - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The complaint seeks monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June
25, 1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed
and filed a Stipulation of Settlement ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
NOTE H - PRIOR PERIOD RESTATEMENT
The Partnership's consolidated financial statements have been restated to
correct an error in calculating the amortization of debt discount on the zero-
coupon mortgage encumbering the Partnership's Village in The Woods Apartments
property. The effect of the restatement for the nine months ended September 30,
1998, was an increase in net income of approximately $231,000 which equates to
an increase in net income per limited partnership unit of $2.71.
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
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of five apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Cherry Creek Gardens Apartments 97% 95%
Englewood, Colorado
Creekside Apartments 98% 97%
Denver, Colorado
The Lodge Apartments 98% 97%
Denver, Colorado
The Village in the Woods Apartments 93% 95%
Cypress, Texas
Cooper's Pond Apartments 96% 97%
Tampa, Florida
Results of Operations
The Partnership generated net income for the nine months ended September 30,
1999 of approximately $1,740,000 as compared to net income of approximately
$996,000 for the corresponding period of 1998. The Partnership's net income for
the three months ended September 30, 1999 was approximately $507,000 compared to
approximately $178,000 for the three months ended September 30, 1998. The
increase in net income for the three and nine months ended September 30, 1999
was primarily due to an increase in total revenues, a decrease in total expenses
and the recognition of an extraordinary loss on early extinguishment of debt in
1998. Total revenues for both periods increased primarily due to an increase in
rental income. For the nine months ended September 30, 1999, the increase in
rental income was partially offset by a decrease in other income. For the three
months ended September 30, 1999, other income remained constant as compared to
the same period in 1998. The increase in rental income was primarily due to an
increase in average rental rates at all of the Partnership's investment
properties and, to a lesser extent, increased occupancy at Cherry Creek Gardens
Apartments, Creekside Apartments, and The Lodge Apartments. These increases
were partially offset by decreased occupancy at Village in the Woods and
Cooper's Pond Apartments as well as increased concession costs and bad debt
expense at Village in the Woods Apartments. Other income decreased for the nine
months ended September 30, 1999 primarily due to reduced interest income due to
lower average cash balances in interest bearing accounts which was partially
offset by increased tenant charges at all the Partnership's properties.
Total expenses decreased primarily due to decreased operating expenses which
more than offset increases in general and administrative expenses, depreciation
expense and interest expense. The decrease in operating expenses was primarily
due to a decrease in maintenance expenses due to fewer repair and maintenance
projects at the Partnership's investment properties, decreased insurance expense
due to lower rates provided by a new insurance carrier late in 1998 at all of
the Partnership's properties, and to decreased advertising and sewer expenses at
both Cherry Creek Apartments and Village in the Woods Apartments. In addition,
there was a loss on disposal of assets included in operating expenses in 1998
that resulted from the write-off of roofs at Village in the Woods Apartments
which were not fully depreciated at the time of their replacement in 1998. The
increase in general and administrative expenses resulted primarily from an
increase in legal expenses due to the settlement of a lawsuit as disclosed in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998, and an increase in printing and mailing costs. Included in
general and administrative expenses at both September 30, 1999 and 1998 are
reimbursements to the 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
required by the Partnership Agreement are included. Depreciation expense
increased due to capital improvements completed during the second half of 1998
and the first half of 1999 that are now being depreciated. Interest expense
increased primarily due to the increasing mortgage balance at Village in the
Woods Apartments due to amortization of the debt discount on the zero-coupon
mortgage encumbering the property. The extraordinary loss on the early
extinguishment of debt in 1998 related to the refinancing of mortgages at
Creekside Apartments and The Lodge Apartments in August of 1998.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $3,405,000 compared to approximately $5,018,000 at September 30,
1998. The decrease in cash and cash equivalents of approximately $626,000 from
the Partnership's year ended December 31, 1998 is due to approximately
$3,971,000 of cash used in financing activities and approximately $1,090,000 of
cash used in investing activities partially offset by approximately $4,435,000
of cash provided by operating activities. Net cash used in financing activities
consisted primarily of distributions to partners and, to a lesser extent,
payments of principal made on the mortgages encumbering the Partnership's
investment properties. Cash used in investing activities consisted of property
improvements and replacements partially offset by net withdrawals from escrow
accounts maintained by the mortgage lender. The Partnership invests its working
capital reserves in money market accounts.
On August 24, 1998, the Partnership refinanced the mortgages encumbering
Creekside Apartments and The Lodge Apartments. The refinancing of Creekside
Apartments replaced indebtedness of approximately $5,091,000 with a new mortgage
in the amount of $6,500,000. The refinancing of The Lodge Apartments replaced
indebtedness of approximately $5,593,000 with a new mortgage in the amount of
$7,200,000. Both of the new mortgages carry a stated interest rate of 6.43%.
Interest on both of the refinanced mortgages was 7.875%. Payments on both
mortgage loans are due on the first day of each month until the loans mature
on September 1, 2008. The Partnership received net proceeds from these
refinancings in the aggregate amount of $2,689,000 of which $2,000,000 was
paid as a distribution to the partners during October 1998 and the remainder
was distributed during 1999. In addition, the Partnership was required to
establish escrows with the lender for repairs, insurance, and tax costs.
Total capitalized loan costs were approximately $327,000 at September 30,
1998. The Partnership recognized an extraordinary loss on the early
extinguishment of debt of approximately $96,000 due to the write-off of
unamortized loan costs.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit. Based on present plans, the Managing General Partner does not
anticipate the need to borrow in the near future. Other than cash and cash
equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Partnership's properties are detailed below.
Cherry Creek Gardens Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $227,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, air conditioning unit replacement,
fencing, recreational facility improvements, parking lot resurfacing, pool
upgrades, electrical upgrades, and other structural improvements. As of
September 30, 1999, the fencing, parking lot resurfacing, pool upgrades, and
recreational facility improvements were substantially complete. These
improvements were funded from the Partnership's 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 $179,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $249,000 for 1999 at this property which include certain of the
required improvements and consist of carpet and vinyl replacement, electrical
upgrades, landscaping, and structural improvements.
Creekside Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $419,000 of capital improvements at the property, consisting
primarily of appliance replacements, carpet and vinyl replacement, parking lot
resurfacing, plumbing upgrades, water heaters, equipment purchases, and roof
replacement. These improvements were funded from the Partnership's reserves and
operating cash flows. 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 $695,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $577,000 for 1999 at this property which include
certain of the required improvements and consist of water heaters, appliances,
plumbing upgrades, carpet and vinyl replacement and structural improvements.
The Lodge Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $303,000 of capital improvements at the property, consisting
primarily of structural improvements, swimming pool upgrades, carpet and vinyl
replacement, parking lot resurfacing, and landscaping. As of September 30,
1999, swimming pool upgrades, landscaping, and structural upgrades were
substantially complete. These improvements were funded from the Partnership's
reserves and operating cash flows. 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 $474,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $323,000 for 1999 at this
property which include certain of the required improvements and consist of
carpet and vinyl replacement, parking lot resurfacing, swimming pool upgrades,
and structural upgrades.
The Village in the Woods Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $373,000 of capital improvements at the property, consisting
primarily of roof replacement, parking lot resurfacing, electrical upgrades,
lighting improvements, carpet and vinyl replacement and structural improvements.
As of September 30, 1999, the parking lot resurfacing, electrical upgrades,
lighting upgrades, roof replacement, and structural improvements were
substantially complete. These improvements were funded from operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $362,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $445,000 for 1999 at this property which include certain of the
required improvements and consist of air conditioning units, carpet replacement,
parking lot resurfacing, electrical upgrades, landscaping and roof replacement.
Cooper's Pond Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $372,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, structural improvements, electrical
upgrades, landscaping, parking lot resurfacing, plumbing improvements and
appliances. As of September 30, 1999, the parking lot resurfacing and plumbing
improvements were complete and the electrical upgrades were approximately 75%
complete. These improvements were funded from the Partnership's 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 $517,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $546,000 for 1999 at this property which include
certain of the required improvements and consist of carpet and vinyl
replacement, landscaping, grounds lighting, parking lot resurfacing, pool
upgrades, appliances, and other structural upgrades.
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 Parnership'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 $42,456,000, net of discount, is amortized over
varying periods with maturity dates ranging from July 1999 at Cooper's Pond
Apartments to September 2008 at all the other properties. The maturity date of
July 1999 for the loan at Cooper's Pond Apartments has been extended by the
lender while the Managing General Partner negotiates the refinancing of the
loan. Although there can be no assurance that it will be able to do so, the
Managing General Partner believes it will be able to refinance the debt at
Cooper's Pond. 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 Partnership
will risk losing such property through foreclosure.
During the nine months ended September 30, 1999, the Partnership paid
distributions of approximately $3,670,000 (approximately $3,305,000 to the
limited partners or $44.07 per limited partnership unit) to its partners. The
distributions consisted of approximately $2,981,000 (approximately $2,630,000 to
the limited partners or $35.07 per limited partnership unit) from operations and
approximately $689,000 (approximately $675,000 to the limited partners or $9.00
per limited partnership unit) from the proceeds of the refinancing of the
mortgage loans encumbering Creekside Apartments and The Lodge Apartments in
August 1998. A cash distribution from operations of approximately $3,329,000
was paid during the nine months ended September 30, 1998. Of this amount,
approximately $393,000 was paid to the general partners and approximately
$2,936,000 ($39.15 per unit) was paid to the limited partners. Future cash
distributions will depend on the levels of net cash generated from operations,
timing of debt maturities, refinancings and/or property sales and the
availability of cash reserves. The Partnership's distribution policy is
reviewed on a quarterly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after required
capital improvements to permit further distributions to its partners during the
remainder of 1999 or subsequent periods.
Tender Offer
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner, commenced a tender offer to purchase up to 20,860.54 (approximately
27.81% of the total outstanding units) units of limited partnership interest in
the Partnership for a purchase price of $448 per unit. The offer expired on
July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,864.00
units. As a result, AIMCO and its affiliates currently own 31,445.00 units of
limited partnership interest in the Partnership representing approximately
41.93% of the total outstanding units. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO (see "Item 1. Financial Statements, Note G -
Legal Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
Managing General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The Managing General Partner filed demurrers to the amended complaint
which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed
and filed a Stipulation of Settlement ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Partnership caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XVII
By: FOX PARTNERS
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
<PAGE>
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XVII 1999 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000356472
<NAME> CENTURY PROPERTIES FUND XVII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,405
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 69,878
<DEPRECIATION> 34,587
<TOTAL-ASSETS> 40,765
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 42,456
0
0
<COMMON> 0
<OTHER-SE> (3,039)
<TOTAL-LIABILITY-AND-EQUITY> 40,765
<SALES> 0
<TOTAL-REVENUES> 10,749
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,009
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,674
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,740
<EPS-BASIC> 20.47<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
