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 0-11137
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, Post Office 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)
June 30, 1999
Assets
Cash and cash equivalents $ 4,055
Receivables and deposits 960
Restricted escrows 597
Other assets 304
Investment properties:
Land $ 7,078
Buildings and related personal property 62,050
69,128
Less accumulated depreciation (33,941) 35,187
$ 41,103
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 93
Tenant security deposit liabilities 296
Accrued property taxes 533
Other liabilities 333
Mortgage notes payable 42,224
Partners' Capital (Deficit)
General partner's $ (7,748)
Limited partners' (75,000 units issued
and outstanding) 5,372 (2,376)
$ 41,103
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 Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues: (As Restated) (As Restated)
Rental income $3,409 $3,251 $6,765 $6,415
Other income 198 206 361 394
Total revenues 3,607 3,457 7,126 6,809
Expenses:
Operating 1,147 1,294 2,300 2,582
General and administrative 105 62 174 144
Depreciation 621 582 1,232 1,153
Interest 890 860 1,784 1,723
Property taxes 205 204 403 389
Total expenses 2,968 3,002 5,893 5,991
Net income $ 639 $ 455 $1,233 $ 818
Net income allocated to
general partner $ 75 $ 54 $ 145 $ 97
Net income allocated to
limited partners 564 401 1,088 721
$ 639 $ 455 $1,233 $ 818
Net income per limited
partnership unit $ 7.52 $ 5.35 $14.51 $ 9.61
Distribution per limited
partnership unit $ -- $ -- $30.31 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XVII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(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)
Distribution to Partners -- (227) (2,273) (2,500)
Net income for the six
months ended June 30, 1999 -- 145 1,088 1,233
Partners' (deficit) capital at
June 30, 1999 75,000 $(7,748) $ 5,372 $(2,376)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XVII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities: (As Restated)
Net income $1,233 $ 818
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,232 1,153
Amortization of loan costs and debt discounts 710 654
Loss on disposal of property -- 36
Change in accounts:
Receivables and deposits 72 353
Other assets (44) 37
Accounts payable (49) 14
Tenant security deposit liabilities 22 4
Accrued property taxes (145) (187)
Other liabilities (48) (30)
Net cash provided by operating activities 2,983 2,852
Cash flows from investing activities:
Net withdrawals from restricted escrows 684 269
Property improvements and replacements (944) (903)
Net cash used in investing activities (260) (634)
Cash flows from financing activities:
Payments on mortgage notes payable (199) (219)
Distribution to partners (2,500) --
Net cash used in financing activities (2,699) (219)
Net increase in cash and cash equivalents 24 1,999
Cash and cash equivalents at beginning of period 4,031 4,011
Cash and cash equivalents at end of period $4,055 $6,010
Supplemental disclosure of cash flow information:
Cash paid for interest $1,075 $1,071
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 "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 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.
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
The Lodge Apartments, entities in which the Partnership ultimately holds a 100%
interest. 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 affiliates
during the six months ended June 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $356 $335
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expense and operating expense) 121 111
During the six months 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 $356,000 and $335,000 for the
six months ended June 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $121,000 and
$111,000 for the six months ended June 30, 1999 and 1998, respectively.
Included in these expenses is approximately $41,000 and $30,000 in construction
oversight costs for the six months ended June 30, 1999 and 1998, respectively.
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 (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 31,092.00 units of
limited partnership interest in the Partnership representing 41.46% 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.
NOTE D - DISTRIBUTION
During the six months ended June 30, 1999, the Partnership paid a distribution
of approximately $2,500,000 (approximately $30.31 per limited partnership unit)
to its partners. The distribution consisted of approximately $1,811,000 from
operations and approximately $689,000 from the proceeds of the refinancing of
the mortgage loans encumbering Creekside Apartments and the Lodge Apartments in
August 1998. As a part of the distribution paid to the general partner, a
management incentive fee of approximately $181,000 is included. No distributions
to the partners were made during the six month period ending June 30, 1998.
Subsequent to June 30, 1999, the Partnership declared and paid a distribution
from operations of approximately $1,170,000 (approximately $13.76 per limited
partnership unit) to its partners.
NOTE E - SEGMENT REPORTING
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of five apartment complexes
in Colorado, 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 fiscal year ended December
31, 1998.
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 months 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 $ 6,765 $ -- $ 6,765
Other income 337 24 361
Interest expense 1,784 -- 1,784
Depreciation 1,232 -- 1,232
General and administrative expense -- 174 174
Segment profit (loss) 1,383 (150) 1,233
Total assets 40,498 605 41,103
Capital expenditures for investment
properties 944 -- 944
1998
Residential Other Totals
Rental income $ 6,415 $ -- $ 6,415
Other income 321 73 394
Interest expense 1,723 -- 1,723
Depreciation 1,153 -- 1,153
General and administrative expense -- 144 144
Segment profit (loss) 889 (71) 818
Total assets 39,633 3,516 43,149
Capital expenditures for investment
properties 903 -- 903
NOTE F - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates as well as a
recently announced agreement between Insignia and AIMCO. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs 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 demurrers has been received. The Managing General Partner does
not anticipate that the costs associated with this case, if any, 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 G - 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 six months ended June 30, 1998,
was an increase in net income of approximately $154,000 which equates to an
increase in net income per limited partnership unit of $1.81.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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 five apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Cherry Creek Gardens Apartments
Englewood, Colorado 97% 95%
Creekside Apartments
Denver, Colorado 98% 97%
The Lodge Apartments
Denver, Colorado 98% 97%
The Village in the Woods Apartments
Cypress, Texas 93% 95%
Cooper's Pond Apartments
Tampa, Florida 96% 96%
Results of Operations
The Partnership generated net income for the six months ended June 30, 1999 of
approximately $1,233,000 compared to net income of approximately $818,000 for
the corresponding period of 1998. The Partnership's net income for the three
months ended June 30, 1999 was approximately $639,000 compared to approximately
$455,000 for the three months ended June 30, 1998. The increase in net income
for the three and six month periods ended June 30, 1999 was due to an increase
in total revenues and a decrease in total expenses. Total revenues for both
periods increased primarily due to an increase in rental income which was
partially offset by a decrease in other income. 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 lessor extent to increased
occupancy at Cherry Creek Gardens, Creekside, and the Lodge Apartments. These
increases were partially offset by decreased occupancy and increased concession
costs at Village in the Woods Apartments. Other income decreased 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 expense, 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 the use of a new insurance carrier at all of the Partnership's
properties, decreased advertising and sewer expenses at both Cherry Creek
Apartments and Village in the Woods Apartments. Partially offsetting these
decreases, 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 the Everest 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 June 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.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. 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 Partnership had cash and cash equivalents of approximately
$4,055,000 compared to approximately $6,010,000 at June 30, 1998. The increase
in cash and cash equivalents of approximately $24,000 from the Partnership's
year ended December 31, 1998 is due to approximately $2,983,000 of cash provided
by operating activities substantially offset by approximately $2,699,000 of cash
used in financing activities and approximately $260,000 of cash used in
investing activities. Net cash used in financing activities consisted primarily
of a distribution to partners and to a lessor extent of payments of principal
made on the mortgages encumbering the Partnership's investment properties. Cash
used in investing activities consisted of property improvements and replacements
which is partially offset by withdrawals from escrow accounts maintained by the
mortgage lender. The Partnership invests its working capital 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 various 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 six months ended June 30, 1999, the Partnership completed
approximately $131,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, fencing, parking lot repairs, pool
repairs, electrical upgrades, and other structural improvements. 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 six months ended June 30, 1999, the Partnership completed
approximately $143,000 of capital improvements at the property, consisting
primarily of appliance replacements, carpet and vinyl replacement, parking lot
repairs, plumbing upgrades, water heaters, equipment purchases, and structural
improvements. These improvements were funded from the Partnership's 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 $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 six months ended June 30, 1999, the Partnership completed
approximately $244,000 of capital improvements at the property, consisting
primarily of structural improvements, swimming pool repairs, carpet and vinyl
replacement, parking lot improvements, and fencing. These improvements were
funded from the Partnership's 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 $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 improvements, swimming pool repairs,
and structural upgrades.
The Village in the Woods Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $253,000 of capital improvements at the property, consisting
primarily of roof replacement, parking lot repairs, carpet and vinyl replacement
and structural improvements. These improvements were funded from operating cash
flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates 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 repairs, electrical upgrades, landscaping, and roof replacement.
Cooper's Pond Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $173,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, structural improvements, landscaping,
and appliances. 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 repairs, pool repairs,
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 Partnership'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 $42,224,000, 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 maturing
at Cooper's Pond. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
may risk losing such properties through foreclosure.
During the six months ended June 30, 1999, the Partnership paid a distribution
of approximately $2,500,000 (approximately $2,273,000 to the limited partners or
$30.31 per limited partnership unit) to its partners. The distribution
consisted of approximately $1,811,000 (approximately $1,597,000 to the limited
partners or $21.30 per limited partnership unit) from operations and
approximately $689,000 (approximately $675,000 to the limited partners or $9.01
per limited partnership unit) from the proceeds of the refinancing of the
mortgage loans encumbering Creekside Apartments and the Lodge Apartments in
August 1998. As a part of the distribution paid to the general partner, a
management incentive fee of approximately $181,000 is included. Subsequent to
June 30, 1999, the Partnership declared and paid a distribution from operations
of approximately $1,170,000 (approximately $1,032,000 to the limited partners or
$13.76 per limited partnership unit) to its partners. No distributions were
made to the partners during the six month period ending June 30, 1998. 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 will
be 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 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 20,860.54 (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 31,092.00 units of
limited partnership interest in the Partnership representing 41.46% 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.
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 ("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 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 demurrers has been received. The Managing General Partner does
not anticipate that the costs associated with this case, if any, 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 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 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/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XVII 1999 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,055
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 69,128
<DEPRECIATION> 33,941
<TOTAL-ASSETS> 41,103
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 42,224
0
0
<COMMON> 0
<OTHER-SE> (2,376)
<TOTAL-LIABILITY-AND-EQUITY> 41,103
<SALES> 0
<TOTAL-REVENUES> 7,126
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,784
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,233
<EPS-BASIC> 14.51<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
