FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
UNITED STATES
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, 1998
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11934
CENTURY PROPERTIES FUND XVIII
(Exact name of small business issuer as specified in its charter)
California 94-2834149
(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 XVIII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1998
Assets
Cash and cash equivalents $ 2,092
Receivables and deposits 479
Restricted escrows 212
Other assets 488
Investment properties:
Land $ 7,296
Buildings and related personal property 19,811
27,107
Less accumulated depreciation (10,298) 16,809
$ 20,080
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 47
Other liabilities 166
Accrued property taxes 300
Tenant security deposit liabilities 80
Mortgage notes payable 19,509
Partners' (Deficit) Capital
General partner $ (6,333)
Limited partners (75,000 units issued
and outstanding) 6,311 (22)
$ 20,080
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 1,143 $ 1,149 $ 3,427 $ 3,422
Other income 71 78 211 240
Total revenues 1,214 1,227 3,638 3,662
Expenses:
Operating 426 424 1,209 1,220
General and administrative 53 50 160 155
Depreciation 176 175 521 515
Interest 347 428 1,082 1,114
Property tax 100 95 299 290
Total expenses 1,102 1,172 3,271 3,294
Income before extraordinary item $ 112 $ 55 $ 367 $ 368
Extraordinary item-gain on
extinguishment of debt -- 108 -- 108
Net income $ 112 $ 163 $ 367 $ 476
Net income allocated to
general partner (9.9%) $ 11 $ 16 $ 36 $ 47
Net income allocated to
limited partners (90.1%) 101 147 331 429
Net income $ 112 $ 163 $ 367 $ 476
Per limited partnership unit:
Income before extraordinary item $ 1.34 $ .66 $ 4.41 $ 4.42
Extraordinary item -- 1.30 -- 1.30
Net income $ 1.34 $ 1.96 $ 4.41 $ 5.72
Surplus distributions
per limited partnership unit $ 9.81 $ -- $ 9.81 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS 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, 1997 75,000 $(6,362) $ 6,716 $ 354
Distribution to partners -- (7) (736) (743)
Net income for the nine months
ended September 30, 1998 -- 36 331 367
Partners' (deficit) capital
at September 30, 1998 75,000 $(6,333) $ 6,311 $ (22)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income $ 367 $ 476
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 521 515
Amortization of loan costs 27 33
Extraordinary item-gain on extinguishment of debt -- (108)
Change in accounts:
Receivables and deposits (375) 240
Other assets (6) (18)
Accounts payable (15) (50)
Other liabilities (1) (7)
Accrued property taxes 5 (3)
Tenant security deposit liabilities -- (24)
Net cash provided by operating activities 523 1,054
Cash flows used in investing activities:
Property improvements and replacements (248) (99)
Net (deposits to) receipts from restricted escrows (181) 131
Net cash (used in) provided by
investing activities (429) 32
Cash flows used in financing activities:
Proceeds from mortgage notes payable 9,000 10,600
Repayment of mortgage notes payable (7,907) (10,132)
Loan costs paid (243) (227)
Payments on mortgage notes payable (134) (314)
Distributions to partners (743) --
Net cash used in financing activities (27) (73)
Net increase in cash and cash equivalents 67 1,013
Cash and cash equivalents at beginning of period 2,025 1,259
Cash and cash equivalents at end of period $ 2,092 $ 2,272
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,061 $ 1,048
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XVIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Century
Properties Fund XVIII (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The Partnership's general partner is Fox Partners. The general partners of Fox
Partners are Fox Capital Management Corporation (the "Managing General Partner"
or FCMC"), Fox Realty Investors ("FRI"), and Fox Partners 82. In the opinion of
the Managing General Partner, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 1998,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
Note B - 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 paid property management fees to
affiliates of the Managing General Partner based upon collected gross rental
revenues for property management services as noted below for the nine month
periods ended September 30, 1998 and 1997, respectively. The Partnership's
limited partnership agreement ("Agreement") provides for reimbursement to the
Managing General Partner and its affiliates for costs incurred in connection
with the administration of Partnership activities. The Managing General Partner
and its affiliates received reimbursements and fees as reflected in the
following table:
Nine Months Ended
September 30,
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $181 $181
Reimbursement for services of affiliates (1)
(included in operating, general and administrative
expenses and investment properties) 117 96
(1) Included in "reimbursements for services of affiliates" for the nine months
ended September 30, 1998 and 1997, is approximately $2,000 per year in
reimbursements for construction oversight costs. As well, $18,000 in loan
costs were paid for the nine months ended September 30, 1998. These loan
costs have been capitalized and are being amortized over the term of the
loan.
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner, which receives payments on these obligations from the agent. The
amount of the Partnership's insurance premiums that accrued to the benefit of
the affiliate of the Managing General Partner by virtue of the agent's
obligations was not significant.
On December 17, 1997, an affiliate of the Managing General Partner (the
"Purchaser") commenced a tender offer for limited partnership interests in the
Partnership. The Purchaser offered to purchase up to 30,000 of the outstanding
units of limited partnership interest ("units") in the Partnership, at $70.00
per Unit, net to the seller in cash. On January 30, 1998, the Purchaser
acquired an additional 5,260 units pursuant to this tender offer.
Note C - Refinancing
In August 1998, the Partnership refinanced the mortgage indebtedness encumbering
Overlook Point Apartments. The total indebtedness refinanced was approximately
$7,907,000. The new indebtedness, in the principal amount of $9,000,000,
carries a stated interest rate of 6.33% per annum and is being amortized over 30
years, with a balloon payment due September 1, 2005. The proceeds from the
refinancing enabled the Partnership to pay-off its previous first mortgage note.
As a condition of the loan, the Partnership was required to deposit
approximately $99,000 into a repair escrow fund in order to pay the costs of
certain repairs on the property over the next twelve months.
In September 1997, the Partnership refinanced the mortgage indebtedness
encumbering Oak Run Apartments. The total indebtedness refinanced was
approximately $10,132,000. The new indebtedness, in the principal amount of
$10,600,000, carries a stated interest rate of 7.36% per annum and is being
amortized over 30 years, with a balloon payment due October 1, 2004. The
proceeds from the refinancing enabled the Partnership to pay-off its previous
first mortgage note and a participating note held by a former lender. As a
result of the refinancing, the Partnership recognized a net gain of
approximately $108,000 upon extinguishment of the debt. This gain is due to the
write-off of $133,000 in unamortized loan costs and due to $241,000 in debt
forgiveness as a result of the participating note holder accepting a reduced
pay-off. In order to obtain the new loan on Oak Run Apartments, the lender
required that the property be conveyed to a single purpose entity. As a result,
the property was conveyed from the Partnership to Oak Run, L.L.C., a South
Carolina limited liability company. The Partnership is the sole owner of Oak
Run, L.L.C.
For the nine months ended September 1998 and 1997, total loan costs of $243,000
and $227,000, respectively, relating to the refinancings have been capitalized
and are being amortized over the terms of each of the respective loans.
Note D - Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired
approximately 51% of the outstanding common shares of beneficial interest of
Insignia Properties Trust ("IPT"), the entity which controls the Managing
General Partner. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares.
AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT
Merger and has granted an irrevocable limited proxy to unaffiliated
representatives of IPT to vote the IPT Shares acquired by AIMCO and its
subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and
its agreement, the vote of no other holder of IPT is required to approve the
merger. The Managing General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Oak Run Apartments (1)
Dallas, Texas 92% 97%
Overlook Point Apartments
Salt Lake City, Utah 93% 93%
(1) The decrease in occupancy at Oak Run Apartments is a result of a surplus of
newer properties with nicer interior and amenities in the immediate
submarket.
The Partnership's net income for the nine months ended September 30, 1998, was
approximately $367,000, of which approximately $112,000 was reported in the
third quarter. The Partnership's net income for the corresponding periods in
1997 was approximately $476,000 and $163,000, respectively. The decrease in net
income is attributable to the gain on extinguishment of debt in 1997. Despite
decreases in average occupancy at both investment properties, rental income
increased for the nine months ended September 30, 1998, due to an increase in
average rental rates. For the three months ended September 30, 1998, rental
income decreased slightly primarily due to a decrease in average occupancy at
Oak Run Apartments, as discussed above. Other income decreased due to the
decrease in income from corporate units and deposit forfeitures at Overlook
Point Apartments. A company that was relocating used the apartment complex for
short term, temporary housing during 1997. This decrease in other income was
partially offset by an increase in interest income due to the Partnership
carrying higher cash balances in 1998. Interest expense decreased for the three
and nine months ended September 30, 1998, as compared to the three and nine
months ended September 30, 1997, due to the refinancing of the mortgage
indebtedness encumbering Oak Run Apartments in September 1997. In addition, the
mortgage indebtedness encumbering Overlook Point Apartments was refinanced in
August, 1998 contributing to the decrease in interest expense for the three
months ended September 1998.
Included in operating expenses for the nine months ended September 30, 1998, is
approximately $16,000 of major repairs and maintenance mainly comprised of
parking lot repairs and window coverings. Included in operating expenses for
the nine months ended September 30, 1997, was approximately $41,000 of major
repairs and maintenance mainly comprised of exterior building repairs, major
landscaping, window coverings, and swimming pool repairs.
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.
At September 30, 1998, the Partnership had cash and cash equivalents of
approximately $2,092,000, as compared to approximately $2,272,000 at September
30, 1997. Cash and cash equivalents increased approximately $67,000 and
$1,013,000 for the nine month periods ended September 30, 1998 and 1997,
respectively. Net cash provided by operating activities decreased for the nine
months ended September 30, 1998, as compared to the nine months ended September
30, 1997, due to the decrease in net income as discussed above and an increase
in receivables and deposits. Receivables and deposits increased due to an
increase in funds escrowed for insurance and property taxes relating to the
refinancings at both properties. Net cash used in investing activities for the
nine months ended September 30, 1998, increased as a result of the following
property improvement and replacement expenditures: conversion of a tennis court
into a sport court at Overlook Point Apartments, an ongoing balcony replacement
project at Oak Run Apartments and replacement of lighting systems at both
properties. The increase in deposits to restricted escrows is due to increased
deposits to a Repair Escrow Fund at Overlook Point Apartments and to a
Replacement Reserve Fund at Oak Run Apartments as required by a condition of the
refinancings at both properties. Cash used in financing activities is attributed
to the surplus distribution to partners of $743,000 during the third quarter of
1998. Offsetting this use was proceeds of $9,000,000 from the refinancing of
Overlook Point Apartments as noted below. The decrease in payments on mortgage
notes payable for the nine months ended September 30, 1998, as compared to the
same period in 1997, is due to the refinancing of the indebtedness at Oak Run
Apartments in September 1997. During 1997, principal payments were also being
made on the participating note to the former lender, as discussed below.
In August 1998, the Partnership refinanced the mortgage indebtedness encumbering
Overlook Point Apartments. The total indebtedness refinanced was approximately
$7,907,000. The new indebtedness, in the principal amount of $9,000,000,
carries a stated interest rate of 6.33% per annum and is being amortized over 30
years, with a balloon payment due September 1, 2005. The proceeds from the
refinancing enabled the Partnership to pay-off its previous first mortgage note.
As a condition of the loan, the Partnership was required to deposit
approximately $99,000 into a Repair Escrow Fund in order to pay the costs of
certain repairs on the property over the next twelve months.
In September 1997, the Partnership refinanced the mortgage indebtedness
encumbering Oak Run Apartments. The total indebtedness refinanced was
approximately $10,132,000. The new indebtedness, in the principal amount of
$10,600,000, carries a stated interest rate of 7.36% per annum and is being
amortized over 30 years, with a balloon payment due October 1, 2004. The
proceeds from the refinancing enabled the Partnership to pay-off its previous
first mortgage note and a participating note held by a former lender. As a
result of the refinancing, the Partnership recognized a net gain of
approximately $108,000 upon extinguishment of the debt. This gain is due to the
write-off of $133,000 in unamortized loan costs and due to $241,000 in debt
forgiveness as a result of the participating note holder accepting a reduced
pay-off. In order to obtain the new loan on Oak Run Apartments, the lender
required that the property be conveyed to a single purpose entity. As a result,
the property was conveyed from the Partnership to Oak Run, L.L.C., a South
Carolina limited liability company. The Partnership is the sole owner of Oak
Run, L.L.C.
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. At the present time, the Partnership has no outstanding amounts
due under this line of credit. Based on present plans, the Managing General
Partner does not anticipate the need to borrow in the near future. Other than
cash and cash equivalents, the line of credit is the Partnership's only unused
source of liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with federal,
state and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
Managing General Partner is currently assessing the need for capital
improvements at each of the Partnership's properties. To the extent that
additional capital improvements are required, the Partnership's distributable
cash flow, if any, may be adversely affected. The mortgage indebtedness of
$19,509,000 is amortized over thirty years with balloon payments of $9,728,000
and $8,170,000 due in October 2004 and September 2005, respectively. The
Managing General Partner will attempt to refinance such indebtedness or sell the
properties prior to such maturity date. If the properties cannot be refinanced
or sold for a sufficient amount, the Partnership will risk losing such
properties through foreclosure. A cash distribution of $743,000 was declared
during the second quarter of 1998 and paid in July 1998. No cash distributions
were made during the first nine months of 1997. Future cash distributions will
depend on the levels of net cash generated from operations, refinancings,
property sales and the availability of cash reserves. The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations to permit distributions to its partners in 1998 or subsequent
periods.
On December 17, 1997, an affiliate of the Managing General Partner (the
"Purchaser") commenced a tender offer for limited partnership interests in the
Partnership. The Purchaser offered to purchase up to 30,000 of the outstanding
units of limited partnership interest ("units") in the Partnership, at $70.00
per Unit, net to the seller in cash. On January 30, 1998, the Purchaser
acquired an additional 5,260 units pursuant to this tender offer.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired
approximately 51% of the outstanding common shares of beneficial interest of
Insignia Properties Trust ("IPT"), the entity which controls the Managing
General Partner. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares.
AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT
Merger and has granted an irrevocable limited proxy to unaffiliated
representatives of IPT to vote the IPT Shares acquired by AIMCO and its
subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and
its agreement, the vote of no other holder of IPT is required to approve the
merger. The Managing General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.
Year 2000
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the Managing General Partner was to the security
systems, elevators, heating-ventilation-air-conditioning systems, telephone
systems and switches, and sprinkler systems. The Managing General Partner is
currently engaged in the identification of all non-compliant operational
systems, and is in the process of estimating the costs associated with any
potential modifications or replacements needed to such systems in order for them
to be Year 2000 compliant. It is not expected that such costs would have a
material adverse affect upon the operations of the Partnership.
RISK ASSOCIATED WITH THE YEAR 2000
The Managing General Partner believes that the Managing Agent has an effective
program in place to resolve the Year 2000 issue in a timely manner and has
appropriate contingency plans in place for critical applications that could
affect the Partnership's operations. To date, the Managing General Partner is
not aware of any external agent with a Year 2000 issue that would materially
impact the Partnership's results of operations, liquidity or capital resources.
However, the Managing General Partner has no means of ensuring that external
agents will be Year 2000 compliant. The Managing General Partner does not
believe that the inability of external agents to complete their Year 2000
resolution process in a timely manner will have a material impact on the
financial position or results of operations of the Partnership. However, the
effect of non-compliance by external agents is not readily determinable.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements speak only as of the date of this
quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in 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 to acquire
limited partnership units, the management of partnerships 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, plaintiffs have recently filed an amended complaint. The
Managing General Partner has filed demurrers to the amended complaint which are
scheduled to be heard on January 8, 1999. The Managing General Partner believes
the action to be without merit, and intends to vigorously defend it.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, County of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). The complaint names as defendants Insignia, several
Insignia Affiliates alleged to be managing partners of the Subject Partnerships,
the Partnership and the Managing General Partner. Plaintiffs allege that they
have requested from, but have been denied by each of the Subject Partnerships,
lists of their respective limited partners for the purpose of making tender
offers to purchase up to 4.9% of the limited partner units of each of the
Subject Partnerships. The complaint also alleges that certain of the defendants
made tender offers to purchase limited partner units in many of the Subject
Partnerships, with the alleged result that plaintiffs have been deprived of the
benefits they would have realized from ownership of the additional units. The
plaintiffs assert eleven causes of action, including breach of contract, unfair
business practices, and violations of the partnership statutes of the states in
which the Subject Partnerships are organized. Plaintiffs seek compensatory,
punitive and treble damages. The Managing General Partner filed an answer to the
complaint on September 15, 1998. The Managing General Partner believes the
claims to be without merit and intends to defend the action vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner of the Partnership
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition,
results of operations or liquidity of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits required by Item 601 of Regulation S-B:
Refer to Exhibit Index in this report.
b) Reports on Form 8-K filed during the third quarter of 1998:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XVIII
By: FOX PARTNERS,
Its General Partner
By: Fox Capital Management Corporation,
Its Managing General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 12, 1998
EXHIBIT INDEX
S-K Reference
Number Description
10.1 Multi-Family Note between Century Properties Fund XVIII, L.P., a
California limited partnership, and Newport Mortgage Company,
L.P., a Texas limited partnership, dated August 24, 1998,.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Century Properties Fund XVIII 1998 Third Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000704271
<NAME> CENTURY PROPERTIES FUND XVIII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,092
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 27,107
<DEPRECIATION> (10,298)
<TOTAL-ASSETS> 20,080
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 19,509
0
0
<COMMON> 0
<OTHER-SE> (22)
<TOTAL-LIABILITY-AND-EQUITY> 20,080
<SALES> 0
<TOTAL-REVENUES> 3,638
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,082
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367
<EPS-PRIMARY> 4.41<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
MULTIFAMILY NOTE
(MULTISTATE)
US $9,000,000.00 August 24, 1998
FOR VALUE RECEIVED, the undersigned ("BORROWER") jointly and severally (if
more than one) promises to pay to the order of NEWPORT MORTGAGE COMPANY, L.P.,
a Texas limited partnership the principal sum of Nine Million Dollars
(US $9,000,000.00), with interest on the unpaid principal balance at the annual
rate of six 33/100 percent (6.33%).
1. DEFINED TERMS. As used in this Note, (i) the term "LENDER" means the
holder of this Note, and (ii) the term "INDEBTEDNESS" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. ADDRESS FOR PAYMENT. All payments due under this Note shall be
payable at 8411 Preston Road, Suite 680, Dallas, Texas 75225 or such other place
as may be designated by written notice to Borrower from or on behalf of Lender.
3. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest shall be
paid as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of Fifty five thousand eight hundred eight-three and 67/100 Dollars
(US $55,883.67), shall be payable on the first day of each month beginning on
October 1, 1998, until the entire unpaid principal balance evidenced by this
Note is fully paid. Any accrued interest remaining past due for 30 days or more
shall be added to and become part of the unpaid principal balance and shall bear
interest at the rate or rates specified in this Note, and any reference below to
"accrued interest" shall refer to accrued interest which has not become part of
the unpaid principal balance. Any remaining principal and interest shall be due
and payable on September 1, 2005 or on any earlier date on which the unpaid
principal balance of this Note becomes due and payable, by acceleration or
otherwise (the "MATURITY DATE"). The unpaid principal balance shall continue to
bear interest after the Maturity Date at the Default Rate set forth in this Note
until and including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest
that is received by Lender before the date it is due shall be deemed to have
been received on the due date solely for the purpose of calculating interest
due.
4. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion. Borrower agrees that neither Lender's
acceptance of a payment from Borrower in an amount that is less than all amounts
then due and payable nor Lender's application of such payment shall constitute
or be deemed to constitute either a waiver of the unpaid amounts or an accord
and satisfaction.
5. SECURITY. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "SECURITY INSTRUMENT"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. ACCELERATION. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. LATE CHARGE. If any monthly amount payable under this Note or under
the Security Instrument or any other Loan Document is not received by Lender
within ten (10) days after the amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to five percent
(5%) of such amount. Borrower acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the loan evidenced by this Note (the "LOAN"), and that it is
extremely difficult and impractical to determine those additional expenses.
Borrower agrees that the late charge payable pursuant to this Paragraph
represents a fair and reasonable estimate, taking into account all circumstances
existing on the date of this Note, of the additional expenses Lender will incur
by reason of such late payment. The late charge is payable in addition to, and
not in lieu of, any interest payable at the Default Rate pursuant to Paragraph
8.
8. DEFAULT RATE. So long as (a) any monthly installment under this Note
remains past due for 30 days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "DEFAULT RATE") equal to the lesser of 4 percentage points above the
rate stated in the first paragraph of this Note or the maximum interest rate
which may be collected from Borrower under applicable law. If the unpaid
principal balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate. Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan, that, during the time that any monthly
installment under this Note is delinquent for more than 30 days, Lender will
incur additional costs and expenses arising from its loss of the use of the
money due and from the adverse impact on Lender's ability to meet its other
obligations and to take advantage of other investment opportunities, and that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for more than 30 days or any other
Event of Default has occurred and is continuing, Lender's risk of nonpayment of
this Note will be materially increased and Lender is entitled to be compensated
for such increased risk. Borrower agrees that the increase in the rate of
interest payable under this Note to the Default Rate represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
of this Note, of the additional costs and expenses Lender will incur by reason
of the Borrower's delinquent payment and the additional compensation Lender is
entitled to receive for the increased risks of nonpayment associated with a
delinquent loan.
9. LIMITS ON PERSONAL LIABILITY.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit
or impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the unpaid principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment of
all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "MORTGAGED PROPERTY" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. VOLUNTARY AND INVOLUNTARY PREPAYMENTS.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on the last Business Day of a calendar month if Borrower
has given Lender at least 30 days prior notice of its intention to make such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Schedule A. For all purposes including the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the month
shall be deemed to have been received on the last calendar day of such month.
For purposes of this Note, a "BUSINESS DAY" means any day other than a Saturday,
Sunday or any other day on which Lender is not open for business. Borrower
shall not have the option to voluntarily prepay less than all of the unpaid
principal balance.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid principal
balance of this Note outstanding at the time of the acceleration, (A) all
accrued interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note prior
to the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
thirty (30) days before the Maturity Date, or (B) any prepayment occurring as a
result of the application of any insurance proceeds or condemnation award under
the Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
11. COSTS AND EXPENSES. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. FORBEARANCE. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. WAIVERS. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. LOAN CHARGES. If any applicable law limiting the amount of interest
or other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of the Note. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.
15. COMMERCIAL PURPOSE. Borrower represents that the Indebtedness is
being incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. COUNTING OF DAYS. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. GOVERNING LAW. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. CAPTIONS. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. NOTICES. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. CONSENT TO JURISDICTION AND VENUE. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "PROPERTY
JURISDICTION"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. THE FOLLOWING SCHEDULES ARE ATTACHED TO THIS NOTE:
|X | SCHEDULE A PREPAYMENT PREMIUM (REQUIRED)
|X | SCHEDULE B MODIFICATIONS TO MULTIFAMILY NOTE
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
BORROWER:
CENTURY PROPERTIES FUND XVIII,
a California limited partnership
By: FOX PARTNERS, a California general
partnership, General Partner
By: Fox Capital Management Corporation,
a California corporation, Managing
General Partner
By: /s/ Robert D. Long Jr.
Robert D. Long, Jr.,
Vice President
Borrower's Social Security/Employer ID Number 94-2834149
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date
that is seventy-eight (78) months after the first day of the first calendar
month following the date of this Note (the "YIELD MAINTENANCE PERIOD"), the
prepayment premium shall be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
MONTHLY NOTE RATE: one-twelfth (1/12) of the annual interest rate of
the Note, expressed as a decimal calculated to five digits.
PREPAYMENT DATE: in the case of a voluntary prepayment, the date on
which the prepayment is made; in any other case, the date on which
Lender accelerates the unpaid principal balance of the Note.
ASSUMED REINVESTMENT RATE: one-twelfth (1/12) of the yield rate as of
the date 5 Business Days before the Prepayment Date, on the 5.625%
U.S. Treasury Security due May 1, 2005, as reported in The Wall Street
Journal, expressed as a decimal calculated to five digits. In the
event that no yield is published on the applicable date for the
Treasury Security used to determine the Assumed Reinvestment Rate,
Lender, in its discretion, shall select the non-callable Treasury
Security maturing in the same year as the Treasury Security specified
above with the lowest yield published in The Wall Street Journal as of
the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, Lender shall
select a security with a comparable rate and term to the Treasury
Security used to determine the Assumed Reinvestment Rate. The
selection of an alternate security pursuant to this Paragraph shall be
made in Lender's discretion.
PRESENT VALUE FACTOR: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during
the months remaining in the Yield Maintenance Period, using the
Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
1
1(1+ARR)
ARR
N = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than ninety (90) days before the Maturity Date, the
prepayment premium shall be 1.0% of the unpaid principal balance of this Note.
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
The foregoing Multifamily Note is hereby modified in the following respects:
A. The final sentence of Paragraph 9(a) is amended to read as follows:
This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any
guarantor of the Indebtedness or any guarantor of any
obligations of Borrower in accordance with the applicable
guaranty.
B. Clause (3) of Paragraph 9(c) is modified to read as follows:
(3) failure of Borrower to comply with Section 14(e) of the
Security Instrument relating to the delivery of books and
records, statements, schedules and reports.
C. In clause (3) of Paragraph 9(e), "fraud or written material
misrepresentation" is changed to "fraud or intentional, written material
misrepresentation."
D. Paragraph 9(f) is modified to read as follows:
(f) In addition to any personal liability for the
Indebtedness, Borrower shall be personally liable to Lender
for (1) the performance of all of Borrower's obligations
under Section 18 of the Security Instrument (relating to
environmental matters) and (2) any costs and expenses
incurred by Lender in connection with the collection of any
amount for which Borrower is personally liable under this
Paragraph 9, including reasonable fees and out of pocket
expenses of attorneys and expert witnesses and the costs of
conducting any independent audit of Borrower's books and
records to determine the amount for which Borrower has
personal liability. The personal liability of Borrower with
respect to its obligations under Section 18 of the Security
Instrument with respect to such obligations shall not exceed
$1,000,000 in the aggregate.
E. Section 10(b) is modified to read as follows:
(b) Notwithstanding the provisions of Paragraph
10(a), no prepayment premium shall be payable with respect
to (A) any prepayment made no more than 90 days before the
Maturity Date, (B) any prepayment occurring as a result of
the application of any insurance proceeds or condemnation
award under the Security Instrument or (C) any amounts
disbursed by Lender under Section 12 of the Security
Instrument.
F. The phrase "default under this Note" in Paragraph 11 is changed to "Event
of Default as defined in Section 22 of the Security Instrument."
G. Clause (1) of Paragraph 9(e) shall not apply.
No other modifications are made to the Note.
/s/ RL
BORROWER'S INITIALS
