March 8, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Century Properties Fund XVIII
Form 10-KSB
File No. 0-11934
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
Managing General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
- -------------------------------------------------------------------------------
FORM 10-KSB -- ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from _________to _________
Commission file number 0-11934
CENTURY PROPERTIES FUND XVIII
(Name of small business issuer in its charter)
California 94-2834149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
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___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $5,048,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
- ------------------------------------------------------------------------------
PART I
Item 1. Description of Business
Century Properties Fund XVIII (the "Partnership" or "Registrant") was organized
in July 1982, as a California limited partnership under the Uniform Limited
Partnership Act of the California Corporations Code. Fox Partners, a California
general partnership, is the general partner of the Registrant. The general
partners of Fox Partners are Fox Capital Management Corporation (the "Managing
General Partner" or "FCMC"), a California corporation, Fox Realty Investors
("FRI"), a California general partnership, and Fox Partners 82, a California
general partnership. NPI Equity Investments II, Inc. ("NPI Equity"), a Florida
Corporation, is the Managing General Partner of FRI. The Managing General
Partner and NPI Equity are subsidiaries of Apartment Management and Investment
Company ("AIMCO"), a publicly traded real estate investment trust (See "Transfer
of Control"). The Partnership agreement provides that the Partnership is to
terminate on December 31, 2020, unless terminated prior to such date.
The principal business of the Registrant is to operate and hold real estate
properties for investment. From February 1983 to September 1983, the Registrant
offered and sold pursuant to a Registration Statement filed with the Securities
and Exchange Commission, 75,000 Units of Limited Partnership Interest (the
"Units") at a purchase price of $1,000 per Unit for an aggregate of $75,000,000.
The net proceeds of this offering were used to acquire twelve income-producing
real estate properties. The Registrant's original property portfolio was
geographically diversified with properties acquired in seven states. The
Registrant's acquisition activities were completed in June 1984 and since then,
the principal activity of the Registrant has been managing its portfolio. In the
period from 1987 through February 1994, ten properties were either sold or
otherwise disposed. The Registrant continues to own and operate two remaining
properties. See "Item 2. Description of Properties".
The Partnership has no full time employees. The Managing General Partner is
vested with full authority as to the general management and supervision of the
business and affairs of the Partnership. The Limited Partners have no right to
participate in the management or conduct of such business and affairs. Property
management services were performed at the Partnership's properties by an
affiliate of the Managing General Partner.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Registrant's properties and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates own and/or control a significant number of apartment units in the
United States such units represent an insignificant percentage of total
apartment units in the United States and competition for apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into 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 has had or will have a
material effect on the affairs and operations of the Partnership.
Item 2. Description of Properties:
The following table sets forth the Partnership's investment in properties:
Date of
Property Purchase Type of Ownership Use
Overlook Point Apartments 07/83 Fee ownership Apartments
subject
Salt Lake City, Utah to first mortgage 304 units
Oak Run Apartments 11/83 Fee ownership Apartments
subject
Dallas, Texas to first mortgage 420 units
(1)
(1) The property was held by Oak Run, LLC in which the Registrant was the sole
owner. Effective December 1999, Oak Run LLC's interest in Oak Run
Apartments was transferred to Oak Run, LP in which the Registrant owns a
99% limited partnership interest. The general partner of Oak Run, LP is
Oak Run GP, LLC which is wholly-owned by the Registrant.
<PAGE>
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
- -------- ----- ------------ ---- ------ ---------
(in thousands) (in
thousands)
Overlook Point $10,647 $ 5,017 5-30 yrs (1) $ 2,005
Apartments
Oak Run Apartments 17,217 6,177 5-30 yrs (1) 6,382
------ ------ ------
$27,864 $11,194 $ 8,387
====== ====== ======
(1) Straight-line.
See "Item 7. Financial Statements, Note A" to the financial statements included
in "Item 7" for a description of the Partnership's depreciation policy and "
Item 7. Financial Statements, Note I - Change in Accounting Principle."
Schedule of Property Indebtedness:
- ---------------------------------
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity (1)
-------- ---- ---- --------- ---- --------
(in thousands) (in thousands)
Overlook Point Apts $ 8,860 6.33% 30 years 09/2005 $ 8,127
Oak Run Apartments 10,363 7.36% 30 years 10/2004 9,728
------ ------
$19,223 $17,855
====== ======
(1) See "Item 7. Financial Statements, Note C" for information with respect to
the Registrant's ability to prepay these loans and other more specific
details as to the terms of the loans.
All mortgage agreements include non-recourse provisions which limit the lenders'
remedies in the event of default to the specific property collateralizing each
loan.
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. The
remaining proceeds were distributed to partners during 1998 and 1999.
<PAGE>
Schedule of Rental Rates and Occupancy:
Average annual rental rate and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rates Occupancy
------------ ---------
(per unit)
Property 1999 1998 1999 1998
-------- ---- ---- ---- ----
Overlook Point Apartments $ 7,433 $ 7,296 96% 93%
Oak Run Apartments 7,108 6,805 92% 92%
The Managing General Partner attributes the increase in occupancy at Overlook
Point Apartments to more aggressive marketing efforts and exterior improvements
completed during the year to enhance the property's curb appeal.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other apartment complexes in the area. The Managing General
Partner believes that all of the properties are adequately insured. The
multi-family residential properties' lease terms are for one year or less. No
individual tenant leases 10% or more of the available rental space. All of the
properties are in good physical condition, subject to normal depreciation and
deterioration as is typical for assets of this type and age.
Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 for each property were:
1999 1999
Billing Rate
(in thousands)
Overlook Point Apartments $ 99 1.45%
Oak Run Apartments 357 2.58%
Capital Improvements:
Overlook Point Apartments: The Partnership completed approximately $394,000 in
capital expenditures at Overlook Point Apartments as of December 31, 1999,
consisting primarily of flooring, appliances, structural improvements, parking
lot upgrades, major landscaping and roofing projects. These improvements were
funded from cash flow and replacement reserves. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $91,200.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Oak Run Apartments: The Partnership completed approximately $327,000 in capital
expenditures at Oak Run Apartments as of December 31, 1999, consisting primarily
of flooring, appliances, structural enhancements, interior improvements, parking
lot upgrades, air conditioning and swimming pool upgrades and landscaping. These
improvements were funded from cash flow and replacement reserves. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $126,000. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations and Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
Item 3. 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 action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 7. Financial Statements, Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs have filed an amended complaint. The Managing General Partner filed
demurrers to the amended complaint which were heard February 1999. Pending the
ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
Managing General Partner and its affiliates terminated the proposed settlement.
Certain plaintiffs have filed a motion to disqualify some of the plaintiffs'
counsel in the action. The Managing General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
During the quarter ended December 31, 1999, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Partnership's Common Equity and Related Security
Holder Matters
The Partnership, a publicly-held limited partnership, sold 75,000 Limited
Partnership Units aggregating $75,000,000. The Partnership currently has 75,000
units outstanding held by 3,840 Limited Partners of record. Affiliates of the
Managing General Partner owned 37,062 or 49.42% at December 31, 1999. No public
trading market has developed for the Units, and it is not anticipated that such
a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999 as well as the subsequent period through
March 1, 2000:
Distributions
Per Limited
Partnership
Aggregate Unit
1/1/98 - 12/31/98 $1,593,000(1) $21.03
1/1/99 - 12/31/99 $1,620,000(1) $21.39
1/1/00 - 3/1/00 220,000(1) $ 2.90
(1) Distributions were made from prior cumulative undistributed sale and
refinancing proceeds. See Item 6. Capital Resources and liquidity.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of debt maturities,
refinancings and /or property sales. The Partnership's distribution policy is
reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after required
capital expenditures, to permit any additional distributions to its partners in
2000 or subsequent periods. See "Item 2. Description of Properties - Capital
Improvements" for information relating to anticipated capital expenditures at
the properties.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the fiscal years ended December 31, 1999 and
1998. As a result of these tender offers, AIMCO and its affiliates currently own
37,062 units of limited partnership units in the Partnership representing 49.42%
of the 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. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the Managing General Partner because of their affiliation
with the Managing General Partner.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB 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-KSB 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.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Registrant's net income for year ended December 31, 1999 was approximately
$540,000 as compared to approximately $442,000 for the year ended December 31,
1998. (See "Item 7. Financial Statements, Note D" for a reconciliation of these
amounts to the Registrant's federal taxable income.) Net income increased due to
an increase in total revenues, which was partially offset by an increase in
total expenses. The increase in total revenues is attributable to an increase in
rental income, which was partially offset by a decrease in other income. The
increase in rental income is the result of an increase in average annual rental
rates at both investment properties as well as an increase in average occupancy
at Overlook Point Apartments. Other income decreased due to a decrease in
interest income resulting from a decline in cash balances.
Total expenses increased primarily due to increases in general and
administrative expenses, depreciation and property taxes, which were partially
offset by decreases in operating and interest expense. General and
administrative expenses increased primarily due to the first time payment of a
Corporation Franchise Tax to the state of Texas by Oak Run, LLC, a limited
liability company wholly-owned by the Partnership. In addition, legal costs
increased due to the legal costs associated with the Nuanes matter during 1999.
The increase in depreciation expense is the result of the amounts spent on
capital improvements and replacements during 1999 and 1998. Property tax expense
increased due to an increase in the tax rate at Overlook Point Apartments. The
decrease in operating expense is primarily attributable to a decrease in
contract services as well as the completion of parking lot repairs at both
properties and swimming pool repairs at Overlook Point Apartments during the
year ended December 31, 1998. Interest expense decreased as the result of
refinancing the mortgage encumbering Overlook Point Apartments in August 1998,
which decreased the interest rate on the debt.
Included in general and administrative expenses at both December 31, 1999 and
1998 are management reimbursements to the Managing General Partner allowed under
the Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
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.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by approximately $102,000 ($1.23 per limited partnership
unit). The cumulative effect, had this change been applied to prior periods, is
not material. The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the Managing General
Partner and affiliates.
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 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.
Capital Resources and Liquidity
At December 31, 1999, the Registrant had cash and cash equivalents of
approximately $462,000 as compared to approximately $1,477,000 at December 31,
1998. Cash and cash equivalents decreased approximately $1,015,000 for the year
ended December 31, 1999. The decrease in cash and cash equivalents is primarily
due to approximately $1,854,000 of cash used in financing activities and
approximately $634,000 of cash used in investing activities, which more than
offset approximately $1,473,000 of cash provided by operating activities. Cash
used in financing activities consisted of distributions to partners, and
payments of principal made on the mortgages encumbering the Registrant's
properties. Cash used in investing activities consisted of capital improvements
and replacements, partially offset by net withdrawals from restricted escrows
maintained by the mortgage lender. The Registrant invests its working capital
reserves in money market accounts.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. 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 Registrant and to comply with federal,
state, and local legal and regulatory requirements. The Partnership is currently
evaluating the capital improvement needs of the properties for the upcoming
year. The minimum to be budgeted is expected to be $300 per unit or $217,200.
Additional improvements may be considered and will depend on the physical
condition of the properties as well as replacement reserves and anticipated cash
flow generated by the properties.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of $19,223,000 is amortized over thirty years with balloon payments
of $8,127,000 and $9,728,000 due on September 2005 and October 2004,
respectively. The Managing General Partner may attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
may risk losing such properties through foreclosure.
Cash distributions of prior cumulative undistributed sale and refinancing
proceeds of approximately $1,620,000 (approximately $1,604,000 to the limited
partners or $21.39 per limited partnership unit) and $1,593,000 (approximately
$1,577,000 to the limited partners or $21.03 per limited partnership unit) were
made during the years ended December 31, 1999 and 1998, respectively. Subsequent
to December 31, 1999 the Partnership declared and paid a distribution of
approximately $220,000 to the partners. Future cash distributions will depend on
the levels of net cash generated from operations, the availability of cash
reserves and the timing of debt maturities, refinancings and/or property sales.
The Partnership's distribution policy is reviewed on a semi-annual basis. There
can be no assurance, however, that the Partnership will generate sufficient
funds from operations after required capital expenditures to permit any
additional distributions to its partners in 2000 or subsequent periods.
Year 2000 Compliance
General Description
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 Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted 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.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
CENTURY PROPERTIES FUND XVIII
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young, LLP Independent Auditors
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations - Years ended December 31, 1999
and 1998
Consolidated Statements of Changes in Partners' (Deficit) Capital - Years
ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 1999
and 1998
Notes to Consolidated Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Century Properties Fund XVIII
We have audited the accompanying consolidated balance sheet of Century
Properties Fund XVIII as of December 31, 1999, and the related consolidated
statements of operations, changes in partners' (deficit) capital and cash flows
for each of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Century Properties
Fund XVIII at December 31, 1999, and the consolidated results of its operations
and its cash flows for each of the two years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
As discussed in Note I to the consolidated financial statements, the Partnership
changed its method of accounting to capitalize the cost of exterior painting and
major landscaping effective January 1, 1999.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 21, 2000
<PAGE>
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
Assets
Cash and cash equivalents $ 462
Receivables and deposits 454
Restricted escrows 154
Other assets 337
Investment properties (Notes C and F):
Land $ 7,296
Buildings and related personal property 20,568
-------
27,864
Less accumulated depreciation (11,194) 16,670
------- ------
$18,077
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 62
Other liabilities 233
Accrued property taxes 366
Tenant security deposit liabilities 70
Mortgage notes payable (Notes C and F) 19,223
Partners' (Deficit) Capital
General partner $ (6,297)
Limited partners (75,000 units
issued and outstanding) 4,420 (1,877)
------ ------
$ 18,077
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1999 1998
Revenues:
Rental income $4,790 $4,616
Other income 258 277
----- -----
Total revenues 5,048 4,893
----- -----
Expenses:
Operating 1,623 1,644
General and administrative 290 208
Depreciation 721 696
Interest 1,404 1,469
Property tax 470 434
----- -----
Total expenses 4,508 4,451
----- -----
Net income $ 540 $ 442
===== =====
Net income allocated to general partner (9.9%) $ 53 $ 44
Net income allocated to limited partners (90.1%) 487 398
----- -----
$ 540 $ 442
===== =====
Net income per limited partnership unit $ 6.49 $ 5.31
===== =====
Distributions per limited partnership unit $21.39 $21.03
===== =====
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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
Distributions to partners -- (16) (1,577) (1,593)
Net income for the year ended
December 31, 1998 -- 44 398 442
------ ------ ------ -----
Partners' (deficit) capital at
December 31, 1998 75,000 (6,334) 5,537 (797)
Distributions to partners -- (16) (1,604) (1,620)
Net income for the year
ended December 31, 1999 -- 53 487 540
------ ------ ------ ------
Partners' (deficit) capital
at December 31, 1999 75,000 $(6,297) $ 4,420 $(1,877)
====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1999 1998
Cash flows from operating activities:
Net income $ 540 $ 442
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 721 696
Amortization of loan costs 71 43
Change in accounts:
Receivables and deposits 47 (397)
Other assets (5) (9)
Accounts payable 41 (41)
Other liabilities 56 10
Accrued property taxes 18 53
Tenant security deposit liabilities (16) 6
------ ------
Net cash provided by operating activities 1,473 803
------ ------
Cash flows from investing activities:
Property improvements and replacements (721) (284)
Net withdrawals from(deposits to)restricted 87 (210)
------ -------
escrows
Net cash used in investing activities (634) (494)
------ -------
Cash flows from financing activities:
Proceeds from mortgage note payable -- 9,000
Repayment of mortgage note payable -- (7,907)
Loan costs paid -- (171)
Payments on mortgage notes payable (234) (186)
Distributions to partners (1,620) (1,593)
------ ------
Net cash used in financing activities (1,854) (857)
------ ------
Net decrease in cash and cash equivalents (1,015) (548)
Cash and cash equivalents at beginning of year 1,477 2,025
------ ------
Cash and cash equivalents at end of year $ 462 $ 1,477
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,443 $ 1,433
====== ======
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
19
CENTURY PROPERTIES FUND XVIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Organization and Significant Accounting Policies
Organization: Century Properties Fund XVIII (the "Partnership" or "Registrant")
is a California limited partnership organized in July 1982, to acquire and
operate residential apartment complexes. 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. The Managing General Partner, as well as, the
managing general partner of FRI, are affiliates of Apartment Investment and
Management Company ("AIMCO"). See "Note B - Transfer of Control". As of December
31, 1999, the Partnership operates two residential apartment complexes located
in Texas and Utah. The Partnership Agreement provides that the Partnership is to
terminate on December 31, 2020 unless terminated prior to such date. The
directors and officers of the Managing General Partner also serve as executive
officers of AIMCO.
Principles of Consolidation: The Partnership's financial statements include the
accounts of the Partnership and its wholly-owned partnership, Oak Run LP the
entity which holds title to Oak Run Apartments.
Allocations to Partners: Net income, losses and cash available for distribution
(excluding those arising from the occurrence of sales or dispositions) of the
Partnership will be allocated (i) 9% to the General Partner and (ii) the
remainder allocated 1% to the General Partner and 99% to the Limited Partners on
an annual basis.
In accordance with the Partnership Agreement, any gain from the sale or other
disposition of Partnership properties shall be allocated; (i) first to the
General Partner to the extent it is entitled to receive distributions of cash
pursuant to the above and from the sale or disposition of properties (ii) next,
until such time as the General Partner does not have a deficit in its capital
account, 10% to the General Partner and 90% to the Limited Partnership Unit
Holders, and (iii) to the Limited Partnership Unit Holders.
Cash from sales or other dispositions, or refinancing and working capital
reserves are distributed 99% to the Limited Partnership Unit Holders and 1% to
the General Partner, until: (i) each Limited Partnership Unit Holder receives an
amount which equals the total of their original invested capital contributed for
his Limited Partnership Units and (ii) a sum equal to 8% per year, as determined
on a cumulative, non-compounded basis, on the Adjusted Invested Capital, as
adjusted from time to time, of such Limited Partnership Unit Holder, calculated
from the first day of the month in which he was admitted as a Limited Partner.
Thereafter, the General Partner will receive 15% of any additional cash from
sales or refinancing and working capital reserve available for distribution and,
finally, the remainder of such being allocated 99% to the Limited Partnership
Unit Holders and 1% to the General Partner. Upon sale of all properties and
termination of the Partnership, the General Partner may be required to
contribute certain funds to the Partnership in accordance with the Partnership
Agreement.
Depreciation: Depreciation is calculated by the straight-line method over the
estimated lives of the rental properties and related personal property.
Effective January 1, 1999 the Partnership changed its method of accounting to
capitalize the cost of painting and major landscaping (Note I).
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in
banks and money market accounts. At certain times, the amount of cash deposited
at a bank may exceed the limit on insured deposits.
Available Line of Credit: 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.
Security Deposits: The Partnership requires security deposits from lessees for
the duration of the lease and such deposits are included in receivables and
deposits. The security deposits are refunded when the tenant vacates, provided
the tenant has not damaged its space and is current on its rental payments.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the Managing General Partner's policy is to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Loan Costs: Loan costs of $415,000 are included in other assets in the
accompanying consolidated balance sheet and are being amortized on a
straight-line basis over the life of the loans. At December 31, 1999,
accumulated amortization is $122,000. Amortization of loan costs is included in
interest expense in the accompanying consolidated statement of operations.
Investment Properties: Investment properties consist of two apartment complexes
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of these assets. No
adjustments for impairment of value were recorded in the years ended December
31, 1999 or 1998.
Income Taxes: Taxable income or loss of the Partnership is reported in the
income tax returns of its partners. Accordingly, no provision for income
taxes is made in the consolidated financial statements of the Partnership.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. See "Note G" for
detailed disclosure about the Registrant's segments.
Advertising Costs: The Partnership expenses the costs of advertising as
incurred. Advertising costs of approximately $103,000 and $92,000 for the years
ended December 31, 1999 and 1998 were charged to operating expense as incurred.
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. and Insignia Properties Trust
merged into 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 has had or will have a
material effect on the affairs and operations of the Partnership.
<PAGE>
Note C - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
-------- ---- -------- ---- ---- --------
(in thousands) (in thousands)
Overlook Point
Apartments $ 8,860 $ 56 6.33% 09/2005 $ 8,127
Oak Run Apartments 10,363 73 7.36% 10/2004 9,728
------ ---- ------
$19,223 $ 129 $17,855
====== ==== ======
Scheduled principal payments on the mortgage notes payable subsequent to
December 31, 1999 are as follows (in thousands):
2000 $ 212
2001 246
2002 264
2003 283
2004 9,990
Thereafter 8,228
------
$19,223
All mortgage agreements include non-recourse provisions which limit the lenders'
remedies in the event of default to the specific property collateralizing each
loan. The notes require prepayment penalties if prepaid prior to maturity.
Further, the properties may not be sold subject to existing indebtedness.
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.
Note D - Income Taxes
Differences between the net income as reported and Federal taxable income result
primarily from depreciation over different methods and lives and on differing
cost basis. The following is a reconciliation of reported net income and Federal
taxable income:
1999 1998
Net income as reported $ 540 $ 442
Add (deduct):
Depreciation differences 212 20
Other 49 103
---- ----
Federal taxable income $ 801 $ 565
===== ====
Federal taxable income per limited
partnership unit $9.62 $6.79
==== ====
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
1999
Net liabilities as reported $(1,877)
Land and buildings 1,181
Accumulated depreciation (9,464)
Syndication and distribution costs 9,592
Other 204
------
Net deficiency - Federal tax basis $ (364)
======
Note E - 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 (i) payments to
affiliates for services and (ii) 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 years ended December 31, 1999
and 1998:
1999 1998
---- ----
(in thousands)
Property management fees (included in operating $254 $244
expense)
Reimbursement for services of affiliates (included in
operating and general and administrative expenses,
other
assets and investment properties) 126 148
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $254,000 and $244,000 for the
years ended December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $126,000 and
$148,000 for the years ended December 31, 1999 and 1998, respectively. Included
in these costs is approximately $18,000 in loan costs paid to an affiliate of
the Managing General Partner during the year ended December 31, 1998 in
connection with the 1998 refinancing of the mortgage indebtedness at Overlook
Point Apartments (see "Note C - Mortgage Notes Payable"). No such costs were
paid for the year ended December 31, 1999.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the fiscal years ended December 31, 1999 and
1998. As a result of these tender offers, AIMCO and its affiliates currently own
37,062 units of limited partnership units in the Partnership representing 49.42%
of the 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. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the Managing General Partner because of their affiliation
with the Managing General Partner.
Note F - Investment Properties and Accumulated Depreciation
Initial Cost
To Partnership
--------------
(in thousands)
Buildings Costs
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
----------- ------------ ---- -------- -----------
(in thousands) (in thousands)
Overlook Point Apartments $ 8,860 $1,082 $ 8,225 $ 1,340
Oak Run Apartments 10,363 6,218 8,713 2,286
------ ----- ------ ------
Total $19,223 $7,300 $16,938 $ 3,626
====== ===== ====== ======
Gross Amount At Which Carried
At December 31, 1999
(in thousands)
Buildings
And
Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
----------- ---- -------- ----- ------------ ------ ----------
(in thousands)
Overlook Point $1,078 $ 9,569 $10,647 $ 5,017 7/83 5-30 yrs
Apartments
Oak Run Apartments 6,218 10,999 17,217 6,177 11/83 5-30 yrs
----- ------ ------ ------
Total $7,296 $20,568 $27,864 $11,194
===== ====== ====== ======
<PAGE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31,
1999 1998
---- ----
Investment Properties (in thousands)
- ---------------------
Balance at beginning of year $27,143 $26,859
Property Improvements 721 284
------ ------
Balance at end of year $27,864 $27,143
====== ======
Accumulated Depreciation
Balance at beginning of year $10,473 $ 9,777
Additions charged to expense 721 696
------ ------
Balance at end of year $11,194 $10,473
====== ======
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1999 and 1998, are approximately $29,045,000 and $28,338,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $20,658,000 and $20,149,000,
respectively.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties consisting of
two apartment complexes in Salt Lake City, Utah and Dallas, Texas. The
Partnership rents apartment units to tenants for terms that are typically twelve
months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
Factors management used to identify the enterprise's reportable segment:
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 years 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 $ 4,790 $ -- $ 4,790
Other income 238 20 258
Interest expense 1,404 -- 1,404
Depreciation 721 -- 721
General and administrative -- 290 290
expense
Segment profit (loss) 810 (270) 540
Total assets 18,040 37 18,077
Capital expenditures for
investment properties 721 -- 721
1998 Residential Other Totals
Rental income $ 4,616 $ -- $ 4,616
Other income 208 69 277
Interest expense 1,469 -- 1,469
Depreciation 696 -- 696
General and administrative -- 208 208
expense
Segment profit (loss) 581 (139) 442
Total assets 18,110 1,182 19,292
Capital expenditures for
investment properties 284 -- 284
Note H - 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 action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note I - Change in Accounting Principles
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by approximately $102,000 ($1.23 per limited partnership
unit). The cumulative effect, had this change been applied to prior periods, is
not material.The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the Managing General
Partner and affiliates.
Note J - Distributions
Cash distributions of prior cumulative undistributed sale and refinancing
proceeds of approximately $1,620,000 (approximately $1,604,000 to the limited
partners or $21.39 per limited partnership unit) and $1,593,000 (approximately
$1,577,000 to the limited partners or $21.03 per limited partnership unit) were
made during the years ended December 31, 1999 and 1998, respectively.
<PAGE>
Item 8. Changes in and Disagreements with Accountant on Accounting and
Financial Disclosures
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Neither the Registrant, nor Fox Partners ("Fox"), the general partner of the
Registrant, has any officers or directors. Fox Capital Management Corporation
(the "Managing General Partner" or "FCMC"), the managing general partner of Fox,
manages and controls substantially all of the Registrant's affairs and has
general responsibility and ultimate authority in all matters affecting its
business.
The names and ages of, as well as the positions and offices held by, the
executive officers and directors of the Managing General Partner are set forth
below. There are no family relationships between or among any officers or
directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and
Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the
Managing General Partner since October 1, 1998. Mr. Foye has served as
Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO,
Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher &
Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels,
Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy
Chairman of the Long Island Power Authority and serves as a member of the
New York State Privatization Council. He received a B.A. from Fordham
College and a J.D. from Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Managing
General Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia Financial Group, Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO Properties, L.P. and its joint filers failed to timely file a Form 3 with
respect to its acquisition of Units and AIMCO and its joint filers failed to
timely file a Form 4 with respect to its acquisition of Units.
Item 10. Executive Compensation
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of Fox Partners. However, certain fees and other
payments have been made to the Managing General Partner and its affiliates, as
described in "Item 12. Certain Relationships and Related Transactions."
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Registrant's limited partnership units
as of December 31, 1999.
Name of Percentage
Beneficial Owner Number of Units of Class
Insignia Properties, LP
(an affiliate of AIMCO) 21,717.0 28.96%
Madison River Properties, LLC
(an affiliate of AIMCO) 5,259.5 7.01%
AIMCO Properties, LP
(an affiliate of AIMCO) 10,085.5 13.45%
Madison River Properties, LLC and Insignia Properties LP are indirectly
ultimately owned by AIMCO. Their business address is 55 Beattie Place,
Greenville, SC 29602.
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Blvd, Denver, Colorado 80222.
No director or officer of the Managing General Partner owns any units.
Item 12. Certain Relationships and Related Transactions
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 (i) payments to
affiliates for services and (ii) 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 years ended December 31, 1999
and 1998:
1999 1998
---- ----
(in thousands)
Property management fees $254 $244
Reimbursement for services of affiliates 126 148
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $254,000 and $244,000 for the
years ended December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $126,000 and
$148,000 for the years ended December 31, 1999 and 1998, respectively. Included
in these costs is approximately $18,000 in loan costs paid to an affiliate of
the Managing General Partner during the year ended December 31, 1998 in
connection with the 1998 refinancing of the mortgage indebtedness at Overlook
Point Apartments (see "Note C - Mortgage Notes Payable"). No such costs were
paid for the year ended December 31, 1999.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the fiscal years ended December 31, 1999 and
1998. As a result of these tender offers, AIMCO and its affiliates currently own
37,062 units of limited partnership units in the Partnership representing 49.42%
of the 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. Consequently, AIMCO is in a position to significantly
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the units it acquired in a manner favorable
to the interest of the Managing General Partner because of their affiliation
with the Managing General Partner.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for
Change in Accounting Principle is filed as an exhibit to this
report.
Exhibit 27, Financial Data Schedule is filed as an exhibit to this
report.
(b) Reports on Form 8-K was filed during the quarter ended December 31,
1999.
None.
<PAGE>
SIGNATURES
In accordance with section 13 or 15(d) 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 J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf by the registrant and in the capacities and on the
date indicated.
/s/Patrick J. Foye Date:
- ------------------
Patrick J. Foye
Executive Vice President
and Director
/s/Martha L. Long Date:
- -----------------
Martha L. Long
Senior Vice President and
Controller
<PAGE>
CENTURY PROPERTIES FUND XVIII
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.5 Master Indemnity Agreement Incorporated by reference to Form
8-K filed by Insignia Financial Group, Inc. with the
Securities and Exchange Commission on September 1, 1995.
(Page 2)
3.4 Agreement of Limited Partnership Incorporated by reference to
Exhibit A to the Prospectus of the Registrant dated November 5,
1982, as revised December 30, 1982, and after supplemented
contained in the Registrant's Agreement on For S-11 (Reg. No.
2-78495). (Page 1)
10.1 Promissory Note between Oak Run, L.L.C., a South Carolina
limited liability company, and Lehman Brothers Holdings Inc.
d/b/a Lehman Capital, a division of Lehman Brothers Holdings
Inc., a Delaware corporation, dated September 1997. Filed
with December 31, 1997 10-KSB.
10.2 Deed of Trust and Security Agreement between Oak Run, L.L.C.,
a South Carolina limited liability company, David M. Parnell,
and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a
division of Lehman Brothers Holdings Inc., a Delaware
corporation, dated September 1997. Filed with December 31,
1997 10-KSB.
10.3 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. Filed with December 31, 1998 10-KSB.
16 Letter dated November 11, 1998 from the Registrant's former
Independent Auditor regarding its concurrence with the statements
made by the Registrant in Current Report on Form 8-K dated
November 10, 1998. Filed with December 31, 1998 10-KSB.
18 Independent Accountants' Preferability Letter for Change in
Accounting Principle.
27 Financial Data Schedule.
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
Fox Capital Management Corporation
Managing General Partner of Century Properties Fund XVIII
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note I of Notes to the Consolidated Financial Statements of Century Properties
Fund XVIII included in its Form 10-KSB for the year ended December 31, 1999
describes a change in the method of accounting to capitalize exterior painting
and major landscaping, which would have been expensed under the old policy. You
have advised us that you believe that the change is to a preferable method in
your circumstances because it provides a better matching of expenses with the
related benefit of the expenditures and is consistent with policies currently
being used by your industry and conforms to the policies of the Managing General
Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/ Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted fromCentury
Properties Fund XVIII 1999 Fourth Quarter 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000704271
<NAME> CENTURY PROPERTIES FUND XVIII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 462
<SECURITIES> 0
<RECEIVABLES> 454
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 27,864
<DEPRECIATION> (11,194)
<TOTAL-ASSETS> 18,077
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 19,223
0
0
<COMMON> 0
<OTHER-SE> (1,877)
<TOTAL-LIABILITY-AND-EQUITY> 18,077
<SALES> 0
<TOTAL-REVENUES> 5,048
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,404
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 540
<EPS-BASIC> 6.49 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
