FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________to_________
Commission file number 0-11935
CENTURY PROPERTIES FUND XIX
(Exact name of small business issuer as specified in its charter)
California 94-2887133
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, 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 XIX
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1998
Assets
Cash and cash equivalents $ 3,867
Receivables and deposits 1,031
Restricted escrows 264
Other assets 770
Investment properties:
Land $ 11,635
Buildings and related personal property 84,774
96,409
Less accumulated depreciation (41,472) 54,937
$60,869
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 164
Tenant security deposits payable 302
Accrued property taxes 613
Other liabilities 514
Mortgage notes payable (Note C) 61,004
Partners' (Deficit) Capital
General partner's $ (9,096)
Limited partners' (89,292 units issued and
outstanding) 7,368 (1,728)
$60,869
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenues:
Rental income $3,846 $3,687 $7,642 $7,363
Other income 228 202 437 406
Total revenues 4,074 3,889 8,079 7,769
Expenses:
Operating 1,614 1,594 3,053 3,017
General and administrative 76 69 157 153
Depreciation 731 715 1,456 1,421
Interest 1,244 1,263 2,491 2,525
Property tax 290 276 612 557
Total expenses 3,955 3,917 7,769 7,673
Net income (loss) $ 119 $ (28) $ 310 $ 96
Net income (loss) allocated to
general partner $ 15 $ (4) $ 37 $ 11
Net income (loss) allocated to
limited partners 104 (24) 273 85
$ 119 $ (28) $ 310 $ 96
Net income (loss) per limited
partnership unit $ .96 $ (.28) $ 3.06 $ .95
Distributions per limited
partnership unit $20.01 $ -- $20.01 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 89,292 $ -- $ 89,292 $ 89,292
Partners' (deficit) capital
at December 31, 1997 89,292 $(9,096) $ 8,882 $ (214)
Distribution paid to partners -- (37) (1,787) (1,824)
Net income for the six months
ended June 30, 1998 -- 37 273 310
Partners' (deficit) capital
at June 30, 1998 89,292 $(9,096) $ 7,368 $ (1,728)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 310 $ 96
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 1,456 1,421
Amortization 61 66
Change in accounts:
Receivables and deposits (186) (86)
Other assets 56 (58)
Accounts payable (9) (76)
Tenant security deposits payable 24 (23)
Accrued property taxes 192 185
Other liabilities (512) 96
Net cash provided by operating activities 1,392 1,621
Cash flows from investing activities:
Property improvements and replacements (568) (422)
Net withdrawals from (deposits to) restricted escrows 142 (139)
Net cash used in investing activities (426) (561)
Cash flows from financing activities:
Payment on mortgage notes payable (311) (376)
Proceeds from mortgage notes payable 270 --
Distributions to partners (1,824) --
Loan costs paid (21) (21)
Net cash used in financing activities (1,886) (397)
Net (decrease) increase in cash and cash equivalents (920) 663
Cash and cash equivalents at beginning of period 4,787 3,419
Cash and cash equivalents at end of period $ 3,867 $ 4,082
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,934 $ 2,351
Supplemental information on noncash financing activity:
Conversion of accrued interest to principal $ 154 $ --
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES FUND XIX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XIX (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.
In the opinion of Fox Capital Management Corporation, a California corporation,
("FCMC" or the "Managing General Partner"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 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 general partners of Fox Partners II are FCMC, Fox Realty Investors ("FRI"),
and Fox Partners 83. NPI Equity Investments II, Inc., a Florida Corporation
("NPI Equity"), is the managing general partner of FRI.
The Partnership has no employees and is dependent on its general partner, Fox
Partners II, a California general partnership, and the Managing General Partner
and their affiliates for the management and administration of all partnership
activities. The Managing General Partner and NPI Equity are wholly-owned by
Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group,
Inc. ("Insignia"). The Partnership Agreement provides for certain payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia were incurred in the six
month periods ended June 30, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating
expenses) $405 $369
Reimbursement for services of affiliates (included in
general and administrative and operating
expenses) 82 78
In addition, the Partnership paid approximately $3,000 and $9,000 during the six
month periods ended June 30, 1998 and 1997, respectively. These reimbursements
were paid to an affiliate of the Managing General Partner for construction
oversight reimbursements related to capital improvements and major repair
projects.
During the first quarter of 1998, the Partnership borrowed $270,000 from an
affiliate of the Managing General Partner in conjunction with the modification
of the mortgages encumbering McMillan Place as discussed in Note C.
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 but 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 received 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 August 28, 1997, an Insignia affiliate (the "Purchaser") commenced tender
offers for limited partnership interests in six real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 27,000 of the outstanding
units of limited partnership interest in the Partnership, at $175.00 per Unit,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated August 28, 1997 (the "Offer to Purchase")
and the related Assignment of Partnership Interest attached as Exhibits (a)(1)
and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1
originally filed with the Securities and Exchange Commission on August 28, 1997.
Because of the existing and potential future conflicts of interest (described in
the Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the Managing General Partner
expressed any opinion as to the Offer to Purchase and made no recommendation as
to whether unit holders should tender their units in response to the Offer to
Purchase. In addition, because of these conflicts of interest, including as a
result of the Purchaser's affiliation with various Insignia affiliates, the
manner in which the Purchaser votes its limited partnership interests in the
Partnership may not always be consistent with the best interests of the other
limited partners. As a result of the tender offer, an Insignia affiliate
purchased 4,892 of the outstanding limited partner units of the Partnership.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.
NOTE C - MORTGAGE NOTES PAYABLE
On January 29, 1998, the Managing General Partner successfully negotiated a
modification of the terms of the mortgages encumbering McMillan Place, which had
been in default since January 20, 1997. The total future cash payments of the
modified loans exceed the carrying value of the loans as of the date of
modification. Consequently, interest on the restructured debt is being recorded
at an effective rate of 9.15% for the first mortgage and 4.47% for the second
mortgage which are the rates required to equate the present value of the total
future cash payments under the new terms with the carrying amount of the loans
at the date of modification. Accrued interest and late charges to the
effective date were paid on the first mortgage and approximately $86,000 was
transferred from the second mortgage balance to the first mortgage balance
increasing the first mortgage to approximately $10,219,000. The first mortgage
requires interest only payments through October 31, 2001, at a rate of 9.15% and
for the final year, at a fixed rate of 325 basis points plus the annualized
yield on United States Treasury non-callable bonds having a one year maturity,
as determined at November 1, 2001. In addition, any excess cash as defined in
the modified loan agreement is required to be remitted to the mortgage holder by
January 20 of each year to be applied to outstanding principal and interest.
Additional interest is required to be paid upon maturity of the note equal to
50% of the appreciated fair market value of McMillan Place as defined in the
note agreement. The Partnership was required to pay $270,000 of accrued
interest on the second mortgage. In addition, an affiliate of the Managing
General Partner was required to pay an additional $270,000 on behalf of the
Partnership which was applied to accrued interest on the second mortgage. The
remaining accrued interest on the second mortgage was rolled to principal in the
amount of approximately $154,000. The second mortgage balance of approximately
$2,207,000 consists of a non-interest bearing portion of $800,000 which is due
at the maturity date of October 31, 2002, and an interest bearing portion. The
interest bearing portion has a stated interest rate of 9.15% and an effective
rate of 4.47%. Under the terms of the modified mortgages, the Partnership is no
longer restricted from making distributions to its partners from cash from
operations generated by the Partnership's properties other than McMillan Place.
The Partnership is still prohibited, however, from making distributions from
cash from operations derived from McMillan Place.
NOTE D - DISTRIBUTIONS
During the first six months of 1998, the Partnership distributed approximately
$1,787,000 ($20.01 per limited partnership unit) to the limited partners and
approximately $37,000 to the general partners from sale proceeds for Parkside
Village Apartments in May 1993. No cash distributions were paid in 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of eight apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the six months ended June 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Sunrunner Apartments
St. Petersburg, Florida 96% 94%
Misty Woods Apartments
Charlotte, North Carolina 90% 91%
McMillan Place Apartments
Dallas, Texas 95% 96%
Vinings Peak Apartments
Atlanta, Georgia 92% 92%
Wood Lake Apartments
Atlanta, Georgia 93% 93%
Plantation Crossing
Atlanta, Georgia 93% 87%
Greenspoint Apartments
Phoenix, Arizona 93% 92%
Sandspoint Apartments
Phoenix, Arizona 95% 91%
The Managing General Partner attributes the increase in occupancy at Plantation
Crossing to the improved economy of the market and an increase in concessions to
new tenants and at Sandspoint to increased marketing efforts.
The Partnership realized net income of approximately $310,000 and $96,000 for
the six month periods ended June 30, 1998 and 1997, respectively. The
Partnership realized net income of approximately $119,000 for the three months
ended June 30, 1998 and a net loss of approximately $28,000 for the three months
ended June 30, 1997. The increase in net income, for both the three and six
month periods ended June 30, 1998, is primarily due to an increase in rental
income attributable to increased occupancy at a majority of the Partnership's
properties. Partially offsetting the increase in net income is an increase in
property tax expense. The increase is largely the result of an increase in the
assessed value of Greenspoint. In addition to the above, the net income for the
three months ended June 30, 1998, increased due to an increase in other income.
Other income increased due to an increase in interest income related to higher
investment balances held in the second quarter of 1998 versus the comparable
period in 1997.
Included in operating expense for the six month period ended June 30, 1998, are
approximately $225,000 in major repairs and maintenance expense versus
approximately $187,000 for the corresponding period in 1997. The 1998 costs are
primarily comprised of exterior building improvements and landscaping. The 1997
costs are primarily comprised of landscaping, window coverings, and exterior
building improvements.
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.
At June 30, 1998, the Partnership held cash and cash equivalents of
approximately $3,867,000 as compared to approximately $4,082,000 at June 30,
1997. The net decrease in cash and cash equivalents for the six month period
ended June 30, 1998, was approximately $920,000. For the six month period ended
June 30, 1997 the Partnership had a net increase in cash and cash equivalents of
approximately $663,000. Net cash provided by operating activities decreased
despite an increase in net income due primarily to the repayment of accrued
interest included in other liabilities. This repayment was in connection with
the modification of the debt encumbering McMillian Place as discussed below.
Net cash used in investing activities decreased due to increased net withdrawals
from restricted escrows related to capital improvements. Partially offsetting
this decrease was an increase in cash used for property improvements and
replacements. Net cash used in financing activities increased due to the
distribution paid to the partners in the second quarter of 1998. Partially
offsetting the effect of the distributions was the receipt of proceeds from the
borrowing from an affiliate of the Managing General Partner in conjunction with
the modification of the terms of the mortgages encumbering McMillian Place in
January of 1998.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit. Based on present plans, management does not anticipate the need to
borrow in the near future. Other than cash and cash equivalents, the line of
credit is the Partnership's only unused source of liquidity.
On January 29, 1998, the Managing General Partner successfully negotiated a
modification of the terms of the mortgages encumbering McMillan Place, which had
been in default since January 20, 1997. The total future cash payments of the
modified loans exceed the carrying value of the loans as of the date of
modification. Consequently, interest on the restructured debt is being recorded
at an effective rate of 9.15% for the first mortgage and 4.47% for the second
mortgage which are the rates required to equate the present value of the total
future cash payments under the new terms with the carrying amount of the loans
at the date of modification. Accrued interest and late charges to the
effective date were paid on the first mortgage and approximately $86,000 was
transferred from the second mortgage balance to the first mortgage balance
increasing the first mortgage to approximately $10,219,000. The first mortgage
requires interest only payments through October 31, 2001, at a rate of 9.15% and
for the final year, at a fixed rate of 325 basis points plus the annualized
yield on United States Treasury non-callable bonds having a one year maturity,
as determined at November 1, 2001. In addition, any excess cash as defined in
the modified loan agreement is required to be remitted to the mortgage holder by
January 20 of each year to be applied to outstanding principal and interest.
Additional interest is required to be paid upon maturity of the note equal to
50% of the appreciated fair market value of McMillan Place as defined in the
note agreement. The Partnership was required to pay $270,000 of accrued
interest on the second mortgage. In addition, an affiliate of the Managing
General Partner was required to pay an additional $270,000 on behalf of the
Partnership which was applied to accrued interest on the second mortgage. The
remaining accrued interest on the second mortgage was rolled to principal in the
amount of approximately $154,000. The second mortgage balance of approximately
$2,207,000 consists of a non-interest bearing portion of $800,000 which is due
at the maturity date of October 31, 2002, and an interest bearing portion. The
interest bearing portion has a stated interest rate of 9.15% and an effective
rate of 4.47%. Under the terms of the modified mortgages, the Partnership is no
longer restricted from making distributions to its partners from cash from
operations generated by the Partnership's properties other than McMillan Place.
The Partnership is still prohibited, however, from making distributions from
cash from operations derived from McMillan Place.
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. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. Mortgage
indebtedness of approximately $61,004,000 is amortized over varying periods with
required balloon payments ranging from October 2002 to January 2006, at which
time the properties will either be refinanced or sold. During the first six
months of 1998, the Partnership distributed approximately $1,787,000 ($20.01 per
limited partnership unit) to the limited partners and approximately $37,000 to
the general partners from sale proceeds for Parkside Village Apartments in May
1993. No cash distributions were paid in 1997. Future cash distributions will
depend on the levels of cash generated from operations (except for McMillan
Place), property sales or refinancings and the availability of cash reserves.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in 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 its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates as well as a recently announced agreement between Insignia and AIMCO.
The complaint seeks monetary damages and equitable relief, including judicial
dissolution of the Partnership. The Managing General Partner believes the
action to be without merit, and intends to vigorously defend it. On June 24,
1998, the Managing General Partner filed a motion seeking dismissal of the
action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner believes that all such
pending or outstanding litigation will be resolved without a material adverse
effect upon the business, financial condition, or operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998.
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 XIX
By: FOX PARTNERS II,
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Century Properties Fund XIX 1998 Second Quarter 10-QSB and is qualified
in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000705752
<NAME> CENTURY PROPERTIES FUND XIX
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,867
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 96,409
<DEPRECIATION> 41,472
<TOTAL-ASSETS> 60,869
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 61,004
0
0
<COMMON> 0
<OTHER-SE> (1,728)
<TOTAL-LIABILITY-AND-EQUITY> 60,869
<SALES> 0
<TOTAL-REVENUES> 8,079
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,491
<INCOME-PRETAX> 0
<INCOME-TAX> 0
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<NET-INCOME> 310
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<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
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