FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________to_________
Commission file number 0-11935
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.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1999
Assets
Cash and cash equivalents $ 2,913
Receivables and deposits 1,265
Restricted escrows 309
Other assets 709
Investment properties:
Land $ 11,635
Buildings and related personal property 85,843
97,478
Less accumulated depreciation (44,457) 53,021
$58,217
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 205
Tenant security deposits payable 312
Accrued property taxes 617
Due to former affiliate 270
Other liabilities 603
Mortgage notes payable 60,095
Partners' (Deficit) Capital
General partner's $ (9,202)
Limited partners' (89,292 units issued and
outstanding) 5,317 (3,885)
$58,217
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,
1999 1998 1999 1998
Revenues:
Rental income $4,021 $3,846 $8,089 $7,642
Other income 179 228 362 437
Total revenues 4,200 4,074 8,451 8,079
Expenses:
Operating 1,329 1,614 2,598 3,053
General and administrative (117) 76 189 157
Depreciation 749 731 1,488 1,456
Interest 1,230 1,244 2,463 2,491
Property tax 301 290 599 612
Total expenses 3,492 3,955 7,337 7,769
Net income $ 708 $ 119 $1,114 $ 310
Net income allocated to
general partner $ 84 $ 15 $ 131 $ 37
Net income allocated to
limited partners 624 104 983 273
$ 708 $ 119 $1,114 $ 310
Net income per limited
partnership unit $ 6.99 $ 1.16 $11.01 $ 3.06
Distributions per limited
partnership unit $ -- $20.01 $39.23 $20.01
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENT OF 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, 1998 89,292 $(9,034) $ 7,837 $ (1,197)
Distribution paid to partners -- (299) (3,503) (3,802)
Net income for the six months
ended June 30, 1999 -- 131 983 1,114
Partners' (deficit) capital
at June 30, 1999 89,292 $(9,202) $ 5,317 $ (3,885)
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,
1999 1998
Cash flows from operating activities:
Net income $ 1,114 $ 310
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 1,488 1,456
Amortization 57 61
Change in accounts:
Receivables and deposits (150) (186)
Other assets (77) 56
Accounts payable (8) (9)
Tenant security deposits payable -- 24
Accrued property taxes 56 192
Other liabilities 38 (512)
Net cash provided by operating activities 2,518 1,392
Cash flows from investing activities:
Property improvements and replacements (569) (568)
Net (deposits to) withdrawals from restricted escrows (57) 142
Net cash used in investing activities (626) (426)
Cash flows from financing activities:
Payment on mortgage notes payable (315) (311)
Proceeds from long-term borrowings -- 270
Distributions to partners (3,802) (1,824)
Loan costs paid -- (21)
Net cash used in financing activities (4,117) (1,886)
Net decrease in cash and cash equivalents (2,225) (920)
Cash and cash equivalents at beginning of period 5,138 4,787
Cash and cash equivalents at end of period $ 2,913 $ 3,867
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,407 $ 2,934
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
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Fund XIX (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Fox Capital Management Corporation, 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, 1999, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
Principles of Consolidation:
The Registrant's financial statements include the accounts of Misty Woods CPF
19, LLC, a wholly owned subsidiary. All significant intercompany transactions
have been eliminated.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company, a publicly traded real
estate investment trust ("AIMCO"), with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe
that this transaction will have a material effect on the affairs and operations
of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Registrant 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 certain payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following transactions with the Managing General Partner and its affiliates
were incurred during the six month periods ended June 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating $429 $405
expenses)
Reimbursement for services of affiliates 85 85
(included in general and administrative and
operating expenses and investment properties)
Partnership management fee 228 --
During the six months ended June 30, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $429,000 and
$405,000 for the six months ended June 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $85,000 for both
the six month periods ended June 30, 1999 and 1998, including approximately
$4,000 and $3,000 of construction oversight reimbursements in 1999 and 1998,
respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the
Partnership, the general partner is entitled to receive a Partnership management
fee equal to 10% of the Partnership's adjusted cash from operations as
distributed. Approximately $228,000 in Partnership management fees were paid
along with the distribution from operations made during the six months ended
June 30, 1999. During the three months ended June 30, 1999, the fee was
correctly accounted for as a distribution to the General Partner, per the
Partnership Agreement. No fees were paid during the six months ended June 30,
1998 as the entire distribution during this period was from sales proceeds.
On May 19, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 26,900.39 (30.13% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $230 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,204.00
units. As a result, AIMCO and its affiliates currently own 32,319.66 units of
limited partnership interest in the Partnership representing 36.20% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO.
NOTE D - 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, at a rate of 9.15% through October 31, 2001,
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 for the next loan year. 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 of approximately $154,000
was added to principal. 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 E - DISTRIBUTION
During the first six months of 1999, the Partnership distributed approximately
$3,802,000 (approximately $3,053,000 to limited partners, $39.23 per limited
partnership unit). Approximately $2,052,000 of the distribution was from
operations and approximately $1,522,000 was from the sale of Parkside Village
Apartments in May 1993.
During the first six months of 1998, the Partnership distributed approximately
$1,824,000 (approximately $1,787,000 to limited partners, $20.01 per limited
partnership unit) from sale proceeds for Parkside Village Apartments in May
1993.
NOTE F - DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of eight apartment complexes
located in the Southeast and Southwest. 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 net income. The accounting
policies of the reportable segment are the same as those of the Partnership as
described in Partnership's annual report on Form 10-KSB for the year ended
December 31, 1998.
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 six months ended June 30, 1999 and 1998 (in thousands) is
shown in the tables below. The "Other" Column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999 Residential Other Totals
Rental income $ 8,089 $ -- $ 8,089
Other income 327 35 362
Interest expense 2,463 -- 2,463
Depreciation 1,488 -- 1,488
General and administrative expense -- 189 189
Segment profit (loss) 1,268 (154) 1,114
Total assets 57,296 921 58,217
Capital expenditures for investment
properties 569 -- 569
1998 Residential Other Totals
Rental income $ 7,642 $ -- $ 7,642
Other income 344 93 437
Interest expense 2,491 -- 2,491
Depreciation 1,456 -- 1,456
General and administrative expense -- 157 157
Segment profit (loss) 374 (64) 310
Total assets 57,877 2,992 60,869
Capital expenditures for investment
properties 568 -- 568
NOTE G - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates as well as a
recently announced agreement between Insignia and AIMCO. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs filed an amended complaint. The Managing General Partner has filed
demurrers to the amended complaint which were heard during February 1999. No
ruling on such demurrers has been received. The Managing General Partner does
not anticipate that costs associated with this case, if any, will be material to
the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of eight apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the six months ended June 30, 1999 and 1998:
Average
Occupancy
Property 1999 1998
Sunrunner Apartments
St. Petersburg, Florida 95% 96%
Misty Woods Apartments
Charlotte, North Carolina 94% 90%
McMillan Place Apartments
Dallas, Texas 97% 95%
Vinings Peak Apartments
Atlanta, Georgia 95% 92%
Wood Lake Apartments
Atlanta, Georgia 95% 93%
Plantation Crossing
Atlanta, Georgia 95% 93%
Greenspoint Apartments
Phoenix, Arizona 95% 93%
Sandspoint Apartments
Phoenix, Arizona 93% 95%
The Managing General Partner attributes the increase at Misty Woods to an
improved local market and increased marketing efforts. The increase at Vinings
Peak is the result of increased lease renewals due to increased resident
retention efforts.
The Partnership realized net income of approximately $1,114,000 and $310,000 for
the six month periods ended June 30, 1999 and 1998, respectively. For the three
month periods ended June 30, 1999 and 1998, the Partnership realized net income
of approximately $708,000 and $119,000, respectively. The increase in net
income for both the three and six month periods is attributable to an increase
in total revenues and a decrease in total expenses. The increase in total
revenues is attributable to an increase in rental income partially offset by a
decrease in other income. The increase in rental income is the result of
increased rental rates at all the Partnership's properties and increased
occupancy at the majority of the Partnership's properties. The decrease in other
income is primarily due to a decrease in average cash balances held in interest-
bearing accounts. The decrease in total expenses is primarily attributable to a
decrease in operating expense. The decrease in operating expenses is largely the
result of decreased maintenance expense. The decrease in maintenance expense is
primarily due to the completion of landscaping at Vinings Peak Apartments,
Plantation Crossing Apartments, and Wood Lake Apartments and the completion of
exterior building improvements at Sunrunner Apartments.
The decrease in general and administrative expense during the three months ended
June 30, 1999, is primarily due to the Partnership Management fee paid during
the first quarter being correctly accounted for as a distribution to the General
Partner. Included in general and administrative expenses for the six months
ended June 30, 1999 and 1998, are reimbursements to the Managing General Partner
allowed under the Partnership Agreement associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
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.
Liquidity and Capital Resources
At June 30, 1999, the Registrant had cash and cash equivalents of approximately
$2,913,000 as compared to approximately $3,867,000 at June 30, 1998. For the
six months ended June 30, 1999, cash and cash equivalents decreased
approximately $2,225,000 from the Registrant's year ended December 31, 1998.
The decrease in cash and cash equivalents is due to approximately $626,000 of
cash used in investing activities and approximately $4,117,000 of cash used in
financing activities partially offset by approximately $2,518,000 of cash
provided by operating activities. Net cash used in investing activities
consisted of capital improvements and replacements and net deposits to
restricted escrows maintained by the mortgage lender. Net cash used in
financing activities consisted primarily of a distribution to partners discussed
below and payments of principal made on the mortgages encumbering the
Registrant's properties. The Partnership 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. 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. Capital improvements
planned for each of the Partnerships properties are detailed below.
Sunrunner Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $27,000 of capital improvements consisting primarily of carpet and
vinyl replacement, appliance replacements and lighting improvements. These
improvements were funded from operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $150,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to capital improvements of approximately $198,000 for 1999 at
this property which include certain of the required improvements and consist of
carpet and vinyl replacements, landscaping, swimming pool repairs, roof
replacements, appliances and building improvements.
Misty Woods Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $83,000 of capital improvements consisting primarily of carpet and
vinyl replacement, pool repairs, and building improvements. These improvements
were funded from replacement reserves and operating cash flow. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the Managing General Partner on
interior improvements, it is estimated that the property requires approximately
$356,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to capital improvements of approximately $372,000
for 1999 at this property which include certain of the required improvements and
consist of carpet and vinyl replacement, countertop replacement, landscaping,
exterior painting, parking lot repairs, swimming pool repairs and roof
replacements.
McMillian Place Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $40,000 of capital improvements consisting primarily of carpet and
vinyl replacements, and pool repairs. These improvements were funded from
operating cash flow. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
Managing General Partner on interior improvements, it is estimated that the
property requires approximately $232,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to capital
improvements of approximately $284,000 for 1999 at this property which include
certain of the required improvements and consist of carpet and vinyl
replacement, fencing, grounds lighting, landscaping, exterior painting, parking
lot improvements and swimming pool repairs.
Vinings Peak Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $52,000 of capital improvements consisting primarily of carpet and
vinyl replacement, repairs to recreation facilities, and appliances. These
improvements were funded from operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $62,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to capital improvements of approximately $124,000 for 1999 at
this property which include certain of the required improvements and consist of
carpet and vinyl replacements, parking lot improvements, roof replacements,
appliances and building improvements.
Plantation Crossing Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $52,000 of capital improvements consisting primarily of carpet and
vinyl replacement, appliances and building improvements. These improvements
were funded from operating cash flow. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the Managing General Partner on interior improvements, it is
estimated that the property requires approximately $452,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to capital improvements of approximately $431,000 for 1999 at this
property which include certain of the required improvements and consist of
interior and exterior building improvements.
Wood Lake Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $60,000 of capital improvements consisting primarily of clubhouse
renovations, parking lost repairs, carpet and vinyl replacement, and exterior
painting. These improvements were funded from operating cash flow. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the Managing General Partner on
interior improvements, it is estimated that the property requires approximately
$64,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to capital improvements of approximately $108,000
for 1999 at this property which include certain of the required improvements and
consist of carpet and vinyl replacement, parking lot improvements and roof
replacement.
Greenspoint Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $113,000 of capital improvements consisting primarily of carpet
and vinyl replacement, water heaters and building improvements. These
improvements were funded from operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $220,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to capital improvements of approximately $273,000 for 1999 at
this property which include certain of the required improvements and consist of
carpet and vinyl replacement, plumbing improvements, structural improvements,
parking lot repairs, swimming pool repairs and roof replacements.
Sands Point Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $142,000 of capital improvements consisting primarily of parking
lot repairs and resurfacing, building improvements, carpet and vinyl
replacement, and pool repairs. These improvements were funded from operating
cash flow. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
Managing General Partner on interior improvements, it is estimated that the
property requires approximately $197,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to capital
improvements of approximately $310,000 for 1999 at this property which include
certain of the required improvements and consist of carpet and vinyl
replacement, HVAC replacements, electrical improvements, fencing, landscaping,
exterior painting, parking lot improvements, roof replacements, structural
improvements and swimming pool repairs.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $60,095,000, net of discount, is amortized over
varying periods with required balloon payments ranging from January 2003 to
January 2006. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If any
property cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such property through foreclosure.
The Registrant was prohibited from making distributions form the operations of
the Registrant until the mortgages encumbering McMillan Place were satisfied.
However, under the terms of the debt restructuring obtained on McMillan Place on
January 29, 1998, the Registrant is now permitted to make distributions from the
operations of the Registrant's other investment properties. During the first
six months of fiscal 1999, the Partnership made a distribution of approximately
$3,802,000 (approximately $3,503,000 to limited partners, $39.23 per limited
partner unit) consisting of approximately $2,280,000 from operations and
approximately $1,522,000 from sale proceeds for Parkside Village Apartments,
which was sold in May 1993. During the first six months of 1998, the
Partnership distributed approximately $1,824,000 (approximately $1,787,000 to
limited partners, $20.01 per limited partnership unit) from sale proceeds for
Parkside Village Apartments in May 1993. The Registrant's distribution policy
is reviewed on a semi-annual basis. 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.
There can be no assurance, however, that the Registrant will generate sufficient
funds from operations to permit further distributions to its partners in 1999 or
subsequent periods.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of June 30, 1999, had completed approximately 90% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system. The estimated completion date for this project is October, 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 1999. Any
operating equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
June 30, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999. The Managing Agent has updated data transmission standards with all of the
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by September 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates as well as a
recently announced agreement between Insignia and AIMCO. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs filed an amended complaint. The Managing General Partner has filed
demurrers to the amended complaint which were heard during February 1999. No
ruling on such demurrers has been received. The Managing General Partner does
not anticipate that costs associated with this case, if any, will be material to
the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K: None filed during the quarter ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XIX
By: FOX PARTNERS II,
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION,
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XIX 1999 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,913
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 97,478
<DEPRECIATION> 44,457
<TOTAL-ASSETS> 58,217
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 60,095
0
0
<COMMON> 0
<OTHER-SE> 3,885
<TOTAL-LIABILITY-AND-EQUITY> 58,217
<SALES> 0
<TOTAL-REVENUES> 8,451
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,463
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,114
<EPS-BASIC> 39.23<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
