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 September 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, PO 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 preceding 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)
September 30, 1999
Assets
Cash and cash equivalents $ 2,174
Receivables and deposits 1,568
Restricted escrows 304
Other assets 689
Investment properties:
Land $ 11,635
Buildings and related personal property 86,373
98,008
Less accumulated depreciation (45,245) 52,763
$ 57,498
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 336
Tenant security deposits payable 320
Accrued property taxes 917
Due to former affiliate 270
Other liabilities 536
Mortgage notes payable 59,926
Partners' Capital (Deficit):
General partner $ (9,310)
Limited partners (89,292 units issued and
outstanding) 4,503 (4,807)
$ 57,498
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 4,030 $ 3,903 $12,119 $11,545
Other income 203 220 565 657
Total revenues 4,233 4,123 12,684 12,202
Expenses:
Operating 1,429 1,551 4,027 4,604
General and administrative 68 55 257 212
Depreciation 788 732 2,276 2,188
Interest 1,227 1,240 3,690 3,731
Property tax 300 301 899 913
Total expenses 3,812 3,879 11,149 11,648
Net income $ 421 $ 244 $ 1,535 $ 554
Net income allocated
to general partner $ 50 $ 28 $ 182 $ 65
Net income allocated
to limited partners 371 216 1,353 489
$ 421 $ 244 $ 1,535 $ 554
Net income per limited
partnership unit $ 4.15 $ 2.42 $ 15.15 $ 5.48
Distributions per limited
partnership unit $ 13.26 $ -- $ 52.49 $ 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)
Distributions paid to partners -- (458) (4,687) (5,145)
Net income for the nine months
ended September 30, 1999 -- 182 1,353 1,535
Partners' (deficit) capital
at September 30, 1999 89,292 $(9,310) $ 4,503 $(4,807)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income $ 1,535 $ 554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,276 2,188
Amortization of loan costs and discount 87 91
Change in accounts:
Receivables and deposits (453) (461)
Other assets (93) 16
Accounts payable 123 7
Tenant security deposits payable 8 28
Accrued property taxes 356 489
Other liabilities (29) (486)
Net cash provided by operating activities 3,810 2,426
Cash flows from investing activities:
Property improvements and replacements (1,099) (864)
Net (deposits to) withdrawals from restricted escrows (52) 183
Net cash used in investing activities (1,151) (681)
Cash flows from financing activities:
Payment on mortgage notes payable (478) (462)
Proceeds from long-term borrowings -- 270
Distributions to partners (5,145) (1,824)
Loan costs paid -- (21)
Net cash used in financing activities (5,623) (2,037)
Net decrease in cash and cash equivalents (2,964) (292)
Cash and cash equivalents at beginning of period 5,138 4,787
Cash and cash equivalents at end of period $ 2,174 $ 4,495
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,605 $ 4,144
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" 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 nine
month periods ended September 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 fiscal year ended December 31, 1998.
Principles of Consolidation
The Registrant's financial statements include the accounts of Misty Woods CPF
19, LLC, a limited liability company in which the Registrant ultimately owns a
100% economic interest. All significant inter-entity 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 ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe
that this transaction will have a material effect on the affairs and operations
of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The 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 payments to the Managing General Partner and its affiliates were
incurred during the nine months ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $645 $613
Reimbursement for services of affiliates (included in
general and administrative and operating expenses
and investment properties) 114 123
Partnership management fee (included in general partner's
deficit) 362 --
During the nine months ended September 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 $645,000 and $613,000 for the
nine months ended September 30, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $114,000 and
$123,000 for the nine month periods ended September 30, 1999 and 1998,
respectively, including approximately $6,000 and $5,000 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 $362,000 in Partnership management fees were paid
along with the distribution from operations made during the nine months ended
September 30, 1999. No fees were paid during the nine months ended September
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 33,102.66 units of
limited partnership interest in the Partnership representing 37.07% of the total
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO (see "Note G - Legal Proceedings").
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 loan 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 nine months of 1999, the Partnership distributed approximately
$5,145,000 (approximately $4,687,000 to the limited partners, $52.49 per limited
partnership unit). Approximately $3,623,000 of the distribution was from
operations and approximately $1,522,000 was from the remaining proceeds of the
sale of Parkside Village Apartments in May 1993.
During the first nine months of 1998, the Partnership distributed approximately
$1,824,000 (approximately $1,787,000 to limited partners, $20.01 per limited
partnership unit) from the sale proceeds of 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 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 nine months ended September 30, 1999 and 1998 is
shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
1999 Residential Other Totals
Rental income $12,119 $ -- $12,119
Other income 523 42 565
Interest expense 3,690 -- 3,690
Depreciation 2,276 -- 2,276
General and administrative expense -- 257 257
Segment profit (loss) 1,750 (215) 1,535
Total assets 57,197 301 57,498
Capital expenditures for investment
properties 1,099 -- 1,099
1998 Residential Other Totals
Rental income $11,545 $ -- $11,545
Other income 528 129 657
Interest expense 3,731 -- 3,731
Depreciation 2,188 -- 2,188
General and administrative expense -- 212 212
Segment profit (loss) 637 (83) 554
Total assets 57,703 3,597 61,300
Capital expenditures for investment
properties 864 -- 864
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 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 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 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 ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. 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 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
operations. 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 the
nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Sunrunner Apartments 94% 96%
St. Petersburg, Florida
Misty Woods Apartments 94% 92%
Charlotte, North Carolina
McMillan Place Apartments 97% 96%
Dallas, Texas
Vinings Peak Apartments 95% 94%
Atlanta, Georgia
Wood Lake Apartments 95% 94%
Atlanta, Georgia
Plantation Crossing 94% 93%
Atlanta, Georgia
Greenspoint Apartments 95% 91%
Phoenix, Arizona
Sandspoint Apartments 94% 94%
Phoenix, Arizona
The Managing General Partner attributes the increase at Greenspoint Apartments
to improved marketing efforts.
Results of Operations
The Partnership realized net income of approximately $1,535,000 and $554,000 for
the nine month periods ended September 30, 1999 and 1998, respectively. For the
three month periods ended September 30, 1999 and 1998, the Partnership realized
net income of approximately $421,000 and $244,000, respectively. The increase
in net income for both the three and nine month periods is attributable to an
increase in total revenues and a decrease in total expenses. The increase in
total revenues is due 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 and increased occupancy at a 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 due to an
increase in cash distributed to the partners. The decrease in total expenses is
primarily attributable to a decrease in operating expense. The decrease in
operating expenses is the result of decreased maintenance expense and decreased
insurance expense. The decrease in maintenance expense is primarily due to the
completion of major landscaping projects at Vinings Peak Apartments, Plantation
Crossing Apartments, and Wood Lake Apartments and the completion of exterior
building improvements at Sunrunner Apartments during 1998. The decrease in
insurance expense is the result of decreased premiums at all the Partnership's
properties after selecting a new carrier late in 1998. Partially offsetting
these decreases were increased general and administrative expense and
depreciation expense. General and administrative expense increased due to an
increase in professional fees associated with the management of the Partnership.
The increase in depreciation expense is the result of the addition of capital
assets during the past twelve months.
Included in general and administrative expense at both September 30, 1999 and
1998 are management reimbursement 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.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1999, the Registrant had cash and cash equivalents of
approximately $2,174,000 as compared to approximately $4,495,000 at September
30, 1998. For the nine months ended September 30, 1999, cash and cash
equivalents decreased approximately $2,964,000 from the Registrant's year ended
December 31, 1998. The decrease in cash and cash equivalents is due to
approximately $1,151,000 of cash used in investing activities and approximately
$5,623,000 of cash used in financing activities partially offset by
approximately $3,810,000 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 distributions to the
partners 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 Registrant's properties are detailed below.
Sunrunner Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $65,000 of capital improvements consisting primarily of carpet and
vinyl replacement, appliance replacements and landscaping improvements. The
landscaping improvements are approximately 50% complete as of September 30,
1999. 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
enhancements, roof replacements, appliances and building improvements.
Misty Woods Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $167,000 of capital improvements consisting primarily of roof
replacements, carpet and vinyl replacement, pool enhancements, and building
improvements. The roof replacements and pool enhancements are substantially
complete as of September 30, 1999. 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 replacements, countertop replacement, landscaping,
parking lot resurfacing, swimming pool upgrades and roof replacements.
McMillian Place Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $115,000 of capital improvements consisting primarily of carpet
and vinyl replacement, pool enhancements, and building improvements. The pool
enhancements are approximately 75% complete as of September 30, 1999. 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 replacements, fencing, grounds lighting, landscaping,
parking lot improvements and swimming pool enhancements.
Vinings Peak Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $104,000 of capital improvements consisting primarily of parking
lot improvements, carpet and vinyl replacement, enhancements to the recreation
facilities, and appliances. The parking lot improvements are substantially
complete as of September 30, 1999. 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 nine months ended September 30, 1999, the Partnership completed
approximately $98,000 of capital improvements consisting primarily of carpet and
vinyl replacement, building improvements 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 $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 nine months ended September 30, 1999, the Partnership completed
approximately $100,000 of capital improvements consisting primarily of roof
replacements, carpet and vinyl replacement, and parking lot improvements. The
parking lot improvements and roof replacements are substantially complete as of
September 30, 1999. 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 nine months ended September 30, 1999, the Partnership completed
approximately $215,000 of capital improvements consisting primarily of parking
lot improvements, carpet and vinyl replacement, roof replacements, and interior
improvements. The parking lot improvements are substantially complete as of
September 30, 1999. The roof replacements are approximately 50% complete as of
September 30, 1999. 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 improvements, swimming pool
enhancements, and roof replacements.
Sands Point Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $235,000 of capital improvements consisting primarily of carpet
and vinyl replacement, building improvements, and parking lot improvements.
These improvements were funded from operating cash flow. The parking lot
improvements are substantially complete as of September 30, 1999. 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, parking lot improvements,
roof replacements, structural improvements and swimming pool enhancements.
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 $59,926,000, net of discount, is amortized over
varying periods with required balloon payments ranging from October 2002 to
January 2006. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such properties through foreclosure.
The Registrant was prohibited from making distributions from 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
nine months of fiscal 1999, the Partnership made a distribution of approximately
$5,145,000 (approximately $4,687,000 to the limited partners, $52.49 per limited
partner unit) consisting of approximately $3,623,000 from operations and
approximately $1,522,000 from the remaining sale proceeds for Parkside Village
Apartments, which was sold in May 1993. During the first nine 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 during the
remainder of 1999 or subsequent periods.
Tender Offer
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 33,102.66 units of
limited partnership interest in the Partnership representing 37.07% 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 (see "Item 1. Financial Statements, Note G - Legal Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed 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.
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 virtually all of the server operating systems.
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 virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 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
September 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 has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
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 expenses
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 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
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). 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 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 ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing General Partner does not anticipate that
costs associated with this case 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
September 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/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XIX 1999 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,174
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 98,008
<DEPRECIATION> 45,245
<TOTAL-ASSETS> 57,498
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 59,926
0
0
<COMMON> 0
<OTHER-SE> (4,807)
<TOTAL-LIABILITY-AND-EQUITY> 57,498
<SALES> 0
<TOTAL-REVENUES> 12,684
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,149
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,690
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,535
<EPS-BASIC> 15.15<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
