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 March 31, 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.)
One Insignia Financial Plaza
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)
March 31, 1999
Assets
Cash and cash equivalents $ 2,116
Receivables and deposits 1,161
Restricted escrows 312
Other assets 729
Investment properties:
Land $ 11,635
Buildings and related personal property 85,438
97,073
Less accumulated depreciation (43,708) 53,365
$57,683
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 193
Tenant security deposits payable 312
Accrued property taxes 464
Due to former affiliate 270
Other liabilities 550
Mortgage notes payable 60,259
Partners' (Deficit) Capital
General partner's $ (9,057)
Limited partners' (89,292 units issued and
outstanding) 4,692 (4,365)
$57,683
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
March 31,
1999 1998
Revenues:
Rental income $ 4,068 $ 3,796
Other income 183 209
Total revenues 4,251 4,005
Expenses:
Operating 1,269 1,439
General and administrative 306 81
Depreciation 739 725
Interest 1,233 1,247
Property taxes 298 322
Total expenses 3,845 3,814
Net income $ 406 $ 191
Net income allocated to general partner $ 48 $ 4
Net income allocated to limited partners 358 187
$ 406 $ 191
Net income per limited partnership unit $ 4.01 $ 2.10
Distribution per limited partnership unit $ 39.23 $ --
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 -- (71) (3,503) (3,574)
Net income for the three
months ended March 31, 1999 -- 48 358 406
Partners' (deficit) capital
at March 31, 1999 89,292 $(9,057) $ 4,692 $ (4,365)
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES FUND XIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net income $ 406 $ 191
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 739 725
Amortization of loan costs and discount 28 32
Change in accounts:
Receivables and deposits (46) (4)
Other assets (63) 41
Accounts payable (20) (34)
Tenant security deposits payable -- 10
Accrued property taxes (97) 36
Other liabilities (15) (498)
Net cash provided by operating activities 932 499
Cash flows from investing activities:
Property improvements and replacements (164) (133)
Net deposits to restricted escrows (60) (45)
Net cash used in investing activities (224) (178)
Cash flows from financing activities:
Payment on mortgage notes payable (156) (165)
Proceeds from long term borrowings -- 270
Distribution to partners (3,574) --
Loan costs paid -- (21)
Net cash (used in) provided by financing
activities (3,730) 84
Net (decrease) increase in cash and cash equivalents (3,022) 405
Cash and cash equivalents at beginning of period 5,138 4,787
Cash and cash equivalents at end of period $ 2,116 $ 5,192
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,205 $ 1,720
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 months
ended March 31, 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 three month periods ended March 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $215 $198
Reimbursement for services of affiliates, including
approximately $1,000 of construction oversight
reimbursements in 1998 (included in general and
administrative and operating expenses and
investment properties) 36 46
Partnership management fee 228 --
During the three months ended March 31, 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 $215,000 and
$198,000 for the three months ended March 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $36,000 and
$46,000 for the three months ended March 31, 1999 and 1998, respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the
Partnership, the general partners are 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 are
included in general and administrative expense for the three months ended March
31, 1999 and were paid along with the distribution from operations. No fees
were paid during the three months ended March 31, 1998.
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 quarter of 1999, the Partnership distributed approximately
$3,574,000 ($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.
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 three months ended March 31, 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 $ 4,068 $ -- $ 4,068
Other income 157 26 183
Interest expense 1,233 -- 1,233
Depreciation 739 -- 739
General and administrative expense -- 306 306
Segment profit (loss) 686 (280) 406
Total assets 56,684 999 57,683
Capital expenditures for investment
properties 164 -- 164
1998 Residential Other Totals
Rental income $ 3,796 $ -- $ 3,796
Other income 163 46 209
Interest expense 1,247 -- 1,247
Depreciation 725 -- 725
General and Administrative expense -- 81 81
Segment profit (loss) 226 (35) 191
Total assets 58,539 4,006 62,545
Capital expenditures for investment
properties 133 -- 133
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.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, county of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on 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 three months ended March 31, 1999 and 1998:
Average
Occupancy
Property 1999 1998
Sunrunner Apartments
St. Petersburg, Florida 94% 98%
Misty Woods Apartments
Charlotte, North Carolina 95% 86%
McMillan Place Apartments
Dallas, Texas 97% 94%
Vinings Peak Apartments
Atlanta, Georgia 96% 92%
Wood Lake Apartments
Atlanta, Georgia 95% 93%
Plantation Crossing
Atlanta, Georgia 96% 92%
Greenspoint Apartments
Phoenix, Arizona 97% 94%
Sandspoint Apartments
Phoenix, Arizona 94% 96%
The Managing General Partner attributes the decrease in occupancy at Sunrunner
Apartments to increased competition in the local market resulting from new
construction of apartment complexes. The increase at Misty Woods and McMillian
Place results from 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 increase at Plantation Crossing
results from an improved local market and interior and exterior improvements at
the property increasing its curb appeal. The increase at Greenspoint is the
result of increased marketing efforts.
The Partnership realized net income of approximately $406,000 and $191,000 for
the three month periods ended March 31, 1998 and 1997, respectively. The
increase in net income is attributable to an increase in total revenues offset
by a slight increase 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 the rent
escalations at all the Partnership's properties and increased occupancy at the
majority of the Partnership's properties. The increase in total expenses is
attributable to an increase in general and administrative expense offset by a
decrease in operating expense and slight decreases in property tax and interest
expense. The increase in general and administrative expense is primarily due to
payment of a Partnership management fee associated with the distribution of
operating cash flow during the three months ended March 31, 1999. The decrease
in operating expenses is largely the result of decreased maintenance expense.
Included in general and administrative expenses for the three months ended March
31, 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 March 31, 1999, the Registrant had cash and cash equivalents of approximately
$2,116,000 as compared to approximately $5,192,000 at March 31, 1998. For the
three months ended March 31, 1999 cash and cash equivalents decreased
approximately $3,022,000 from the Registrant's year ended December 31, 1998.
The decrease in cash and cash equivalents is due to approximately $224,000 of
cash used in investing activities and approximately $3,730,000 of cash used in
financing activities partially offset by approximately $932,000 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 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 three months ended March 31, 1999, the Partnership completed
approximately $14,000 of capital improvements consisting primarily of
appliances, carpet and vinyl replacement 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 near term. Capital improvements planned for
1999 consist of, but are not limited to, carpet and vinyl replacements,
landscaping, swimming pool repairs, roof replacements, appliances and building
improvements. These improvements are expected to cost approximately $198,000.
Misty Woods Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $21,000 of capital improvements consisting primarily of carpet and
vinyl replacement 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 near term. Capital improvements planned for 1999 consist
of, but are not limited to, carpet and vinyl replacement, countertop
replacement, landscaping, exterior painting, parking lot repairs, swimming pool
repairs and roof replacements. These improvements are expected to cost
approximately $372,000.
McMillian Place Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $13,000 of capital improvements consisting primarily of carpet and
vinyl replacements. 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 near term. Capital
improvements planned for 1999 consist of, but are not limited to, carpet and
vinyl replacement, fencing, grounds lighting, landscaping, exterior painting,
parking lot improvements and swimming pool repairs. These improvements are
expected to cost approximately $284,000.
Vinings Peak Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $15,000 of capital improvements consisting primarily of carpet and
vinyl replacement 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 near
term. Capital improvements planned for 1999 consist of, but are not limited to,
carpet and vinyl replacements, parking lot improvements, roof replacements,
appliances and building improvements. These improvements are expected to cost
approximately $124,000.
Plantation Crossing Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $24,000 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 near term. Capital improvements planned for 1999 consist
of, but are not limited to, interior and exterior building improvements. These
improvements are expected to cost approximately $431,000.
Wood Lake Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $14,000 of capital improvements consisting primarily of clubhouse
renovations, 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 near term. Capital improvements planned for
1999 consist of, but are not limited to, carpet and vinyl replacement, parking
lot improvements and roof replacement. These improvements are expected to cost
approximately $108,000.
Greenspoint Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $32,000 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 near term. Capital improvements planned for 1999 consist
of, but are not limited to, carpet and vinyl replacement, plumbing improvements,
structural improvements, parking lot repairs, swimming pool repairs and roof
replacements. These improvements are expected to cost approximately $273,000.
Sands Point Apartments
During the three months ended March 31, 1999, the Partnership completed
approximately $31,000 of capital improvements consisting primarily of 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 near
term. Capital improvements planned for 1999 consist of, but are not limited to,
carpet and vinyl replacement, HVAC replacements, electrical improvements,
fencing, landscaping, exterior painting, parking lot improvements, roof
replacements, structural improvements and swimming pool repairs. These
improvements are expected to cost approximately $310,000.
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 $60,259,000, 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
quarter of fiscal 1999, the Partnership made a distribution of approximately
$3,574,000 ($39.23 per limited partner unit) consisting of approximately
$2,052,000 from operations and approximately $1,522,000 from sale proceeds for
Parkside Village Apartments, which was sold in May 1993. The Registrant's
distribution policy is reviewed on a quarterly 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 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 mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, 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
March 31, 1999, had completed approximately 75% 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 July
31, 1999.
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.
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 the testing process is
expected to be completed by July 31, 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 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
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. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
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 May 1999.
The Managing Agent has updated data transmission standards with two of the three
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 June 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 $2.8 million ($0.6 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.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, county of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on 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 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 March 31, 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
Date: May 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XIX 1999 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,116
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 97,073
<DEPRECIATION> 45,708
<TOTAL-ASSETS> 57,683
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 60,259
0
0
<COMMON> 0
<OTHER-SE> (4,365)
<TOTAL-LIABILITY-AND-EQUITY> 57,683
<SALES> 0
<TOTAL-REVENUES> 4,251
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,845
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,233
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 406
<EPS-PRIMARY> 4.01<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
