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 0-13418
CENTURY PROPERTIES GROWTH FUND XXII
(Exact name of small business issuer as specified in its charter)
California 94-2939418
(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 GROWTH FUND XXII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1999
Assets
Cash and cash equivalents $ 2,950
Receivables and deposits 1,455
Restricted escrows 1,185
Other assets 1,461
Investment properties:
Land $ 14,396
Buildings and related personal property 119,725
134,121
Less accumulated depreciation (59,255) 74,866
$ 81,917
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 220
Tenant security deposits payable 352
Accrued property taxes 1,247
Other liabilities 790
Mortgage notes payable 72,617
Partners' (Deficit) Capital
General partner $ (7,894)
Limited partners (82,848 units issued and
outstanding) 14,585 6,691
$ 81,917
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PROPERTIES GROWTH FUND XXII
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 $ 5,397 $ 5,159 $16,063 $15,325
Other income 299 327 825 922
Total revenues 5,696 5,486 16,888 16,247
Expenses:
Operating 1,956 2,119 5,549 5,878
General and administrative 91 96 302 282
Depreciation 1,024 1,025 3,107 3,029
Interest 1,469 1,481 4,421 4,451
Property taxes 427 448 1,370 1,330
Total expenses 4,967 5,169 14,749 14,970
Income before
extraordinary item 729 317 2,139 1,277
Extraordinary loss on early
extinguishment of debt -- -- -- (28)
Net income $ 729 $ 317 $ 2,139 $ 1,249
Net income allocated
to general partner $ 86 $ 37 $ 252 $ 147
Net income allocated
to limited partners 643 280 1,887 1,102
$ 729 $ 317 $ 2,139 $ 1,249
Net income per limited
partnership unit:
Income before extraordinary
item $ 7.76 $ 3.38 $ 22.78 $ 13.60
Extraordinary loss on early
extinguishment of debt -- -- -- (.30)
Net Income $ 7.76 $ 3.38 $ 22.78 $ 13.30
Distributions per limited
partnership unit $ 19.00 $ -- $ 72.23 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PROPERTIES GROWTH FUND XXII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 82,848 $ -- $82,848 $82,848
Partners' (deficit) capital at
December 31, 1998 82,848 $(7,345) $18,682 $11,337
Net income for the nine months
ended September 30, 1999 -- 252 1,887 2,139
Distributions to partners -- (801) (5,984) (6,785)
Partners' (deficit) capital at
September 30, 1999 82,848 $(7,894) $14,585 $ 6,691
See Accompanying Notes to Consolidated Financial Statements
d)
CENTURY PROPERTIES GROWTH FUND XXII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income $ 2,139 $ 1,249
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,107 3,029
Amortization of loan costs 159 157
Loss on disposal of property -- 42
Extraordinary loss on early extinguishment of debt -- 28
Change in accounts:
Receivables and deposits 293 (337)
Other assets (8) (28)
Accounts payable 15 19
Tenant security deposits payable 10 (17)
Accrued property taxes 11 347
Other liabilities 34 77
Net cash provided by operating activities 5,760 4,566
Cash flows from investing activities:
Net (deposits to) withdrawals from restricted escrows (258) 159
Property improvements and replacements (1,933) (1,003)
Net cash used in investing activities (2,191) (844)
Cash flows from financing activities:
Mortgage principal payments (518) (464)
Loan costs paid -- (167)
Repayment of mortgage note payable -- (2,840)
Proceeds from mortgage note payable -- 4,000
Distributions to partners (6,785) --
Net cash (used in) provided by
financing activities (7,303) 529
Net (decrease) increase in unrestricted
cash and cash equivalents (3,734) 4,251
Unrestricted cash and cash equivalents at beginning of
period 6,684 3,345
Unrestricted cash and cash equivalents at end of period $ 2,950 $ 7,596
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,262 $ 4,296
See Accompanying Notes to Consolidated Financial Statements
e)
CENTURY PROPERTIES GROWTH FUND XXII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Properties Growth Fund XXII (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
("FCMC" or the "Managing General Partner"), a California corporation, 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 Partnership's consolidated financial statements include the accounts of Wood
Creek CPGF 22, L.P., Plantation Creek CPGF 22, L.P., Stoney Creek CPGF 22, L.P.,
Four Winds CPGF 22, L.P., Coopers Point CPGF 22, L.P., Hampton Greens CPGF 22,
L.P., Century Stoney Greens, L.P. and Copper Mill CPGF 22, L.P., in which the
registrant owns 100% interest in each of these partnerships. The Partnership
has the ability to control the major operating and financial policies of these
partnerships. All interpartnership 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 Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following transactions with affiliates of the Managing General Partner were
incurred during the nine month periods ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $848 $807
Reimbursement for services of affiliates (included in
general and administrative expenses and investment
properties) 132 141
Partnership management fee (included in partners' captial) 679 --
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 Partnership's properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$848,000 and $807,000 for the nine months ended September 30, 1999 and 1998,
respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $132,000 and $141,000 for the
nine months ended September 30, 1999 and 1998, respectively. These amounts
include approximately $11,000 and $23,000 of construction services
reimbursements during the nine months ended September 30, 1999 and 1998,
respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the
Partnership, the Managing General Partner is entitled to receive a Partnership
management fee equal to 10% of the Partnership's adjusted cash from operations
as distributed. Approximately $679,000 in Partnership management fees were paid
along with the distribution from operations made during the nine months ended
September 30, 1999. The fee is accounted for as a distribution to the Managing
General Partner, in accordance with the terms of the Partnership Agreement. No
fees were paid during the nine months ended September 30, 1998 as no
distributions were paid during this period.
As part of the refinancing of Promontory Point Apartments (see "Note E"), the
Partnership paid an affiliate of the Managing General Partner a broker's fee of
$20,000 during the nine months ended September 30, 1998.
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner, commenced a tender offer to purchase up to 27,208.11 (32.84% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $359 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,830.00
units. As a result, AIMCO and its affiliates currently own 26,342.50 units of
limited partnership interest in the Partnership representing 31.80% 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 - DISTRIBUTION
During the nine months ended September 30, 1999, the Partnership distributed
approximately $6,785,000 (approximately $5,984,000 to the limited partners,
$72.23 per limited partnership unit) to the partners. There were no
distributions made during the nine months ended September 30, 1998.
NOTE E - REFINANCING AND EXTRAORDINARY LOSS
On April 3, 1998, the Partnership refinanced the mortgage encumbering Promontory
Point. The refinancing replaced indebtedness of $2,840,000 with a new mortgage
in the amount of $4,000,000. The new mortgage carries a stated interest rate of
7.04%, which replaced a mortgage with an interest rate equal to LIBOR plus 3.75%
(approximately 9.46% at the time of the refinancing). The new mortgage matures
May 1, 2008. For financial statement purposes, the Partnership recognized an
extraordinary loss on the early extinguishment of debt of approximately $28,000
during the second quarter of 1998. This loss is attributable to the write-off of
unamortized loan costs associated with the previous mortgage.
NOTE F - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property consists of nine apartment complexes in the
Southeast, Midwest and Southwest United States. 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 different products and services. Although each of the investment
properties are 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 segments.
1999 Residential Other Totals
Rental revenue $16,063 $ -- $16,063
Other income 807 18 825
Interest expense 4,421 -- 4,421
Depreciation 3,107 -- 3,107
General and administrative expense -- 302 302
Segment profit (loss) 2,423 (284) 2,139
Total assets 81,845 72 81,917
Capital expenditures for investment
properties 1,933 -- 1,933
1998 Residential Other Totals
Rental income $15,325 $ -- $15,325
Other income 858 64 922
Interest expense 4,451 -- 4,451
Depreciation 3,029 -- 3,029
General and administrative expense -- 282 282
Extraordinary loss on early
extinguishment of debt (28) -- (28)
Segment profit (loss) 1,467 (218) 1,249
Total assets 86,602 2,578 89,180
Capital expenditures for investment
properties 1,003 -- 1,003
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 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 OPERATIONS
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 Partnership from time to time.
The discussion of the Partnership'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 nine apartment complexes.
The following table sets forth the average occupancy for each of the properties
for the nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Cooper's Pointe Apartments 96% 97%
North Charleston, South Carolina
Copper Mill Apartments (1) 96% 88%
Richmond, Virginia
Four Winds Apartments 96% 97%
Overland Park, Kansas
Autumn Run Apartments 95% 95%
Naperville, Illinois
Plantation Creek Apartments 96% 95%
Atlanta, Georgia
Wood Creek Apartments 94% 95%
Mesa, Arizona
Promontory Point Apartments 96% 94%
Austin, Texas
Hampton Greens Apartments (2) 97% 92%
Dallas, Texas
Stoney Creek Apartments (2) 97% 93%
Dallas, Texas
(1) The increase in occupancy at Copper Mill Apartments is due to an improved
market in the western Richmond, Virginia area.
(2) The increase in occupancy at Hampton Greens and Stoney Creek Apartments is
due to increased marketing efforts.
Results of Operations
The Partnership's net income for the three and nine month periods ended
September 30, 1999, was approximately $729,000 and $2,139,000, respectively, as
compared to approximately $317,000 and $1,249,000, respectively, for the
corresponding periods in 1998. The increase in net income is primarily due to
increases in total revenues and a decrease in total expenses.
The increase in total revenues for the three and nine month periods ended
September 30, 1999, is due to increased rental income which was partially offset
by decreased other income. The increase in rental income is primarily due to an
increase in rental rates at all of the Partnership's rental properties except
Cooper Mill in addition to increased occupancy at Cooper Mill, Plantation Creek,
Promontory Point, Stoney Creek, and Hampton Greens Apartments. This was
partially offset by a decrease in other income. Other income decreased primarily
due to decreased interest income resulting from lower cash balances held in
interest bearing accounts as a result of distributions made during 1999. Total
expenses for the nine month period ended September 30, 1999, decreased primarily
due to decreases in operating expenses and interest expenses partially offset by
an increase in depreciation, general and administrative, and property tax
expenses. Operating expenses decreased primarily as a result of a decrease in
maintenance expenses at all of the properties. Maintenance expenses decreased
primarily due to decreases in landscaping at Wood Creek, Plantation Creek,
Stoney Creek, Promontory Point, and Four Winds, decreases in exterior building
improvements at Autumn Run and a decrease in insurance proceeds received as a
result of a hail storm in 1998 at Hampton Greens Apartments. Interest expense
decreased primarily as a result of a greater portion of the monthly debt service
payments being applied to principal. Depreciation expense increased resulting
from depreciable assets being placed into service at the Partnership's
investment properties during the last twelve months. Property tax expense
increased due to an increase in assessed value in 1998 not recognized until the
fourth quarter of 1998 at both Wood Creek and Stoney Creek. General and
administrative expenses increased due to an increase in administrative expenses
and the settlement of a legal case during the first quarter of 1998 as disclosed
in the Partnership's Annual Report on Form 10-KSB for the year ended December
31, 1998. Also contributing to the increase in net income was a $28,000
extraordinary loss on early extinguishment of debt which was recognized during
the three and nine months ended September 30, 1998.
Total expenses for the three month period ended September 30, 1999, decreased
primarily due to decreases in operating, general and administrative, interest
and property tax expenses. The decreases in operating and interest expense are
discussed above. The decrease in general and administrative expense is
primarily due to the timing of professional fees in 1998. The decrease in
property tax expense is primarily due to the timing of receipt of the tax bill
for Autumn Run Apartments.
Included in general and administrative expenses for the nine months ended
September 30, 1999 and 1998, are reimbursements to the Managing General Partner
allowed under the Partnership Agreement associated with its management of the
Partnership. 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.
Capital Resources and Liquidity
At September 30, 1999, the Partnership had unrestricted cash and cash
equivalents of approximately $2,950,000 as compared to approximately $7,596,000
at September 30, 1998. For the nine months ended September 30, 1999,
unrestricted cash and cash equivalents decreased approximately $3,734,000 from
the Partnership's year ended December 31, 1998. The decrease in cash and cash
equivalents is due to approximately $7,303,000 of cash used in financing
activities and approximately $2,191,000 of cash used in investing activities,
which was partially offset by approximately $5,760,000 of cash provided by
operating activities. Cash used in investing activities consists of property
improvements and replacements and deposits to restricted escrows maintained by
the mortgage lenders. Cash used in financing activities consists of principal
payments made on the mortgages encumbering the Partnership's investment
properties and cash distributions made to the partners. 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.
On April 3, 1998, the Partnership refinanced the mortgage encumbering Promontory
Point. The refinancing replaced indebtedness of $2,840,000 with a new mortgage
in the amount of $4,000,000. The new mortgage carries a stated interest rate of
7.04%, which replaced a rate equal to LIBOR plus 3.75%. The new mortgage
matures May 1, 2008.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership and to
comply with Federal, state, and local legal and regulatory requirements.
Capital improvements planned for each of the Partnership's properties are
detailed below.
Wood Creek
During the nine months ended September 30, 1999, the Partnership completed
approximately $213,000 of capital improvement projects at Wood Creek, consisting
primarily of floor covering replacements, landscaping, parking lot improvements,
and structural 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 $360,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to capital improvements of
approximately $434,000 for 1999 at this property which include certain of the
required improvements and consist of parking lot improvements, plumbing
replacements, pool enhancements, landscaping, floor covering replacements and
roof replacements.
Plantation Creek
During the nine months ended September 30, 1999, the Partnership completed
approximately $551,000 of capital improvement projects at Plantation Creek,
consisting primarily of landscaping, floor covering replacements, roof
replacements, and appliance replacements. 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 $862,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to capital improvements of approximately $978,000 for 1999 at this
property which include certain of the required improvements and consist of
landscaping, floor covering replacements, parking lot improvements and roof
replacements.
Stoney Creek
During the nine months ended September 30, 1999, the Partnership completed
approximately $95,000 of capital improvement projects at Stoney Creek,
consisting primarily of floor covering replacements, landscaping, and HVAC
replacements. These improvements were funded from replacement reserves. 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 $473,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to capital improvements of
approximately $267,000 for 1999 at this property which include certain of the
required improvements and consist of floor covering replacements, HVAC
replacements and landscaping.
Four Winds
During the nine months ended September 30, 1999, the Partnership completed
approximately $303,000 of capital improvement projects at Four Winds, consisting
primarily of floor covering replacements, fencing, parking lot improvements,
roof replacements, structural improvements, and light fixtures. The fencing,
light fixtures, parking lot improvements, roof replacements, and structural
improvements 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 $262,000 of capital improvements over the next few years. The
Partnership has budgeted, but is not limited to capital improvements of
approximately $302,000 for 1999 at this property which include certain of the
required improvements and consist of lighting upgrades, parking lot
improvements, air conditioning and appliance upgrades, floor covering
replacement, structural improvements, roof and building improvements.
Promontory Point
During the nine months ended September 30, 1999, the Partnership completed
approximately $227,000 of capital improvement projects at Promontory Point
Apartments, consisting primarily of structural improvements, roof replacement,
fencing, and floor covering replacements. 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 $320,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to capital improvements of approximately $371,000 for 1999 at this
property which include certain of the required improvements and consist of
perimeter fencing, roof replacements, floor covering replacements and
landscaping.
Cooper's Pointe
During the nine months ended September 30, 1999, the Partnership completed
approximately $125,000 of capital improvement projects at Cooper's Pointe,
consisting primarily of floor covering replacements, roof replacements, and
parking lot improvements. The parking lot improvements and roof replacements
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 $160,000
of capital improvements over the next few years. The Partnership has budgeted,
but is not limited to capital improvements of approximately $197,000 for 1999 at
this property which include certain of the required improvements and consist of
parking lot improvements, floor covering replacements and landscaping.
Hampton Greens
During the nine months ended September 30, 1999, the Partnership completed
approximately $76,000 of capital improvement projects at Hampton Greens,
consisting primarily of floor covering replacements and fencing, which is
substantially complete. These improvements were funded from replacement
reserves. 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 $155,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to capital improvements of
approximately $189,000 for 1999 at this property which include certain of the
required improvements and consist of floor covering replacements, fencing, and
landscaping.
Autumn Run
During the nine months ended September 30, 1999, the Partnership completed
approximately $192,000 of capital improvement projects at Autumn Run, consisting
primarily of floor covering replacements, electrical improvements, HVAC
replacements, and structural improvements. The HVAC 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 $189,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to capital
improvements of approximately $254,000 for 1999 at this property which include
certain of the required improvements and consist of building improvements, floor
covering replacements, air conditioning upgrades, pool enhancements, structural
upgrades, and floor covering replacements.
Copper Mill
During the nine months ended September 30, 1999, the Partnership completed
approximately $151,000 of capital improvement projects at Copper Mill,
consisting primarily of floor covering replacements, structural improvements,
roof replacements, lighting, and other improvements. The lighting is
approximately 75% complete and the roof replacements 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 $219,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to capital improvements of approximately $248,000 for 1999 at this
property which include certain of the required improvements and consist of water
heater and air conditioning upgrades, floor covering replacements, and parking
lot improvements.
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 Partnership'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 $72,617,000 is being amortized over varying
periods with balloon payments due over periods ranging from November 2003 to May
2008. The Managing General Partner will attempt to refinance such remaining
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
During the nine months ended September 30, 1999, the Partnership distributed
approximately $6,785,000 (approximately $5,984,000 went to limited partners,
$72.23 per limited partnership unit) from operations. Future cash
distributions will depend on the levels of cash generated from operations, and
the availability of cash reserves, the timing of debt maturities, property
sales, and/or refinancings. The Partnership's distribution policy is reviewed
on a quarterly basis. There can be no assurance, however, that the Partnership
will generate sufficient funds from operations after required capital
improvements to permit additional distributions to its partners in 1999 or
subsequent periods.
Tender Offer
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 27,208.11 (32.84% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $359 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,830.00
units. As a result, AIMCO and its affiliates currently own 26,342.50 units of
limited partnership interest in the Partnership representing 31.80% 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 "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 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 GROWTH FUND XXII
By: FOX PARTNERS IV
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
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 Growth Fund XXII 1999 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000740156
<NAME> CENTURY PROPERTIES GROWTH FUND XXII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,950
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 134,121
<DEPRECIATION> 59,255
<TOTAL-ASSETS> 81,917
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 72,617
0
0
<COMMON> 0
<OTHER-SE> 6,691
<TOTAL-LIABILITY-AND-EQUITY> 81,917
<SALES> 0
<TOTAL-REVENUES> 16,888
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,749
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,421
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,139
<EPS-BASIC> 22.78<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
