FORM 10-QSB--QUARTERLY OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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 0-14528
CENTURY PENSION INCOME FUND XXIII
(Exact name of registrant as specified in its charter)
California 94-2963120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
June 30, 2000
Assets
Cash and cash equivalents $ 3,294
Receivables and deposits, net of allowance for
uncollectible amounts of $435 1,417
Debt trustee escrow 21,014
Investment properties 12,933
38,658
Liabilities
Accounts payable 58
Tenant security deposit liabilities 53
Accrued property taxes 121
Other liabilities 1,320
Non-recourse promissory notes:
Principal 28,418
Interest payable 30,376
Minority interest in consolidated joint venture 467
Estimated costs during the period of liquidation 452
61,265
Net liabilities in liquidation $(22,607)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
CENTURY PENSION INCOME FUND XXIII
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
Six Months Ended June 30, 2000
Net liabilities in liquidation at beginning of period $(20,509)
Changes in net liabilities in liquidation attributed to:
Increase in cash and cash equivalents 1,215
Increase in receivables and deposits 857
Increase in debt trustee escrow 16,269
Decrease in mortgage loan receivable (1,000)
Decrease in investment in properties (34,004)
Increase in accounts payable (8)
Decrease in tenant security deposits 141
Increase in accrued property taxes (20)
Increase in other liabilities (1,023)
Decrease in accrued interest - notes payable 295
Decrease in mortgage note payable 6,856
Decrease in non-recourse promissory notes - principal 4,358
Decrease in non-recourse promissory notes - interest
payable 2,863
Decrease in minority interest in consolidated joint
venture 1,147
Increase in estimated costs during the period of
liquidation (44)
Net liabilities in liquidation at end of period $(22,607)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
Revenues:
<S> <C> <C>
Rental income $ 2,773 $ 5,524
Interest income on mortgage loans 28 41
Other income 434 677
Total revenues 3,235 6,242
Expenses:
Operating 739 1,531
General and administrative 246 535
Depreciation 562 1,196
Interest on notes payable 207 414
Interest to promissory note holders 1,215 2,431
Amortization of deferred charges -- 52
Property taxes 373 764
Loss on disposal of investment properties 436 436
Total expenses 3,778 7,359
Loss before minority interest in joint ventures'
operations (543) (1,117)
Minority interest in joint ventures' operations 50 (25)
Net loss $ (493) $(1,142)
Net loss allocated to general partner (2%) $ (10) $ (23)
Net loss allocated to limited partners (98%) (483) (1,119)
$ (493) $(1,142)
Net loss per limited partnership unit (95,789
units issued and outstanding) $ (5.04) $(11.68)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended June 30, 1999
Cash flows from operating activities:
Net loss $(1,142)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 1,196
Amortization of deferred charges and lease commissions 173
Minority interest in joint ventures' operations 25
Deferred interest on non-recourse promissory notes 1,383
Loss on disposal of investment properties 436
Change in accounts:
Receivables and deposits (118)
Other assets (299)
Accounts payable 106
Tenant security deposit liabilities (148)
Accrued property taxes (316)
Other liabilities (146)
Accrued interest on notes payable 82
Net cash provided by operating activities 1,232
Cash flows from investing activities:
Property replacements and improvements (270)
Lease commissions paid (260)
Proceeds from sale of investment properties 14,199
Net cash provided by investing activities 13,669
Cash flows used in financing activities:
Cash distributions to the general partner (21)
Net increase in cash and cash equivalents 14,880
Cash and cash equivalents at beginning of period 11,698
Cash and cash equivalents at end of period $26,578
Supplemental disclosure of cash flow information:
Cash paid for interest - notes payable $ 398
Cash paid for interest - non-recourse promissory notes $ 1,048
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
e)
CENTURY PENSION INCOME FUND XXIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
As of December 31, 1999, Century Pension Income Fund XXIII (the "Partnership" or
"Registrant") adopted the liquidation basis of accounting due to the imminent
sale of its investment properties.
The Partnership's Non-Recourse Promissory Notes are secured by a deed of trust
on all properties owned in fee by the Partnership, by a security interest in the
joint venture interests held by the Partnership, and by a pledge of the note and
of the deed of trust on the real properties underlying the mortgage loans made
by the Partnership. The Notes were issued in two series. The "1985 Series
Notes," in the amount of $33,454,000 bear interest at 12% per annum, and the
"1986 Series Notes," in the amount of $8,485,000, bear interest at 10% per
annum. Portions of the interest on both the "1985 Series Notes" and the "1986
Series Notes" were permitted to be deferred, provided the Partnership made
minimum interest payments of 5% on the unpaid principal balance. The Nonrecourse
Promissory Notes had a balance of principal and deferred interest of
approximately $80,000,000 at their maturity date of February 15, 1999. The
Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity,
and as a result, the Partnership was in default on the Nonrecourse Promissory
Notes. Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner") the Managing General Partner of the Partnership's general partner
contacted the indenture trustee for the Nonrecourse Promissory Notes regarding
this default. In connection with these conversations, on July 30, 1999 the
Partnership entered into a forbearance agreement with the indenture trustee
pursuant to which the indenture trustee agreed not to exercise its rights and
remedies under the indenture for up to 390 days. The trustee has indicated,
however, that it will extend the forebearance period to accommodate the
completion of the sale of the Partnership's remaining properties pursuant to the
current purchase and sale agreements. In turn, the Partnership agreed to (a)
deliver to the indenture trustee for the benefit of the noteholders all of the
accumulated cash of the Partnership, less certain reserves and anticipated
operating expenses, (b) market all of its properties for sale, (c) deliver all
net cash proceeds from any sales to the indenture trustee until the notes are
fully satisfied and (d) comply with the reporting requirements under the
indenture. Based on the proceeds received to date from sales of Partnership
assets and the anticipated net proceeds from sales of the Partnership's
remaining properties, it is unlikely that the sale of the Partnership's assets
will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in
full and accordingly, generate any cash for distribution. Upon the sale or
disposal of the last property (which is anticipated to occur during the second
half of 2000), the Partnership is expected to terminate.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its consolidated financial statements at
December 31, 1999, to the liquidation basis of accounting. Consequently, assets
have been valued at their estimated net realizable value and liabilities are
presented at their estimated settlement amounts, including estimated costs
associated with carrying out the liquidation. The valuation of assets and
liabilities necessarily requires many estimates and assumptions and there are
substantial uncertainties in carrying out the liquidation. The actual
realization of assets and settlement of liabilities could be higher or lower
than amounts indicated and is based upon the Managing General Partner's
estimates as of the date of the financial statements.
Included in liabilities in the statement of net liabilities in liquidation as of
June 30, 2000 is approximately $452,000 of costs, net of income, that the
Managing General Partner estimates will be incurred during the period of
liquidation based on the assumption that the liquidation process will be
completed by September 30, 2000. Because the success in realization of assets
and the settlement of liabilities is based on the Managing General Partner's
best estimates, the liquidation period may be shorter than projected or it may
be extended beyond the projected period.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the
Partnership and the joint ventures in which the Partnership has a controlling
interest. An affiliated partnership owned the minority interest in these joint
ventures. All significant inter-entity transactions and balances 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 has had or 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 six month
periods ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses
in 1999) $ 65 $ 63
Reimbursement for services of affiliates
(included in general and administrative expenses in 1999) 32 95
Partnership management fee (included in
general and administrative expenses in 1999) -- 55
During the six months ended June 30, 2000 and 1999, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from the
Partnership's residential property as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$65,000 and $63,000 for the six months ended June 30, 2000 and 1999,
respectively. For the Partnership's commercial properties, these services were
provided by an unrelated party for the six months ended June 30, 2000 and 1999.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $32,000 and
$95,000 for the six months ended June 30, 2000 and 1999, respectively.
On January 4, 1999, an affiliate of the Managing General Partner purchased 3,554
of the Partnership's 1985 Nonrecourse Promissory Notes and 1,270 of the
Partnership's 1986 Nonrecourse Promissory Notes from a noteholder for $600 per
note.
During the six months ended June 30, 1999, the general partner received a cash
distribution of approximately $21,000, which was equal to two percent of cash
distributions to the Promissory Note holders prior to July 1, 1999. The
partnership management fee and partnership management incentive are limited by
the Partnership Agreement to ten percent of cash available for distribution
before interest payments to the Promissory Note holders and the partnership
management fee. There were no distributions during the six months ended June 30,
2000.
Note D - Sale of Investment Properties
On June 29, 2000, the Partnership sold Interrich Plaza to an unaffiliated third
party for net sales proceeds of approximately $1,609,000 after the payment of
closing costs. The Partnership's net sales proceeds are held by the indenture
trustee to be applied to the amounts due to the noteholders.
On June 8, 2000, the Partnership sold Regency Center to an unaffiliated third
party for net sales proceeds of approximately $12,025,000 after the payment of
closing costs. The Partnership's net sales proceeds are held by the indenture
trustee to be applied to the amounts due to the noteholders.
On May 26, 2000, the Partnership sold The Enclaves Apartments to an unaffiliated
third party for net sales proceeds of approximately $14,545,000 after the
payment of closing costs. A portion of the proceeds were used to pay off the
first mortgage encumbering the property. In addition, a $775,000 reserve was
held in escrow. The remaining proceeds of approximately $6,779,000 are held by
the indenture trustee to be applied to the amounts due to the noteholders.
On January 19, 2000, Coral Palm Joint Venture, a joint venture in which the
Partnership has a controlling interest, sold Coral Palm Plaza, to an
unaffiliated third party for net sales proceeds of approximately $5,992,000
after payment of closing costs. The Partnership's share of the net sales
proceeds is approximately $3,995,000 and the minority's share is approximately
$1,997,000, which was distributed during the six months ended June 30, 2000. The
Partnership's share of the net sales proceeds was used to pay a portion of the
principal and accrued interest on the Nonrecourse Promissory Notes.
On June 1, 1999, Minneapolis Business Park Joint Venture ("Minneapolis"), a
joint venture in which the Partnership has a controlling interest, sold Alpha
Business Center, Plymouth Service Center, and Westpoint Service Center to an
unaffiliated third party for net sales proceeds of approximately $14,202,000
after payment of closing costs. The Partnership's share of the net sales
proceeds was approximately $9,657,000 and the minority holder's share was
approximately $4,545,000. Minneapolis realized a loss of approximately $433,000
on the sale. The Partnership's share of the loss on the sale was approximately
$294,000 and the minority holder's share was approximately $139,000, which was
allocated to the minority holder through the minority interest in joint
ventures' operations. The Partnership's share of the net sales proceeds were
used to pay a portion of the principal and accrued interest on the Nonrecourse
Promissory Notes.
<PAGE>
Note E - Mortgage Loans Receivable
The Partnership entered into various agreements with the borrowers on two of the
Partnership's second mortgage loans receivable which were cross collateralized
and in default. The properties are located in Irvine ("Irvine") and Costa Mesa,
California ("Costa Mesa"). The borrower on the Irvine property had terminated
payments on the mortgage loan receivable in October 1994, and in January 1995, a
court appointed receiver was placed on the Irvine property. As a result, on
April 20, 1995, the Partnership acquired the Irvine property through a deed in
lieu of foreclosure and satisfied the existing first mortgage encumbering the
property in the principal amount (including expense) of approximately
$1,114,000. On May 31, 1995, the receiver on the Irvine property was dismissed.
The Partnership commenced operating the property on June 1, 1995. The mortgage
loan receivable, net of the previously recorded provision for impairment of
value of $1,250,000 was reclassified as real estate in 1995. The mortgagor of
the Costa Mesa property assumed $400,000 of the principal amount of the debt
encumbering the Irvine property resulting in an aggregate outstanding principal
balance of $1,137,000. The Partnership extended the maturity date of the loan on
the Costa Mesa property to March 31, 2000. Monthly payments to the Partnership
remained the same. As of December 31, 1999, the Partnership determined that this
receivable was impaired and its value was written down approximately $137,000 to
reflect its fair value at December 31, 1999 of $1,000,000. During the second
quarter of 2000, the mortgager repaid this note in full. The Partnership waived
its right to receive a contingent interest of 50% of the amount received in
excess of the current debt upon the sale of the property in exchange for
immediate full repayment.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership had two reportable segments: residential properties and
commercial properties. The Partnership's residential property segment consisted
of one apartment complex located in Atlanta, Georgia. The Partnership rented
apartment units to tenants for terms that are typically twelve months or less.
This apartment complex was sold on May 26, 2000 (see "Note D - Sale of
Investment Properties"). The commercial property segment consists of two
business parks located in Florida and North Carolina and one shopping center
located in Georgia. In addition, the Partnership also owned a controlling
interest in a joint venture whose property was sold January 19, 2000. The
Partnership also owned a controlling interest in a joint venture whose
properties were sold June 1, 1999. Effective December 31, 1999, the Partnership
adopted the liquidation basis of accounting (see "Note A - Basis of
Presentation"). As a result, segment information is only provided for the three
and six month periods ended June 30, 1999.
Measurement of segment profit or loss:
The Partnership evaluated performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1999.
Factors management used to identify the Partnership's reportable segments:
The Partnership's reportable segments consisted of investment properties that
offered different products and services. The reportable segments were each
managed separately because they provided distinct services with different types
of products and customers.
<PAGE>
Segment information for the three and six month periods ended June 30, 1999, 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.
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 1999 Residential Commercial Other Totals
<S> <C> <C> <C> <C>
Rental income $ 603 $ 2,170 $ -- $ 2,773
Interest income on mortgage
loans -- -- 28 28
Other income 15 125 294 434
Interest expense 207 -- 1,215 1,422
Depreciation 88 474 -- 562
General and administrative
expense -- -- 246 246
Loss on disposal of investment
properties -- 436 -- 436
Minority interest in joint
ventures' operations -- 50 -- 50
Segment profit (loss) 70 579 (1,142) (493)
For the Six Months Ended
June 30, 1999 Residential Commercial Other Totals
Rental income $ 1,223 $ 4,301 $ -- $ 5,524
Interest income on mortgage
loans -- -- 41 41
Other income 26 298 353 677
Interest expense 414 -- 2,431 2,845
Amortization of deferred costs -- -- 52 52
Depreciation 175 1,021 -- 1,196
General and administrative
expense -- -- 535 535
Loss on disposal of investment
properties -- 436 -- 436
Minority interest in joint
ventures' operations -- (25) -- (25)
Segment profit (loss) 114 1,368 (2,624) (1,142)
Total assets 6,864 11,095 52,233 70,192
Capital expenditures for
investment properties 52 218 -- 270
</TABLE>
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, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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.
<PAGE>
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 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 remaining investment properties consist of two business parks
and one shopping center. The following table sets forth the average occupancy
for each of the Partnership's investment properties for the six months ended
June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Commerce Plaza 75% 100%
Tampa, Florida
Highland Park III 93% 93%
Charlotte, North Carolina
Centre Stage Shopping Center 100% 97%
Norcross, Georgia
The Managing General Partner attributes the decrease in occupancy at Commerce
Plaza to a major tenant vacating the property during the first quarter of 2000
when its lease expired. A portion of the space was leased to a new tenant and
the Managing General Partner is actively marketing the remaining space. The
Managing General Partner attributes the increase in occupancy at Centre Stage
Shopping Center to 2,854 square feet of space being leased to two new tenants
since June 30, 1999. The Partnership's Centre Stage Shopping Center and Commerce
Plaza are currently under contract for sale to unaffiliated third parties. These
sales, which are subject to the purchasers completing their due diligence review
and other customary closing conditions, are expected to close, if at all, during
the third quarter of 2000 at their estimated liquidation value. There can be no
assurance, however, that these transactions will be consummated or as to what
the final sales terms will be.
As of December 31, 1999, the Partnership adopted the liquidation basis of
accounting due to the imminent loss of its investment properties. The
Nonrecourse Promissory Notes had a balance of principal and deferred interest of
approximately $80,000,000 at their maturity date of February 15, 1999. The
Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity
and as a result, the Partnership was in default on the Nonrecourse Promissory
Notes. Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner"), the Managing General Partner of the Partnership's general partner,
contacted the indenture trustee for the Nonrecourse Promissory Notes regarding
this default. The trustee has indicated, however, that it will extend the
forebearance period to accommodate the completion of the sale of the
Partnership's remaining properties pursuant to the current purchase and sale
agreements. In turn, the Partnership agreed to (a) deliver to the indenture
trustee for the benefit of the noteholders all of the accumulated cash of the
Partnership, less certain reserves and anticipated operating expenses, (b)
market all of its properties for sale, (c) deliver all net cash proceeds from
any sales to the indenture trustee until the notes are fully satisfied and (d)
comply with the reporting requirements under the indenture. Based on the
proceeds received to date from sales of Partnership assets and the anticipated
net proceeds from sales of the Partnership's remaining properties, it is
unlikely that the sale of the Partnership's assets will generate sufficient
proceeds to pay off the Nonrecourse Promissory Notes in full and accordingly,
generate any cash for distribution. Upon the sale or disposal of the last
property (which is anticipated to occur during the second half of 2000), the
Partnership is expected to terminate.
The statement of net liabilities in liquidation as of June 30, 2000 includes
approximately $452,000 of costs, net of income, that the Managing General
Partner estimates will be incurred during the period of liquidation, based on
the assumption that the liquidation process will be completed by September 30,
2000. Because the success in realization of assets and the settlement of
liabilities is based on the Managing General Partner's best estimates, the
liquidation period may be shorter or extended beyond the projected period.
On June 29, 2000, the Partnership sold Interrich Plaza to an unaffiliated third
party for net sales proceeds of approximately $1,609,000 after the payment of
closing costs. The Partnership's net sales proceeds are held by the indenture
trustee to be applied to the amounts due to the noteholders.
On June 8, 2000, the Partnership sold Regency Center to an unaffiliated third
party for net sales proceeds of approximately $12,025,000 after the payment of
closing costs. The Partnership's net sales proceeds are held by the indenture
trustee to be applied to the amounts due to the noteholders.
On May 26, 2000, the Partnership sold The Enclaves Apartments to an unaffiliated
third party for net sales proceeds of approximately $14,545,000 after the
payment of closing costs. A portion of the proceeds were used to pay off the
first mortgage encumbering the property. In addition, a $775,000 reserve was
held in escrow. The remaining proceeds of approximately $6,779,000 are held by
the indenture trustee to be applied to the amounts due to the noteholders.
On January 19, 2000, Coral Palm Joint Venture, a joint venture in which the
Partnership has a controlling interest, sold Coral Palm Plaza, to an
unaffiliated third party for net sales proceeds of approximately $5,992,000
after payment of closing costs. The Partnership's share of the net sales
proceeds is approximately $3,995,000 and the minority's share is approximately
$1,997,000, which was distributed during the six months ended June 30, 2000. The
Partnership's share of the net sales proceeds was used to pay a portion of the
principal and accrued interest on the Nonrecourse Promissory Notes.
On June 1, 1999, Minneapolis Business Park Joint Venture ("Minneapolis"), a
joint venture in which the Partnership has a controlling interest, sold Alpha
Business Center, Plymouth Service Center, and Westpoint Service Center to an
unaffiliated third party for net sales proceeds of approximately $14,202,000
after payment of closing costs. The Partnership's share of the net sales
proceeds was approximately $9,657,000 and the minority holder's share was
approximately $4,545,000. Minneapolis realized a loss of approximately $433,000
on the sale. The Partnership's share of the loss on the sale was approximately
$294,000 and the minority holder's share was approximately $139,000, which was
allocated to the minority holder through the minority interest in joint
ventures' operations. The Partnership's share of the net sales proceeds were
used to pay a portion of the principal and accrued interest on the Nonrecourse
Promissory Notes.
The Partnership's Centre Stage Shopping Center and Commerce Plaza are currently
under contract for sale to unaffiliated third parties. These sales, which are
subject to the purchasers completing their due diligence review and other
customary closing conditions, are expected to close, if at all, during the third
quarter of 2000 at their estimated liquidation value. There can be no assurance,
however, that these transactions will be consummated or as to what the final
sales terms will be.
<PAGE>
The Partnership entered into various agreements with the borrowers on two of the
Partnership's second mortgage loans receivable which were cross collateralized
and in default. The properties are located in Irvine ("Irvine") and Costa Mesa,
California ("Costa Mesa"). The borrower on the Irvine property had terminated
payments on the mortgage loan receivable in October 1994, and in January 1995, a
court appointed receiver was placed on the Irvine property. As a result, on
April 20, 1995, the Partnership acquired the Irvine property through a deed in
lieu of foreclosure and satisfied the existing first mortgage encumbering the
property in the principal amount (including expense) of approximately
$1,114,000. On May 31, 1995, the receiver on the Irvine property was dismissed.
The Partnership commenced operating the property on June 1, 1995. The mortgage
loan receivable, net of the previously recorded provision for impairment of
value of $1,250,000 was reclassified as real estate in 1995. The mortgagor of
the Costa Mesa property assumed $400,000 of the principal amount of the debt
encumbering the Irvine property resulting in an aggregate outstanding principal
balance of $1,137,000. The Partnership extended the maturity date of the loan on
the Costa Mesa property to March 31, 2000. Monthly payments to the Partnership
remained the same. As of December 31, 1999, the Partnership determined that this
receivable was impaired and its value was written down approximately $137,000 to
reflect its fair value at December 31, 1999 of $1,000,000. During the second
quarter of 2000, the mortgager repaid this note in full. The Partnership waived
its right to receive a contingent interest of 50% of the amount received in
excess of the current debt upon the sale of the property in exchange for
immediate full repayment.
In light of the maturity of the Notes, no distributions were made to the limited
partners for the six month periods ended June 30, 2000 and 1999. In accordance
with the Partnership Agreement, the General Partner received cash distributions
equal to 2% of the interest payments on the nonrecourse promissory notes which
amounted to approximately $21,000 during the six months ended June 30, 1999.
The following is a general description of the tax consequences that my result to
a limited partner upon the sale of the Partnership's remaining properties. Each
limited partner should consult with his or her own tax advisor to determine his
or her particular tax consequences. The taxable gain and income resulting from
the sale of the Partnership's properties will pass through to the limited
partners, and will likely result in income tax liability to the limited partners
without any distribution of cash from the Partnership.
Capital improvements planned for each of the Partnership's properties are
detailed below. Additional capital expenditures will be incurred only if cash is
available from operations.
Commerce Plaza:
During the six months ended June 30, 2000, the Partnership spent approximately
$30,000 in capital improvements at Commerce Plaza consisting of tenant
improvements. The improvements were funded from operating cash flow. The
Partnership has not budgeted capital improvements for 2000 since it anticipates
selling this property in 2000.
Regency Centre:
During the six months ended June 30, 2000, the Partnership did not complete any
capital improvements at Regency Center. This property was sold June 8, 2000.
Highland Park III:
During the six months ended June 30, 2000, the Partnership did not complete any
capital improvements at Highland Park Commerce Center. The Partnership has not
budgeted capital improvements for 2000 since it anticipates selling this
property in 2000.
Interrich Plaza:
During the six months ended June 30, 2000, the Partnership spent approximately
$9,000 in capital improvements at Interrich Plaza consisting of tenant
improvements. This property was sold June 29, 2000.
Centre Stage Shopping Center:
During the six months ended June 30, 2000, the Partnership spent approximately
$17,000 in capital improvements at Centre Stage Shopping Center consisting of
tenant improvements. These improvements were funded from operating cash flow.
The Partnership has not budgeted capital improvements for 2000 since it
anticipates selling this property in 2000.
The Enclaves:
During the six months ended June 30, 2000, the Partnership spent approximately
$55,000 for capital improvements consisting primarily of carpet replacement,
plumbing upgrades, and wall covering replacements. These improvements were
funded from operating cash flow. This property was sold May 26, 2000.
Coral Palm Plaza:
During the period January 1, 2000 through January 19, 2000, the Partnership
completed approximately $29,000 of capital improvements at Coral Palm Plaza
consisting of tenant improvements. These improvements were funded from operating
cash flow. The property was sold January 19, 2000.
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.
<PAGE>
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, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2000.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PENSION INCOME FUND XXIII
By: FOX PARTNERS V
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
