<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR QUARTER ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 33-22857
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-4166241
9090 Wilshire Blvd., Suite 201
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve 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> 2
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, September 30, 1995 and December 31, 1994 ................. 1
Statements of Operations,
Nine and Three Months Ended September 30, 1995 and 1994............. 2
Statement of Partners' Equity
Nine Months Ended September 30, 1995 .............................. 3
Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994....................... 4
Notes to Financial Statements ............................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................ 13
Item 6. Exhibits and Reports on Form 8-K......................................... 13
Signatures .......................................................................... 14
</TABLE>
<PAGE> 3
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
RENTAL PROPERTY $34,948,718 $35,660,385
CASH AND CASH EQUIVALENTS 2,988,133 2,425,486
RESTRICTED CASH 158,700 158,700
OTHER ASSETS 43,787 332,885
----------- -----------
$38,139,338 $38,577,456
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued liabilities $ 930,058 $ 1,505,746
Due to managing general partner -- 91,331
Prepaid rent 16,481 22,732
Security deposits 316,532 320,340
----------- -----------
1,263,071 1,940,149
PARTNERS' CAPITAL 36,876,267 36,637,307
----------- -----------
$38,139,338 $38,577,456
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1995 Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 4,168,156 $ 1,353,957 $ 4,024,492 $ 1,307,239
Interest and other income 245,054 177,432 103,213 29,907
----------- ----------- ----------- -----------
4,413,210 1,531,389 4,127,705 1,337,146
----------- ----------- ----------- -----------
EXPENSES
Operating 993,132 288,079 933,712 323,847
Property taxes 408,076 134,741 485,228 216,146
Management fees-affiliate 142,543 41,026 205,541 66,780
General and administrative 440,256 226,788 149,494 27,900
Depreciation 536,667 178,889 537,683 179,228
Earthquake loss 25,000 25,000 1,144,551 960,207
----------- ----------- ----------- -----------
2,545,674 894,523 3,456,209 1,774,108
----------- ----------- ----------- -----------
NET INCOME $ 1,867,536 $ 636,866 $ 671,496 $ (436,962)
=========== =========== =========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .25 $ .09 $ .09 $ (.06)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Special
General Limited Limited
Partners Partners Partner Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS
September 30, 1995 7,258,000
============
EQUITY (DEFICIENCY),
at January 1, 1995 $ (285,507) $ 36,922,814 $ -- $ 36,637,307
Distributions (16,286) (1,612,290) -- (1,628,576)
Net income for the nine months
ended September 30, 1995 18,675 1,848,861 -- 1,867,536
------------ ------------ ------------ ------------
EQUITY (DEFICIENCY),
at September 30, 1995 $ (283,118) $ 37,159,385 $ -- $ 36,876,267
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,867,536 $ 671,496
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 536,667 537,683
Decrease in:
Other assets 289,098 343,689
Increase (decrease) in:
Accounts payable and other liabilities (575,688) 1,118,295
Due to managing general partner (91,331) --
Prepaid rent (6,251) (2,347)
Security deposits (3,808) (34,184)
----------- -----------
Net cash provided by operating activities 2,016,223 2,634,632
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of certificates of deposit -- 1,451,600
Increase in restricted cash -- (681,200)
Amounts collected pursuant to minimum
distribution guaranty agreement 175,000 2,945,222
----------- -----------
Net cash provided by investing activities 175,000 3,715,622
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (1,628,576) (4,460,678)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 562,647 1,889,576
CASH AND CASH EQUIVALENTS, beginning of period 2,425,486 135,471
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,988,133 $ 2,025,047
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
financial statements; accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements
and related notes thereto contained in the Annual Report for the year
ended December 31, 1994 prepared by Century HillCreste Apartment
Investors, L.P. (the "Partnership"). Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end.
The results of operations for the interim periods presented are not
necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position
as of September 30, 1995, and the results of operations for the three
and nine months then ended and changes in cash flows for the nine months
then ended.
ORGANIZATION
The Partnership, a California limited partnership, was formed on June 6,
1988, with National Partnership Investments Corp. ("NAPICO" or the
"Managing General Partner"), a then wholly owned subsidiary of Coast
Savings and Loan Association ("Coast"), and HillCreste Properties Inc.
(formerly Shearson Lehman Hutton HillCreste Properties Inc. and
hereinafter referred to as "HillCreste Properties") as general partners.
On October 26, 1988, the Partnership issued to investors (the "Limited
Partners") 7,258,000 depositary units (each depositary unit being
entitled to the beneficial interest of a limited partnership interest)
for a total amount raised of $72,580,000.
Concurrent with the issuance of the depositary units, the Partnership
purchased a 315-unit luxury apartment complex in West Los Angeles,
California (the "Property") from Casden Properties (formerly CoastFed
Properties) and hereinafter referred to as the "Seller". To complete the
purchase of the Property, the Seller purchased a 10% special limited
partnership interest in the Partnership for $6,855,000.
Among other provisions, the Partnership Agreement provides that the 10%
special limited partnership interest is subordinate to the Limited
Partners' return of capital and specified priority return.
In January 1990, Casden Investment Corporation, an affiliate of the
Seller, acquired all of the outstanding common stock of NAPICO.
5
<PAGE> 8
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MINIMUM DISTRIBUTION GUARANTEE
The Minimum Distribution Guarantee Agreement (the "Guarantee Agreement")
required the Seller, who is also the special limited partner of the
Partnership, to make certain payments to the Partnership, if and when
necessary, in an amount sufficient to enable the Partnership to provide
the Limited Partners with distributions sufficient to achieve a minimum
annual return upon the Limited Partners' investment in the Partnership,
through December 31, 1993, as follows:
<TABLE>
<CAPTION>
Years Ended December 31, Annual Return on Investment
------------------------ ---------------------------
<S> <C> <C>
1988 8.0%
1989 8.0%
1990 8.5%
1991 9.0%
1992 9.0%
1993 9.0%
</TABLE>
Pursuant to the Memorandum of Understanding entered into on August 11,
1995, the Seller agreed to pay to the Partnership, the sum of $350,000
in two equal installments of $175,000 each; the first such $175,000
payment was made in August 1995 and the second payment shall be made on
February 11, 1996. These payments represent the amount of a real estate
tax refund received in 1994 for overpayment of prior year taxes which
had previously been offset against amounts receivable from the Seller
under the Guarantee Agreement.
Through September 30, 1995, the Seller has funded a total of $12,955,998
directly to the Partnership for distributions to the Limited Partners
pursuant to the Guarantee Agreement, which amount includes the $175,000
paid in August 1995, referred to above. The period covered by the
Guarantee Agreement expired on December 31, 1993. Except with respect to
the payments made or to be made pursuant to the Memorandum of
Understanding, commencing in 1994, distributions, if any, to the
Partners are made from cash flow from operations. The minimum
distribution guarantee payments from the Seller have been reflected as a
reduction in the carrying amount of the property.
In addition, in August 1995, the Seller made an additional payment of
$135,000 to the Partnership pursuant to the Memorandum of Understanding
entered into on August 11, 1995, which amount represents interest on
late payments to the Partnership covering the period from the second
quarter of 1991 to the fourth quarter of 1993 pursuant to the Guarantee
Agreement.
6
<PAGE> 9
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION
Depreciation is reported using the straight-line method over the
estimated useful lives of the buildings and equipment as follows:
Buildings 35 years
Furniture and equipment 5 years
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash and bank certificates of
deposit with an original maturity of three months or less
RESTRICTED CASH
Restricted cash consists of bank certificates of deposits assigned to
the City of Los Angeles in lieu of purchasing a subdivision improvement
bond to effectuate the privatization of streets located within the
Property's perimeter (see Note 4).
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements as such taxes, if any, are the liability of the
individual partners.
NET INCOME PER LIMITED PARTNERSHIP INTEREST
Net income per limited partner unit was computed by dividing the limited
partners' share of net income (99%) by the number of limited partner
units outstanding during the year. The number of limited partner units
was 7,258,000 for the periods presented.
NOTE 2 - RENTAL PROPERTY
At September 30, 1995 and December 31, 1994, the rental property
consists of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Land $ 16,175,000 $ 16,175,000
Building 24,869,402 25,044,402
Furniture and equipment 3,870,000 3,870,000
------------ ------------
44,914,402 45,089,402
Less accumulated depreciation (9,965,684) (9,429,017)
------------ ------------
$ 34,948,718 $ 35,660,385
============ ============
</TABLE>
Minimum distribution guarantee payments have been reflected as a
reduction in the carrying value of the Property (Note 1).
7
<PAGE> 10
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 3 - FEES PAID TO GENERAL PARTNERS AND AFFILIATES
In accordance with the Partnership Agreement certain fees and
reimbursements are paid to the general partners and their affiliates as
follows:
(a) A Partnership management fee payable to the Managing General
Partner of $50,000 annually. One quarter of this fee is included
in general and administrative expenses for each quarter.
(b) Prior to February 1, 1995, a property management fee equal to 5
percent of collected revenues was paid to an affiliate of the
Managing General Partner. Effective February 1, 1995, the fee was
reduced from 5 percent to 3 percent. The property management fees
for the nine months ended September 30, 1995 and 1994 were
approximately $143,000 and $205,500, respectively.
It is currently anticipated that property management will be
transferred to an unaffiliated agent, on or about December 1,
1995, who will manage the property for a management fee of 3% of
rental revenue.
(c) Partnership expense reimbursements, payable to HillCreste
Properties, not to exceed $50,000 annually. The 1990
reimbursement has been accrued and is included in accounts
payable and accrued liabilities at September 30, 1995.
The Partnership is obligated to pay fees to the Managing General Partner
or its affiliates upon sale of the Property based upon the form of such
sale. The payment of such fees are subordinated to certain preferred
returns to the Limited Partners.
At December 31, 1994, approximately $91,000 was due the Managing General
Partner for reimbursement of expenses paid on behalf of the Partnership.
In addition, an affiliate of the Managing General Partner performed
certain earthquake related repairs during 1994 (see Note 4 below).
NOTE 4 - COMMITMENTS
(a) On January 17, 1994, the Property sustained damage due to the
earthquake in the Los Angeles area. As of September 30, 1995,
approximately $1,290,000 has been spent to perform repairs of
certain damage caused by the earthquake. The total cost of such
damage is estimated to be approximately $1,525,000. Of the amount
spent, approximately $376,000 was paid to an affiliate of the
Managing General Partner during 1994. The Partnership entered
into a contract in the amount of $1,091,723 with an unaffiliated
contractor to repair the majority of the damage. At September 30,
1995, approximately $235,000 remains due under this contract,
which is included in accounts payable and accrued liabilities on
the balance sheet.
Based on a determination by the building's insurance carrier that
the loss suffered by the Property as a result of the earthquake
was $1,537,718, the Partnership received in August 1994 a net
insurance settlement in the amount of $355,448. This amount was
determined by reducing the gross amount of the building's loss
by: (a) the deductible provided for in the policy in the
8
<PAGE> 11
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 4 - COMMITMENTS (CONTINUED)
amount of $1,071,808; (b) the $34,095 paid to the independent public
adjuster that processed the building's claim; and (c) the insurance
company's holdback of $76,367.
(b) Approvals from the City of Los Angeles were obtained to
"privatize" the streets and alleys providing access to the
Property and to construct wrought iron security fencing with
controlled entrances into the Property. The final resolution
vacating the streets and alleys was approved on December 31,
1994. Landscape and architectural drawings have been prepared for
the construction of the perimeter fencing and related
improvements, including a guardhouse at the Ambassador Street
entrance and a directory/trellis at the Peerless Street location.
These plans were approved and a building permit was issued by the
City of Los Angeles on June 20, 1995. This permit will expire on
December 20, 1995, unless work commences. A six month extension
to May 20, 1995 is being applied for while the plans are being
bid out and other construction coordination issues are being
resolved.
As a condition to its approval of the proposed "privatization",
the City of Los Angeles requires the construction of a storm
drain and related improvements, for which an improvement
agreement and guarantee in the amount $158,000 has been filed
with the City of Los Angeles, the construction of which has been
deferred until after March 15, 1996. Construction of these
improvements at March 15, 1996, the end of the traditional rainy
season, will make their implementation less difficult and costly.
(c) NAPICO is a plaintiff in various lawsuits and has also been named
as defendant in other lawsuits arising from transactions in the
ordinary course of business. In the opinion of management, the
claims will not result in any material liability to the
Partnership.
9
<PAGE> 12
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership raised proceeds of $72,580,000 from the sale of limited
partnership interests, pursuant to a public offering and received
additional capital contributions from the General Partners of $1,050 and
from the special limited partner of $6,855,000, all of which funds were
previously expended. Currently, the only sources of Partnership revenue
consist of income from rental operations at the Property and interest
earned on Partnership reserves.
Concurrent with the issuance of depositary units to the Limited Partners,
the Partnership received the Guarantee Agreement from the Seller, (now an
affiliate of the Managing General Partner), which required the Seller to
make payments or loans as provided therein, if and when necessary, in an
amount sufficient to enable the Partnership to provide the Limited
Partners with minimum distributions through December 1993.
Pursuant to the Memorandum of Understanding entered into on August 11,
1995, the Seller agreed to pay to the Partnership the sum of $350,000 in
two equal installments of $175,000 each; the first such $175,000 payment
was made in August 1995 and the second payment shall be made on February
11, 1996. These payments represent the amount of a real estate tax refund
received in 1994 for overpayment of prior year taxes which had previously
been offset against amounts receivable from the Seller under the Guarantee
Agreement.
Through September 30, 1995, the Seller has funded $12,955,998 directly to
the Partnership for distributions to the Limited Partners pursuant to the
Guarantee Agreement, which includes the $175,000 made in August 1995
referred to above. Distributions to the partners, relating to 1994, were
made from cash flow from operations in the approximate amount of
$2,156,000. In addition, during 1995 the Partnership made a special
distribution to the limited partners in the amount of $135,000. (See
"Results of Operations" for further discussion.)
Approvals from the City of Los Angeles were obtained to "privatize" the
streets and alleys providing access to the Property and to construct
wrought iron security fencing with controlled entrances into the Property.
The final resolution vacating the streets and alleys was approved on
December 31, 1994. Landscape and architectural drawings have been prepared
for the construction of the perimeter fencing and related improvements,
including a guardhouse at the Ambassador Street entrance and a
directory/trellis at the Peerless Street location. These plans were
approved and a building permit was issued by the City of Los Angeles on
June 20, 1995. This permit will expire on December 20, 1995, unless work
commences. A six month extension to May 20, 1995 is being applied for
while the plans are being bid out and other construction coordination
issues are being resolved.
As a condition to its approval of the proposed "privatization", the City
of Los Angeles requires the construction of a storm drain and related
improvements, for which an improvement agreement and guarantee in the
amount $158,000 has been filed with the City of Los Angeles, the
construction of which has been deferred until after March 15, 1996.
Construction of these improvements at March 15, 1996, the end of the
traditional rainy season, will make their implementation less difficult
and costly.
10
<PAGE> 13
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Occupancy averaged 95% for nine months ended September 30, 1995 as
compared to an average of 96% for the same time period in 1994. Despite
the decrease in occupancy, rental income has increased, due to improved
collections at the Property.
Concurrently with the execution of the Memorandum of Understanding on
August 11, 1995, the Partnership received the sum of $135,000 from the
Seller as compensation for late distribution payments under the Guarantee
Agreement. This amount was distributed pro rata to the Limited Partners
and represents interest, on such late payments calculated at the rate of
approximately five percent (5%) per annum, from the date of each such
distribution was required to be made to Limited Partners to the date such
distribution was actually made. The $135,000 has been included in Interest
and Other Income on the income statement for the period ended September
30, 1995, and is the primary reason for the increase in this item compared
with same period last year.
On January 17, 1994, the Property sustained damage due to the earthquake
in the Los Angeles area. As of September 30, 1995, approximately
$1,290,000 has been spent to perform repairs of certain damage caused by
the earthquake. The total cost of such damage is estimated to be
approximately $1,525,000. Of the amount spent, approximately $376,000 was
paid to an affiliate of the Managing General Partner during 1994. The
Partnership entered into a contract in the amount of $1,091,723 with an
unaffiliated contractor to repair the majority of the damage. At September
30, 1995, approximately $235,000 remains due under this contract, which is
included in accounts payable and accrued liabilities on the balance sheet.
Based on a determination by the building's insurance carrier that the loss
suffered by the Property as a result of the earthquake was $1,537,718, the
Partnership received in August 1994 a net insurance settlement in the
amount of $355,448. This amount was determined by reducing the gross
amount of the building's loss by: (a) the deductible provided for in the
policy in the amount of $1,071,808; (b) the $34,095 paid to the
independent public adjuster that processed the building's claim; and (c)
the insurance company's holdback of $76,367.
11
<PAGE> 14
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
HillCreste Properties, Inc., and certain of its affiliates, on their own behalf
and on behalf of the Partnership and certain other partnerships with which they
are associated (collectively, the "Plaintiff Partnerships"), and NAPICO, and
certain of its affiliates, have entered into a Memorandum of Understanding dated
August 11, 1995. In addition to establishing certain Partnership controls, the
Memorandum of Understanding resolves and settles various management and control
issues which were under discussion for some time and various claims which were
raised in a lawsuit filed in the Los Angeles Superior Court on June 9, 1995 by
HillCreste Properties, the Partnership and others against, among others, your
Managing General Partner ("the Lawsuit"). All parties entered into the
Memorandum of Understanding without any admission of wrongdoing or liability by
any defendant as to any claim in the Lawsuit, in a desire to avoid continued
litigation that would be expensive, time consuming and complex.
By virtue of the Memorandum of Understanding, the parties thereto have agreed,
among other things, that:
1. To compensate the Partnership and its Limited Partners for guarantee
and distribution payments that were not made on a timely basis in
1991, 1992, 1993, and 1994, the Partnership received the sum of
$135,000 on behalf of its property management company, Mayer
Management, Inc. ("MMI"), and distributed pro rata to the Limited
Partners, which represents interest, calculated at the rate of
approximately five percent (5%) per annum, from the due date of each
such distribution to Limited Partners to the date such distribution
was actually made.
2. Casden Properties will pay to the Partnership $350,000, representing
the amount of a real estate tax rebate which had previously been
offset against amounts due from Casden Properties under the Guarantee
Agreement. Although the parties disagree about the appropriate
accounting treatment for this tax rebate, Casden Properties has
agreed to repay this rebate to the Partnership in two equal
installments of $175,000 each; the first such $175,000 payment was
made concurrently with the signing of the Memorandum of Understanding
and the second payment shall be made on February 11, 1996.
3. Your Managing General Partner has agreed to allow the accounting firm
of Price Waterhouse to complete its analysis of the books and records
of the Partnership including an analysis of the books and records of
the master disbursement account maintained by the Partnership's
property management company, MMI. Your Managing General Partner has
also agreed that it and its affiliates, including MMI, will pay to
the Partnership any amounts (with interest thereon) properly
determined to be owed to the Partnership as a result of the Price
Waterhouse analysis.
4. Property management responsibility for the HillCreste property will
be transferred from MMI to an independent property management company
designated by HillCreste Properties subject to the approval of your
Managing General Partner.
12
<PAGE> 15
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS (CONTINUED)
5. The Partnership will continue to retain Deloitte & Touche as the
Partnership's auditors for 1995, but will solicit competitive bids
from at least three Big Six accounting firms for the Partnership's
audit work beginning with fiscal year 1996 and at least every three
(3) years thereafter.
6. The Partnership will employ an independent Cash Manager, designated
by HillCreste Properties and approved by your Managing General
Partner, to perform cash management services, including maintenance
of the Partnership's bank accounts and reserves, payment of property
management fees and other accounts payable, payments to affiliates of
your Managing General Partner, and payment of cash distributions to
the Limited Partners. Your Managing General Partner has agreed to
prepare detailed annual budgets to be approved by HillCreste
Properties and thereafter used by the Cash Manager as a guide and
control over Partnership operations.
7. The parties to the Memorandum of Understanding have agreed to enter
into a formal Settlement Agreement and, concurrently therewith, (a)
the plaintiffs in the Lawsuit will execute a special release of the
defendants with respect to the allegations contained in the Lawsuit,
(b) the defendants in the Lawsuit will execute a special release of
each plaintiff in the Lawsuit that is a general partner of a
Plaintiff Partnership with respect to all claims which would have
been compulsory counterclaims thereunder, and (c) the defendants will
execute a special release of any claims, other than those regarding
specifically scheduled contractual relations, which any defendant may
have against this Partnership or any of the other Plaintiff
Partnerships.
8. Upon the uncured breach of certain provisions of the Memorandum of
Understanding or upon a future breach of NAPICO's fiduciary duties,
HillCreste Properties may cause your Managing General Partner to (I)
surrender its rights as managing general partner of the Partnership
or (ii) resign as the managing general partner of the Partnership and
become a limited partner thereof.
The staff of the Securities and Exchange Commission (the "Commission") informed
the Partnership and its NAPICO in August, 1995 that it intends to recommend that
the Commission institute a civil action and/or administrative proceeding against
the Partnership, NAPICO and others that would be based, in part, on allegations
that certain of the Partnership's financial statements in 1991, 1992 and 1993
should have characterized certain current assets deposited in the master
disbursement account of the Partnership's property management company as
accounts receivable from a related party rather than as cash. Since the staff's
investigation and its recommendation concern the Partnership's financial
statements and Commission filings, a portion of the legal fees incurred in
responding to the staff have been allocated to and charged to the Partnership.
In addition, approximately $150,000 has been accrued, as the estimated legal
fees incurred in connection with issues relating to the Memorandum of
Understanding. These legal fees primarily account for the increase in general
and administrative expenses in 1995, compared to 1994. The Partnership and
NAPICO strenuously disagree with the staff's contentions, which have not yet
been considered by the Commission. Moreover, in the opinion of NAPICO, any
action that might result from the staff's recommendation is not likely to have a
material
13
<PAGE> 16
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II - OTHER INFORMATION
ITEM 3 - LEGAL PROCEEDINGS (CONTINUED)
adverse effect on the Partnership. Finally, an independent account analysis
conducted by Price Waterhouse pursuant to the Memorandum of Understanding of the
property management company's master disbursement account has determined that
the Partnership had no funds on deposit in that account as of June 30, 1995, and
was not owed any money by the Partnership's property management company.
Pursuant to the Memorandum of Understanding referenced above, the Partnership is
in the process of employing an independent property manager and will no longer
be using the property management company's master disbursement account.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended September
30, 1995.
14
<PAGE> 17
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(a California limited partnership)
By: National Partnership Investments Corp.
Managing General Partner
Date:______________________________
By: ______________________________
Bruce Nelson
President
Date:______________________________
By: ______________________________
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,988,133
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,031,920
<PP&E> 44,914,402
<DEPRECIATION> 9,965,684
<TOTAL-ASSETS> 38,139,338
<CURRENT-LIABILITIES> 930,058
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 36,876,267
<TOTAL-LIABILITY-AND-EQUITY> 38,139,338
<SALES> 0
<TOTAL-REVENUES> 4,413,210
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,545,674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,867,536
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,867,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,867,536
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
