<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Registrant as Specified In Its Charter)
EVEREST HILLCRESTE INVESTORS, LLC
a California Limited Liability Company
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
SOLICITATION OF PROXIES
OF
LIMITED PARTNERS
OF
CENTURY HILLCRESTE
APARTMENT INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
BY
EVEREST HILLCRESTE INVESTORS, LLC
DECEMBER 12, 1996
Everest Hillcreste Investors, LLC ("Everest") is proposing to purchase the
Century HillCreste Apartments (the "HillCreste Apartments") now owned by Century
HillCreste Apartment Investors, L.P. ("Century HillCreste" or the "Partnership")
for a purchase price of $40,000,000 in cash, which purchase must be completed by
January 15, 1997, on the terms set forth in a purchase and sale agreement
substantially in the form attached as Exhibit A hereto (the "Purchase
Agreement"). Everest is not affiliated with any of the general partners of the
Partnership.
This proxy statement (the "Proxy Statement") and the enclosed proxy card
are being mailed to you and to each of the other holders (the "Limited
Partners") of limited partnership interests in the Partnership (the "Units") to
seek your authorization to call a Special Meeting of the Limited Partners (the
"Special Meeting") and your approval of this proposed sale at the Special
Meeting. Action on the proposed sale cannot be taken unless the holders of at
least 10% of the Partnership's outstanding Units, including the approximately
2.8% of the Partnership's outstanding Units owned by an affiliate of Everest,
authorize the calling of the Special Meeting. Limited Partners should carefully
consider the factors discussed on pages 4 and 5 below in evaluating whether to
authorize and approve the actions described herein.
Everest estimates that the proposed sale will result in net cash sales
proceeds of approximately $39,729,000 (or approximately $5.47 per Unit) based on
$271,000 of estimated Partnership direct sale expenses. Everest also estimates
that approximately $43,325,995 (or approximately $5.97 per Unit) in cash will be
available for distribution to the Limited Partners, taking into account the
Partnership's $3,596,995 of unrestricted cash reserves (based on information
contained in the Partnership's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 (the "September 1996 Form 10-Q")). This cash amount
available for distribution would exceed the Partnership's net book value per
Unit, as of September 30, 1996, of $5.25 by $.72, or approximately 14%. See
"Selected Financial Data" below. Everest will request the managing general
partner of the Partnership (the "Managing General Partner") to distribute the
net proceeds of the Proposed Sale within 10 days of the completion of the sale
or as soon thereafter as possible. The Managing General Partner is not required
to, and there can be no assurance that it will, comply with such request. The
Partnership's Agreement of Limited Partnership (the "Partnership Agreement"),
however, requires distribution of the net sales proceeds from a sale of all or
substantially all of the Partnership's assets in connection with the termination
and liquidation of the Partnership to be made by the end of the taxable year of
such liquidation or, if later, within 90 days after the date of such
liquidation.
Under the Partnership Agreement, the Limited Partners are authorized,
without necessity of the consent of the Managing General Partner or any other
general partner of the Partnership (collectively, the "General Partners"), to
approve sale of the Partnership's property. Through this proxy solicitation, the
Limited Partners are being asked by Everest to authorize and approve the
following actions for the purpose of obtaining approval of the proposed sale
described herein:
<PAGE> 3
1. The giving of notice to National Partnership Investments Corp., the
Managing General Partner, on behalf of Limited Partners representing at
least 10% of the outstanding Units calling the Special Meeting of the
Limited Partners to approve the Proposed Sale at a date, place and time,
and with a record date for the determination of Limited Partners entitled
to vote at such meeting, to be specified in such notice. By signing and
returning the enclosed Proxy Card, Limited Partners will authorize Everest
to so notify the Managing General Partner on their behalf.
2. The adoption at the Special Meeting of a resolution approving the
sale of the HillCreste Apartments to Everest pursuant to the Purchase
Agreement for a purchase price of $40,000,000 in cash (the "Proposed
Sale"), which resolution will also include a request to the Managing
General Partner to distribute the available proceeds of the Proposed Sale
within 10 days of the completion of the sale or as soon thereafter as
possible, all as set forth in the form of Resolutions of Limited Partners
attached as Exhibit B to this Proxy Statement.
3. Adjournment and reconvening of the Special Meeting, if and to the
extent necessary in the judgment of Everest, to solicit further votes to
approve the Proposed Sale.
4. To vote, in the discretion of Everest, on such other matters as may
come before the Special Meeting.
WE URGE YOU TO VOTE TODAY BY SIGNING THE ENCLOSED BLUE PROXY CARD. IF YOU
HAVE ANY QUESTIONS, PLEASE CONTACT MORROW & CO., INC. AT (800) 566-9061.
PROPOSED SALE TRANSACTION
Everest is offering to purchase the HillCreste Apartments, together with
certain associated Partnership assets, for $40,000,000 in cash on the terms set
forth in the Purchase Agreement. Everest is making the Proposed Sale offer with
a view to making a profit. The following description of the Proposed Sale is
qualified in its entirety by reference to the complete form of Purchase
Agreement attached as Exhibit A hereto. (The references in parentheses in the
following paragraphs are references to sections of the Purchase Agreement
described in such paragraph).
PURCHASE AGREEMENT TERMS
The Purchase Agreement provides that within five business days following
execution of the Purchase Agreement, and subject only to the satisfaction or
waiver of the limited conditions to the Proposed Sale set forth in the Purchase
Agreement, Everest shall purchase the HillCreste Apartments, together with all
tangible personal property and all contract rights and intangible property
located on such real estate or relating thereto owned by the Partnership.
(Section 7).
The purchase price of $40,000,000 will be paid to the Partnership by
Everest in immediately available cash funds, less any credits due Everest based
upon customary prorations between Everest and the Partnership. (Sections 2 and
7). Everest has received a firm written commitment to finance the acquisition of
the Property from an institutional lender. Such financing, together with
Everest's existing capital, will provide sufficient funds to pay the purchase
price for the HillCreste Apartments.
No brokerage or sales commissions will be payable by the Partnership in the
Proposed Sale. The title insurance premium for an ALTA Owner's Policy of Title
Insurance, which Everest estimates will be approximately $32,000, the
documentary transfer taxes for the Proposed Sale, which Everest estimates will
be approximately $224,000, and other escrow fees and expenses, which Everest
estimates will be approximately $15,000, are the principal expenses that Everest
expects the Partnership would incur in connection with the Proposed Sale.
Accordingly, the material closing costs to the Partnership are estimated to be
$271,000, resulting in estimated total net sales proceeds to the Partnership of
approximately $39,729,000.
The Purchase Agreement requires the Partnership to provide only a limited
number of representations and warranties. (Section 8). Further, the obligation
of Everest to complete the Proposed Sale would be
2
<PAGE> 4
subject to only a limited number of conditions, including that the Proposed Sale
be completed by no later than January 15, 1997, and is not subject to any
financing contingency. (Section 6).
The purchase price offered for the HillCreste Apartments was decided upon
by Everest and its advisors on the basis of, among other things, their own views
as to real estate markets and values in Los Angeles County, including
consideration of capitalization rates Everest believes to be appropriate for
multi-family properties in the current West Los Angeles marketplace, publicly
available information about the Partnership and the HillCreste Apartments
(without any access to the Partnership's books and records) and the $46,900,000
valuation of the HillCreste Apartments stated by the Managing General Partner in
the Partnership's Annual Report dated June 20, 1996 (the "Annual Report"). In
evaluating the Managing Partner's stated $46,900,000 valuation for the
HillCreste Apartments, Everest and its advisors considered that (i) such
valuation was stated in the Annual Report to be "only an opinion of value and
[is] not necessarily indicative of the potential price at which the [HillCreste
Apartments] could be sold[,]" (ii) the Proposed Sale will constitute an
immediate sale for cash and, because no brokerage commissions will be payable by
the Partnership, the net proceeds to the Partnership of such sale will be
greater than in a typical sales transaction of this type, (iii) only a limited
number of representations and warranties are required to be given by the
Partnership in the Purchase Agreement and (iv) the limited number and nature of
conditions to closing provided for in the Purchase Agreement, including the
absence of a financing contingency, provide substantially greater certainty that
the Proposed Sale, if approved by the Limited Partners, will be completed than
is typical for most real estate sales transactions.
FACTORS TO BE CONSIDERED BY LIMITED PARTNERS
In considering whether to authorize the calling of the Special Meeting and
to approve the Proposed Sale, Limited Partners should consider the following
factors, among others:
- The $40,000,000 purchase price offered by Everest is 14.7% less than the
$46,900,000 valuation of the HillCreste Apartments that the Managing
General Partner stated in the Annual Report. The Managing Partner noted
that this valuation was "only an opinion of value and [is] not
necessarily indicative of the potential price at which the [HillCreste
Apartments] could be sold." The HillCreste Apartments' actual valuation
may be greater or lesser than this estimated valuation.
- The Managing General Partner is not required to comply with the request
that Everest will make on behalf of the Limited Partners to distribute
the net proceeds of the Proposed Sale within 10 days of the sale's
completion or as soon thereafter as possible. It must, however,
distribute such proceeds within the applicable time period provided in
the Partnership Agreement, as described above on pages 1 and 2.
- The lack of an established exchange or market for the Units makes it
extremely difficult for Limited Partners to sell their current investment
in the Partnership.
- The Proposed Sale will not involve payment of any real estate brokerage
commissions, which could otherwise approximate $1,000,000 to $2,000,000
in the aggregate (based on commission rates ranging from 2.5% to 5% of
the purchase price) or approximately $.14 to $.28 per Unit. The Proposed
Sale will also result in the elimination of the Partnership's
administrative costs of operating the HillCreste Apartments.
- A Limited Partner will recognize taxable gain or loss as a result of
consummation of the Proposed Sale, depending on the specific
circumstances of each Limited Partner. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" below.
- The sale of the HillCreste Apartments, the Partnership's principal asset,
to Everest will result in a dissolution of the Partnership under the
Partnership Agreement if the Managing General Partner or another
authorized party determines that the Proposed Sale is a sale or other
disposition of all or substantially all of the Partnership's assets.
Everest is not aware of any reason that completion of the Proposed Sale
should not be so regarded. If the Partnership is dissolved, the Limited
Partners will
3
<PAGE> 5
receive a final Schedule K-1 from the Partnership and the ongoing expense
to the Limited Partners of processing annual Schedules K-1 would
thereafter be eliminated.
PRIOR CONTACTS BETWEEN EVEREST AND THE PARTNERSHIP. There have been no
prior contacts between Everest or its affiliates, on the one hand, and the
Partnership or the General Partners, on the other hand, regarding the Proposed
Sale. An affiliate of Everest owns 204,980 Units, constituting approximately
2.8% of the Partnership's outstanding Units, all of which Units were acquired by
such affiliate in 1996.
APPRAISAL RIGHTS. Neither the Partnership Agreement nor applicable law
provide rights of appraisal or similar rights to the Limited Partners who
dissent from the vote of a majority in interest of the Limited Partners
approving the Proposed Sale.
REGULATORY APPROVALS. Based on its review of publicly available filings by
the Partnership with the Securities and Exchange Commission (the "Commission")
and other publicly available information regarding the Partnership, Everest is
not aware of any filings, approvals or other actions by or with any domestic or
foreign governmental authority or administrative or regulatory agency that would
be required prior to the consummation of the Proposed Sale as contemplated
herein.
ACCOUNTING TREATMENT; PARTNERSHIP'S ACCOUNTANTS. Everest believes that the
Proposed Sale will be treated as a purchase transaction under generally accepted
accounting principles. Everest is not aware (i) whether any representatives of
the principal accountants of the Partnership for the current year and the most
recently completed fiscal year will be present at the Special Meeting, (ii)
whether, if such representatives are present at the Special Meeting, they will
have an opportunity to make a statement if they desire to do so, and (iii)
whether such representatives are expected to be available to respond to
appropriate questions at the Special Meeting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain federal income tax
considerations believed by Everest to be applicable to the Partnership and the
Limited Partners in connection with the Proposed Sale contemplated by this Proxy
Statement. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), final and proposed regulations promulgated thereunder
("Treasury Regulations"), court decisions and Internal Revenue Service ("IRS")
rulings and positions as of the date of this Proxy Statement. All of the
foregoing are subject to change, and any such change could affect the continuing
accuracy of this summary. The following discussion assumes that the Partnership
is treated as a partnership for federal income tax purposes and is not treated
as a "publicly traded partnership" within the meaning of Section 7704 of the
Code, and that the limited partnership interests constitute partnership
interests for federal income tax purposes. This summary does not discuss all
aspects of federal income taxation that may be relevant to a particular Limited
Partner in light of such Limited Partner's specific circumstances or to certain
types of Limited Partners subject to special treatment under the federal income
tax laws (for example, corporations, foreign persons, dealers in securities,
banks, insurance companies and specific types of tax-exempt organizations), nor
does it discuss any aspect of state, local, foreign or other tax laws.
EACH LIMITED PARTNER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF CONSUMMATION OF THE
PROPOSED SALE. EVEREST HAS NOT HAD ACCESS TO TAX INFORMATION FILED BY, OR
OTHERWISE CONTAINED IN THE RECORDS OF, THE PARTNERSHIP AND THE STATEMENTS
CONTAINED HEREIN MAY BE SUBJECT TO CHANGE OR SUPPLEMENTAL DISCUSSION BASED ON A
MORE COMPLETE REVIEW OF SUCH TAX INFORMATION.
The transfer of the HillCreste Apartments by the Partnership to Everest in
exchange for the cash purchase price will be treated as a taxable sale for
Federal income tax purposes. The Partnership itself will not pay any Federal
income tax on the sale, as a partnership is not treated as a separate taxpayer
for Federal income tax purposes. Each Limited Partner will recognize its
allocable share of the Partnership's gain on the
4
<PAGE> 6
sale of the Partnership Property which will be equal to the excess of the
Partnership's amount realized from the sale over the Partnership's adjusted tax
basis in the Partnership Property. Any gain realized by the Partnership on the
sale generally is expected to be treated as "Section 1231 gain" (except to the
extent that such gain represents depreciation recapture taxable as ordinary
income) arising from the sale of "Section 1231 property" (i.e., real property
and depreciable assets subject to Section 1231 of the Code which are used in a
trade or business and held for more than one year). Under the rules applicable
to Section 1231 property, a Limited Partner's proportionate share of the gain
from the sale of the HillCreste Apartments would be combined with any other
Section 1231 gains or losses recognized by the Limited Partner in that year and
the Limited Partner's net Section 1231 gain or loss would be taxed as capital
gain or constitute ordinary loss, as the case may be. However, net Section 1231
gain will be treated as ordinary income to the extent of unrecaptured net
Section 1231 losses for the five most recent prior years.
The Partnership anticipates that substantially all of the gain realized
from the transfer of the HillCreste Apartments will be treated as passive income
for purposes of the limitations on deductibility of passive losses under Section
469 of the Code. However, for purposes of these limitations, a small portion of
such gain may be treated as portfolio income to the extent that ordinary working
capital, security deposits or other portfolio income producing items are
transferred to Everest.
The maximum marginal Federal income tax rate for individuals currently is
39.6 percent (determined without regard to the phase-out of exemptions and other
tax benefits). For Limited Partners other than corporations, net long-term
capital gains (i.e., the excess of net long-term capital gain over net
short-term capital loss) are taxed at a maximum marginal rate of 28%, while
short-term capital gains are taxed at a maximum marginal rate of 39.6%. For a
taxpayer other than a corporation, net capital loss may be used to offset
ordinary income up to $3,000 per year. In general, for taxpayers other than
corporations, the unused portion of such loss may be carried forward
indefinitely, but not carried back.
DISTRIBUTION OF NET SALE PROCEEDS FROM THE PARTNERSHIP. As a result of the
sale of the HillCreste Apartments, a Limited Partner's tax basis in his limited
partnership interests will be increased by the amount of the gain realized.
Accordingly, except as discussed below, the distribution by the Partnership of
the net proceeds from the sale generally will not result in recognition by a
Limited Partner of any additional gain, provided that the Limited Partner's tax
basis in his limited partnership interests prior to the sale is equal to the
Limited Partner's proportionate share of the Partnership's tax basis in the
HillCreste Apartments. The distribution to a Limited Partner may result in gain
or loss to that Limited Partner, however, if the Limited Partner's tax basis in
his limited partnership interests does not equal the Limited Partner's
proportionate share of the Partnership's tax basis in the HillCreste Apartments.
Such a gain or loss would most likely arise in the case of a Limited Partner
that acquired its interest through a transfer subsequent to the initial
formation of the Partnership at a time when the Partnership did not then have in
effect an election under Section 754 of the Code. In addition, further
adjustments upon dissolution and liquidation of the Partnership to take into
account accrued or other expenses may result in some additional loss (or
reduction in gain) realized.
CONSEQUENCES OF A LIQUIDATION OF THE PARTNERSHIP. If the Partnership,
following the sale of the Hillcreste Apartments and distribution of the sale
proceeds, liquidates and distributes any remaining assets to its partners (and
creditors, if any), the taxable year of the Partnership will terminate upon the
winding up of its affairs. A Limited Partner will be required to include his
distributive share of Partnership items of income and loss for such Partnership
taxable year (including the Limited Partner's share of gain from the sale of the
Hillcreste Apartments) in the Limited Partner's taxable year in which such
taxable year of the Partnership ends.
Upon liquidation, if the Partnership has further assets to distribute, cash
received by a Limited Partner will reduce his basis in his limited partnership
interest and the Limited Partner will recognize gain to the extent that the cash
distributed to such partner exceeds his tax basis in his limited partnership
interest. A distribution of property to a Limited Partner generally would not
result in gain or loss to such partner, and such property would take a basis
equal to such partner's basis in his limited partnership interest reduced by the
cash distributed to such partner. Such basis will be allocated first to any
"unrealized receivables" and "inventory" distributed to the Limited Partner in
proportion to (but not in excess of) his respective basis in the Partnership.
The remaining basis in the Limited Partner's partnership interest (if any) would
be allocated
5
<PAGE> 7
to the other items of property he receives in proportion to his respective basis
in the Partnership. If a Limited Partner receives only cash and/or unrealized
receivables and inventory and such partner's basis in his limited partnership
interest exceeds the amount of cash plus the Partnership's basis in the property
distributed, generally such partner will recognize such excess as a loss. In
general, any gain or loss recognized by a Limited Partner on liquidation will be
capital gain or loss, and long term capital gain or loss if such partner's
holding period in his limited partnership interest is more than one year. Such
gain or loss should be passive gain or loss.
INFORMATION CONCERNING EVEREST
Everest is a California limited liability company, formed for the sole
purpose of purchasing the HillCreste Apartments. Everest does not have any
significant assets, liabilities or business, other than its equity
capitalization. Everest is managed by Everest Realty Management, LLC, a
California limited liability company (the "Manager"). The offices of Everest and
the Manager are located at 3280 E. Foothill Boulevard, Suite 320, Pasadena,
California 91107; telephone: 818-585-5920.
Set forth below is biographical information concerning executive officers
of the Manager who are involved in the organization, direction, or arranging of
financing for this solicitation and the Proposed Sale. The persons identified
below are each United States citizens.
W. ROBERT KOHORST. Mr. Kohorst is the President and Secretary of the
Manager and Everest Properties, LLC, a California limited liability company. He
is a lawyer by profession. Since 1991, Mr. Kohorst, acting through affiliated
companies, has been engaged in the acquisition of general partner interests,
real estate companies and related assets. Mr. Kohorst holds a Juris Doctor
degree from the University of Michigan and a Bachelor of Science degree in
accounting from the University of Dayton.
DAVID I. LESSER. Mr. Lesser is the Executive Vice President of the Manager
and Everest Properties, LLC. He is a lawyer by profession. From 1991 through
1995, Mr. Lesser was a principal and member of Feder, Goodman & Schwartz and its
predecessor firm, co-managing such firm's corporate and real estate practice.
Between 1990 and 1992, Mr. Lesser was counsel to Howard, Rice, Nemerovski,
Robertson, Canady & Falk. Mr. Lesser holds a Juris Doctor degree from Columbia
University and a Bachelor of Arts degree from the University of Rochester.
INFORMATION CONCERNING THE
PARTNERSHIP AND THE HILLCRESTE APARTMENTS
Except as otherwise indicated, the information contained in this section
and the selected financial data and the financial statements of the Partnership
contained in Exhibit C attached hereto are based upon documents and reports
publicly filed by the Partnership with the Commission. Although Everest has no
information that any statements contained in this section or any of the
financial data and statements contained in Exhibit C are untrue, Everest does
not take responsibility for the accuracy or completeness of any information
contained in this section, all of which is derived from such public documents,
or any of the financial data and statements contained in Exhibit C, which are
based entirely on public filings of the Partnership, or for any failure by the
Partnership to disclose events which may have occurred and may affect the
significance or accuracy of any such information or any such financial data and
statements but which are unknown to Everest.
The principal executive offices of the Partnership are located at 9090
Wilshire Blvd., Suite 201, Beverly Hills, California 90211, and its telephone
number at that address is (310) 278-2191. The Partnership is a limited
partnership formed on June 6, 1988 under the laws of the State of California.
The Partnership raised $72,580,000 from sales of 7,258,000 units entitled to the
beneficial interest of a limited partner through a public offering of such
interests in 1988, and concurrently therewith purchased the HillCreste
Apartments from an affiliate of the Managing General Partner for a purchase
price of $68,548,000. The business of the Partnership is conducted primarily by
the Managing General Partner as the Partnership has no employees of
6
<PAGE> 8
its own, and consists of the operation and management of the Century HillCreste
Apartments. The Partnership owns no real property other than the HillCreste
Apartments.
The HillCreste Apartments are a 315-unit apartment complex known as the
Century HillCreste Apartments, located at 1420 Ambassador Street in Los Angeles,
California. The average occupancy rate at the HillCreste Apartments for 1995 and
through April 30, 1996 was 94%.
The HillCreste Apartments suffered substantial damage as a result of the
January 17, 1994 Northridge Earthquake. The total cost to repair the earthquake
damage was approximately $1,476,923, of which approximately $376,000 was paid to
an affiliate of the Managing General Partner during 1994 for emergency repair
work and approximately $1,100,923 was paid to an unaffiliated contractor for the
remaining repairs. Based on an estimate by the Partnership's insurance carrier,
the loss suffered by the Partnership as a result of the earthquake damage to
HillCreste Apartments was determined to be $1,537,718, and the Partnership
received in August 1994 a net insurance settlement in the amount of $355,448.
Through January 31, 1995, an affiliate of the Managing General Partner,
Mayer Management Inc., managed the HillCreste Apartments and was paid management
fees of $181,375, $273,130 and $257,142 in 1995, 1994 and 1993, respectively,
based on 5% of collected rents. However, pursuant to a settlement of litigation
brought by the Partnership and the non-managing General Partner against the
Managing General Partner asserting, among other claims, breach of fiduciary duty
and misuse of Partnership funds, property management was transferred to an
unaffiliated property management agent, Trammel Crow Residential Services West,
which is entitled to receive an annual management fee equal to 3% of collected
rents.
The Partnership's Annual Report on Form 10-K for the Year ended December
31, 1995 (the "1995 Form 10-K") states that the General Partners own all of the
outstanding general partnership interests of the Partnership and no person is
known to own beneficially in excess of 5% of the outstanding limited partnership
interests.
The Partnership's audited financial statements for the year ended December
31, 1995, which have been reproduced from the 1995 Form 10-K, and the
Partnership's interim financial statements for the Quarter ended September 30,
1996, which have been reproduced from the September 1996 Form 10-Q, are attached
hereto as Exhibit C to this Proxy Statement.
7
<PAGE> 9
SELECTED FINANCIAL DATA. Set forth below is a summary of certain financial
and statistical information with respect to the Partnership, all of which has
been excerpted or derived from the 1995 Form 10-K and from the September 1996
10-Q. More comprehensive financial and other information is included in such
reports and other documents filed by the Partnership with the Commission, and
the following summary is qualified in its entirety by reference to such reports
and other documents and all the financial information and related notes
contained therein.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Rental revenues.............. $ 5,413,821 $ 4,984,986 $ 5,109,914 $ 5,390,358 $ 5,394,552 $ 3,966,912
Interest and other income.... 148,113 137,813 131,332 81,885 287,523 178,793
----------- ----------- ----------- ----------- ----------- -----------
Total revenues............... $ 5,561,934 $ 5,122,799 $ 5,241,246 $ 5,472,243 $ 5,682,075 $ 4,145,705
=========== =========== =========== =========== =========== ===========
Net income................... $ 1,376,911 $ 972,848 $ 1,848,761 $ 1,224,739 $ 2,498,336 $ 1,968,840
=========== =========== =========== =========== =========== ===========
Net income per limited
partner interest........... $ 0.19 $ 0.13 $ 0.25 $ 0.17 $ 0.34 $ 0.27
=========== =========== =========== =========== =========== ===========
Rental property owned at cost
less accumulated
depreciation............... 46,118,308 $41,001,958 36,424,447 $ 35,660,38 34,772,331 $34,248,165
=========== =========== =========== =========== =========== ===========
Distributions to Limited
Partners................... $ 6,440,732 $ 6,532,200 $ 4,885,727 $ 4,905,234 $ 2,290,626 $ 1,657,076
=========== =========== =========== =========== =========== ===========
Total assets................. 50,114,552 $44,340,806 41,344,209 $ 38,577,45 37,684,178 $38,096,372
=========== =========== =========== =========== =========== ===========
Total assets per limited
partner interest(1)........ $ 6.90 $ 6.11 $ 5.70 $ 5.32 $ 5.19 $ 5.19
=========== =========== =========== =========== =========== ===========
Pro forma total assets per
limited partner
interest(2)................ $ 6.00
=========== =========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Assumes 7,258,000 Units issued and outstanding.
(2) The computation of pro forma total assets per limited partner interest is
based upon an estimated $39,729,000 of net proceeds from the sale of the
rental property, as if such sale had occurred on September 30, 1996.
INFORMATION RELATING TO VOTING, SPECIAL
MEETING PROCEDURES, AND PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by Everest for the purpose of obtaining authority to call the Special
Meeting of the Limited Partners of the Partnership and to vote on behalf of such
Limited Partners at the Special Meeting to approve the Proposed Sale, including
the related resolution of Limited Partners calling for prompt distribution of
the net proceeds of such sale described herein. The proxies solicited hereby
also confer authority on the proxy holder named therein (i) to vote in favor of
adjournment and reconvening of the Special Meeting at a later time and place if
and to the extent Everest believes necessary to solicit additional proxies to
obtain approval of the Proposed Sale, and (ii) to vote in the proxy holder's
discretion on such other matters as may come before the Special Meeting.
The Partnership Agreement provides that holders of 10% or more in interest
of the Limited Partners may call a special meeting of the Limited Partners by
providing appropriate notice to the Managing General Partner requesting that
such meeting be called for a date not less than 15 nor more than 60 days after
the date such request is received by the Managing General Partner. The
Partnership Agreement further provides that the Limited Partners calling such
meeting may designate the record date for the determination of Limited Partners
entitled to vote at the special meeting called by them and may also designate
the time and place of such meeting. The Managing General Partner also may call a
special meeting of the Limited Partners under the Partnership Agreement on its
own authority. The proxies solicited hereby authorize the proxy holder
8
<PAGE> 10
named therein to give appropriate notice to the Managing General Partner
specifying the record date and the time, place and date for the Special Meeting
described herein. Everest will give such notice to the Managing General Partner
as soon as it determines that it will have sufficient proxies to approve the
Proposed Sale and further subject to having received proxies authorizing the
calling of the Special Meeting by holders of at least approximately 7.2% of the
Partnership's outstanding Units. Within 10 days of receipt of such notice by the
Managing General Partner, it will be required under the Partnership Agreement to
provide notice of the Special Meeting to all of the Limited Partners.
Each Limited Partner, including the corporate affiliate of the Managing
General Partner that is denominated in the Partnership Agreement as the "Special
Limited Partner" and which holds approximately 10% of the Partnership's
outstanding Units, will be entitled to cast a number of votes at the Special
Meeting equal to that partner's initial "Adjusted Invested Capital" in the
Partnership divided by $10. The term "Adjusted Invested Capital" is defined in
the Partnership Agreement to mean the amount of the capital contribution to the
Partnership made by such Limited Partner (i.e., the amounts paid by such Limited
Partner for his Units in the initial public offering thereof), as reduced by all
distributions to such Limited Partner made from net proceeds of sales or
financing of Partnership assets. Everest believes that there have been no such
distributions to date. In the case of Limited Partners who purchased their Units
after the initial offering thereof by the Partnership, such Limited Partners'
Adjusted Invested Capital is equal to the Adjusted Invested Capital of the
Limited Partner or Limited Partners from whom they acquired their Units, as
reduced by any subsequent distributions of the foregoing type.
The Partnership Agreement provides that sales of Partnership property may
be approved by the affirmative vote of a "Majority in Interest" of the Limited
Partners at a meeting of Limited Partners, without the approval of the General
Partners. The term "Majority In Interest" is defined in the Partnership
Agreement as the affirmative vote of Limited Partners, including the Special
Limited Partner, who collectively have votes equal to more than 50% of the total
outstanding votes of the Partnership. Pursuant to such provisions of the
Partnership Agreement, the approval of a majority of the outstanding Units,
including as outstanding the interests of the Special Limited Partner, will be
required to approve the Proposed Sale at the Special Meeting. FAILURE TO VOTE,
IN PERSON OR BY PROXY, AT THE SPECIAL MEETING WILL THUS HAVE THE EFFECT OF A
VOTE AGAINST THE APPROVAL OF THE PROPOSED SALE. The September 1996 Form 10-Q
states that as of September 30, 1996 a total of 7,258,000 Units were issued and
outstanding. The Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995, states that there were 6,670 holders of Units of record as of
December 31, 1995.
All duly executed proxy cards received in response to this solicitation
will be voted at the Special Meeting in accordance with the instructions
specified thereon. If an executed proxy is received that does not specify a
choice, such proxies will be voted "FOR" each of the proposals described herein,
including adjournment and reconvening of the Special Meeting to the extent
Everest believes necessary to solicit additional proxies sufficient to approve
the Proposed Sale. A Limited Partner who gives a proxy may revoke it at any time
before it is voted at the Special Meeting by executing and delivering a written
revocation of such proxy, including a later dated proxy, or by attending the
Special Meeting and voting in person.
ONLY HOLDERS OF UNITS ON THE RECORD DATE MAY GRANT A PROXY WITH RESPECT TO
SUCH UNITS. IF UNITS STAND OF RECORD IN THE NAMES OF TWO OR MORE PERSONS, ALL
SUCH PERSONS SHOULD SIGN THE PROXY CARD. IF YOUR UNITS ARE HELD IN THE NAME OF A
BROKERAGE FIRM, BANK, NOMINEE OR OTHER INSTITUTION, ONLY SUCH INSTITUTION CAN
SIGN A PROXY WITH RESPECT TO YOUR UNITS AND CAN DO SO ONLY AT YOUR DIRECTION.
ACCORDINGLY, PLEASE CONTACT YOUR ACCOUNT REPRESENTATIVE AND GIVE YOUR
REPRESENTATIVE INSTRUCTIONS FOR A PROXY TO BE SIGNED WITH RESPECT TO YOUR UNITS.
All costs associated with this solicitation of proxies will be borne by
Everest, who will not seek any reimbursement from the Partnership therefor. This
solicitation by mail may be supplemented by additional solicitations by
telephone, personal contacts or other means. Everest has engaged Morrow & Co.,
Inc. (the "Solicitor") for solicitation and advisory services in connection with
this proxy solicitation. In connection
9
<PAGE> 11
therewith, the Solicitor will be paid reasonable and customary compensation and
will be reimbursed for its reasonable out-of-pocket expenses. Everest has also
agreed to indemnify the Solicitor against certain liabilities and expenses,
including liabilities and expenses under federal securities laws.
Everest will not pay any fees or commissions to any broker or dealer or
other person (other than the Solicitor) for soliciting proxies pursuant to this
solicitation. Banks, brokerage houses and other custodians, nominees and
fiduciaries, if any, will be requested to forward this Proxy Statement to the
customers for whom they hold Units.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT. IF GIVEN OR
MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY EVEREST. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN
NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF EVEREST OR
THE PARTNERSHIP SINCE THE DATE HEREOF.
------------------------
10
<PAGE> 12
EXHIBIT A
FORM OF PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of , 1997, by and between Century HillCreste Apartment
Investors, L.P., a California limited partnership ("Seller"), and Everest
Hillcreste Investors, LLC, a California limited liability company.
IN CONSIDERATION of the respective agreements hereinafter set forth, Seller
and Buyer hereby agree as follows:
1. PROPERTY. Seller hereby agrees to sell and convey to Buyer, and Buyer
hereby agrees to purchase from Seller, subject to the terms and conditions set
forth herein, the following: (a) that certain real property owned by Seller and
located on Ambassador Road, in the City of Los Angeles, State of California,
more particularly described in Schedule 1 to the "Deed" (as hereinafter defined,
the "Land"); (b) all rights, privileges and easements appurtenant to the Land,
(collectively, the "Appurtenances"); (c) all improvements and fixtures located
on the Land and Appurtenances (collectively, the "Improvements", and together
with the Land and Appurtenances, the "Real Property"); (d) all tangible personal
property owned by Seller located on or in or used in connection with the Real
Property as of the date hereof and as of the "Closing Date" (as defined in
Paragraph 7 (b) below), including, without limitation, (i) all laundry
equipment, recreation equipment, pool and spa furniture and equipment,
furnishings in the on-site leasing facility, clubhouse and fitness center, and
all air conditioners, refrigerators, dishwashers, ovens/ranges, microwaves and
washer/dryer units located in the rental units, and (ii) all those items
described Schedule 2 to the "Bill of Sale" (as hereinafter defined,
collectively, the "Tangible Personal Property"); and (e) any intangible personal
property now or hereafter owned by Seller and used in the ownership, use or
operation or development of the Real Property, and Tangible Personal Property,
including, without limitation, the right to use the name "Century HillCreste
Apartments" and any goodwill associated therewith, any contract or lease rights
(individually or collectively, the "Leases"), and Seller's interest in all
security deposits and prepaid rent, if any, under the Leases (provided that
Seller's interest in such security deposits and prepaid rent shall not be paid
in cash to Buyer upon the Closing but instead shall be transferred in the form
of a credit against the Purchase Price pursuant to Paragraph 9 (f) below) and,
to the extent assignable, any and all guaranties of the Leases, utility
contracts or other agreements or rights relating to the ownership, use and
operation of the Real Property or Tangible Personal Property (collectively, the
"Intangible Property", and together with the Tangible Personal Property, the
"Personal Property"). All of the items referred to in Subparagraphs (a), (b),
and (c), (d) and (e) above are collectively referred to herein as the
"Property".
2. PURCHASE PRICE.
(a) The purchase price for the Property is Forty Million Dollars
($40,000,000) subject to reduction by any credits due Buyer hereunder (the
"Purchase Price").
(b) The Purchase Price shall be paid in full in cash less any credits
due Buyer hereunder at closing. Closing shall be accomplished through an
escrow ("the Escrow") opened at Chicago Title Company (the "Escrow
Holder").
3. TITLE TO THE PROPERTY.
(a) At the Closing, Seller shall convey to Buyer marketable and
insurable fee simple title to the Real Property and Improvements, by duly
executed and acknowledged grant deed prepared by Buyer in form reasonably
acceptable to Seller (the "Deed"). Evidence of delivery of marketable and
insurable fee simple title shall be the issuance by Chicago Title Insurance
Company (the "Title Company") to Buyer of an ALTA Owner's Policy of Title
Insurance (form B, ref. 10/17/70) in the amount of the Purchase Price,
insuring fee simple title to the Real Property and Improvements in Buyer,
and without boundary, encroachment or survey exceptions (the "Title
Policy"). The Title Policy shall provide full coverage against mechanics'
and materialmen's liens and shall contain such special endorsements as
Buyer may reasonably require.
11
<PAGE> 13
(b) At the Closing (i) Seller shall transfer title to the Intangible
Property, all contracts relating to the use, operation or ownership of the
Property which Buyer elects to assume (the "Assigned Contracts") and all
applicable permits by an assignment and assumption of Intangible Property
prepared by Buyer in form reasonably acceptable to Seller (the "Assignment
of Intangible Property") and (ii) Seller shall transfer title to the Leases
by an assignment and assumption of Leases prepared by Buyer in form
reasonably acceptable to Seller (the "Assignment of Leases"), such title in
each case to be free of any liens, encumbrances or interests, other than
exceptions to title approved by Buyer pursuant to Paragraph 4 below. Other
than those obligations of Seller expressly assumed by Buyer hereunder or
under any Closing document, Seller shall pay and be solely responsible for
all obligations arising out of the conduct of Seller's business or the
operation of the Property prior to Closing.
4. DUE DILIGENCE. Buyer has obtained a current extended coverage
preliminary title report dated July 25, 1996 on the Real Property, issued by
Title Company, accompanied by copies of all documents referred to in the report
(collectively, the "Preliminary Report"). Title Company's unconditional
commitment to issue the Title Policy in approved form and subject only to Items
on Schedule B to the Preliminary Report at the Closing shall be a Condition
Precedent to Buyer's obligation to proceed with the Closing in addition to the
other Conditions Precedent set forth in Paragraph 6 below. In any event, Seller
covenants to cause to be released and reconveyed from the Property, and to
remove as exceptions to title at or prior to the Closing, any mortgages, deeds
of trust, or other monetary encumbrances, assessments or indebtedness shown on
the Preliminary Report, except for non-delinquent real property taxes and
assessments included on the tax bill with such real property taxes.
5. SELLER'S DELIVERIES. Seller shall deliver or cause to be delivered to
Buyer, or make available for review by Buyer either at the Property or at
Seller's offices, at Seller's sole cost and expense, within two (2) business
days following the date of this Agreement, all documents and information
relating to the Property, including, without limitation, all Leases, warranties
and permits.
6. CONDITIONS PRECEDENT TO CLOSING. The following are conditions precedent
to Buyer's obligation to purchase the Property (the "Conditions Precedent"). The
Conditions Precedent are intended solely for the benefit of Buyer and may be
waived only by Buyer in writing. In the event any Condition Precedent is not
timely satisfied, Buyer may, in its sole and absolute discretion, terminate this
Agreement, and all obligations of Buyer and Seller hereunder (except provisions
of this Agreement which recite that they survive termination) shall terminate
and be of no further force or effect.
(a) All of Seller's representations and warranties contained in or
made pursuant to this Agreement shall have been true and correct when made
and shall be true and correct as of the Closing Date.
(b) The physical condition of the Property shall be substantially the
same on the day of Closing as on the date of Buyer's execution of this
Agreement, reasonable wear and tear excepted.
(c) As of the Closing Date, there shall be no litigation or
administrative agency or other governmental proceeding of any kind
whatsoever, pending or threatened, which after Closing would, in Buyer's
sole discretion, materially adversely affect the value of the Property or
the ability of Buyer to operate the Property in the manner in which it is
currently being operated.
(d) Seller shall have fully complied with all of Seller's duties and
obligations contained in this Agreement to be complied with at or prior to
the Closing, which shall take place not later than January 15, 1997.
(e) Buyer shall have confirmed that at least ninety percent (90%) (the
"Required Occupancy Level") of the apartment units on the Property are
physically occupied by tenants ("Qualified Tenants") who (1) are not in
default under their respective Leases and (2) are paying rental at
commercially reasonable rates without any special concessions.
7. ESCROW; CLOSING.
(a) Upon mutual execution of this Agreement, the parties hereto shall
deposit an executed counterpart of this Agreement with Escrow Holder and
this agreement shall serve as instructions to
12
<PAGE> 14
Escrow Holder for consummation of the purchase and sale contemplated
hereby. Seller and Buyer shall execute such supplemental Escrow
instructions as may be appropriate to enable Escrow Holder to comply with
the terms of this Agreement, provided such supplemental Escrow instructions
are not in conflict with this Agreement as it may be amended in writing
from time to time. In the event of any conflict between the provisions of
this Agreement and any supplemental Escrow instructions signed by Buyer and
Seller, the terms of this Agreement shall control.
(b) The parties intend for the "Closing" to take place not more than
five (5) business days after execution of this Agreement (the "Closing
Date").
(c) At or before the Closing, Seller shall deliver to Escrow Holder or
Buyer the following: (i) a duly executed and acknowledged Deed; (ii) a duly
executed Bill of Sale; (iii) originals of all Leases (which may be
delivered by leaving the same at the on-site management office of the
Property) and two duly executed original counterparts of the Assignment of
Leases; (iv) originals of the Assigned Contracts (which may be delivered by
leaving the same at the on-site management office of the Property); (v) two
duly executed original counterparts of the Assignment of Intangible
Property; (vi) such resolutions, authorizations, bylaws or other documents
or agreements relating to Seller, its partners and/or the Property as shall
be reasonably required by Buyer; and (vii) and notice to tenants in a form
reasonably satisfactory to Buyer and Seller.
(d) At or before the Closing, Buyer shall deliver to Escrow Holder or
Seller the following: (i) the Purchase Price, less any closing credit due
to Buyer; (ii) two duly executed original counterparts of the Assignment of
Intangible Property; and (iii) two duly executed original counterparts of
the Assignment of Leases.
(e) Seller and Buyer shall each deposit such other instruments as are
reasonably required by Escrow Holder or otherwise required to close the
escrow and consummate the purchase of the Property in accordance with the
terms hereof and practice customary in Los Angeles County.
(f) (i) The following are to be apportioned as of the Closing Date (with
Buyer being deemed to own the Property for the entire day of the Closing
for purposes of such apportionments), as follows: (1) rent under the
Leases shall be apportioned as of the Closing Date, regardless of
whether or not such rent has been received by Seller; and (2) Seller
shall pay as of the Closing all leasing commission and tenant
improvement costs, if any, in connection with any Lease executed on or
before the Closing and Buyer shall be entitled to a credit against the
Purchase Price for any such commissions or costs incurred in connection
with any lease executed on or before the Closing; (3) Buyer shall be
entitled to a credit against the Purchase Price for the total sum of all
security deposits paid to Seller by tenants under any Leases, and any
interest earned thereon (to the extent interest is earned by the tenants
on such security deposits); (4) Seller shall use reasonable efforts to
cause all the utility meters to be read on the Closing Date, and will be
responsible for the cost of all utilities used prior the Closing Date,
except to the extent such utility charges are billed to and paid by
tenants directly; (5) general real estate taxes and assessments included
on the tax bill with such real property taxes, which are payable for the
fiscal year in which the Closing occurs, shall be prorated by Seller and
Buyer as of the Closing Date; (6) amounts payable under the Assigned
Contracts, annual or periodic permit and/or inspection fees (calculated
on the basis of the period covered), and liability for other Property
operation and maintenance expenses and other recurring costs shall be
apportioned as of the Closing Date; (7) Seller and Buyer shall jointly
prepare and approve a preliminary Closing Statement on the basis of the
Leases and other sources of income and expenses, and shall deliver such
computation to Escrow Holder prior to Closing; and (8) if any of the
aforesaid prorations cannot be definitely calculated on the Closing
Date, then they shall be estimated at the Closing and definitely
calculated as soon after the Closing Date as feasible. Either party
owing the other party a sum of money based on such subsequent
proration(s) and the post closing audit shall promptly pay said sum to
the other party.
(ii) Seller shall be liable for the premium for the Title Policy,
any sales taxes, any county and/or city transfer taxes applicable to the
sale, and any costs of obtaining or updating, as applicable,
13
<PAGE> 15
any survey required for the issuance of the Title Policy. Escrow fees
and recording fees for recording of the Deed shall be paid fifty percent
(50%) by Buyer and fifty percent (50%) by Seller. All other costs and
charges of the Escrow not otherwise provided for in this Agreement shall
be allocated in accordance with the closing customs for the County where
the Property is located. Buyer and Seller shall each be responsible for
their respective legal fees to negotiate and execute this Agreement.
(iii) The provisions of this Subparagraph (f) shall survive the
Closing.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. As of the date
hereof and again as of Closing, Seller represents and warrants to, and covenants
with, Buyer as follows:
(a) Seller has not received written notice of, and otherwise has no
knowledge of, any material physical or mechanical defects of the Property,
including, without limitation, the structural and load-bearing components
of the Property, the parking lots, the plumbing, heating, air-conditioning
and electrical and life safety systems and building roofs.
(b) Seller has not received written notice of, and otherwise has no
knowledge of, (i) any non-compliance of the Property or the operation
thereof with applicable housing and building codes, environmental, zoning,
life safety, laws, rules and regulations related to handicapped or disabled
(including without limitation the ADA and the FHAA), land use laws and
regulations, and other applicable local, state and federal laws and
regulations (collectively, the "Laws"), or (ii) any order or directive of
the applicable Department of Building and Safety, Health Department or any
other municipal, county, state or federal authority that any work or
repair, maintenance or improvement is required to be performed on the
Property.
(c) Seller has not received written notice of, and otherwise has no
knowledge of (i) any condemnation, environmental, zoning or other land-use
regulation proceedings, either instituted or planned to be instituted,
which would materially and adversely affect the use, operation or value of
the Property, or (ii) any special assessment proceedings affecting the
Property. Seller shall notify Buyer promptly of any such proceedings of
which Seller becomes aware.
(d) There are no free rent, abatements, incomplete tenant
improvements, rebates, allowances, or other unexpired concessions or rights
under any existing or pending Leases (with the exception of those
specifically excepted in Exhibit A attached hereto and incorporated herein
by this reference). Seller has paid in full all of landlord's leasing costs
or obligations with respect to existing leases.
(e) This Agreement is, and all documents executed by Seller which are
to be delivered to Buyer at the Closing will then be, duly authorized,
executed and delivered by Seller, are and at the time of Closing will be
legal, valid and binding obligations of Seller enforceable against Seller
in accordance with their respective terms.
(f) Seller is not a "foreign person" within the meaning of Internal
Revenue Code Section 1445(f)(3). Seller is not a person with respect to
which California Revenue and Taxation Code Sections 18662, 18668 and 18669
require withholding.
9. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller that this Agreement is, and all documents executed by Buyer
which are to be delivered to Seller at the Closing will then be, duly
authorized, executed and delivered by Buyer, and are and at the Closing will be
legal, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.
10. CONTINUATION AND SURVIVAL. All representations and warranties and
covenants by the respective parties contained herein or made in writing pursuant
to this Agreement, unless expressly provided to the contrary, shall survive the
execution and delivery of this Agreement, the Deed and the Closing for a period
of two (2) years.
11. POSSESSION. Possession of the Property shall be delivered to Buyer on
the Closing Date, provided, however, that prior to the Closing Date Seller shall
afford authorized representatives of Buyer access to the Property during normal
business hours for purposes of satisfying Buyer with respect to the
representations,
14
<PAGE> 16
warranties and covenants of Seller contained herein and with respect to
satisfaction of any Conditions Precedent to the Closing contained herein.
12. MAINTENANCE OF THE PROPERTY AND PROPERTY PERSONNEL. Between Seller's
execution of this Agreement and the Closing, Seller shall maintain the Property
in good order, condition and repair, ordinary wear and tear excepted, shall
perform all work required to be performed by the landlord under the terms of any
Lease, and shall make all repairs, maintenance and replacements of the
Improvements and any Tangible Personal Property and otherwise operate the
Property in the same manner as before the making of this Agreement, as if Seller
were retaining the Property. After full execution of this Agreement and until
the Closing, Seller shall maintain all existing personnel on the Property in
their current employment positions at their current rate of compensation,
subject to personnel turnover in the ordinary course of business.
13. LEASING; COLLECTION OF DELINQUENT RENT. Seller shall use commercially
reasonable efforts until Closing to lease any vacant space, or space becoming
vacant, in the Real Property to tenants at rental amounts and utilizing the
criteria Seller used prior to execution of this Agreement and shall otherwise
operate the Property in the manner in which it has been previously operated.
Buyer shall be solely responsible for collection of any delinquent rent from
continuing tenants, which collections for periods prior to Closing shall be
promptly paid to Seller. All such collections shall be applied first to the most
recent rent due.
14. INSURANCE. Through the Closing Date, Seller shall maintain or cause to
be maintained, at Seller's sole cost and expense, policies of insurance with
respect to the Property consistent with such insurance policies as are presently
maintained by Seller.
15. MARKETING. Seller agrees not to market or show the Property to any
other prospective purchasers during the term of this Agreement.
16. INDEMNITY. Buyer agrees to indemnify and hold harmless Seller for all
liability arising out of the operation by Buyer of the Property after the
Closing.
17. AS IS PURCHASE. Buyer agrees that, except as expressly set forth
herein, it is acquiring the Property on an "as-is, where-is" basis.
18. MISCELLANEOUS. (a) NOTICES. Any notice, consent or approval required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given upon (i) hand delivery, (ii) one business day after
being deposited with Federal Express or another reliable overnight courier
service or next day delivery or transmitted by facsimile transmission, or (iii)
two business days after being deposited in the United States mail, registered or
certified mail, postage prepaid, return receipt required, and addressed as
follows:
If to Seller:
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
If to Buyer:
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
or such other address as either party may from time to time specify in writing
to the other.
(b) AMENDMENTS. Except as otherwise provided herein, this Agreement may be
amended or modified only by a written instrument executed by Seller and Buyer.
(c) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15
<PAGE> 17
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but any number of
which, taken together, shall constitute one and the same instrument.
(e) TIME OF THE ESSENCE. Time is of the essence in the transactions
contemplated by this Agreement.
(f) ATTORNEYS' FEES. In the event any action is brought to enforce or
interpret this Agreement, the prevailing party in such action shall be entitled
to its reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<TABLE>
<S> <C>
Buyer: Seller:
EVEREST HILLCRESTE INVESTORS, LLC, CENTURY HILLCRESTE APARTMENT
a California limited liability company INVESTORS, L.P.,
a California limited partnership
By: EVEREST PROPERTIES, LLC, MANAGER
By: By:
----------------------------------------- -----------------------------------------
Its Authorized Representative Its Authorized Representative
</TABLE>
16
<PAGE> 18
EXHIBIT B
RESOLUTIONS OF THE LIMITED PARTNERS
OF CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
WHEREAS, it has been proposed that Century HillCreste Apartment Investors,
L.P., a California limited partnership (the "Partnership"), enter into a
Purchase and Sale Agreement (the "Purchase Agreement") between the Partnership
and Everest Hillcreste Investors, LLC, a California limited liability company
("Everest"), substantially in the form attached as Exhibit A to the Proxy
Statement, dated December 12, 1996 (the "Proxy Statement") distributed to
holders of limited partnership interests in the Partnership (the "Limited
Partners"), under which Everest would purchase the Century HillCreste
Apartments, together with certain associated Partnership assets (the "HillCreste
Apartments"), for $40,000,000 in cash on the terms set forth in the Purchase
Agreement; and
WHEREAS, the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement") provides that sales of Partnership property may be
approved by the affirmative vote of a Majority in Interest of the Limited
Partners at a meeting of Limited Partners, without the approval or consent of
National Partnership Investments Corp., the Partnership's managing general
partner (the "Managing General Partner"), or any other general partner of the
Partnership.
NOW, THEREFORE, BE IT RESOLVED, that the Managing General Partner of the
Partnership is hereby authorized and directed to sell the HillCreste Apartments
to Everest on substantially the terms set forth in the Purchase Agreement;
RESOLVED FURTHER, that the Managing General Partner is hereby authorized
and directed to execute and deliver, on behalf of and in the name of the
Partnership, the Purchase Agreement, with such amendments thereto as the
Managing General Partner and Everest shall deem appropriate and not inconsistent
with the material terms of the form of Purchase Agreement attached as Exhibit A
to the Proxy Statement, such Managing General Partner's approval in that regard
to be conclusively evidenced by its execution of the Purchase Agreement, and
such other documents, instruments, agreements, certificates and other matters as
may be necessary or desirable in order to consummate the sale of the HillCreste
Apartments to Everest as provided in the Purchase Agreement;
RESOLVED FURTHER, that the Managing General Partner is hereby requested to
distribute to the partners of the Partnership the available proceeds of the sale
of the HillCreste Apartments within 10 days of the completion of such sale or as
soon thereafter as practicable;
RESOLVED FURTHER, that the Managing General is hereby further authorized,
empowered and directed, on behalf of and in the name of the Partnership, to take
or cause to be taken in the name of the Partnership all such other and further
actions, and to execute, acknowledge, deliver and file any and all agreements or
other instruments in such form as may be required and to incur such expense, as
in its judgment is reasonably necessary, proper or convenient in order to carry
out and implement the purposes and intentions of the foregoing resolutions and
to consummate the sale of the HillCreste Apartments by the Partnership to
Everest and promptly thereafter distribute the available proceeds of the sale of
the HillCreste Apartments; and
RESOLVED FURTHER, that any and all agreements, documents and instruments
executed and delivered on behalf of the Partnership pursuant to the foregoing
resolutions shall be deemed to be the act and deed of the Partnership and shall
be binding and enforceable against the Partnership in all respects.
17
<PAGE> 19
EXHIBIT C
THE PARTNERSHIP'S FINANCIAL STATEMENTS
The following audited financial statements of the Century Hillcreste
Apartment Investors, L.P. (the "Partnership") for the Year ended December 31,
1995 have been reproduced from the Annual Report on Form 10-K for the year ended
December 31, 1995 of the Partnership.
ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K:
FINANCIAL STATEMENTS
Reports of Independent Public Accountants.
Balance Sheets as of December 31, 1995 and 1994.
Statements of Income for the years ended December 31, 1995, 1994 and 1993.
Statements of Partners' Capital (Deficiency) for the years ended December,
31, 1995, 1994 and 1993.
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.
Notes to Financial Statements.
FINANCIAL STATEMENT SCHEDULE:
Schedule III -- Real Estate and Accumulated Depreciation, December 31,
1995.
The remaining schedules are omitted because any required information is
included in the financial statements and notes thereto, or they are not
applicable or not required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Century HillCreste Apartment Investors, L.P.
(A California Limited partnership)
We have audited the accompanying balance sheets of Century HillCreste Apartment
Investors, L.P. (a California Limited partnership) as of December 31, 1995 and
1994, and the related statements of income, partners' capital (deficiency) and
cash flows for the years then ended. Our audits also included the financial
statement schedule listed in the index at Item 14. These financial statements
and financial statement schedule are the responsibility of the management of the
Partnership. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Century HillCreste Apartment
Investors, L.P. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 29, 1996
18
<PAGE> 20
CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
----------- -----------
<S> <C> <C>
RENTAL PROPERTY (Notes 1, 2 and 3)................................ $34,772,331 $35,660,385
CASH AND CASH EQUIVALENTS (Note 1)................................ 2,738,045 2,425,486
RESTRICTED CASH (Notes 1 and 5)................................... 158,700 158,700
OTHER ASSETS (Note 5)............................................. 15,102 332,885
----------- -----------
$37,684,178 $38,577,456
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Note 4)................. $ 359,359 $ 414,023
LIABILITY FOR EARTHQUAKE LOSS (Note 5)............................ -- 1,091,723
DUE TO GENERAL PARTNERS (Note 4).................................. 150,000 91,331
PREPAID RENT...................................................... 46,965 22,732
SECURITY DEPOSITS................................................. 310,099 320,340
----------- -----------
866,423 1,940,149
COMMITMENTS AND CONTINGENCIES (Note 5)
PARTNERS' CAPITAL (Note 1)........................................ 36,817,755 36,637,307
----------- -----------
$37,684,178 $38,577,456
=========== ===========
</TABLE>
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Rental income........................................ $5,394,552 $5,390,358 $5,109,914
Interest and other income (Note 3)................... 287,523 81,885 131,332
---------- ---------- ----------
5,682,075 5,472,243 5,241,246
---------- ---------- ----------
EXPENSES
Operating (Note 4)................................... 1,178,744 1,076,682 1,055,706
Property taxes....................................... 422,121 525,867 394,042
Management fee -- related party (Note 4)............. 181,375 273,130 257,142
General and administrative (Note 4).................. 651,783 513,638 335,045
Depreciation......................................... 713,054 716,572 1,350,550
Provision for earthquake loss (Note 5)............... 36,662 1,141,615 --
---------- ---------- ----------
3,183,739 4,247,504 3,392,485
---------- ---------- ----------
NET INCOME............................................. $2,498,336 $1,224,739 $1,848,761
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP INTEREST............ $ 0.34 $ 0.17 $ 0.25
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 21
CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
SPECIAL LIMITED
GENERAL LIMITED PARTNER
PARTNERS PARTNERS (NOTE 1) TOTAL
--------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993.................... $(217,343) $43,671,010 $ -- $43,453,667
DISTRIBUTIONS............................... -- (4,885,727) -- (4,885,727)
NET INCOME FOR 1993......................... 18,488 1,830,273 -- 1,848,761
--------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1993.................. (198,855) 40,615,556 -- 40,416,701
DISTRIBUTIONS............................... (98,899) (4,905,234) -- (5,004,133)
NET INCOME FOR 1994......................... 12,247 1,212,492 -- 1,224,739
--------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1994.................. (285,507) 36,922,814 -- 36,637,307
DISTRIBUTIONS............................... (27,262) (2,290,626) (2,317,888)
NET INCOME FOR 1995......................... 24,983 2,473,353 -- 2,498,336
--------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1995.................. $(287,786) $37,105,541 $ -- $36,817,755
========= =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 22
CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 2,498,336 $ 1,224,739 $ 1,848,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 713,054 716,572 1,350,550
Provision for earthquake loss.................. 36,662 1,141,615 --
Decrease (increase) in other assets............ 317,783 324,066 (328,185)
Increase (decrease) in accounts payable and
accrued liabilities.......................... (54,664) (396,000) 33,343
Increase in due to general partners............ 58,669 91,331 --
Decrease in security deposits.................. (10,241) (13,430) (6,825)
Increase (decrease) in prepaid rent............ 24,233 (30,465) 13,851
----------- ----------- -----------
Net cash provided by operating
activities.............................. 3,583,832 3,058,428 2,911,495
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of short term investments.............. -- 1,451,600 --
Increase in restricted cash....................... -- (158,700) --
Payments received pursuant to the minimum
distribution guarantee......................... 175,000 2,992,712 1,105,317
Insurance proceeds for earthquake loss............ -- 355,448 --
Earthquake loss payments.......................... (1,128,385) (405,340) --
----------- ----------- -----------
Net cash provided (used in) by investing
activities.............................. (953,385) 4,235,720 1,105,317
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners......................... (2,317,888) (5,004,133) (4,885,727)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 312,559 2,290,015 (868,915)
CASH AND CASH EQUIVALENTS, beginning of year........ 2,425,486 135,471 1,004,386
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year.............. $ 2,738,045 $ 2,425,486 $ 135,471
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Reduction in rental property resulting from
minimum distribution guarantee receivable...... $ -- $ -- $ 2,945,222
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 23
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Century HillCreste Apartment Investors, L.P. (the "Partnership"), a
California limited partnership, was formed on June 6, 1988, with National
Partnership Investments Corp. (the "Managing General Partner"), and HillCreste
Properties Inc. (the "Non-Managing General Partner") as the 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, through a public offering.
Concurrent with the issuance of the depositary units, the Partnership
purchased a 315-unit apartment complex in the Century City area of Los Angeles,
California (the "Property") from Casden Properties (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 things, the Partnership Agreement provides that the 10% special
limited partnership interest be subordinate to the other Limited Partners'
specified priority return in the case of distributions of net cash flow from
operations, plus the other Limited Partners' return of capital in the case of
net sales or refinancing distribution proceeds.
Casden Investment Corporation, an affiliate of the Seller, owns 100% of the
outstanding common stock of NAPICO. DA Group Holdings Inc. owns 100% of the
stock of HillCreste Properties Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Depreciation
Depreciation is reported using the straight-line method over the estimated
useful lives of the buildings and equipment as follows:
<TABLE>
<S> <C>
Buildings.................................................. 35 years
Furniture and equipment.................................... 5 years
</TABLE>
Minimum Distribution Guarantee
The minimum distribution guarantee payments from the Seller have been
reflected as a reduction in the carrying amount of the Property.
For its contribution of $6,855,000, the Seller has rights to receive an
allocation of the Partnership's net cash from operations after the Limited
Partners receive a specified priority return.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and bank certificates of deposit
with an original maturity of three months or less.
22
<PAGE> 24
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 city streets located within the Property's
perimeter (see Note 5).
Income Taxes
No provision has been made for income taxes in the accompanying financial
statements since such taxes, if any, are the liability of the partners.
Net Income Per Limited Partner Unit
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 all years presented.
Reclassifications
Certain reclassifications have been made to the 1994 financial statements
to conform to the 1995 presentation.
2. RENTAL PROPERTY
At December 31, 1995 and 1994, rental property consists of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land.............................................. $16,175,000 $16,175,000
Buildings......................................... 24,869,402 25,044,402
Furniture and equipment........................... 3,870,000 3,870,000
----------- -----------
44,914,402 45,089,402
Less: Accumulated depreciation.................... 10,142,071 9,429,017
----------- -----------
$34,772,331 $35,660,385
=========== ===========
</TABLE>
3. MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER
The Minimum Distribution Guarantee Agreement (the "Guarantee Agreement")
required the Seller, who is also the Special Limited Partner, to make 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
23
<PAGE> 25
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
3. MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER (CONTINUED)
achieve a minimum annual return upon the Limited Partners' investment in the
Partnership, through December 31, 1993, as follows:
<TABLE>
<CAPTION>
YEARS ENDED ANNUAL RETURN
DECEMBER 31 ON INVESTMENT
----------- -------------
<S> <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 was to be made on February 11, 1996 (but has
not yet been made). 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. Because certain disputes have arisen among the parties, the Seller
has not yet paid the second installment of $175,000, which is not reflected in
the accompanying financial statements.
Through December 31, 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 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 Partnership's basis in 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.
4. FEES PAID TO MANAGING GENERAL PARTNER 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 of $50,000 annually is paid to the
Managing General Partner. This fee is included in general and
administrative expenses for 1995, 1994 and 1993.
b. Prior to February 1, 1995, a property management fee equal to 5% of
collected revenues was paid to an affiliate of the Managing General
Partner. Effective February 1, 1995, the property management fee was
reduced to 3%. On January 1, 1996, property management was transferred to
an unaffiliated agent, who manages the property for a fee of 3% of rental
revenues. The property management fees paid to the affiliate for the years
ended December 31, 1995, 1994 and 1993 were $181,375, $273,130 and
$257,142, respectively. Additionally, the Partnership paid approximately
$41,700, $21,200 and $53,500 for the years
24
<PAGE> 26
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. FEES PAID TO MANAGING GENERAL PARTNER AND AFFILIATES (CONTINUED)
ended December 31, 1995, 1994 and 1993, respectively, to an affiliate of
the Managing General Partner for maintenance services.
c. Through December 1990, partnership expense reimbursements, not to
exceed $50,000 annually, were paid to the Non-Managing General Partner. The
1990 reimbursement has been accrued and is included in accounts payable and
accrued liabilities at December 31, 1995 and 1994. The Non-Managing General
Partner has requested reimbursement for expenses for 1991 through 1995,
however, the Managing General Partner is disputing such reimbursements and
none have been paid or accrued.
d. Payments in the amount of approximately $376,000 were made to an
affiliate of the Managing General Partner, in connection with earthquake
related repairs during the year ended December 31, 1994 (see Note 5). These
amounts were included in the provision for earthquake damage.
e. 1% of distributions (as defined in the Partnership Agreement) is
payable quarterly to the Managing General Partner. The fees paid for the
years ended December 31, 1995, 1994 and 1993 were $27,262, $98,899 and $0,
respectively.
f. The Partnership is obligated to pay certain fees to the Managing
General Partner or its affiliates upon sale of the Property. The payment of
such fees is subordinated to certain preferred returns to the Limited
Partners.
At December 31, 1995, $150,000 was estimated as due to the Non-Managing
General Partner for reimbursement of professional fees paid on behalf of the
Partnership in connection with issues raised in the Memorandum of Understanding.
At December 31, 1994, approximately $91,000 was due the Managing General Partner
for reimbursement of professional fees paid on behalf of the Partnership. This
amount was paid in 1995.
5. COMMITMENTS AND CONTINGENCIES
a. On January 17, 1994, the Property sustained damage due to the earthquake
in the Los Angeles area (the "Northridge Earthquake"). For the years ended
December 31, 1995 and 1994, approximately $37,000, and $1,142,000, respectively,
has been provided for repairing the damage caused by the Northridge Earthquake.
Based on a determination by the building's insurance carrier that the loss
suffered by the Property as a result of the Northridge 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 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. The insurance settlement of $355,448 has been offset against the
provision for earthquake loss.
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 was to expire on December 20, 1995,
however, a six month extension to June 20, 1996 was approved.
25
<PAGE> 27
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
Presently, plans for the improvements are being bid out and other
construction coordination issues are being resolved. Thereafter, the work on the
improvements will commence.
c. The Managing General Partner of the Partnership is a plaintiff in
various lawsuits and has also been named as a defendant in other lawsuits
arising from transactions in the ordinary course of business. In the opinion of
management and the Managing General Partner, the claims will not result in any
material liability to the Partnership.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments. The carrying amount of assets and liabilities
reported on the balance sheets that require such disclosure approximates fair
value due to their short-term maturity.
26
<PAGE> 28
SCHEDULE III
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
NOTES:
1. Rental property is stated at cost. Depreciation is provided for on the
straight-line method over the estimated useful lives of the assets.
Substantially all of the apartments are leased on a month-to-month basis.
2. The total cost of land, buildings, and equipment for federal income tax
purposes at December 31, 1995 is approximately $51,053,790.
3. Investment in rental property:
<TABLE>
<CAPTION>
BUILDINGS,
FURNITURE
AND
LAND EQUIPMENT TOTAL
------------ ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1993............................ $16,175,000 $32,188,853 $48,363,853
Less: minimum distribution guarantee amounts funded
and accrued in 1993............................... -- (3,226,961) (3,226,961)
----------- ----------- -----------
Balance, December 31, 1993.......................... 16,175,000 28,961,892 45,136,892
Less: minimum distribution guarantee amounts funded
in 1994........................................... -- (47,490) (47,490)
----------- ----------- -----------
Balance, December 31, 1994.......................... 16,175,000 28,914,402 45,089,402
Less: minimum distribution guarantee amounts funded
in 1995........................................... -- (175,000) (175,000)
----------- ----------- -----------
Balance, December 31, 1995.......................... $16,175,000 $28,739,402 $44,914,402
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED DEPRECIATION:
- -------------------------
<S> <C>
Balance, January 1, 1993.......................................... $ 7,361,895
Provision for the year ended December 31, 1993.................... 1,350,550
-----------
Balance, December 31, 1993........................................ 8,712,445
Provision for the year ended December 31, 1994.................... 716,572
-----------
Balance, December 31, 1994........................................ 9,429,017
Provision for the year ended December 31, 1995.................... 713,054
-----------
Balance, December 31, 1995........................................ $10,142,071
===========
</TABLE>
27
<PAGE> 29
The following interim financial statements for the Quarter ended September
30, 1996 of Century HillCreste Apartment Investors, L.P. (the "Partnership")
have been reproduced from the Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1996 of the Partnership.
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, September 30, 1996 and December 31, 1995......................... 31
Statements of Operations,
Nine and Three Months Ended September 30, 1996 and 1995........................ 32
Statement of Partners' Capital (Deficiency)
Nine Months Ended September 30, 1996........................................... 33
Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995.................................. 34
Notes to Financial Statements.................................................... 35
</TABLE>
28
<PAGE> 30
CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBVER 31,
1996 1995
------------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
RENTAL PROPERTY (Notes 1, 2 and 3).................................. $34,248,165 $34,772,331
CASH AND CASH EQUIVALENTS (Note 1).................................. 3,596,995 2,738,045
RESTRICTED CASH (Notes 1 and 4)..................................... 158,700 158,700
OTHER ASSETS (Note 5)............................................... 92,512 15,102
----------- -----------
$38,096,372 $37,684,178
LIABILITIES AND PARTNERS' CAPITAL
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Note 3)................... $ 579,132 $ 359,359
DUE TO GENERAL PARTNER (Note 3)..................................... -- 150,000
PREPAID RENT........................................................ 70,445 46,965
SECURITY DEPOSITS................................................... 328,526 310,099
----------- -----------
978,103 866,423
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL (Note 1).......................................... 37,118,269 36,817,755
----------- -----------
$38,096,372 $37,684,178
=========== ===========
</TABLE>
STATEMENTS OF INCOME
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS NINE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1996 SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Rental income........................ $3,966,912 $1,364,743 $4,045,047 $1,353,957
Interest and other income (Notes 1
and 3)............................ 178,793 46,967 368,163 177,432
---------- ---------- ---------- ----------
4,145,705 1,411,710 4,413,210 1,531,389
---------- ---------- ---------- ----------
EXPENSES
Operating (Note 3)................... 859,409 333,754 993,132 288,079
Property taxes....................... 312,340 178,818 408,076 134,741
Management fee -- related party in
1995 (Note 3)..................... 150,550 71,038 142,543 41,026
General and administrative
(Note 3).......................... 325,400 90,870 440,256 226,788
Depreciation......................... 529,166 176,389 536,667 178,889
Earthquake loss...................... -- -- 25,000 25,000
---------- ---------- ---------- ----------
2,176,865 850,869 2,545,674 894,523
---------- ---------- ---------- ----------
NET INCOME............................. $1,968,840 $ 560,841 $1,867,536 $ 636,866
========== ========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
INTEREST............................. $ 0.27 $ 0.08 $ 0.26 $ 0.09
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 31
CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL (DEFICIENCY)
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SPECIAL LIMITED
GENERAL LIMITED PARTNER
PARTNERS PARTNERS (NOTE 1) TOTAL
--------- ----------- --------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS, September 30,
1996................................ 7,258,000
===========
BALANCE, January 1, 1996.............. $(287,786) $37,105,541 $ -- $36,817,755
Distributions......................... (11,250) (1,657,076) -- (1,668,326)
Net income for the nine months ended
September 30, 1996.................. 19,688 1,949,152 -- 1,968,840
--------- ----------- ----------- -----------
BALANCE, September 30, 1996........... $(279,348) $37,397,617 $ -- $37,118,269
========= =========== =========== ===========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 1,968,840 $ 1,867,536
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 529,166 536,667
(Increase) decrease in other assets......................... (77,410) 289,098
Increase (decrease) in accounts payable and accrued
liabilities............................................... 219,773 (575,688)
Decrease in due to general partner.......................... (150,000) (91,331)
Increase (decrease) in security deposits.................... 18,427 (3,808)
Increase (decrease) in prepaid rent......................... 23,480 (6,251)
----------- -----------
Net cash provided by operating activities.............. 2,532,276 2,016,223
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in fixed assets....................................... (180,000) --
Payments pursuant to the minimum distribution guarantee........ 175,000 175,000
Distributions to partners...................................... (1,668,326) (1,628,576)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................ 858,950 562,647
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................... 2,738,045 2,425,486
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................... $ 3,596,995 $ 2,988,133
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 32
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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, 1995 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 NAPICO, 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, 1996, and
the results of operations for the nine and three 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"), and HillCreste Properties Inc. (the Non-Managing General
Partner") 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, through a public offering.
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 (hereinafter referred to as the
"Seller"), an affiliate of the Managing General Partner. To complete the
purchase of the Property, the Seller purchased a 10% special limited partnership
interest in the Partnership for $6,855,000. For its contribution, the Seller has
rights to receive an allocation of the Partnership's net cash from operations
after the Limited Partners receive a specified priority return, all as more
particularly set forth in the Partnership Agreement.
Among other provisions, the Partnership Agreement provides that the 10%
special limited partnership interest is subordinate to the other Limited
Partners' specified priority return in the case of distributions of net cash
flow from operations, plus the other Limited Partners' return of capital in the
case of net sales or refinancing proceeds.
Casden Investment Corporation, an affiliate of the Seller, owns all of the
outstanding common stock of NAPICO. DA Group Holdings Inc. owns 100% of the
stock of HillCreste Properties Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
31
<PAGE> 33
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
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 based upon the
Limited Partners' investment in the Partnership, through December 31, 1993, as
follows:
<TABLE>
<CAPTION>
YEARS ENDED ANNUAL RETURN
DECEMBER 31, ON INVESTMENT
------------ -------------
<S> <C>
1988.......................................... 8.0%
1989.......................................... 8.0%
1990.......................................... 8.5%
1991.......................................... 9.0%
1992.......................................... 9.0%
1993.......................................... 9.0%
</TABLE>
Pursuant to a 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 was made in May 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, 1996, the Seller has funded a total of $13,130,998
directly to the Partnership for distributions to the Limited Partners pursuant
to the Guarantee Agreement, which amount includes the $350,000 referred to
above. The period covered by the Guarantee Agreement expired on December 31,
1993. Except with respect to the payments 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, which
amount represents interest on late payments to the Partnership made pursuant to
the Guarantee Agreement covering the period from the second quarter of 1991 to
the fourth quarter of 1993.
Depreciation
Depreciation is reported using the straight-line method over the estimated
useful lives of the buildings and equipment as follows:
<TABLE>
<S> <C>
Buildings.......................................... 35 years
Furniture and equipment............................ 5 years
</TABLE>
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.
32
<PAGE> 34
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Unit
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.
Reclassifications
Certain reclassifications have been made in the 1995 financial statements
to conform to the 1996 presentation.
NOTE 2 -- RENTAL PROPERTY
At September 30, 1996 and December 31, 1995, the rental property consists
of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Land............................................. $ 16,175,000 $16,175,000
Building......................................... 24,694,402 24,869,402
Furniture and equipment.......................... 3,870,000 3,870,000
Exterior improvements in progress................ 180,000 --
------------ -----------
44,919,412 44,914,402
Less accumulated depreciation.................... (10,671,237) 10,142,071
------------ -----------
$ 34,248,165 $34,772,331
============ ===========
</TABLE>
Payments made pursuant to the Guarantee Agreement have been reflected as a
reduction in the carrying value of the Property (see Note 1).
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. The fee is included in general and
administrative expenses.
(b) Through December 31, 1995, the Property was managed by an
affiliate of the Managing General Partner for a fee of 3% of rental revenue
(5% prior to February 1, 1995). The property
33
<PAGE> 35
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 3 -- FEES PAID TO GENERAL PARTNERS AND AFFILIATES (CONTINUED)
management was transferred to an unaffiliated agent, on January 1, 1996,
who manages the property for a management fee of 3% of rental revenue.
(c) Partnership expense reimbursements, payable to the Non-Managing
General Partner, not to exceed $50,000 annually. The 1990 reimbursement has
been accrued and is included in accounts payable and accrued liabilities at
September 30, 1996 and December 31, 1995. The Non-Managing General partner
has requested reimbursement for expenses for 1991 through September 30,
1996, however, the Managing General Partner is disputing such reimbursement
and none have been accrued.
(d) 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.
(e) 1% of distributions (as defined in the Partnership Agreement) is
payable quarterly to the Managing General Partner.
(f) Due to the complexity of the storm drain work (Note 4), an
affiliate of the Operating General Partner is providing construction
supervision of the storm drain improvements at a cost not to exceed $1,820.
(g) Pursuant to the Memorandum of Understanding entered into on August
11, 1995, the previously affiliated management company paid to the
Partnership $8,095 in interest on May 1, 1996, related to funds it
maintained in a master disbursement account, and the Seller made payments
to the Partnership in the amount of $485,000, as more particularly
described above. In addition, the Partnership on May 1, 1996 reimbursed the
Non-Managing General Partner $90,000 for professional fees, which were
estimated to have been paid on behalf of the Partnership in connection with
issues raised in the Memorandum of Understanding.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
a. 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 by the
City 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 was to expire on December 20, 1995, however, an
extension to December 31, 1996 was approved.
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
Partnership has pledged a Certificate of Deposit in such amount to the City
to secure the improvement guarantee. Contracts in the amount of $683,000
and $49,975 have been awarded to construct the wrought iron security
fencing and to construct a storm drain and related improvements,
respectively, for which construction work has commenced in September 1996.
As of September 30, 1996, $180,000 has been paid to the contractor.
34
<PAGE> 36
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 4 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
b. The Managing General Partner of the Partnership is a plaintiff in
various lawsuits and has also been named as a defendant in other lawsuits
arising from transactions in the ordinary course of business. In the
opinion the Managing General Partner, the claims will not result in any
material liability to the Partnership.
NOTE 5 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments. The carrying amount of assets and liabilities
reported on the balance sheets that require such disclosure approximates fair
value due to their short-term maturity.
35
<PAGE> 37
FOR MORE INFORMATION REGARDING
THIS PROXY STATEMENT PLEASE CONTACT
MORROW & CO., INC.
909 Third Avenue - 20th Floor
New York, NY 10022-4799
800-566-9061
<PAGE> 38
PROXY OF LIMITED PARTNER
The undersigned has received the Proxy Statement of Everest Hillcreste
Investors, LLC, a California limited liability company ("Everest"), dated
December 12, 1996, relating to (1) authorization of Everest to notify National
Partnership Investments Corp., the Managing General Partner of Century
HillCreste Apartment Investors, L.P., a California limited partnership (the
"Partnership"), to call a special meeting of Limited Partners (the "Special
Meeting") of the Partnership; (2) a proposal to adopt a resolution at the
Special Meeting approving the sale of the HillCreste Apartments now owned by the
Partnership to Everest for a purchase price of $40,000,000 in cash (the
"Proposed Sale"), which resolution will also include a request to the Managing
General Partner to distribute the available proceeds of the Proposed Sale within
10 days of the completion of such sale or as soon thereafter as possible; (3)
authorization of Everest to vote for adjournment and reconvening of the Special
Meeting, if and to the extent necessary in the judgment of Everest, to solicit
further votes to approve the Proposed Sale; and (4) authorization of Everest to
vote, in its discretion, upon such other matters as may properly come before the
Special Meeting.
The undersigned, hereby appoints W. Robert Kohorst and David I. Lesser as
the proxy and attorney in fact of the undersigned, with full power of
substitution, to vote all Units held by the undersigned as follows for all
matters set forth in the above referenced Proxy Statement by signing and
returning this Proxy:
<TABLE>
<C> <S> <C> <C> <C>
(1) Authorization of Everest to notify the Managing General Grant Withhold
Partner to call a Special Meeting of the Limited Authority Authority
Partners................................................. [ ] [ ]
(2) Proposal to approve the sale of the HillCreste Apartments
to Everest and to distribute the available proceeds of For Against Abstain
the Proposed Sale........................................ [ ] [ ] [ ]
(3) Adjournment and reconvening of the Special Meeting....... Grant Withhold
Authority Authority
[ ] [ ]
(4) Authorization of Everest to vote upon such other matters Grant Withhold
as may properly come before the Special Meeting.......... Authority Authority
[ ] [ ]
</TABLE>
THIS PROXY IS SOLICITED ON BEHALF OF EVEREST HILLCRESTE INVESTORS, LLC,
WHICH IS NOT AFFILIATED WITH ANY OF THE GENERAL PARTNERS OF THE PARTNERSHIP.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED UNITHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Dated: ___________ , 199__
If joint ownership ALL PARTIES SHOULD SIGN
- ------------------------------------------
Signature of Investor
- ------------------------------------------
Print Name of Investor
- ------------------------------------------
Signature of Joint Investor (if any)
- ------------------------------------------
Print Name of Joint Investor (if any)
<PAGE> 39
PLEASE RETURN THIS PROXY CARD PROMPTLY BY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
PLACE IN U.S. MAIL OR FAX TO 212-754-8300
MORROW & CO., INC.
800-566-9061
<TABLE>
<S> <C>
By Mail: By Hand/Overnight Delivery
Proxy Services Century HillCreste Apartment Investors, LP
P.O. Box 5336 c/o Morrow & Co., Inc.
New York, NY 10126-1445 909 Third Avenue - 20th Floor
New York, NY 10022-4799
</TABLE>
