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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended MARCH 31, 1999
Commission File Number 33-22857
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-4166241
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No []
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, March 31, 1999 and December 31, 1998 .....................1
Statements of Operations,
Three Months Ended March 31, 1999 and 1998..........................2
Statement of Partners' Capital (Deficiency)
Three Months Ended March 31, 1999 ..................................3
Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998..........................4
Notes to Financial Statements ............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................9
Item 6. Exhibits and Reports on Form 8-K.............................................9
Signatures ..........................................................................10
</TABLE>
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CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS
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<CAPTION>
1999 1998
(Unaudited) (Audited)
------------- --------------
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CASH DUE FROM ESCROW (Note 2) $ -- $57,836,152
CASH AND CASH EQUIVALENTS (Note 1) 1,510,342 5,505,534
RESTRICTED CASH (Notes 1) 158,700 158,700
OTHER ASSETS (Note 5) 84,542 94,363
----------- -----------
$ 1,753,584 $63,594,749
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES $ 9,556 $ 436,035
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL (Note 1) 1,744,028 63,158,714
----------- -----------
$ 1,753,584 $63,594,749
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
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<CAPTION>
1998 1998
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REVENUES
Rental income $ $1,492,831
Interest and other income 209,843 87,447
---------- ----------
209,843 1,580,278
---------- ----------
EXPENSES
Operating 51,813 311,750
Property taxes 64,067
Management fee 45,213
General and administrative (Note 3) 118,364 91,088
Depreciation 176,389
---------- ----------
170,177 688,507
---------- ----------
NET INCOME $ 39,666 $ 891,771
========== ==========
NET INCOME PER DEPOSITORY UNIT $ 0.01 $ 0.12
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
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<CAPTION>
Special Limited
General Limited Partner
Partners Partners (Note 1) Total
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS
============
BALANCE, JANUARY 1, 1999 $ (18,942) $ 61,605,222 $ 1,572,434 $ 63,158,714
DISTRIBUTIONS (Note 2) (228,545) (59,653,373) (1,572,434) (61,454,352)
NET INCOME FOR THE THREE
MONTHS ENDED MARCH 31, 1999 397 39,269 39,666
------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1999 $ (247,090) $ 1,991,118 $ 0 $ 1,744,028
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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<CAPTION>
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,666 $ 891,771
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation 176,389
Decrease (increase) in other assets 9,821 28,477
Increase (decrease) in accounts payable and
accrued liabilities (426,479) 12,872
Increase (decrease) in security deposits 9,889
Increase (decrease) in prepaid rent (4,431)
------------ ------------
Net cash (used in) provided by operating activities (376,992) 1,114,967
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash proceeds from escrow 57,836,152 --
Increase in rental property -- (1,840)
------------ ------------
Net cash provided by (used in) investing activities 57,836,152 (1,840)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (61,454,352) (601,022)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,995,192) 512,105
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,505,534 4,100,537
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,510,342 $ 4,612,642
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1998 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 National Partnership Investments Corp. ("NAPICO"), the
accompanying unaudited financial statements contain all adjustments
(consisting primarily of normal recurring accruals) necessary to present
fairly the financial position as of March 31, 1999, and the results of
operations and changes in cash flows for the three months then ended.
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 (collectively, 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.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
Casden Investment Corporation ("CIC"), which is wholly owned by Alan I.
Casden. On December 30, 1998, Casden Properties Operating Partnership,
L.P., (the "Operating Partnership"), a majority owned subsidiary of
Casden Properties Inc., a real estate investment trust organized by Alan
I. Casden, purchased a 95.25% economic interest in NAPICO.
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 and became the Special Limited Partner of the
Partnership.
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.
5
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On December 30, 1998, the Partnership sold the Property for $58,500,000
to the Operating Partnership. The partners intend to dissolve the
Partnership in 1999.
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.
MINIMUM DISTRIBUTION GUARANTEE
The minimum distribution guarantee payments from the seller have been
reflected as a reduction in the carrying amount of the Property.
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. The
Partnership has its cash and cash equivalents on deposit primarily with
one money market mutual fund. Such cash and cash equivalents are
uninsured.
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 during 1998. The Partnership is in process of
having the assignment released.
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
partners.
NET INCOME PER DEPOSITORY UNIT
Net income per depository unit was computed by dividing the limited
partners' share of net income (99 percent) by the number of depository
units outstanding during the year. The number of depository units was
7,258,000 for the periods presented.
6
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been
any permanent impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
If the sum of the expected future cash flows is less than the carrying
amount of the assets, the Partnership recognizes an impairment loss.
NOTE 2 - RENTAL PROPERTY
On December 30, 1998, the Partnership sold the Property for $58,500,000
to the Operating Partnership, an affiliate of NAPICO. The sale resulted
in net cash proceeds to the Partnership of $57,916,894 and a gain of
$24,646,417. The cash proceeds were held in escrow at December 31, 1998
and were collected in 1999.
In March 1999, the Partnership made cash distributions of $59,653,373 to
the limited partners, $1,572,434 to the special limited partner and
$228,545 to the general partners, primarily using proceeds from the sale
of the building.
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) The Managing General Partner is entitled to receive 1 percent of
distributions (as defined in the Partnership Agreement). This is
paid quarterly by the Partnership to the Managing General
Partner.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
a. 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. In addition, the Partnership is
involved in the actions described below:
b. The order concerns, in part, the treatment of Partnership funds
deposited between September 1991 and July 1993 in a master
disbursement
7
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE 4 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
account used by the Partnership's previous property management
company. The Commission found that those funds should have been
recorded on the Partnership's books and reported in its
financial statements as related party accounts receivable rather
than as cash as done so by the Partnership's auditors. Although
the Commission found that this misclassification of current
assets violated federal securities laws, the Commission did not
find that these violations were intentional nor did the
Commission find that limited partners had suffered any loss or
damage as a result of these violations. Moreover, the
Commission's order does not impose any cost, burden or penalty
on the Partnership and does not impact NAPICO's ability to serve
as the Partnership's Managing General Partner.
The events that gave rise to the Commission's order occurred in
or before 1993. Subsequent corrective action by the Partnership
and its general partners precludes any recurrence of the cash
management issues described in the Commission's order.
c. On February 13, 1997, J/B Investment Partners ("J/B") filed an
action in the Los Angeles Superior Court (the "J/B Lawsuit"),
against the Managing General Partner and its directors, and
Casden Properties and certain of its affiliates (collectively,
the "Defendants").
By order dated November 25, 1997, the Los Angeles Superior Court
dismissed the J/B Lawsuit with prejudice. No appeal has been
taken.
The J/B Lawsuit was styled as a class action brought against the
Defendants on behalf of all limited partners of the Partnership,
and a derivative action brought on behalf of the Partnership
itself. The Partnership was named as a "nominal defendant." The
complaint in the J/B Lawsuit contained four causes of action:
(a) breach of fiduciary duty; (b) breach of contract; (c) unjust
enrichment; and (d) equitable relief.
d. The Partnership has assessed the potential impact of the Year
2000 computer systems issue on its operations. The Partnership
believes that no significant actions are required to be taken by
the Partnership to address the issue and that the impact of the
Year 2000 computer systems issue will not materially affect the
Partnership's future operating results or financial condition.
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 amounts of assets
and liabilities reported on the balance sheets that require such
disclosure approximate fair value due to their short-term maturity.
8
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership raised proceeds of $72,580,000 from the sale of
depository units, pursuant to a public offering and received additional
capital contributions from the General Partners of $1,050 and from the
special limited partner of $6,855,000. Currently, the only sources of
Partnership income consist of income from rental operations at the
Property and interest earned on Partnership reserves.
The Partnership pledged a certificate of deposit in the amount of
$158,700 to the City of Los Angeles, to secure an improvement guarantee
on the construction of a storm drain and related improvement, which was
completed in 1998. Upon final inspection, the Partnership will receive
its deposit of $158,700.
RESULTS OF OPERATIONS
Due to the sale of the building on December 31, 1999, operations in 1999
consist of interest and other income and general and administrative
expenses. Included in the interest and other income is interest income
earned on cash and cash equivalents of $206,756 and $58,000 for the
three months ended March 31, 1999 and 1998, respectively. Interest
income increased in 1998 as compared to 1998 as a result of interest
earned on cash proceeds from the sale of the Property. The Partnership
has its cash and cash equivalents on deposit primarily with one money
market mutual fund.
The Partnership has assessed the potential impact of the Year 2000
computer systems issue on its operations. The Partnership believes that
no significant actions are required to be taken by the Partnership to
address the issue and that the impact of the Year 2000 computer systems
issue will not materially affect the Partnership's future operating
results or financial condition.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 1999, NAPICO, the Managing General Partner, was a
plaintiff or defendant in several lawsuits, which are unrelated to the
Partnership. In addition, the Partnership is involved in the actions
described below:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended March
31, 1999.
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CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
(a California limited partnership)
By: National Partnership Investments Corp.
Managing General Partner
/s/ BRUCE NELSON
---------------------------------------
Bruce Nelson
President
Date: May 20, 1999
---------------------------------------
/s/ CHARLES H. BOXENBAUM
---------------------------------------
Charles H. Boxenbaum
Chief Executive Officer
Date: May 20, 1999
--------------------------------------
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,510,342
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,510,342
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,753,584
<CURRENT-LIABILITIES> 9,556
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,744,028
<TOTAL-LIABILITY-AND-EQUITY> 1,753,584
<SALES> 0
<TOTAL-REVENUES> 209,843
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 170,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,666
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,666
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
