-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VHyWfOEEG3EiVeGsIWVcrw6tWYwTxKUFVCiTFfHVeB0EGosAI8fY/+VxfnT/pcuD oc8jV3tMd6wN3ps9EdzH+w== 0000711642-99-000031.txt : 19990331 0000711642-99-000031.hdr.sgml : 19990331 ACCESSION NUMBER: 0000711642-99-000031 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XVI CENTRAL INDEX KEY: 0000351931 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942704651 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-10435 FILM NUMBER: 99578630 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10KSB 1 FORM 10-KSB-ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) (As last amended by 34-31905 effective 4/26/93) [X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the fiscal year ended December 31, 1998 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from to Commission file number 0-10435 CENTURY PROPERTIES FUND XVI (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) California 94-2704651 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Limited Partnership Units (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X State issuer's revenues for its most recent fiscal year. $ 2,976,000. State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of December 31, 1998. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I ITEM 1. DESCRIPTION OF BUSINESS Century Properties Fund XVI (the "Partnership" or "Registrant") was organized in December 1980, as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Capital Management Corporation (the "Managing General Partner" or "FCMC") a California corporation, and Fox Realty Investors ("FRI"), a California general partnership, are the general partners of the Registrant. NPI Equity Investments II Inc., a Florida Corporation ("NPI Equity"), is the managing partner of FRI (see "Transfer of Control"). The partnership agreement provides that the Partnership is to terminate on December 31, 2025 unless terminated prior to such date. Beginning in August 1981 through April 1982, the Registrant offered and sold 130,000 Limited Partnership Units for an aggregate of $65,000,000. The net proceeds of this offering were used to acquire ten income-producing real properties. The Registrant's original property portfolio was geographically diversified with properties acquired in six states. The Registrant's acquisition activities were completed in 1983, and since then, the principal activity of the Registrant has been managing its portfolio. During the period from 1986 through 1991, eight multi-family residential properties were sold or otherwise disposed of. The Registrant continues to own and operate two of its originally acquired properties. See "Item 2. Description of Properties." The Partnership has no full time employees. The Managing General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Partnership. The non-managing general partners and the limited partners have no right to participate in the management or conduct of such business and affairs. An affiliate of the Managing General Partner, provides day-to-day property management services to the Partnership's investment properties. A further description of the Partnership's business is included in "Management's Discussion and Analysis or Plan of Operations" included in "Item 6" of this Form 10-KSB. The business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Registrant's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the Managing General Partner in such market area, could have a material effect on the rental market for apartments at the Registrant's properties and the rents that may be charged for such apartments. While the Managing General Partner and its affiliates are a significant factor in the United States in the apartment industry, competition for the apartments is local. In addition, various limited partnerships have been formed by the Managing General Partner and/or affiliates to engage in business which may be competitive with the Registrant. Both the income and expenses of operating the remaining properties owned by the Partnership are subject to factors outside of the Partnership's control, such as an oversupply of similar properties resulting from overbuilding, increases in unemployment or population shifts, reduced availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed, which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into AIMCO, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership interest in Insignia Properties Trust ("IPT"), the entity which controls the Managing General Partner. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. ITEM 2. DESCRIPTION OF PROPERTIES: The following table sets forth the Registrant's investments in properties: Date of Property Purchase Type of Ownership Use The Landings Apartments 06/82 Fee ownership subject to Residential rental Tampa, Florida first mortgage (1) 200 units Woods of Inverness Apartments 07/82 Fee ownership subject to Residential rental Houston, Texas first mortgage (1) 272 units (1) The property is held by a Limited Partnership which is wholly-owned by the Registrant. SCHEDULE OF PROPERTIES: Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis. Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) The Landings Apartments $ 6,029 $ 3,088 5-30 yrs (1) $ 1,062 Woods of Inverness Apartments 9,535 4,716 5-30 yrs (1) 1,885 $ 15,564 $ 7,804 $ 2,947 (1) Straight - line See "Note A" of the financial statements included in "Item 7." for a description of the Partnership's depreciation policy. SCHEDULE OF PROPERTY INDEBTEDNESS: The following table sets forth certain information relating to the loans encumbering the Registrant's properties. Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 1998 Rate Amortized Date Maturity (in thousands) (in thousands) The Landings Apartments $ 2,238 7.88% 30 years 1/2006 $ 2,016 Woods of Inverness Apartments 5,109 7.88% 30 years 1/2006 4,602 $ 7,347 $ 6,618 Each mortgage note payable is non-recourse and secured by a pledge of the applicable Partnership property and the rental revenues derived therefrom. See "Item 7. Financial Statements - Note C" for information with respect to the Registrant's ability to prepay these loans and other specific details as to the terms of the loans. RENTAL RATES AND OCCUPANCY: Average annual rental rates and occupancy for 1998 and 1997 for each property: Average Annual Average Rental Rates Occupancy Property 1998 1997 1998 1997 The Landings Apartments $5,374/unit $5,369/unit 95% 94% Woods of Inverness Apartments 7,098/unit 6,857/unit 97% 96% As noted under "Item 1. Description of Business", the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other apartment complexes in the area. The Managing General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% of more of the available rental space. All of the properties are in good condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. REAL ESTATE TAXES AND RATES: Real estate taxes and rates in 1998 for each property were: 1998 1998 Billing Rate (in thousands) The Landings Apartments $ 75 2.52% Woods of Inverness Apartments 171 2.79% CAPITAL IMPROVEMENTS: During 1998, the Partnership spent $428,000 on capital improvements at Woods of Inverness, primarily consisting of building improvements to increase the property's curb appeal, carpet and balcony replacements and fencing repairs. These improvements were funded from cash flow and replacement reserves. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $246,000 of capital improvements over the near-term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $205,000 for 1999 at this property consisting of air conditioning and electrical upgrades, flooring replacements and fencing repairs. During 1998, the Partnership spent $189,000 on capital improvements at the Landings, primarily consisting of various building upgrades, flooring and appliance replacements, and signage. These improvements were funded from cash flow and replacement reserves. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $337,000 of capital improvements over the near-term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $341,000 for 1999 at this property consisting of a roof replacement project, structural repairs, appliance replacement and landscaping. The capital improvements planned for 1998 at the Partnership's properties will be made only to the extent of cash available from operations and Partnership reserves. ITEM 3. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The Managing General Partner does not anticipate that costs associated with this case, if any, to be material to the Partnership's overall operations. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California, county of Los Angeles. The action involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). This case was settled on March 3, 1999. The Partnership is responsible for a portion of the settlement. The expense will not have a material effect on the Partnership's operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the quarter ended December 31, 1998, no matters were submitted to a vote of security holders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS The Partnership, a publicly-held limited partnership, offered and sold in 1981 and 1982 130,000 Limited Partnership Units (the "Units") aggregating $65,000,000. The Partnership currently has 130,000 Units outstanding held by 5,501 Limited Partners of record. Affiliates of the Managing General Partner own 47,418.68 units or 36.476% at December 31, 1998. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. The Partnership did not make any distributions to its partners during 1998 or 1997. Future distributions will be dependent on the levels of net cash generated from operations, refinancings, sale of the properties and the availability of cash reserves. The Partnership's distribution policy will be reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit distributions to its partners in 1999 or subsequent periods. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward- looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report. Results of Operations The Registrant's net income for the year ended December 31, 1998, was $127,000 as compared to a net loss of $157,000 for the year ended December 31, 1997. (See "Note D" of the financial statements for a reconciliation of these amounts to the Registrant's federal taxable income (loss)). The increase in net income was due to an increase in total revenues and a decrease in total expenses. Revenues increased primarily due to an increase in rental income. The increase in rental income is primarily attributable to an increase in both occupancy and average annual rental rates at The Landings Apartments and Woods of Inverness Apartments. Also contributing to the increase in rental income was a decrease in the amount of concessions incurred in order to maintain occupancy levels. Expenses decreased primarily due to reductions in operating and general and administrative expenses, partially offset by slight increases in depreciation and property taxes. Operating expense decreased due to reductions in maintenance expenses at both of the Partnership's investment properties along with the completion of swimming pool repairs at The Landings and interior building improvements at Woods of Inverness in 1997. For the year ended December 31, 1997, the Partnership incurred a loss on disposal of property as a result of a re-roofing project at the Woods of Inverness Apartments. This loss is included in operating expense and was the result of the write-off of the old roof that was not fully depreciated at the time of replacement. In addition, insurance expense decreased due to a change in insurance carriers in late 1997. Included in general and administrative expense at both December 31, 1998 and 1997 are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. These reimbursements decreased slightly during 1998. In addition costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. The increase in depreciation expense is a result of the amounts spent on capital expenditures during the year. Property taxes increased as a result of a billing increase at the Woods of Inverness. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Capital Resources and Liquidity At December 31, 1998, the Registrant had cash and cash equivalents of approximately $366,000 as compared to approximately $459,000 at December 31, 1997. The decrease in cash and cash equivalents is due to $608,000 of cash used in investing activities and $75,000 of cash used in financing activities, which was partially offset by $590,000 of cash provided by operating activities. Cash used in investing activities consisted of capital improvements which was partially offset by receipts from escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in money market accounts. An affiliate of the Managing General Partner has made available to the Partnership a credit line of up to $150,000 per property owned by the Partnership. The Partnership has no outstanding amounts due under this line of credit. Based on present plans, the Managing General Partner does not anticipate the need to borrow in the near future. Other than cash and cash equivalents, the line of credit is the Partnership's only unused source of liquidity. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with federal, state, and local legal and regulatory requirements. The Registrant has budgeted approximately $546,000 in capital improvements for all of the Registrant's properties in 1999. Capital improvements include, but are not limited to, air conditioning and electrical upgrades, fencing repairs, a roof replacement project, structural repairs, flooring and appliance replacements and landscaping. The capital expenditures will be incurred only if cash is available from operations or from partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $7,347,000 is amortized over 360 months with a balloon payment of approximately $6,618,000 due January 1, 2006. The Managing General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. The Partnership did not make any distributions to its partners during 1998 or 1997. Future distributions will be dependent on the levels of net cash generated from operations, refinancings, sale of the properties and the availability of cash reserves. The Partnership's distribution policy will be reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit distributions to its partners in 1999 or subsequent periods. Year 2000 Compliance General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Managing General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made or not completed in time, the Year 2000 issue could have a material impact on the operations of the Partnership. The Managing Agent's plan to resolve Year 2000 issues involves four Phases: assessment, remediation, testing, and implementation. To date, the Managing Agent has fully completed its assessment of all the information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase Computer Hardware: During 1997 and 1998, the Managing Agent identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. In August 1998, the mainframe system used by the Managing Agent became fully functional. In addition to the mainframe, PC-based network servers and routers and desktop PCs were analyzed for compliance. The Managing Agent has begun to replace each of the non-compliant network connections and desktop PCs and, as of December 31, 1998, had completed approximately 75% of this effort. The total cost to the Managing Agent to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million of which $1.3 million has been incurred to date. The remaining network connections and desktop PCs are expected to be upgraded to Year 2000 compliant systems by March 31, 1999. Computer software: The Managing Agent utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. During 1998, the Managing Agent began converting the existing property management and rent collection systems to its management properties Year 2000 compliant systems. The estimated additional costs to convert such systems at all properties, is $200,000, and the implementation and the testing process is expected to be completed by March 31, 1999. The final software area is the office software and server operating systems. The Managing Agent has upgraded all non-compliant office software systems on each PC and has upgraded 80% of the server operating systems. The remaining server operating systems are planned to be upgraded to be Year 2000 compliant by March 31, 1999. Operating Equipment: The Managing Agent has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, the Managing Agent began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example elevators, heating, ventilating, and air conditioning systems, security and alarm systems, etc.). The Managing Agent has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non-compliance issues that put the Managing Agent at risk financially or operationally. The Managing Agent intends to have a third-party conduct an audit of these systems and report their findings by March 31, 1999. Any of the above operating equipment that has been found to be non-compliant to date has been replaced or repaired. To date, these have consisted only of security systems and phone systems. As of December 31, 1998 the Managing Agent has evaluated approximately 86% of the operating equipment for the Year 2000 compliance. The total cost incurred for all properties managed by the Managing Agent as of December 31, 1998 to replace or repair the operating equipment was approximately $400,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $325,000, which is expected to be completed by April 30, 1999. The Managing Agent continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within our enterprise. Nature and Level of Importance of Third Parties and Their Exposure to the Year 2000 The Managing Agent continues to conduct surveys of its banking and other vendor relationships to assess risks regarding their Year 2000 readiness. The Managing Agent has banking relationships with three major financial institutions, all of which have indicated their compliance efforts will be complete before May 1999. The Managing Agent has updated data transmission standards with two of the three financial institutions. The Managing Agent's contingency plan in this regard is to move accounts from any institution that cannot be certified Year 2000 compliant by June 1, 1999. The Partnership does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems (external agent). To date the Partnership is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Partnership's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant. The Managing Agent does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Costs to Address Year 2000 The total cost of the Year 2000 project to the Managing Agent is estimated at $3.5 million and is being funded from operating cash flows. To date, the Managing Agent has incurred approximately $2.8 million ($0.6 million expensed and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. The Partnership's portion of these costs are not material. Risks Associated with the Year 2000 The Managing Agent believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Managing Agent has not yet completed all necessary phases of the Year 2000 program. In the event that the Managing Agent does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios could include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Partnership. The Partnership could be subject to litigation for, among other things, computer system failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans Associated with the Year 2000 The Managing Agent has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. ITEM 7. FINANCIAL STATEMENTS CENTURY PROPERTIES FUND XVI LIST OF FINANCIAL STATEMENTS Independent Auditors' Report _ Ernst & Young, LLP Independent Auditors' Report _ Imowitz Koenig & Co., LLP Consolidated Balance Sheet - December 31, 1998 Consolidated Statements of Operations - Years ended December 31, 1998 and 1997 Consolidated Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 1998 and 1997 Consolidated Statements of Cash Flows - Years ended December 31, 1998 and 1997 Notes to Consolidated Financial Statements To the Partners Century Properties Fund XVI Independent Auditors' Report We have audited the accompanying consolidated balance sheet of Century Properties Fund XVI as of December 31, 1998, and the related consolidated statements of operations, changes in partners' capital (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 the Partnership's management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Properties Fund XVI at December 31, 1998, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Greenville, South Carolina March 3,1999 To the Partners Century Properties Fund XVI Greenville, South Carolina Independent Auditors' Report We have audited the accompanying consolidated statements of operations, changes in partners' (deficit) capital and cash flows of Century Properties Fund XVI (a limited partnership)(the "Partnership") and subsidiaries for the year ended December 31, 1997. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Century Properties Fund XVI and subsidiaries for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Imowitz Koenig & Co., LLP Certified Public Accountants New York, N.Y. January 23, 1998 CENTURY PROPERTIES FUND XVI CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 1998 Assets Cash and cash equivalents $ 366 Receivables and deposits 370 Other assets 233 Restricted escrows 100 Investment properties (Notes C and F): Land $ 1,409 Buildings and related personal property 14,155 15,564 Less accumulated depreciation (7,804) 7,760 $ 8,829 Liabilities and Partners' Capital Liabilities Accounts payable $ 56 Accrued property taxes 245 Tenant security deposit liabilities 51 Other liabilities 109 Mortgage notes payable (Notes C and F) 7,347 Partners' Capital (Deficit) General partners $(3,834) Limited partners (130,000 units issued and outstanding) 4,855 1,021 $ 8,829 See Accompanying Notes to Consolidated Financial Statements CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1998 1997 Revenues: Rental income $ 2,855 $ 2,692 Other income 121 108 Total revenues 2,976 2,800 Expenses: Operating 1,319 1,430 General and administrative 186 204 Depreciation 501 479 Interest 612 620 Property tax 231 224 Total expenses 2,849 2,957 Net income (loss) $ 127 $ (157) Net income (loss) allocated to general partners (6.9%) $ 9 $ (11) Net income (loss) allocated to limited partners (93.1%) 118 (146) Net income (loss) $ 127 $ (157) Net income (loss) per limited partnership unit $ 0.91 $ (1.12) See Accompanying Notes to Consolidated Financial Statements CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS'CAPITAL (DEFICIT) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 130,000 $ -- $65,000 $65,000 Partners' capital (deficit) at December 31, 1996 130,000 $(3,832) $ 4,883 $ 1,051 Net loss for the year ended December 31, 1997 -- (11) (146) (157) Partners' capital (deficit) at December 31, 1997 130,000 $(3,843) $ 4,737 $ 894 Net income for the year ended December 31, 1998 -- 9 118 127 Partners capital (deficit) at December 31, 1998 130,000 $(3,834) $ 4,855 $ 1,021 See Accompanying Notes to Consolidated Financial Statements CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 1998 1997 Cash flows from operating activities: Net income (loss) $ 127 $ (157) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 501 479 Amortization of loan costs 30 32 Loss on disposal of property -- 56 Change in accounts: Receivables and deposits (63) (64) Other assets 5 (6) Accounts payable (32) 20 Accrued property taxes 8 51 Tenant security deposit liabilities 1 (6) Other liabilities 13 30 Net cash provided by operating activities 590 435 Cash flows from investing activities: Property improvements and replacements (617) (352) Net receipts from (deposits to) restricted escrows 9 (94) Net cash used in investing activities (608) (446) Cash flows from financing activities: Payments on mortgage notes payable (75) (65) Net cash used in financing activities (75) (65) Net decrease in cash and cash equivalents (93) (76) Cash and cash equivalents at beginning of year 459 535 Cash and cash equivalents at end of year $ 366 $ 459 Supplemental disclosure of cash flow information Cash paid for interest $ 581 $ 554 See Accompanying Notes to Consolidated Financial Statements CENTURY PROPERTIES FUND XVI Notes to Consolidated Financial Statements NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: Century Properties Fund XVI (the "Partnership or Registrant") is a California limited partnership organized in December 1980 to acquire and operate residential apartment properties. The Partnership's general partners are Fox Capital Management Corporation ("FCMC" or the "Managing General Partner") and Fox Realty Investors ("FRI"). As of December 31, 1998, the Partnership operates two residential apartment complexes, located in Texas and Florida. The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. See "Note B _ Transfer of Control." The Partnership Agreement provides that the Partnership is to terminate on December 31, 2025 unless terminated prior to such date. The directors and officers of the Managing General Partner also serve as executive officers of AIMCO. Principles of Consolidation: The Partnership's financial statements include the accounts of the Partnership and its wholly owned subsidiaries. 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Allocations to Partners: Net income and losses (excluding those arising from the occurrence of sales or dispositions) of the Partnership will be allocated 5% to the general partners with the remainder allocated 2% to the general partners and 98% to the limited partners. Distributions of available cash, except as discussed below, are allocated 5% to the general partners with the remainder allocated 2% to the general partners and 98% to the limited partners. In accordance with the Partnership Agreement, any gain from the sale or other disposition of Partnership properties shall be allocated: (i) to the general partners to the extent they are entitled to receive distributions of cash; (ii) 7% to the general partners and 93% to the Limited Partners, to the extent the general partners have a deficit capital balance; and (iii) to the limited partners. Cash from sales or other disposition, or refinancing and working capital reserves must be distributed in the following order: (i) first, an aggregate amount as discussed above to each Limited Partner which equals the total of their original invested capital contributed plus 8% per year, determined on a cumulative, noncompounded basis, on adjusted invested capital, adjusted as needed, of such Limited Partnership Unit Holder; (ii) second, to the General Partners 15% of any additional cash from sales or refinancing and working capital reserve available for distribution, and (iii) the remainder shall be allocated 98% to the limited partners and 2% to the General Partners. Upon sale of all properties and termination of the Partnership, the General Partners may be required to contribute certain funds to the Partnership in accordance with the Partnership Agreement. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks, money market accounts, and certificates of deposit with original maturities of less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Depreciation: Depreciation is calculated by the straight-line method over the estimated lives of the rental properties and related personal property. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the Managing General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Loan Costs: Loan costs of $319,000 are included in "Other assets" in the accompanying balance sheet and are being amortized on a straight-line basis over the life of the loans. At December 31, 1998, accumulated amortization is $94,000. Amortization of loan costs is included in interest expense. Investment Properties: Investment properties consist of two apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of apartment properties that have been permanently impaired have been written down to appraised value. No adjustments for the impairment of value were recorded in the years ended December 31, 1998 or 1997. Fair Value: SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments" requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long-term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying value. Advertising Costs: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $60,000 and $65,000 for the years ended December 31, 1998 and 1997, respectively were charged to operating expense. Segment Reporting: In June 1997, the Financial Accounting Standards Board issued Statement of Financial Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("Statement 131"), which is effective for years beginning after December 15, 1997. Statement 131 established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. See "Note G" for disclosure. Reclassifications: Certain reclassifications have been made to the 1997 balances to conform to the 1998 presentation. NOTE B - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into AIMCO, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership interest in Insignia Properties Trust ("IPT"), the entity which controls the Managing General Partner. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. NOTE C - MORTGAGE NOTES PAYABLE The principle terms of mortgage notes payable are as follows: Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 1998 Interest Rate Date Maturity (in thousands) (in thousands) The Landings Apartments $ 2,238 $ 17 7.88% 1/2006 $ 2,016 Woods of Inverness Apartments 5,109 38 7.88% 1/2006 4,602 $ 7,347 $ 55 $ 6,618 Scheduled principal payments on mortgage notes payable subsequent to December 31, 1998 are as follows (in thousands): 1999 $ 81 2000 88 2001 95 2002 103 2003 111 Thereafter 6,869 $ 7,347 NOTE D - INCOME TAXES Taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Differences between the net income (loss) as reported and Federal taxable income result primarily from depreciation over different methods and lives and on differing cost basis. The following is a reconciliation of reported net income (loss) and Federal taxable income: 1998 1997 (in thousands, except unit data) Net income (loss) as reported $ 127 $ (157) Add (deduct): Depreciation differences 370 167 Miscellaneous 155 59 Federal taxable income $ 652 $ 69 Federal taxable income per limited partnership unit $ 4.67 $ .50 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets (in thousands): 1998 Net assets as reported $ 1,021 Land and buildings 925 Accumulated depreciation (5,738) Syndication and distribution costs 8,258 Prepaid rent 102 Other 64 Net assets - Federal tax basis $ 4,632 NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES On March 29, 1996, an affiliate of Insignia acquired all of the issued and outstanding shares of stock of the general partners of the subsidiary partnerships which hold title to The Landings Apartments and Woods of Inverness Apartments. These general partners held a 1% interest in profits, losses and distributions of such subsidiary partnerships. Effective December 31, 1997, the Partnership acquired these 1% interests and therefore the subsidiary partnerships are wholly-owned by the Partnership. The Partnership has no employees and is dependent upon the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid to the Managing General Partner and affiliates in 1998 and in 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $149 $142 Reimbursement for services of affiliates (included in investment property and general and administrative and operating expenses) (1) 133 135 (1) Included in "reimbursements for services of affiliates" for the years ended December 31, 1998 and 1997, is approximately $29,000 and $21,000, respectively, in reimbursements for construction oversight costs. During the years ended December 31, 1998 and 1997, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $149,000 and $142,000 for the years ended December 31, 1998 and 1997, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $133,000 and $135,000 for the years ended December 31, 1998 and 1997, respectively. AIMCO currently own, through its affiliates, a total of 47,418.68 limited partnership units or 36.476% of the outstanding limited partnership units. Consequently AIMCO could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. For the period from January 1, 1997, to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Managing General Partner which receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. NOTE F - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION Initial Cost To Partnership Cost Buildings Capitalized and Related (Removed) Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) The Landings Apartments $ 2,238 $ 504 $ 4,702 $ 823 Woods of Inverness Apartments 5,109 1,292 10,305 (2,062) Total $ 7,347 $ 1,796 $ 15,007 $ (1,239)
Gross Amount at Which Carried At December 31, 1998 Buildings And Related Year Personal Accumulated of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years (in thousands) The Landings Apartments $ 504 $ 5,525 $ 6,029 $ 3,088 1979 06/82 5-30 yrs Woods of Inverness Apartments 905 8,630 9,535 4,716 1981 07/82 5-30 yrs Total $ 1,409 $ 14,155 $ 15,564 $ 7,804
Reconciliation of Investment Properties and Accumulated Depreciation: Years Ended December 31, 1998 1997 (in thousands) Balance at beginning of year $ 14,947 $ 14,700 Property improvements 617 352 Disposals -- (105) Balance at end of year $ 15,564 $ 14,947 Accumulated Depreciation Balance at beginning of year $ 7,303 $ 6,873 Additions charged to expense 501 479 Disposals -- (49) Balance at end of year $ 7,804 $ 7,303 The aggregate cost of the investment properties for Federal income tax purposes at December 31, 1998 and 1997 is $16,489,000 and $15,863,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 1998 and 1997 is $13,542,000 and $13,411,000, respectively. NOTE G - SEGMENT REPORTING Description of the types of products and services from which reportable segment derives its revenues: As defined by SFAS No. 131, Disclosures about Segment of an Enterprise and Related Information, Century Properties Fund XVI has one reportable segment: residential properties. The Partnership's residential property segment consists of two apartment complexes located in Tampa, Florida and Houston, Texas. The Partnership rents apartment units to people for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties is managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the years 1998 and 1997 is shown in the tables below (in thousands). The 'Other' column includes Partnership administration related items and income and expense not allocated to the reportable segment. 1998 Residential Other Totals Rental income $ 2,855 $ - $ 2,855 Other income 105 16 121 Interest expense 612 - 612 Depreciation 501 - 501 General and administrative expense - 186 186 Segment profit (loss) 297 (170) 127 Total assets 8,562 267 8,829 Capital expenditures 617 - 617 1997 Residential Other Totals Rental income $ 2,692 $ - $ 2,692 Other income 94 14 108 Interest expense 620 - 620 Depreciation 479 - 479 General and administrative expense - 204 204 Loss on disposal of property 56 - 56 Segment profit (loss) 33 (190) (157) Total assets 8,463 324 8,787 Capital expenditures 352 - 352 NOTE H - LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The Managing General Partner does not anticipate that costs associated with this case, if any, to be material to the Partnership's overall operations. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California, county of Los Angeles. The action involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). This case was settled on March 3, 1999. The Partnership is responsible for a portion of the settlement. The expense will not have a material effect on the Partnership's operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 8. Changes in and Disagreements with Accountant on Accounting and Financial Disclosures Effective November 10, 1998, the Registrant dismissed its prior Independent Auditors Imowitz Koenig and Co., LLP ("Imowitz"). Imowitz' Independent Auditor's Report on the Registrant's financial statements for calendar year ended December 31, 1997 did not contain any adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change Independent Auditors was approved by the Managing General Partner's directors. During the calendar year ended 1997 and through November 10, 1998, there were no disagreements between the Registrant and Imowitz on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure which disagreements if not resolved to the satisfaction of Imowitz, would have caused it to make references to the subject matter of the disagreements in connection with its reports. Effective November 24, 1998, the Registrant engaged Ernst & Young LLP as its Independent Auditors. During the last two calendar years and through November 10, 1998, the Registrant did not consult Ernst and Young LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Century Properties Fund XVI (the "Partnership" or the "Registrant") has no officers or directors. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), manages and controls substantially all of the Partnership's affairs and has general responsibility in all matters affecting its business. The names and ages of, as well as the positions and offices held by, the executive officers and directors of Fox Capital Management Corporation are set forth below. There are no family relationships between or among any officers or directors. Name Age Position Patrick J. Foye 41 Executive Vice President and Director Timothy R. Garrick 42 Vice President _ Accounting and Director Patrick J. Foye has been Executive Vice President and Director of the Managing General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice President-Accounting and Director of the Managing General Partner since October 1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting Services of Insignia Financial Group since June of 1997. From 1992 until June of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from 1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to 1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation. From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney. Mr. Garrick received his B.S. Degree from the University of South Carolina and is a Certified Public Accountant. ITEM 10. EXECUTIVE COMPENSATION No direct form of compensation or remuneration was paid by the Partnership to any officer or director of Fox Capital Management Corporation. However, fees and other payments have been made to the Partnership's Managing General Partner and its affiliates, as described in "Item 12. Certain Relationships and Related Transactions." ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding limited partnership units of the Registrant owned by each person or entity is known by the Registrant to own beneficially or exercise voting or dispositive control over more than 5% of the Registrant's limited partnership units as of December 31, 1998. Name of Beneficial Owner Number of Units % of Class Insignia Properties, L.P. 47,418.68 36.476% (an affiliate of AIMCO) Insignia Properties L.P. is indirectly and ultimately owned by AIMCO. The business address is 55 Beattie Place, Greenville, SC 29602. On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real estate investment trust, whose Class A Common Shares are listed on the New York Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP") acquired indirect control of the Managing General Partner. AIMCO and its affiliates currently own 36.476% of the limited partnership interests in the Partnership. AIMCO is presently considering whether it will engage in an exchange offer for additional limited partnership interests in the Partnership. There is a substantial likelihood that, within a short period of time, AIMCO OP will offer to acquire limited partnership interests in the Partnership for cash or preferred units or common units of limited partnerships interests in AIMCO OP. While such an exchange offer is possible, no definite plans exist as to when or whether to commence such an exchange offer, or as to the terms of any such exchange offer, and it is possible that none will occur. A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Form 10-KSB shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On March 29, 1996, an affiliate of Insignia acquired all of the issued and outstanding shares of stock of the general partners of the subsidiary partnerships which hold title to The Landings Apartments and Woods of Inverness Apartments. These general partners held a 1% interest in profits, losses and distributions of such subsidiary partnerships. Effective December 31, 1997, the Partnership acquired these 1% interests and therefore the subsidiary partnerships are wholly-owned by the Partnership. The Partnership has no employees and is dependent upon the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid to the Managing General Partner and affiliates in 1998 and in 1997: 1998 1997 (in thousands) Property management fees (included in Operating expenses) $149 $142 Reimbursement for services of Affiliates (included in Investment property and general and administrative and operating Expenses) (1) 133 135 (1) Included in "reimbursements for services of affiliates" for the years ended December 31, 1998 and 1997, is approximately $29,000 and $21,000, respectively, in reimbursements for construction oversight costs. During the years ended December 31, 1998 and 1997, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $149,000 and $142,000 for the years ended December 31, 1998 and 1997, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $133,000 and $135,000 for the years ended December 31, 1998 and 1997, respectively. AIMCO currently owns, through its affiliates, a total of 47,418.68 limited partnership units or 36.476% of the outstanding limited partnership units. Consequently AIMCO could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. For the period from January 1, 1997, to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Managing General Partner which receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) The Exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report and incorporated in this Annual Report as set forth in said Index. (b) Current Report on Form 8-K dated October 1, 1998 and filed on October 16, 1998 disclosing change in control of Registrant from Insignia Financial Group, Inc. to AIMCO. Current Report on Form 8-K dated November 10, 1998 and filed on November 16, 1998, disclosing the dismissal of Imowitz Koenig & Co., LLP as the registrant's Independent Accountant. Current Report on Form 8-K dated and filed on December 9, 1998 on disclosing the engagement of Ernst & Young, LLP as the registrant's Independent Accountant. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTURY PROPERTIES FUND XVI By: FOX CAPITAL MANAGEMENT CORPORATION, Managing General Partner By: FOX CAPITAL MANAGEMENT CORPORATION, Its Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting Date: March 30, 1999 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature/Name By:/s/Patrick J. Foye Date: March 30, 1999 Patrick J. Foye Executive Vice President and Director By:/s/Timothy R. Garrick Date: March 30, 1999 Timothy R. Garrick Vice President - Accounting and Director CENTURY PROPERTIES FUND XVI EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT (incorporated by reference to Exhibit 2.1 of IPT's Current Report or Form 8-K, file No. 1-4179, dated October 1, 1998. 2.5 Master Indemnity Agreement incorporated by reference to Exhibit 2.5 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. 3.4 Agreement of Limited Partnership incorporated by reference to Exhibit A to the Prospectus of the Registrant dated August 17, 1981 and thereafter supplemented June 25, 1979 and thereafter supplemented, included in the Registrant's Registration Statement on Form S-11 (reg. No. 2-71473). 10.1 Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore Financial Corporation ("Secore") relating to the refinancing of the Landings and Woods of Inverness incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1995. 10.2 Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore relating to the refinancing of the Landings and Woods of Inverness incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1995. 16 Letter from the Registrant's former Independent Auditor dated April 27, 1994 incorporated by reference to Exhibit 10 to the Registrant's Current Report on Form 8-K dated April 22, 1994. 16.1 Letter dated November 11, 1998 from the Registrant's former independent accounting regarding its concurrence with the statements made by the Registrant in Current Report on Form 8-K dated November 10, 1998. 27 Financial Data Schedule EX-27 2
5 This schedule contains summary financial information extracted form Century Properties Fund XVI 1998 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000351931 CENTURY PROPERTIES FUND XVI 1,000 12-MOS DEC-31-1998 DEC-31-1998 366 0 370 0 0 0 15,564 7,804 8,829 0 7,347 0 0 0 1,021 8,829 0 2,976 0 0 2,849 0 612 0 0 0 0 0 0 127 0.91 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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