-----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, ESGj1ao0L+r3etGMNKBZpuIFjXsYLgWK/rZP5aISmGpuQqVCnfOdfM0oe8eC8Bi8 1CPBPCJ+vBQl31FcK3BB9w== 0000711642-99-000079.txt : 19990505 0000711642-99-000079.hdr.sgml : 19990505 ACCESSION NUMBER: 0000711642-99-000079 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990504 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-10435 FILM NUMBER: 99610332 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 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report Pursuant to 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 [ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period.........to......... Commission file number 0-10435 CENTURY PROPERTIES FUND XVI (Exact name of small business issuer as specified 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 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CENTURY PROPERTIES FUND XVI CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1999 Assets Cash and cash equivalents $ 541 Receivables and deposits 266 Other assets 221 Restricted escrows 38 Investment properties: Land $ 1,409 Buildings and related personal property 14,211 15,620 Less accumulated depreciation (7,934) 7,686 $ 8,752 Liabilities and Partners' Capital Liabilities Accounts payable $ 32 Accrued property taxes 138 Tenant security deposit liabilities 51 Other liabilities 115 Mortgage notes payable 7,327 Partners' (Deficit) Capital General partners $(3,829) Limited partners (130,000 units issued and outstanding) 4,918 1,089 $ 8,752 See Accompanying Notes to Consolidated Financial Statements b) CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1999 1998 Revenues: Rental income $ 737 $ 707 Other income 26 30 Total revenues 763 737 Expenses: Operating 296 299 General and administrative 52 53 Depreciation 130 121 Interest 153 154 Property tax 64 43 Total expenses 695 670 Net income $ 68 $ 67 Net income allocated to general partners (6.9%) $ 5 $ 5 Net income allocated to limited partners (93.1%) 63 62 Net income $ 68 $ 67 Net income per limited partnership unit $ .48 $ .48 See Accompanying Notes to Consolidated Financial Statements c) CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 130,000 $ -- $65,000 $65,000 Partners' (deficit) capital at December 31, 1998 130,000 $(3,834) $ 4,855 $ 1,021 Net income for the three months ended March 31, 1999 -- 5 63 68 Partners' (deficit) capital at March 31, 1999 130,000 $(3,829) $ 4,918 $ 1,089 See Accompanying Notes to Consolidated Financial Statements d) CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1999 1998 Cash flows from operating activities: Net income $ 68 $ 67 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 130 121 Amortization 8 8 Change in accounts: Receivables and deposits 104 156 Other assets 4 1 Accounts payable (24) (41) Accrued property taxes (107) (179) Tenant security deposit liabilities -- 1 Other liabilities 6 (2) Net cash provided by operating activities 189 132 Cash flows from investing activities: Property improvements and replacements (56) (20) Net withdrawals from (deposits to) restricted escrows 62 (38) Net cash provided by (used in) investing activities 6 (58) Cash flows used in financing activities: Payments on mortgage notes payable (20) (18) Net increase in cash and cash equivalents 175 56 Cash and cash equivalents at beginning of period 366 459 Cash and cash equivalents at end of period $ 541 $ 515 Supplemental disclosure of cash flow information Cash paid for interest $ 145 $ 146 See Accompanying Notes to Consolidated Financial Statements e) CENTURY PROPERTIES FUND XVI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Century Properties Fund XVI (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Partnership's general partners are Fox Capital Management Corporation (the "Managing General Partner" or "FCMC") and Fox Realty Investors ("FRI"). The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1998. Principles of Consolidation The Partnership's financial statements include the accounts of the Partnership and its wholly owned subsidiaries. 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 acquired a 100% ownership interest in 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 - TRANSACTIONS WITH AFFILIATED PARTIES 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 transactions with affiliates of the Managing General Partner were charged to expense for the three months ended March 31, 1999 and 1998: For the Three Months Ended March 31, 1999 1998 (in thousands) Property management fees (included in operating expenses) $ 38 $ 37 Reimbursement for services of affiliates (included in general and administrative and operating expenses)(1) 26 28 (1) Included in "reimbursements for services of affiliates" for the three months ended March 31, 1998, is approximately $1,000 in reimbursements for construction oversight costs. There were no such costs for the three months ended March 31, 1999. During the three months ended March 31, 1999 and 1998, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from both of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $38,000 and $37,000 for the three months ended March 31, 1999 and 1998, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $26,000 and $28,000 for the three months ended March 31, 1999 and 1998, respectively. NOTE D - SEGMENT REPORTING Description of the types of products and services from which reportable segment derives its revenues: The Partnership has one reportable segment: residential properties, consisting 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 of the Partnership as described in the summary of significant accounting policies in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1998. 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 three months ended March 31, 1999 and 1998 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. 1999 Residential Other Totals Rental income $ 737 $ -- $ 737 Other income 23 3 26 Interest expense 153 -- 153 Depreciation 130 -- 130 General and administrative expense -- 52 52 Segment profit (loss) 117 (49) 68 Total assets 8,373 379 8,752 Capital expenditures 56 -- 56 1998 Residential Other Totals Rental income $ 707 $ -- $ 707 Other income 26 4 30 Interest expense 154 -- 154 Depreciation 121 -- 121 General and administrative expense -- 53 53 Segment profit (loss) 116 (49) 67 Total assets 8,257 358 8,615 Capital expenditures 20 -- 20 NOTE E - 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 funds, 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, will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-QSB 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. The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 1999 and 1998: Average Occupancy Property 1999 1998 Ralston Place (formerly The Landings Apartments) Tampa, Florida 97% 95% Woods of Inverness Apartments Houston, Texas 98% 97% Results of Operations The Registrant's net income for the three months ended March 31, 1999, was $68,000 as compared to $67,000 for the same period in 1998 as an increase in total revenues was offset by an increase in total expenses. The increase in total revenues is primarily attributable to an increase in rental income as a result of increases in occupancy and average annual rental rates at Ralston Place and Woods of Inverness as well as a decrease in rental concessions offered by both of the properties. Total expenses increased primarily due to an increase in property taxes at Woods of Inverness resulting from the timing of the receipt of tax bills for 1999 and 1998 which affected the accruals recorded at March 31, 1999 and 1998. All other expenses remained relatively constant. Included in general and administrative expense at both March 31, 1999 and 1998 are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. 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. 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 conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 1999, the Registrant had cash and cash equivalents of approximately $541,000 as compared to approximately $515,000 at March 31, 1998. Cash and cash equivalents increased approximately $175,000 for the period ended March 31, 1999, from the Registrant's fiscal year end and is primarily due to $189,000 of cash provided by operating activities, and to a lesser extent, $6,000 of cash provided by investing activities, which is partially offset by $20,000 of cash used in financing activities. Cash provided by investing activities consisted of net withdrawals from restricted escrows accounts maintained by the mortgage lender and was partially offset by capital improvements. 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. Capital improvements planned for both of the Registrant's properties are detailed below. Woods of Inverness: 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 Woods of Inverness 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. As of March 31, 1999, the Partnership spent approximately $34,000 on capital improvements at Woods of Inverness, consisting primarily of fencing and flooring replacements and swimming pool repairs. These improvements were funded from cash flow and replacement reserves. Ralston Place: 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 Ralston Place 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 roof replacement project, structural repairs, appliance replacement and landscaping. As of March 31, 1999, the Partnership spent approximately $22,000 on capital improvements at Ralston Place, consisting primarily of flooring and appliance replacements. These improvements were funded from cash flow and replacement reserves. The additional 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 $7,327,000 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 1999 or 1998. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. 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 planned capital expenditures, to permit distributions to its partners in 1999 or subsequent periods. Potential Tender Offer On October 1, 1998, Insignia Financial Group, Inc. merged into Apartment Investment and Management Company ("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 partnership 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-QSB 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. 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, 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 March 31, 1999, 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 July 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 July 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 July 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 July 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 March 31, 1999 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 March 31, 1999 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 August 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 its 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. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, 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 funds, 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, will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None. SIGNATURES In accordance with the requirements 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: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting Date: May 4, 1999 EX-27 2
5 This schedule contains summary financial information extracted from Century Properties Fund XVI 1999 First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000351931 CNETURY PROPERTIES FUND XVI 1,000 3-MOS DEC-31-1999 MAR-31-1999 541 0 0 0 0 0 15,620 (7,934) 8,752 0 7,327 0 0 0 1,089 8,752 0 763 0 0 695 0 153 0 0 0 0 0 0 68 0.48 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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