-----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, E94mRUHKdEoH1xrBtIEsSaawca/zyIuYxsxRid4WpqDmXG7qpU5rUIbcHazJSkJp pQEkvAYm4JlPWf3JzK0SGw== 0000711642-99-000213.txt : 19990816 0000711642-99-000213.hdr.sgml : 19990816 ACCESSION NUMBER: 0000711642-99-000213 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XVII CENTRAL INDEX KEY: 0000356472 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942782037 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-11137 FILM NUMBER: 99688409 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 C/O INSIGNIA FINANCIAL GROUP 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) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-11137 CENTURY PROPERTIES FUND XVII (Exact name of small business issuer as specified in its charter) California 94-2782037 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, Post Office 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 XVII CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 1999 Assets Cash and cash equivalents $ 4,055 Receivables and deposits 960 Restricted escrows 597 Other assets 304 Investment properties: Land $ 7,078 Buildings and related personal property 62,050 69,128 Less accumulated depreciation (33,941) 35,187 $ 41,103 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 93 Tenant security deposit liabilities 296 Accrued property taxes 533 Other liabilities 333 Mortgage notes payable 42,224 Partners' Capital (Deficit) General partner's $ (7,748) Limited partners' (75,000 units issued and outstanding) 5,372 (2,376) $ 41,103 See Accompanying Notes to Consolidated Financial Statements b) CENTURY PROPERTIES FUND XVII CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Revenues: (As Restated) (As Restated) Rental income $3,409 $3,251 $6,765 $6,415 Other income 198 206 361 394 Total revenues 3,607 3,457 7,126 6,809 Expenses: Operating 1,147 1,294 2,300 2,582 General and administrative 105 62 174 144 Depreciation 621 582 1,232 1,153 Interest 890 860 1,784 1,723 Property taxes 205 204 403 389 Total expenses 2,968 3,002 5,893 5,991 Net income $ 639 $ 455 $1,233 $ 818 Net income allocated to general partner $ 75 $ 54 $ 145 $ 97 Net income allocated to limited partners 564 401 1,088 721 $ 639 $ 455 $1,233 $ 818 Net income per limited partnership unit $ 7.52 $ 5.35 $14.51 $ 9.61 Distribution per limited partnership unit $ -- $ -- $30.31 $ -- See Accompanying Notes to Consolidated Financial Statements c) CENTURY PROPERTIES FUND XVII CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 75,000 $ -- $75,000 $75,000 Partners' (deficit) capital at December 31, 1998 75,000 $(7,666) $ 6,557 $(1,109) Distribution to Partners -- (227) (2,273) (2,500) Net income for the six months ended June 30, 1999 -- 145 1,088 1,233 Partners' (deficit) capital at June 30, 1999 75,000 $(7,748) $ 5,372 $(2,376) See Accompanying Notes to Consolidated Financial Statements d) CENTURY PROPERTIES FUND XVII CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1999 1998 Cash flows from operating activities: (As Restated) Net income $1,233 $ 818 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,232 1,153 Amortization of loan costs and debt discounts 710 654 Loss on disposal of property -- 36 Change in accounts: Receivables and deposits 72 353 Other assets (44) 37 Accounts payable (49) 14 Tenant security deposit liabilities 22 4 Accrued property taxes (145) (187) Other liabilities (48) (30) Net cash provided by operating activities 2,983 2,852 Cash flows from investing activities: Net withdrawals from restricted escrows 684 269 Property improvements and replacements (944) (903) Net cash used in investing activities (260) (634) Cash flows from financing activities: Payments on mortgage notes payable (199) (219) Distribution to partners (2,500) -- Net cash used in financing activities (2,699) (219) Net increase in cash and cash equivalents 24 1,999 Cash and cash equivalents at beginning of period 4,031 4,011 Cash and cash equivalents at end of period $4,055 $6,010 Supplemental disclosure of cash flow information: Cash paid for interest $1,075 $1,071 See Accompanying Notes to Consolidated Financial Statements e) CENTURY PROPERTIES FUND XVII NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Century Properties Fund XVII (the "Partnership" or "Registrant") 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. In the opinion of Fox Capital Management Corporation ("FCMC" or 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 and six month periods ended June 30, 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. Certain reclassifications have been made to the 1998 balances to conform to the 1999 presentation. PRINCIPLES OF CONSOLIDATION The financial statements include all the accounts of the Partnership and Apartment CCG 17, L.P., which owns Cherry Creek Apartments, Apartment Creek 17, LLC, which owns Creekside Apartments and Apartment Lodge 17, LLC, which owns the The Lodge Apartments, entities in which the Partnership ultimately holds a 100% interest. All intra-entity balances have been eliminated. 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. ("Insignia") and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 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 on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the Managing General Partner and affiliates during the six months ended June 30, 1999 and 1998: 1999 1998 (in thousands) Property management fees (included in operating expenses) $356 $335 Reimbursement for services of affiliates (included in investment properties and general and administrative expense and operating expense) 121 111 During the six months ended June 30, 1999 and 1998, 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 $356,000 and $335,000 for the six months ended June 30, 1999 and 1998, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $121,000 and $111,000 for the six months ended June 30, 1999 and 1998, respectively. Included in these expenses is approximately $41,000 and $30,000 in construction oversight costs for the six months ended June 30, 1999 and 1998, respectively. On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 20,860.54 (27.81% of the total outstanding units) units of limited partnership interest in the Partnership for a purchase price of $448 per unit. The offer expired on July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,864.00 units. As a result, AIMCO and its affiliates currently own 31,092.00 units of limited partnership interest in the Partnership representing 41.46% of the total outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. NOTE D - DISTRIBUTION During the six months ended June 30, 1999, the Partnership paid a distribution of approximately $2,500,000 (approximately $30.31 per limited partnership unit) to its partners. The distribution consisted of approximately $1,811,000 from operations and approximately $689,000 from the proceeds of the refinancing of the mortgage loans encumbering Creekside Apartments and the Lodge Apartments in August 1998. As a part of the distribution paid to the general partner, a management incentive fee of approximately $181,000 is included. No distributions to the partners were made during the six month period ending June 30, 1998. Subsequent to June 30, 1999, the Partnership declared and paid a distribution from operations of approximately $1,170,000 (approximately $13.76 per limited partnership unit) to its partners. NOTE E - SEGMENT REPORTING The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of five apartment complexes in Colorado, Texas, and Florida. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The Partnership evaluates performance based on net income. The accounting policies of the reportable segment are the same as those described in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998. 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 six months ended June 30, 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 $ 6,765 $ -- $ 6,765 Other income 337 24 361 Interest expense 1,784 -- 1,784 Depreciation 1,232 -- 1,232 General and administrative expense -- 174 174 Segment profit (loss) 1,383 (150) 1,233 Total assets 40,498 605 41,103 Capital expenditures for investment properties 944 -- 944 1998 Residential Other Totals Rental income $ 6,415 $ -- $ 6,415 Other income 321 73 394 Interest expense 1,723 -- 1,723 Depreciation 1,153 -- 1,153 General and administrative expense -- 144 144 Segment profit (loss) 889 (71) 818 Total assets 39,633 3,516 43,149 Capital expenditures for investment properties 903 -- 903 NOTE F - 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 and entities which were, at the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates as well as a recently announced agreement between Insignia and AIMCO. 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 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 the 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. NOTE G - PRIOR PERIOD RESTATEMENT The Partnership's consolidated financial statements have been restated to correct an error in calculating the amortization of debt discount on the zero- coupon mortgage encumbering the Partnership's Village in The Woods Apartments property. The effect of the restatement for the six months ended June 30, 1998, was an increase in net income of approximately $154,000 which equates to an increase in net income per limited partnership unit of $1.81. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 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 disclosures 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 five apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended June 30, 1999 and 1998: Average Occupancy Property 1999 1998 Cherry Creek Gardens Apartments Englewood, Colorado 97% 95% Creekside Apartments Denver, Colorado 98% 97% The Lodge Apartments Denver, Colorado 98% 97% The Village in the Woods Apartments Cypress, Texas 93% 95% Cooper's Pond Apartments Tampa, Florida 96% 96% Results of Operations The Partnership generated net income for the six months ended June 30, 1999 of approximately $1,233,000 compared to net income of approximately $818,000 for the corresponding period of 1998. The Partnership's net income for the three months ended June 30, 1999 was approximately $639,000 compared to approximately $455,000 for the three months ended June 30, 1998. The increase in net income for the three and six month periods ended June 30, 1999 was due to an increase in total revenues and a decrease in total expenses. Total revenues for both periods increased primarily due to an increase in rental income which was partially offset by a decrease in other income. The increase in rental income was primarily due to an increase in average rental rates at all of the Partnership's investment properties and to a lessor extent to increased occupancy at Cherry Creek Gardens, Creekside, and the Lodge Apartments. These increases were partially offset by decreased occupancy and increased concession costs at Village in the Woods Apartments. Other income decreased primarily due to reduced interest income due to lower average cash balances in interest bearing accounts which was partially offset by increased tenant charges at all the Partnership's properties. Total expenses decreased primarily due to decreased operating expenses which more than offset increases in general and administrative expense, depreciation expense and interest expense. The decrease in operating expenses was primarily due to a decrease in maintenance expenses due to fewer repair and maintenance projects at the Partnership's investment properties, decreased insurance expense due to the use of a new insurance carrier at all of the Partnership's properties, decreased advertising and sewer expenses at both Cherry Creek Apartments and Village in the Woods Apartments. Partially offsetting these decreases, was a loss on disposal of assets included in operating expenses in 1998 that resulted from the write-off of roofs at Village in the Woods Apartments which were not fully depreciated at the time of their replacement in 1998. The increase in general and administrative expenses resulted primarily from an increase in legal expenses due to the settlement of the Everest lawsuit as disclosed in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998, and an increase in printing and mailing costs. Included in general and administrative expenses at both June 30, 1999 and 1998 are reimbursements to the General Partner allowed under the Partnership Agreement associated with its management of the Partnership. In addition, costs associated with the quarterly communications with investors and regulatory agencies required by the Partnership Agreement are included. Depreciation expense increased due to capital improvements completed during the second half of 1998 and the first half of 1999 that are now being depreciated. Interest expense increased primarily due to the increasing mortgage balance at Village in the Woods Apartments due to amortization of the debt discount on the zero-coupon mortgage encumbering the property. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. 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. Liquidity and Capital Resources At June 30, 1999, the Partnership had cash and cash equivalents of approximately $4,055,000 compared to approximately $6,010,000 at June 30, 1998. The increase in cash and cash equivalents of approximately $24,000 from the Partnership's year ended December 31, 1998 is due to approximately $2,983,000 of cash provided by operating activities substantially offset by approximately $2,699,000 of cash used in financing activities and approximately $260,000 of cash used in investing activities. Net cash used in financing activities consisted primarily of a distribution to partners and to a lessor extent of payments of principal made on the mortgages encumbering the Partnership's investment properties. Cash used in investing activities consisted of property improvements and replacements which is partially offset by withdrawals from escrow accounts maintained by the mortgage lender. The Partnership invests its working capital 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state and local legal and regulatory requirements. Capital improvements planned for each of the Partnership's properties are detailed below. Cherry Creek Gardens Apartments During the six months ended June 30, 1999, the Partnership completed approximately $131,000 of capital improvements at the property, consisting primarily of carpet and vinyl replacement, fencing, parking lot repairs, pool repairs, electrical upgrades, and other structural improvements. These improvements were funded from the Partnership's reserves and operating cash flow. 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 $179,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $249,000 for 1999 at this property which include certain of the required improvements and consist of carpet and vinyl replacement, electrical upgrades, landscaping, and structural improvements. Creekside Apartments During the six months ended June 30, 1999, the Partnership completed approximately $143,000 of capital improvements at the property, consisting primarily of appliance replacements, carpet and vinyl replacement, parking lot repairs, plumbing upgrades, water heaters, equipment purchases, and structural improvements. These improvements were funded from the Partnership's 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 $695,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $577,000 for 1999 at this property which include certain of the required improvements and consist of water heaters, appliances, plumbing upgrades, carpet and vinyl replacement and structural improvements. The Lodge Apartments During the six months ended June 30, 1999, the Partnership completed approximately $244,000 of capital improvements at the property, consisting primarily of structural improvements, swimming pool repairs, carpet and vinyl replacement, parking lot improvements, and fencing. These improvements were funded from the Partnership's 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 $474,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $323,000 for 1999 at this property which include certain of the required improvements and consist of carpet and vinyl replacement, parking lot improvements, swimming pool repairs, and structural upgrades. The Village in the Woods Apartments During the six months ended June 30, 1999, the Partnership completed approximately $253,000 of capital improvements at the property, consisting primarily of roof replacement, parking lot repairs, carpet and vinyl replacement and structural improvements. These improvements were funded from operating cash flow. 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 $362,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $445,000 for 1999 at this property which include certain of the required improvements and consist of air conditioning units, carpet replacement, parking lot repairs, electrical upgrades, landscaping, and roof replacement. Cooper's Pond Apartments During the six months ended June 30, 1999, the Partnership completed approximately $173,000 of capital improvements at the property, consisting primarily of carpet and vinyl replacement, structural improvements, landscaping, and appliances. These improvements were funded from the Partnership's reserves and operating cash flow. 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 $517,000 of capital improvements over the next few years. The Partnership has budgeted, but is not limited to, capital improvements of approximately $546,000 for 1999 at this property which include certain of the required improvements and consist of carpet and vinyl replacement, landscaping, grounds lighting, parking lot repairs, pool repairs, appliances, and other structural upgrades. 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 Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $42,224,000, net of discount, is amortized over varying periods with maturity dates ranging from July 1999 at Cooper's Pond Apartments to September 2008 at all the other properties. The maturity date of July 1999 for the loan at Cooper's Pond Apartments has been extended by the lender while the Managing General Partner negotiates the refinancing of the loan. Although there can be no assurance that it will be able to do so, the Managing General Partner believes it will be able to refinance the debt maturing at Cooper's Pond. 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 Partnership may risk losing such properties through foreclosure. During the six months ended June 30, 1999, the Partnership paid a distribution of approximately $2,500,000 (approximately $2,273,000 to the limited partners or $30.31 per limited partnership unit) to its partners. The distribution consisted of approximately $1,811,000 (approximately $1,597,000 to the limited partners or $21.30 per limited partnership unit) from operations and approximately $689,000 (approximately $675,000 to the limited partners or $9.01 per limited partnership unit) from the proceeds of the refinancing of the mortgage loans encumbering Creekside Apartments and the Lodge Apartments in August 1998. As a part of the distribution paid to the general partner, a management incentive fee of approximately $181,000 is included. Subsequent to June 30, 1999, the Partnership declared and paid a distribution from operations of approximately $1,170,000 (approximately $1,032,000 to the limited partners or $13.76 per limited partnership unit) to its partners. No distributions were made to the partners during the six month period ending June 30, 1998. Future cash distributions will depend on the levels of net cash generated from operations, timing of debt maturities, refinancings and/or property sales 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 improvements to permit further distributions to its partners in 1999 or subsequent periods. Tender Offer On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 20,860.54 (27.81% of the total outstanding units) units of limited partnership interest in the Partnership for a purchase price of $448 per unit. The offer expired on July 14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,864.00 units. As a result, AIMCO and its affiliates currently own 31,092.00 units of limited partnership interest in the Partnership representing 41.46% of the total outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. 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 main computer system used by the Managing Agent became fully functional. In addition to the main computer system, 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 June 30, 1999, had completed approximately 90% 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 September 30, 1999. The completion of this process is scheduled to coincide with the release of a compliant version of the Managing Agent's operating system. 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. In April, 1999 the Managing Agent embarked on a data center consolidation project that unifies its core financial systems under its Year 2000 compliant system. The estimated completion date for this project is October, 1999. 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 testing process was completed in June, 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 90% of the server operating systems. The remaining server operating systems are planned to be upgraded to be Year 2000 compliant by September, 1999. The completion of this process is scheduled to coincide with the release of a compliant version of the Managing Agent's operating system. 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. A pre-assessment of the properties by the Managing Agent has indicated no Year 2000 issues. A complete, formal assessment of all the properties by the Managing Agent is in process and will be completed in September, 1999. Any operating equipment that is found non-compliant will be repaired or replaced. The total cost incurred for all properties managed by the Managing Agent as of June 30, 1999 to replace or repair the operating equipment was approximately $75,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $125,000. 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 July, 1999. The Managing Agent has updated data transmission standards with all of the 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 September 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 $2.9 million ($0.7 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 and entities which were, at the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates as well as a recently announced agreement between Insignia and AIMCO. 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 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 the 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) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 1999. 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 XVII By: Fox Partners Its General Partner By: Fox Capital Management Corporation, Its Managing General Partner By: /s/ Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/ Carla R. Stoner Carla R. Stoner Senior Vice President Finance and Administration Date: August 13, 1999 EX-27 2
5 This schedule contains summary financial information extracted from Century Properties Fund XVII 1999 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000356472 CENTURY PROPERTIES FUND XVII 1,000 6-MOS DEC-31-1999 JUN-30-1999 4,055 0 0 0 0 0 69,128 33,941 41,103 0 42,224 0 0 0 (2,376) 41,103 0 7,126 0 0 5,893 0 1,784 0 0 0 0 0 0 1,233 14.51 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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